These Are Not The Toys You Are Looking For

7th October, 2015. Posted by Mr Eminence

As we come off a summer where an average Jurassic World set the record with a $524.4M global opening and a record $1B haul in 13 days (who knew the franchise was that popular)— the fastest film to cross that mark — experts believe the seventh Star Wars film, a long-anticipated sequel to 1983’s Return Of The Jedi, will surpass the dinosaurs’ feat and recoup its estimated $200M production cost in historic time.

Star Wars: The Force Awakens won’t open until December 18. But this past September 4^th the public will see the start of an onslaught for a key part of Disney’s effort to build Star Wars Inc. into a commercial force unlike anything Hollywood has ever seen.

The entertainment giant will team with toy and merchandise manufacturers and retailers in an unprecedented collection of Internet and store-based events to introduce and sell consumer products. It gained the moniker “Force Friday.”

“Star Wars toys have always played an important role in how our fans interact with the saga,” Lucasfilm president Kathleen Kennedy says. The new products “will continue that tradition.”

Force Friday was introduced by Disney via video stream on its Star Wars YouTube channel showing personalities from its Maker Studios programs unboxing Star Wars-related toys and other merchandise. The events took place across the globe beginning in Australia, Japan, and South Korea before moving to Europe, Latin America, and the U.S.

Retailers are already doing their part to turn this into the mega-event Disney envisaged: Toys “R” Us, Target, Asda’s parent company Walmart, and World of Disney stores began selling Star Wars merchandise shortly after midnight on Friday. Toy maker Hasbro is the leading manufacturer with other products coming from game producer Electronic Arts, card company Topps, Rubie’s Costumes, Lego, and Tobar novelty toys. Others are expected to offer an array of electronic devices.

Primary sales are going to be the domain of collectors and adults with a soft spot for Star Wars. These buyers are set to dominate the initial sales. Disney’s initial products may include a lot of crafts, artwork, clothing including a very nice set of quilts from heritage brand Pendleton costing a mere $1500 for the set.

Toys and other kids’ items should pick up steam as we approach the holiday season. Hasbro has a lot of skin in that game. The toy company guaranteed Disney as much as $225 million through 2020 back in 2013 when the companies revamped their merchandising alliance to account for the Lucasfilm deal and Star Wars. It sees Force Friday as just the beginning of an ongoing marketing campaign.

“I’ve never heard of launching a toy line with all guns blazing three months before a [movie] premiere,” says Marty Brochstein of LIMA – the International Licensing Industry Merchandisers’ Association. Comparing it “to a Harry Potter book or an Apple iPhone launch.”

Disney, manufacturers, and retailers need to pull out all the stops.

Disney paid $4.1 billion in stock and cash in 2012 for director George Lucas’ Lucasfilm– which owned Star Wars. For accounting purposes, the entertainment giant figures the franchise will have what’s being termed a “useful life” of 40 years.

Key to the effort is product sales which it is hoped will keep the franchise thriving for many years to come. Consumers have already spent more than $20 billion on Star Wars merchandise since 1977 when the first film was released. The licensed product efforts were successful, despite a famously bad bet in 1999 that fans would buy lots of products based on Jar Jar Binks argueably one of the worst characters from the canon.

One analyst, Macquarie Securities’ Tim Nollen estimates the film “could generate $5 billion in consumer merchandise sales in its first year of release, assuming it does better than Cars 2’s $3 billion.” After the revenue for retail and merchandise partners, he estimated that “this would easily net Disney about $500 million in licensing and retail revenue.”

His assumptions predict a higher than usual licensing fee for toys and products, however. “Disney does not disclose its licensed revenue share per product and/or brand. However, in fiscal year 2014, Disney earned $2.54 billion in licensing and publishing revenue, as compared to the $45.2 billion total retail sales of Disney’s licensed products,” representing a licensing fee of approximately 6 percent, the analyst wrote. “Given the Star Wars brand, we estimate that Disney may be able to earn a higher licensing fee, perhaps closer to 10 percent.”

But he lauded the conglomerate for its planned reveal of the Star Wars merchandise. “In true Disney fashion, the company is making this a media event with an 18-hour unveiling of products on YouTube,” Nollen wrote. “We also estimate the movie itself should gross about $2 billion at the global box office, netting nearly $1.2 billion in revenue for the company.” This would put the film at No. 3 in the all-time box-office ranking behind Avatar and Titanic.

However, not all that $5 billion would be going to Disney. If it did, that would cover the $4 billion that Disney spent on Lucasfilm. Revenue from all these sales has to go to retail and merchandise partners first, but even after all the numbers are crunched, assuming The Force Awakens merchandise pulls in $5 billion as projected, Disney would still make $500 million in licensing and retail revenue.

And that’s just after a single movie. This trend will continue with each and every Star Wars movie that comes out every year, though I would imagine that they’ll never top the excitement of The Force Awakens. However, these numbers certainly aren’t a guarantee, as this is just a prediction. The analyst says:

If he’s right, then it suggests Disney’s commanding an extraordinary 20+% royalty rate on the wholesale price of the licensed goods, which typically run close to half of retail, which isn’t bad at all.

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