In my last posting, I mentioned that I was recently interviewed on television by Bloomberg TV and in writing by The Street (see “Mattel’s ‘Cars 2’ Success Junks Hot Wheels”). In both cases, there interest was in the impact of movie tie-ins.
The Street wanted to talk about Mattel’s great second quarter (income was up56%) and its attribution of success being to a great degree generated by sales of Cars 2 products. Revenues from the entertainment division were up 41%.
So significant were Cars 2 sales that The New York Times headlines its July 16 article on the subject with the title, “Sales of Cars2 Toys Lift Profit at Mattel.” Mattel was successful across the board. International sales were up 12% as were sales of Barbie products. In fact, everything was up…with one exception.
Hot Wheels sales were off 2%. I see this as significant in that it is the crux of the movie tie-in question. In the long term, does a toy company benefit from moving some of its revenue stream and brand equity from an evergreen like Hot Wheels to a promotional vehicle like Cars?
Evergreens are the cash cows of any business. They demand less cost, provide steady revenue and profit delivery and ultimately support a company’s need to take on riskier properties.
So, the question is how many of the children who leave Hot Wheels for the latest Cars themed products come back to Hot Wheels? In addition, what is the impact of a bad movie on an evergreen? My sources tell me that GI Joe has not recovered its former strength since the ill-fated movie came out. Rather than see it as a traditional toy, children who saw the movie saw it as just one of last summer’s tie-in movies. Once the movie was done, they moved on to the next movie.
Movie tie-ins are important to the toy industry and no one is suggesting we back off. We may, however, want to think twice about the overall impact of a movie tie-in on the long term health of our highest value brands.