The status quo in the toy industry just got upended on Friday with Mattel’s announcement that they are purchasing MEGA Brands for $407.5 million Canadian dollars ($366.4 million U.S.). The decision by Mattel means that Lego is going to face some heavy duty competition on the construction aisle.
No matter what happens, we are going to find out if Lego has been beating up on lightweights or has the muscle to face down a heavy weight. I for one would not bet against Lego yet I wouldn’t bet against Mattel either.
As we wait for the purchase to go through, it is interesting to speculate on the fallout from Mattel’s acquisition. So what does it mean for the play industry?
- It removes one of the few publicly held toy companies from the marketplace. That means less competition and interest in the industry’s second tier.
- It lifts the MEGA Brands brand of construction blocks from being a distant number 2 construction toy (Lego revenues are $4.7 billion US / Mega Brand revenues are $400 million US) and puts it in the hands of a deep pocketed company that knows how to market and has the brands to do it with.
- It’s going to be good news for advertising companies as they create marketing for what could be a major war for consumer time and dollars.
- Its going to be good news for licensors as Mattel seeks licenses to fuel its Mega Brand push.
- It is going to make life more difficult for buyers who are going to be facing far more difficult choices in space allocation.
- It’s going to be life more pleasant for buyers who are going to face a more competitive environment which should be good for their bottom line.
- It’s going to make life far more difficult for the other construction toy companies as Mega Brand flexes out to greater shelf space. Initially, that space will probably not come from Lego but from secondary and tertiary players. If they do, they could resurrect the brand
- Crayola, Cra-Z-Art and other arts and crafts players are going to be praying that Mattel does not see the RoseArt segment of the purchase as a good fit. If Mattel does, it could mean a resurrection of RoseArt as a significant brand.
No matter what happens, it is important to remember that Lego is no longer just about plastic blocks. They are now a major player in the digital and movie arenas; two areas in which Mattel is a smaller player.
What about Hasbro? According to Gerrick Johnson in his February 24, 2014 “Toy Scout Report” on Hasbro: “The company seems to be Moving away from its Kreo construction line, now making the
product as an exclusive at Toys “R” Us with Dungeons & Dragons, Transformers, Cityville
Invasion, and GI Joe themes.” If that is indeed the case, Hasbro may want to take another look at that strategy. Mattel’s move is a change maker and that means all bets are off for all players.