6 ms·

Because most toy companies don't / can't understand vertical integration and increasing value capture. Or, in other words, they don't have their own version of

by ethbro 6y ago

Because most toy companies don't / can't understand vertical integration and increasing value capture. Or, in other words, they don't have their own version of this strategy chart: https://johnaugust.com/wp-content/uploads/2014/07/disney_chart.jpg https://johnaugust.com/wp-content/uploads/2014/07/disney_cha... (Disney corporate synergy, dated 1957) Your primary consumer has the attention span of a 10-year-old, and no disposable income. Why are we surprised this is a terrible industry? A smarter approach would be what Tim Sweeney is talking about with Fortnite (and Amazon infamously does): you have to do everything you can to pivot any initial success into a durable advantage, by aggressively expanding into adjacent opportunities, even if they're very different businesses (e.g. movie theaters). They've made token moves towards this with the physical toy + computer game mash-up genre, but from an external perspective I don't think any of them quite get how it's supposed to work. Efforts seem under -capitalized / -resourced / -inspired.

watwut 6y ago
The customer is adult parent, grandparent or aunt. They have disposable income and average kid has more toys then the kid needs.
- ethbro 6y ago
  I'd disagree. The purchaser is an adult, but the customer is not. Who gets excited about a particular toy? That's the customer. (Note: I'm not talking about the edutainment market here)
  - pintxo 6y ago
    Don’t we split this into user (child) / customer (the one paying) usually?
  - aflag 6y ago
    Phrase it as you might. The adult is the one making the decisions. The children's excitement and desire is only one of the things the adult takes into consideration when buying a toy. That's a big deal for the parents, but much less so for the grandparents, uncles, aunts, etc. Obviously they want to make the kid happy, but they are distanced enough that they will probably not know what the kid actually considers the hot things. That's why when you were young you had many toys, but not always the ones you really wanted to have.
    - daveFNbuck 6y ago
      The adult isn't always the one making the decision. When I was a kid, I'd often be set free in the toy store and given some limit on how much I was allowed to spend. It was usually a low limit, but there was a good variety of toys under it. The adult set the budget, but as the kid I had control over how that budget was spent, unless it was a toy my parents found objectionable.
      - aflag 6y ago
        Exactly, they had the final say. They were merely making their decision simpler. And that's the best experience you'd get. If you have family and friends, it's likely a good chunk of your toys were bought by them too. Toy makers have to appeal both to kids and adults.
  - watwut 6y ago
    No, because the excited person does not get to make the decision. I do. Also, good proportions of toys are not exciting to kids at all. Especially during Christmas and birthdays. They are swimming in sea of toys they will never actually play with, because it is simply not possible to play with that many toys.
  - wtracy 6y ago
    For certain categories, the adult is definitely the customer. For toys aimed at children under three, the ads regularly talk about training hand-eye coordination and other basic skills. For other categories, you could argue that the toy companies are selling a service: Make the kids stop complaining for a few hours. Naturally, an easy way to do this is to be the reason that the kids are complaining in the first place.
- analog31 6y ago
  This is an interesting distinction within any industry. Who's the customer? Ultimately what matters is how the buying decision is made -- who has agency. Parents and grandparents are the ones who spend the money, sure. But the advertising is directed towards the kids.
iamacyborg 6y ago
> A smarter approach would be what Tim Sweeney is talking about with Fortnite (and Amazon infamously does): you have to do everything you can to pivot any initial success into a durable advantage, by aggressively expanding into adjacent opportunities, even if they're very different businesses (e.g. movie theaters). Do you have any links to articles related to that? Would love to learn more about their strategy.
- ethbro 6y ago
  https://www.washingtonpost.com/video-games/2020/04/17/fortnite-metaverse-new-internet/ https://www.washingtonpost.com/video-games/2020/04/17/fortni...
  - iamacyborg 6y ago
    Thank you!
- shezi 6y ago
  There's also the Epic flywheel as described by Matthew Ball: https://www.matthewball.vc/all/epicprimer1 https://www.matthewball.vc/all/epicprimer1
fanf2 6y ago
The most common example of being in two businesses is the toy/cartoon pairing, e.g. Transformers or He Man or My Little Pony or Care Bears. These work well because you can keep selling the cartoons on repeat for years, and they act as ads for the toys.
- Theodores 6y ago
  The trick is to get five series. Then they can be repeated as infinitum, if not on the primary channels. Octonauts is my favourite toy franchise, they have eight characters and many vehicles with other props. Kids do not mind having duplicates of the octonaut characters. This makes no sense to an adult but a three year old thinks differently. The octonaut characters have large heads and small bodies. Therefore they do not stand up. The vehicles are for under water so there are no wheels. This again is no problem. Scale is also variable. As is quality, some toys come for free on the octonauts magazine. The strength of the TV show is what matters. Sony bought the rights and there is a movie and two more series in the works. The franchise is global.
  - gwern 6y ago
    Yes, I was a little surprised Hobart doesn't cover Hasbro. The multi-media/modal approach seems to be the natural way out of the churn, letting you own demand, and make it multi-generational (eg the MLP:FiM proposal/bible is very clear that it should be a show that moms can enjoy as much as their daughters).
  - toyg 6y ago
    > The trick is to get five series I thought the trick was to do 6, so you’d have more than 100 episodes and trigger a bunch of stuff about extra royalties and syndication. At least this is what US television authors seem to see as the Holy Grail.
desas 6y ago
Lego have got this down pat. Rather than being solely reliant on external IP like Star Wars and Harry Potter where they only get one slice of the cake (and share that) they made their own IP. The most successful IP is Ninjago, there's about a dozen TV series, one film, one computer game, a theme park ride, books serialising the TV series, "fact books", clothing and the full range of merchandise.
- toyg 6y ago
  This is a recent development for LEGO though, likely triggered by a lull in sales that they experienced after their first wave of modern franchised sets (which had literally saved them from bankruptcy) looked depleted. In other words, they learnt a lesson. The rest of the toy industry has been doing this sort of combo for 30+ years with TV series, but their problem historically has been the high costs of animation. LEGO could leverage digital 3d earlier and easier than anyone else, and they did it very well, so now they can reap big rewards.
philwelch 6y ago
> Or, in other words, they don't have their own version of this strategy chart: https://johnaugust.com/wp-content/uploads/2014/07/disney_cha.. https://johnaugust.com/wp-content/uploads/2014/07/disney_cha.... (Disney corporate synergy, dated 1957) I really love that chart because it tells you so much about the company culture that drew it up. Almost any other company would draw this diagram in some depressingly corporate way, but Disney drew it as a cartoon with little characters running around. It's a corporate strategy, expressed in concrete terms, in a way that demonstrates that the company was still run by artists.
arduinomancer 6y ago
This is very similar to the “flywheel” concept of Amazon’s strategy

by ethbro 6y ago

watwut 6y ago

The customer is adult parent, grandparent or aunt. They have disposable income and average kid has more toys then the kid needs.

ethbro 6y ago
I'd disagree. The purchaser is an adult, but the customer is not. Who gets excited about a particular toy? That's the customer. (Note: I'm not talking about the edutainment market here)
- pintxo 6y ago
  Don’t we split this into user (child) / customer (the one paying) usually?
- aflag 6y ago
  Phrase it as you might. The adult is the one making the decisions. The children's excitement and desire is only one of the things the adult takes into consideration when buying a toy. That's a big deal for the parents, but much less so for the grandparents, uncles, aunts, etc. Obviously they want to make the kid happy, but they are distanced enough that they will probably not know what the kid actually considers the hot things. That's why when you were young you had many toys, but not always the ones you really wanted to have.
  - daveFNbuck 6y ago
    The adult isn't always the one making the decision. When I was a kid, I'd often be set free in the toy store and given some limit on how much I was allowed to spend. It was usually a low limit, but there was a good variety of toys under it. The adult set the budget, but as the kid I had control over how that budget was spent, unless it was a toy my parents found objectionable.
    - aflag 6y ago
      Exactly, they had the final say. They were merely making their decision simpler. And that's the best experience you'd get. If you have family and friends, it's likely a good chunk of your toys were bought by them too. Toy makers have to appeal both to kids and adults.
- watwut 6y ago
  No, because the excited person does not get to make the decision. I do. Also, good proportions of toys are not exciting to kids at all. Especially during Christmas and birthdays. They are swimming in sea of toys they will never actually play with, because it is simply not possible to play with that many toys.
- wtracy 6y ago
  For certain categories, the adult is definitely the customer. For toys aimed at children under three, the ads regularly talk about training hand-eye coordination and other basic skills. For other categories, you could argue that the toy companies are selling a service: Make the kids stop complaining for a few hours. Naturally, an easy way to do this is to be the reason that the kids are complaining in the first place.
analog31 6y ago
This is an interesting distinction within any industry. Who's the customer? Ultimately what matters is how the buying decision is made -- who has agency. Parents and grandparents are the ones who spend the money, sure. But the advertising is directed towards the kids.

iamacyborg 6y ago

> A smarter approach would be what Tim Sweeney is talking about with Fortnite (and Amazon infamously does): you have to do everything you can to pivot any initial success into a durable advantage, by aggressively expanding into adjacent opportunities, even if they're very different businesses (e.g. movie theaters). Do you have any links to articles related to that? Would love to learn more about their strategy.

ethbro 6y ago
https://www.washingtonpost.com/video-games/2020/04/17/fortnite-metaverse-new-internet/ https://www.washingtonpost.com/video-games/2020/04/17/fortni...
- iamacyborg 6y ago
  Thank you!
shezi 6y ago
There's also the Epic flywheel as described by Matthew Ball: https://www.matthewball.vc/all/epicprimer1 https://www.matthewball.vc/all/epicprimer1

fanf2 6y ago

The most common example of being in two businesses is the toy/cartoon pairing, e.g. Transformers or He Man or My Little Pony or Care Bears. These work well because you can keep selling the cartoons on repeat for years, and they act as ads for the toys.

Theodores 6y ago
The trick is to get five series. Then they can be repeated as infinitum, if not on the primary channels. Octonauts is my favourite toy franchise, they have eight characters and many vehicles with other props. Kids do not mind having duplicates of the octonaut characters. This makes no sense to an adult but a three year old thinks differently. The octonaut characters have large heads and small bodies. Therefore they do not stand up. The vehicles are for under water so there are no wheels. This again is no problem. Scale is also variable. As is quality, some toys come for free on the octonauts magazine. The strength of the TV show is what matters. Sony bought the rights and there is a movie and two more series in the works. The franchise is global.
- gwern 6y ago
  Yes, I was a little surprised Hobart doesn't cover Hasbro. The multi-media/modal approach seems to be the natural way out of the churn, letting you own demand, and make it multi-generational (eg the MLP:FiM proposal/bible is very clear that it should be a show that moms can enjoy as much as their daughters).
- toyg 6y ago
  > The trick is to get five series I thought the trick was to do 6, so you’d have more than 100 episodes and trigger a bunch of stuff about extra royalties and syndication. At least this is what US television authors seem to see as the Holy Grail.

desas 6y ago

Lego have got this down pat. Rather than being solely reliant on external IP like Star Wars and Harry Potter where they only get one slice of the cake (and share that) they made their own IP. The most successful IP is Ninjago, there's about a dozen TV series, one film, one computer game, a theme park ride, books serialising the TV series, "fact books", clothing and the full range of merchandise.

toyg 6y ago
This is a recent development for LEGO though, likely triggered by a lull in sales that they experienced after their first wave of modern franchised sets (which had literally saved them from bankruptcy) looked depleted. In other words, they learnt a lesson. The rest of the toy industry has been doing this sort of combo for 30+ years with TV series, but their problem historically has been the high costs of animation. LEGO could leverage digital 3d earlier and easier than anyone else, and they did it very well, so now they can reap big rewards.

philwelch 6y ago

> Or, in other words, they don't have their own version of this strategy chart: https://johnaugust.com/wp-content/uploads/2014/07/disney_cha.. https://johnaugust.com/wp-content/uploads/2014/07/disney_cha.... (Disney corporate synergy, dated 1957) I really love that chart because it tells you so much about the company culture that drew it up. Almost any other company would draw this diagram in some depressingly corporate way, but Disney drew it as a cartoon with little characters running around. It's a corporate strategy, expressed in concrete terms, in a way that demonstrates that the company was still run by artists.

arduinomancer 6y ago

This is very similar to the “flywheel” concept of Amazon’s strategy