Spin Master Steps Up While Mattel Steps Aside; 6 Reasons the DC License Changing Hands is Good For Both Companies

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Starting in 2020, Spin Master will be the new home of DC licensed characters. Its quite a moment for one of the few publicly held toy companies as they join the big boys club of Mattel, Hasbro and Lego.

Here is how Bloomberg puts it:

Spin Master Corp. will be the new licensee for DC in the boy’s action category, remote control and robotic vehicles, water toys and games and puzzles, displacing Mattel. The three-year global agreement with Warner Bros. begins in Spring of 2020. Mattel will be keeping some of its licensing rights, including for preschool and girls’ toys, Goldman analyst Michael Ng said in a note to clients.

I think this is ultimately a solid decision by both companies. Here are six reasons why:

1.    Mattel did not lose the license, they relinquished it. If Mattel wanted to, they could have outbid Spin Master and retained the license. They chose not to. 

2.    Mattel has a new CEO and is operating under his turn around plan. Any decision made by Mattel has to be seen in light of the company's overall strategy.

3.    Mattel was unwilling to spend the money or allocate the resources because movie based licenses, particularly those from DC,  have not performed well for the last few years. There are simply too many super hero movie releases for anyone franchise or character to deliver the goods. As a consequence, movie licenses have gone from a sure-thing a decade ago to a risky bet today.

4.    For Mattel to ultimately succeed it needs to enhance the brand value of the properties it owns rather than those it rents. Licensing DC or any brand is ultimately like renting a home. Any work that goes into fixing it up ultimately benefits the owner and not the renter. Bottom line: Best to spend on a home you own than one you don't.

5.    Spin Master rightfully saw this as a chance to move into the big leagues and in so doing enhance their share price and revenue stream.

6.    Though the move is a good one, it is not without risks. Spin Master has been highly adept at creating and marketing its own brands. Licensing a major brand is not a part of the company's history and therefore brings an element of risk. 

The world is in a period of great change and the toy industry is, as well all know only too well, certainly not immune. There is more change to come.  We will have to do our best to manage around it until the new normal takes hold and we can catch our breath.


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