Hollywood blockbusters are becoming a bigger driver of toy sales – MarketWatch










Hollywood’s addiction to film franchises and tentpole blockbusters is more than just a boon for the box office, it’s a benefit to the toy industry as well.

The toy industry has become increasingly tethered to films and pre-existing entertainment properties. According to Goldman Sachs analyst Michael Ng, toys based on these properties are growing faster than non-licensed toys. From 2008 to 2015, these licensed toys made up 21% of toy sales, but contributed 41% of the growth.

In 2016, on the back of Walt Disney Co.’s












DIS, +0.36%










 “Star Wars: The Force Awakens” and Marvel superhero flicks, toy industry revenue grew 5%, reaching $20.4 billion, according to data from NPD Group.

Also read: Disney is betting big on ‘Star Wars’ merchandise with unboxing extravaganza

“Toys that are supported with story-driven content [like TV and movies] will continue to gain share as having distinct brands becomes more important due to increased toy competition and e-commerce growth,” Ng wrote in a note to clients. “Entertainment-backed toys help toy manufacturers differentiate themselves from generic toys by capitalizing on the latest theatrical and TV trends.”

Licensed toy sales grew 10% in 2014 and 2015, according to Ng, outpacing the 5% growth in total toy sales in 2014 and 6% growth in 2015. Film-related products are expected to be a focal point at this year’s industry toy fair, scheduled for Feb. 18 through Feb. 21 in New York.

















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Because of this growing focus on film and TV content in the industry, Goldman Sachs initiated coverage of Hasbro Inc. 












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 with a buy rating and $110 12-month price target, which represents a nearly 12% premium to Monday trading levels.

“Hasbro is a best-in-class toy company with a strong portfolio of entertainment-driven products including Marvel, Star Wars, Disney Princess and Transformers,” Ng wrote.
























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With seven Marvel films currently slated for release in 2018, three back-to-back “Transformer” movies through 2019 and two “Star Wars” films in the next two years the boys toy category should see strong revenue numbers, Ng wrote. And Hasbro’s Disney Princess line, which it snatched from Mattel Inc.












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 in 2015, is expected to benefit from a host of live-action remakes, including 2017’s “Beauty and the Beast” and “Mulan,” expected in November 2018.

Mattel, which Ng assigned a neutral rating and a $27 12-month target price, is in the midst of a turnaround effort. While Mattel brands, such as Barbie, American Girl and Fisher-Price should rejuvenate top-line growth, Ng said the company is bound to see increased competition from Hasbro’s Disney Princess brand.

Also see: Mattel’s earnings miss has some analysts questioning the company’s turnaround

Mattel’s film-related toys might not have the same longevity. Ng wrote that those brands should drive outsize growth in 2017, thanks to “Cars 3” and DC Comics films, but that may be the peak.

“We expect growth in Mattel’s entertainment portfolio to be largely driven by media franchises launched over the next several years,” NG wrote. “That said, 2017 may be peak revenue for the segment. ‘Cars 3’ likely will see a more gradual decline than a typical movie property, but ‘Jurassic World’ toys may help mitigate the decline.”































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