Star Wars: The Toy Story

Moviemakers and retailers have found the formula.

Box Office Hits

Highest-grossing movie franchise of all time in the US, adjusted for inflation

Source: Box Office Mojo

It's no surprise that "Star Wars: The Force Awakens" is expected to produce $9.6 billion in revenue from worldwide ticket sales, merchandise and video games in just its first year. Generations of Star Wars fans have made it the second-highest-grossing movie franchise of all time, after James Bond (adjusted for inflation). 

But not all box-office hits spur the $5 billion in merchandise sales Star Wars is expected to generate in its first year of release through everything from light sabers and robots to eyeliner and cereal. James Bond, Jurassic Park, Shrek, and Lord of the Rings movies are among the ten highest-grossing franchises at the box office, adjusted for inflation, but didn't make a dent in sales of licensed merchandise, according to The Licensing Letter, a trade newsletter.

Cashing In

Global Retail Sales of Licensed Merchandise

Source: The Licensing Letter

Note: 2013 data not available for Frozen since it came out at the end of that year

So what are the ingredients that help a multi-picture franchise make money beyond the box office?

The biggest factor is the audience's age, according to Karina Masolova, managing editor of The Licensing Letter. Toys are the biggest category for licensing, but a kid-friendly movie can also spur licensed clothes, video games, costumes, and even toothpaste, as children want everything they own to be branded with their favorite characters. "It's not like I'm running out to buy a James Bond pen," Masolova said. A franchise aimed at older children, like Harry Potter and Twilight, may spur fewer toy sales, but can make that up in video games. 

Gender is an evolving component of sales potential, according to Oppenheimer toy analyst Sean McGowan. Retailers once clearly divided toy aisles between boys and girls, with action figures in one and dolls in the other. But that's been changing as stores such as Target get rid of gendered aisles and movie studios such as Disney play up strong female characters to attract women and girls. 

A movie's global appeal is another factor. Toy sales grow faster in Asia and Latin America than in the U.S., McGowan said. That's why movie studios are deliberately putting well-known foreign actors in movies and having scenes shot in iconic locations around the world, he said. 

Global Growth

Toy Sales By Region

Source: Jefferies, Euromonitor

How "toyetic" something is -- the industry term for how easy it is to turn a movie feature into a toy -- comes down to how fans relate to the story line and characters. Many children want to be superheroes like Spider-Man or princesses like Elsa (big merchandise hits), but few want to be Shrek (a merchandise flop). Gadgets like Spider-Man's web-blaster and Star Wars light sabers encourage role-playing. Nostalgia attached to some franchises -- Star Wars in particular -- also spurs parents to want to buy the toys they had as kids for their own children. 

Another big factor in a franchise's merchandising success has to do with how willing manufacturers and retailers are to take a chance on the movie property, as licensed toys become a larger part of their business. Since 2008, licensed content has grown at 11 times the rate of non-licensed content for toy and game sales, according to Jefferies. 

License To Sell

Mix Of Toys and Games Market From Licensed Content, As a Percentage Of Total

Source: Euromonitor, Jefferies

Manufacturers and retailers were initially cautious about the new, unproven characters in Frozen, until the runaway hit spurred costumes and toys to fly off the shelves. Retailers didn't stock up on Frozen toys until well after the movie's November 2013 release. It wasn't until a year later that Frozen knocked Barbie off the top holiday toy spot, bringing in more than $530 million in toy sales in 2014 alone, according to NPD. Jefferies said Frozen remains the most popular toy franchise for girls this holiday season and will keep a top spot as toy makers plan for a 2016 sequel.

Next year, Hasbro will take over the Frozen and Disney princess licenses from Mattel, a deal that could drive 5 to 10 percent in incremental revenue growth for 2016 alone, according to Jefferies. It's worth noting that Hasbro has only meaningfully outperformed the broader toy industry in three of the past 12 years -- 2007, 2009, and 2014. All three happened to be years in which other top licensed products, such as the Transformers, were box office hits. 

A preview of 2016 and 2017 movie lineups reveals movie studios are playing right into the hands of toy makers and sellers. Coming up are new films from kid-friendly franchises including Ghostbusters, Power Rangers, Teenage Mutant Ninja Turtles, The Little Mermaid, Pirates of the Caribbean, Spider-Man, Avatar, Transformers and Toy Story.

Like the movies, making and selling toys is an uncertain business. There's a reason these industries keep going back to safe bets.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Shelly Banjo in New York at

    To contact the editor responsible for this story:
    Mark Gongloff at

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