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Tale of the toy makers
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February 10, 1997: 10:16 p.m. ET
Is the industry missing the point as it dances the consolidation shuffle?
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NEW YORK (CNNfn) -- It's an industry like no other. It's as fad-conscious as fashion and as secretive as defense... and, as with the defense industry, the number of toy companies is shrinking.
Mattel, the number-one toy manufacturer, will soon merge with third-place Tyco, after an unsuccessful bid to engulf number-two Hasbro.
And this is just the beginning.
Christopher Byrne, editor-in-chief of Market Focus: Toys, said that the consolidation trend is characteristic for the economy right now. Furthermore, he indicated that the driving goal behind the toy industry -- designing and selling toys that children want to possess -- can get lost in the consolidation shuffle because "a four-year-old child doesn't care what the value of the stock is." (160K WAV) or (160K AIFF)
The consolidation is not limited to toy manufacturers, either. The number of independent toy stores is falling as mass market outlets and discount stores grab a larger share of the market. (1.94M QuickTime Movie)
Five retail chains - Toys 'R' Us, Wal-Mart, Kmart, Target, and Kay-Bee - are responsible for more than 55 percent of the toys sold in the United States, and this is giving the big stores a great deal of control over what kind of toys are manufactured.
The bottom line? Toy industry analyst Sean McGowan with Gerard Klauer Mattison summed it up, saying, "If you can't get the product placed with those five resellers, you basically don't have a product." (178K WAV) or (168K AIFF)
The risk is that the big players won't buy an unproven product from a new or unknown manufacturer ... and a toy with the potential of the Teenage Mutant Ninja Turtles simply won't find shelf space.
However, analysts are quick to point out that this $19 billion industry is subject to the whims of children, who can simply confound the "professionals" when it comes to picking the next "must-have" toy.
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