MARVEL AND HASBRO JOIN FORCES, TOY BIZ WORLDWIDE LICENSE ENDS

[MattBrady]

Marvel and Hasbro today jointly announced that they would join forces, with Marvel granting Hasbro the license to produce toys (including action figures) and games based on the Marvel super hero universe. Characters and properties named in the announcement: Spider-Man, Fantastic Four, X-Men, Captain America, and Ghost Rider. Additionally, Hasbro will produce toys based on Spider-Man 3 and Spider-Man 4. Also announced – Toy Biz Worldwide will no longer produce Marvel toys. The move was apparently made, in part, to stabilize Marvel, financially, and de-link the company's earnings from the volatile toy market.

The deal, which will see its first products ship in January of 2007, is for five years, and guarantees Marvel $205 million in royalty and service fee payments over its term. The royalty Marvel will see from Hasbro, according to Marvel, will be lower than what it saw from Toy Biz Worldwide, though it plans to make up the difference by the increased sales of Hasbro’s Marvel product.

In a separate release, Marvel announced that it has terminated its license with Toy Biz Worldwide, planning to transition all toy business, apparently to Hasbro. The termination went into effect on December 31st, 2005, one year earlier than the scheduled termination date. According to Marvel: “As a result of the termination, in 2006 Marvel-branded action figures and other toys formerly produced by Toy Biz Worldwide will be produced by Marvel. Now, with full control over Marvel-branded toys produced for sale in 2006, Marvel will be in a better position to effect a smooth transition to Hasbro in areas such as toy development, manufacturing, shipping, and retail space. As a result of this early termination, Marvel will record a one-time cash charge of $13 million - $16 million in the fourth quarter of 2005 related to the early termination and reimbursed research and development expenses. The charge is not reflected in Marvel's financial guidance for 2005, last provided on November 9, 2005.”

Marvel's Chairman, Morton Handel, said in the release: "While Marvel will own any inventory produced for 2006, our policy of predominantly manufacturing to order should help mitigate our inventory risk. Commencing in 2007, a wide range of toy and game categories - including action figures, role play and preschool toys, board games and puzzles - will be produced by our new licensee, Hasbro. We are very excited by the business prospects we see in teaming with an industry leader."

The deal, and transition make sense for Marvel as, for years, Toy Biz has shown substantial volatility in terms of Marvel’s divisions, i.e., when a property is hot, the toys (and Toy Biz) do well, but when there is no hot property to base toys upon, the division does poorly, lowering the entire company's quarterly earnings. From the earnings statements, it seemed that Toy Biz had been unable to maintain a stable baseline in regards to toy sales. This move, which apparently seeks to move some of the toy production and distribution (and associated risks) to Hasbro, which, admittedly, ha a much larger machine in place to move toys into the market, given the manufacturer’s continued success with its Star Wars, GI Joe, and Transformers lines, and placement in the larger toy market.

That’s not, of course, to suggest that Hasbro is the loser here, as Marvel licenses are still popular, and can still justify relatively large shelf displays in retailer outlets. What the agreement between the two means for Toy Biz’s future, is still unknown. Marvel and Toy Biz Worldwide struck their deal in mid-2001 for a term of five and a half years, during which, Marvel received a 15% royalty on wholesale sales of toys and an additional "service fee" of 24.5% of wholesale sales in the U.S., and 10% for international sales, according to The Wall Street Journal. The Journal credited the Marvel/Toy Biz deal (which was seen as being highly favorable to Marvel, and that Toy Biz WW would clearly renegotiate at the end of its term) as one of main causes the company saw its licensing revenue skyrocket in the early part of the decade.

Though Toy Biz is owned by Marvel, the announcement made it clear that Marvel was ending the licensing agreement with Toy Biz Worldwide, which (though confusing) is not owned by Marvel, but rather, is a Hong Kong based licensee owned by Jeff Hsieh. TBWW would produce the figures, while they have been designed and marketed by Marvel.

Or, to further clarify the division, from the Toy Biz FAQ:

"Toy Biz is the in-house toy division of Marvel Enterprises, Inc.

"Marvel character-related toy product lines are manufactured and sold by Toy Biz Worldwide Ltd, under license from Marvel Characters Inc., a wholly owned subsidiary of Marvel Enterprises Inc. Toy Biz, a division of Marvel Enterprises Inc., is the sales representative for Toy Biz Worldwide. "

Thereby, while the announcement doesn't directly spell doom for Toy Biz itself, the Marvel division's future is unclear, given the lack of Toy Biz's invovlement in the Marvel/Hasbro deal.

Also unknown, but undoubtedly soon to be revealed, Hasbro's plans for its Marvel line, which could easily rival the company's Star Wars line in terms of depth and diversity of product.

The press releases read:

Hasbro Awarded Five-Year Strategic License to Marvel's Library of Over 5,000 Characters; Product Inspired by Spider-Man 3 Movie to be Among the First to Market

Hasbro, Inc. (NYSE:HAS) and Marvel Entertainment, Inc. (NYSE:MVL), announced today a license under which Marvel has granted Hasbro toy and game rights to its renowned Super Hero universe that includes franchises such as Spider-Man, Fantastic Four, X-Men and Captain America. Through the agreement, Hasbro has obtained the rights to develop products based on Marvel's globally-known universe of over 5,000 characters in a wide range of toy and game categories -- including action figures, role play and preschool toys, board games and puzzles. The agreement covers both the "classic" comic book look of the characters as well as product lines inspired by Marvel-themed movies.

The five-year license gives Hasbro the rights to bring Marvel Entertainment-based toy products to retail beginning January 1, 2007. Hasbro's first full line of products based on Marvel properties is expected to center on Ghost Rider and the highly-anticipated movie event, Spider-Man 3, scheduled for release on May 4, 2007. Marvel has also agreed to provide services to Hasbro in connection with the licensed toys. The license guarantees Marvel $205 million in royalty and service fee payments, of which $70 million would be payable on the theatrical release of Spider-Man 3 and $35 million upon the theatrical release of Spider-Man 4. In addition, the license can be extended past the five year term, dependent on the number of other entertainment properties released during that timeframe.

"We are particularly pleased with this arrangement as it fits strategically into our plan to continually develop our home-grown core brands while aligning ourselves selectively with the best licenses in the business," Alfred J. Verrecchia, President and Chief Executive Officer of Hasbro, Inc. said.

"Hasbro's multi-year agreement with Marvel provides Hasbro with proven properties in categories where we have been long-time industry leaders," said Brian Goldner, Hasbro's President, U.S. Toy Segment. "Marvel's properties are a `who's-who' in children's and family entertainment and provide Hasbro with many exciting opportunities in the years ahead."

Tim Rothwell, Worldwide President, Consumer Media Group, Marvel Entertainment, added, "Hasbro is renowned in the toy arena. It supports its key brands with heavy promotional and advertising campaigns and their innovation provides consumers with an unmatched retail experience. We believe aligning with Hasbro as our master toy and game partner sets the stage for us to further extend the global and domestic reach and image of the overall Marvel brand."

Bruno Maglione, President, Marvel International, commented, "As we continue the process of developing our brands through a heightened mix of coordinated multi-media and product activity it was important to engage with a partner who understands how to leverage and optimize that sort of evergreen franchise approach. Hasbro brings that experience to the table, and with it, the ability and reach to execute globally. It's a perfect match."

David Hargreaves, Chief Financial Officer of Hasbro, Inc, said, "We are very pleased with this deal as it provides Hasbro with incremental revenues in high margin categories and allows us to maintain an appropriate balance in our portfolio of core brands and strategic licenses."

Juli Boylan, Sr Vice President, Sony Pictures Consumer Products, the limited partner in Spider-Man Merchandising LP, stated, "We are thrilled to have Hasbro develop toys and games for Spider-Man 3. We are very proud of the Spider-Man film franchise and feel Hasbro will play a pivotal role in its continued success."

The license is conditioned on its clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Marvel Terminates Toy Biz License

Marvel Entertainment, Inc. (NYSE:MVL), announced today that is has terminated its licensing agreement with Toy Biz Worldwide Ltd., effective as of December 31, 2005, one year earlier than the license's scheduled termination date. As a result of the termination, in 2006 Marvel-branded action figures and other toys formerly produced by Toy Biz Worldwide will be produced by Marvel. Now, with full control over Marvel-branded toys produced for sale in 2006, Marvel will be in a better position to effect a smooth transition to Hasbro in areas such as toy development, manufacturing, shipping, and retail space. As a result of this early termination, Marvel will record a one-time cash charge of $13 million - $16 million in the fourth quarter of 2005 related to the early termination and reimbursed research and development expenses. The charge is not reflected in Marvel's financial guidance for 2005, last provided on November 9, 2005.

Marvel's Chairman, Morton Handel, commented, "While Marvel will own any inventory produced for 2006, our policy of predominantly
manufacturing to order should help mitigate our inventory risk Commencing in 2007, a wide range of toy and game categories - including action figures, role play and preschool toys, board games and puzzles - will be produced by our new licensee, Hasbro. We are very excited by the business prospects we see in teaming with an industry leader."

Additional Background on Hasbro License Agreement

The combined percentage royalty and fees to be received by Marvel from Hasbro will be generally lower than those paid by Toy Biz Worldwide, but Marvel believes that Hasbro's worldwide marketing, promotion and distribution strength should enhance the Marvel brand and Marvel-branded toy sales. In conjunction with the signing of the Hasbro license agreement, Marvel will receive a non-refundable advance of $100 million. There will be no immediate revenue recognition related to the advance payment.

The license is conditioned on its clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

[ostrogorsky]

That's a lot of money for a minimum advance guarantee.

-=O=-

[Cyphon]

Makes sense, but still seems kinda weird, considering Marvel and Toy Biz are sister companies.

Wonder what this will mean for lines like Marvel Legends?

[Peter Geddes]

Yay for the inevitable Marvel vs Transformers comic and game!!

Okay - So the article doesn't really touch upon comics much, but it's GOTTA happen!

[jdurdan]

It's Official. Marvel has lost their mind and Toy Collectors have basically lost the Marvel Legends line.

Hasbro's track record on Super Hero toys is HORRIBLE.

One begins to wonder if Marvel has ANY clue as to what they are doing.

Jim

[joefixit2]

So does this mean that Marvel Legends and Spidey Classics will cease production? Man, I hope not. I don't see that level of articulation and detail with any other figures today, including Hasbro. This is a disappointment for me.

[jdurdan]

I would think that as of now ToyBiz is going to start scaling back production of new items. For example, the latest wave of Marvel Legends, may be the last. Ones that have been shown as future assortments will no doubt be canceled.

I think it's safe to say that this is not going to be a good year for Marvel toys.

[Police-dude]

Originally posted by jdurdan
It's Official. Marvel has lost their mind and Toy Collectors have basically lost the Marvel Legends line.
Hasbro's track record on Super Hero toys is HORRIBLE.

...Dude, chill. There Toys and you are like 30 ok .

[RedBaron]

Originally posted by jdurdan
It's Official. Marvel has lost their mind and Toy Collectors have basically lost the Marvel Legends line.

Hasbro's track record on Super Hero toys is HORRIBLE.

One begins to wonder if Marvel has ANY clue as to what they are doing.

Jim

I have to agree. The Marvel Legends toys have been a success right? If not overwhelmingly commercially then at least solidly with fans of action figures. Marvel Legends even made Mattel step up to the plate with their DC line.

[Marchie77]

no more legends or select?!?

i hope thats not the case....

[Deathangel]

i really, really hope that hasbro continue the marvel legends/spider-man classics/FF classics/x-men classics lines.
if not, well, then i dont suspect i will be picking up any of the figures hasbro produces, unless they are in the same scale.
i've seen what hasbro UK can do, and if their distribution of marvel figures is anything like their distribution of transformers then we UKers will be buying almost exclusively from online stores, once again practically completing lines before they are even released here, much like the current sitaution with galaxy force/cybertron.

[shadow-ray]

Am I the only one thinking a new (old) comics can now be brought back?

A Certain Silver Spaceknight named Rom?

[RotSman]

Is it too much to hope that this might lead to Wizards of the Coast reviving the old TSR Marvel Superheroes RPG? I love that game, and my books are almost 20 years old....

[Peter Geddes]

Originally posted by RotSman
Is it too much to hope that this might lead to Wizards of the Coast reviving the old TSR Marvel Superheroes RPG? I love that game, and my books are almost 20 years old....

Hopefully. Although the RPGing element was a bit...'thin', the actual battles you could enact were great fun.

...Especially if you played either Thor or Captain Marvel, IIRC!!

[Spaz_Monkey]

I'm not holding my breath on this one. At this point, I'm expecting the worse. I have no faith whatsoever in the future of Marvel's figures.

[Quay Lewd]

When I first saw the Marvel Legends toys I thought they were pretty grotesque - all grimaces, bulging eyes and veins. But I warmed up to them as the line expanded - and then I got hooked.

I'm not a completist and almost all of mine have been freed of their packaging (*gasp!*). But I'm worried about the ML line with this news. I was really looking forward to some of the upcoming series (I'll be superamalgamated: a Doc Savage figure!!!).

Ah well, the hunt was fun while it lasted. My small town WalMart always seemed to have the variants that were whisked away in the bigger city stores.

I doubt I'll bother with any future toys as I feel pretty silly about buying them at my age.

[MicroZone]

Originally posted by joefixit2
So does this mean that Marvel Legends and Spidey Classics will cease production?

did you fraking people even read the posts before you start bitching anymore?

The current designers will continue to make & own the molds, and decide what to make. Hasbro will manufacture and distribute the toys.

[BradyKiller]

Maybe I should get Rich Johnson's job....

http://www.newsarama.com/forums/show...threadid=54762

[lex luthor]

Originally posted by BradyKiller
Maybe I should get Rich Johnson's job....

http://www.newsarama.com/forums/show...threadid=54762

And I agree with you.

When I read the title of this article I immediatley thought of the thread you started a few days before this story broke. Good job.

[Michael P]

Originally posted by MicroZone
did you fraking people even read the posts before you start bitching anymore?

The current designers will continue to make & own the molds, and decide what to make. Hasbro will manufacture and distribute the toys.

That's actually not what it says at all.

While I doubt Hasbro will be able to (or want to) call the figures "Marvel Legends," there's no reason why they wouldn't produce a similar line and call it something else.

[mauer]

Originally posted by MattBrady
Hasbro will produce toys based on Spider-Man 3 and Spider-Man 4.

Is this the first confirmation that there is going to be a Spider-Man 4? Is anyone else afraid they're going to wear this concept down like they did with the Batman Films of the 90's?

[jdurdan]

I'll trade you 3 Hasbro Neon Green Batman figures for the soon to be released mauve and yellow Spider-Man in Chain Mail Armor.


Jim

[jedifish]

I wonder if that's why we've seen 3 waves of Marvel Legends hit the US in November and December.

[Nobody]

I guess I'm the only person that hated the Toy Biz over-articulated clunky and broken-looking figures, and am looking forward to seeing what Hasbro does with it.

[User Name]

Originally posted by mauer
Is this the first confirmation that there is going to be a Spider-Man 4? Is anyone else afraid they're going to wear this concept down like they did with the Batman Films of the 90's?

As long as Joel Schumaker doesn't do Spider-Man 4, I'll be fine.

(you may begin the nipple jokes now)