Meet the Street: This Season's Toy Story

Harry Potter and Monsters, Inc. are working their magic on the toy industry.

Expectations for toy sales around these two expected blockbuster movies have been among the factors that have driven the stock prices of a couple of toy makers this year. Hasbro(HAS), which owns the master license for toys based on Monsters. Inc., is up 60% this year, while Mattel(MAT), which owns the master license for toys based on the upcoming Harry Potter movie, has risen 32% so far.

Here to discuss the impact of these films on the toy world is Chris Byrne, otherwise known as "The Toy Guy." Over the past 22 years, Byrne has held several marketing, research and analysis positions in the toy industry and is currently the editor of trade publication The Toy Report. He has spotted a variety of trends and top toys early on, including Tickle Me Elmo and Furby. Byrne's toy reviews can be found on his Web site.

TSC: Who owns the toy licenses for Monsters, Inc. and Harry Potter?

Byrne: Hasbro is the master licensee (meaning it can give sublicenses) for Monsters, Inc., and Mattel is the master licensee for Harry Potter.

These days, companies aren't wedded to the idea of having one toy licensee responsible for every product under the sun. They are calling on the expertise of different toy manufacturers to make things work. Hasbro, for example, is a sublicensee for some of the Harry Potter stuff.

Chris Byrne Editor, The Toy Report

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TSC: What are the unique features of these films for the toy industry?

Byrne: It's been a long time since a movie has appealed almost equally to both genders, as Monsters, Inc. and Harry Potter do. The difference is the Harry Potter player is going to be slightly older and will know the book. Monsters, Inc.'s audience is going to be slightly younger.

TSC: Can you describe the marketing strategies for toys for Monsters, Inc. and Harry Potter?

Byrne: Hasbro has taken a more traditional approach by focusing on the characters, which are what drive Monsters, Inc. They've been very creative, using their Play-Doh product to let kids make monsters and squash them. They've got characters in collectible sizes and bigger plush figures, too.

Mattel has come up with some wonderful products for Harry Potter, such as a levitating challenge game. Kids have responded most strongly to the toys that make them feel like they are a part of the story. They don't want to play with Harry Potter; they want to be Harry Potter.

TSC: What kinds of changes has the toy industry undergone recently?

Byrne: The industry has been streamlining. Toys R Us (TOY) announced about a year ago that they were streamlining their inventory practices. So the industry has responded to it. We're going back to where we were in the 1960s, when there were fewer products driving greater volumes.

TSC: What kinds of changes have Hasbro and Mattel undergone?

Byrne: Beyond Monsters, Inc., Hasbro has Transformers, Lite-Brite, Play-Doh and GI Joe. They have gone through a recent reorganization to streamline. All of these things, plus the momentum of good products, have driven the stock up. It's always risky when you put the fate of a publicly traded company in the hands of a 6-year-old. But that's what these companies do.

Mattel has also been reorganizing. I don't know them as well, because they're on the West Coast, so I don't spend as much time with them. But Harry Potter is doing really well. Fisher-Price is also strong. Barbie is holding her own. Mattel has a lot of equity in its established brands, which gives them deep pockets to work on projects like Harry Potter.

TSC: Given the buzz about these films, do you think it will be a record year for toys?

Byrne: These movies are really what we call "toyetic," in as much as Harry Potter is really a movie that kids want to play. Movie toys are successful when the characters and the movies are so compelling that children want to integrate elements of the stories into their play. Both Monsters, Inc. and Harry Potter are movies that are very imaginative and lend themselves well to toys.

TSC: How will Sept. 11 affect toy sales in the holiday season?

Byrne: Sept. 11 has put into high gear trends that we've been watching for a couple of years. Parents have started to give fewer presents for the fourth-quarter holidays. They've been seeing that their kids had so many toys and not enough time to play with all of them.

That said, parents are going to buy for their kids this year. We have an extra week between Thanksgiving and Christmas this year. So, we think they're going to buy later. There's also uncertainty about the job market. The weekends of Dec. 15 and Dec. 22 are going to be the deciding weekends.

(Editor's Note: This interview was edited for clarity and length.)

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