Every kid plays with toys during their childhood. Some play with action figures. Others take a liking to board games or dolls. Regardless of your socioeconomic standing, chances are that when you’re young, you’ll receive at least one toy from a parent or friend and spend countless hours playing with it.
So it’s no surprise that in 2015, the U.S. toy market was valued at $25 billion, according to the NPD Group and Toy Industry Association. That’s millions of American families bringing home toys for Christmas, giving action figures and Barbies for birthdays, and rewarding good report cards with a plush Elmo. Even adults splurge on collectible vinyl figures based on their favorite comic book and TV characters.
With all this money being spent on toys, it makes one wonder how the companies making them are performing in a digital world. These days, toy companies have to fight for a child’s attention with streaming media services and mobile devices. Wouldn’t that mean less toys are being sold?
Let’s take a look.
These days, kids are starting earlier on tablets and smart phones.
As Hasbro ($HAS) recently learned, however, parents are still buying their kids tons of toys based on entertainment properties.
Hasbro licenses (borrows) the Marvel, Star Wars, and Disney Princess properties from Disney ($DIS). Hasbro makes toys based on their characters, and kids just can’t get enough of it.
Hasbro has to pay a decent amount of money for these rights, but Disney toys sell for more than a generic toy brand and millions of parents in North America buy them.
Since Hasbro sold billions of dollars in toys — more than financial analysts thought they would — their stock was in high demand. This caused it to increase in value.
Mattel ($MAT), Hasbro’s competitor, also makes toys based on brands like Batman (DC) and WWE.
Since they have a similar business model, their stock increased as a result of Hasbro’s success.
Mattel later reported positive earnings, which further increased the value of their stock.
Licensed toys based on other company’s properties are nothing new, but they’ve seen a resurgence in the last decade-plus.
In the early-to-mid 2000s, Lego Group (a private company) saw their sales plummet.
Yet when they started licensing in brands to make specialty Lego sets, their sales hit record highs.
Lego is now one of the biggest toy companies in the world, all thanks to licensing in brands.
Top toy companies like Mattel, Hasbro do well these days thanks to the popularity of branded toys. Their own in-house brands, like Mattel’s Barbie and Hasbro’s My Little Pony, also sell enough to make up a sizable chunk of the company’s revenue. With the holiday season coming up and big superhero blockbusters always around the corner, sales for both companies aren’t going to slow down any time soon, which could lead to continued success on the stock market.
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