Insights

The Franchise Battle of Lego, Mattel, Hasbro & SpinMaster in the Streaming Wars

15 July, 2020

With the bankruptcy of Toys R US in 2019, toy manufacturers continue to lose the physical spaces for making impressions on the new generations of kids. Simultaneously, kids have become increasingly digitally active. Toy makers are adapting by investing more of their marketing efforts in the digital arena. Because TV viewing still makes up the majority of kids’ screen time, creating kids content has become a key route to their eyes, minds, and hearts. Read our primer in which we reveal how kids proactively seek out content digitally.

It is no surprise then, that in the last six months manufacturers Hasbro, Mattel, and Spin Master have revealed new content to be released out of collaborations with Netflix. In this analysis, Parrot Analytics uses demand to examine the frontier of children’s content in the battle among children’s toy makers and to outline sources of opportunities within the streaming wars.

3 Key Takeaways:

1. Streamers' partnerships with toy manufacturers are key to creating highly engaging content and resonating characters.

2. Toy manufacturers have barely scratched the surface of the kids content market owning 6% of the top global kids shows (linear or digital).

3. SVODS are ideal partners for toy manufacturers because increasingly the most in-demand digital originals are kids content.

The Franchise Battle of Lego, Mattel, Hasbro & SpinMaster in the Streaming Wars

The OTTs and children's toys manufacturers have become necessary allies in the battle for children's attention. OTTs and kids’ toys manufacturers are aligned in their goals to 1) create characters with whom children resonate, 2) increase children’s engagement with their content, and 3) globalize the reach of their products. Together, they aim to win the highest form of currency in the attention economy: interactivity.

How are the Streaming Wars Igniting the Kids Franchise Battle?

Kids content is an incredibly important frontier for the elite SVODs in the streaming wars: Netflix, Disney+, and HBO Max. Why?

1. Kids content is fundamental for increasing subscribers. We have found that Netflix’s children’s content has been highly related to its free conversions and gross conversion rates.

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Dramas were the only other genre to have the same relationship. While dramas are staples in Netflix’s catalog, it appears children’s content has also proven to be a valuable driver for subscriber acquisition. The same is likely true of family-oriented Disney+ and new incumbent HBOMax, which led with the Looney Toon Cartoons at launch.

2. Kids are Retainers. While each SVOD has unique platform-specific goals for monetizing children’s content, all agree children’s content can drive retention of subscribers. Children not only watch content, they rewatch it, and become attached to it. Their obsession with shows make them incredibly valuable consumers that are likely to increase CLVs (Customer Lifetime Value). Stated differently, children’s preferences can persuade parents to subscribe to a platform for years, reducing churn (i.e., those that unsubscribe).

3. Top Kids Content are Tentpoles. While children’s content may seem like a “niche” audience, children's titles are often amongst the top titles and serve as blockbuster hits (i.e., tentpoles) for almost all of the elite OTTs. As of today, Spongebob Squarepants on Amazon Prime, Steven Universe on Hulu, Star Wars: The Clone Wars on Disney+, Paw Patrol on Netflix, and Sesame Street now on HBOMax are all within the category of outstanding content -- they are at least 32x more in-demand than the average US TV series.

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Intense Competition: Why Streamers Need Lego, SpinMaster, Mattel and Hasbro?

As kids have become an increasingly important audience for streamers, there has never been more competition for kids attention.

Within the Streaming Wars, the newest entrants, Disney+ and HBOMax, have some of the most elite kids IP. These streamers not only bring new original kids content on their platforms, but also broadened kids content options with classic kids shows from the past. Linear channels, such as Nickelodeon, simultaneously continue to produce new series’ for kids with long-standing expertise in the area. Meanwhile, YouTube and TikTok stars increasingly provide the new generation of kids free user-generated entertaining content.

Hence, to win the kids frontier of the streaming wars, platforms need to be strategic.

Our data suggests, now it is critical to focus on making the “right” content. The intense competition has divided up kids attention, leaving platforms to face an uphill battle. As of June 2020, the current titles fulfilling the children’s digital space appear to be underperforming and experiencing relatively declining demand.

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How can SVODs beat out their competition? By creating stories that lead to greater engagement and interactivity.

The most valuable strategy in the streaming wars is continuing to convert passive viewers into active partakers in story telling. As stories are interacted with more frequently and passionately, the value of the consumption of content multiplies. For SVODs to carve out space in kids attentions within an extremely competitive arena, they need content that will inspire interactivity. Interactivity amongst kids occurs by playing with toys in which they can create new stories that build off of their favorite characters and stories. Playing can both prolong relationships to TV characters and maintain children’s attention between seasons.

These insights illuminate why the top OTTs are heavily investing in children’s content in order to carve out their own segment of the children’s frontier and why they are open to partnerships with toy makers. Now, let's consider the franchise owners and their existing content..

What’s the State of the Kids Franchise Content Battle?

The global toys market is projected to reach revenues of more than $120 billion by 2023, and expected to grow at a CAGR of around 4.5% in the next 4 years. Meanwhile, the current generation of children have developed with their favorite content and characters on the Internet. Thus, the kids franchise battle for content is happening on a global scale.

Thus, the “battling” streamers can offer toy manufacturers global reach as they too globalize their industry. The brand-recognition of beloved toy franchises — such as Barbies, Hot Wheels, My Little Pony dolls, and Legos — on Disney+ or Netflix have the opportunity to impact kids in Germany and Mexico in addition to the US and Canada.

But, what are the track records of these toy makers’ content?

Although Hasbro, Mattel, Spin Master, and Lego have entered the arena of TV to inspire more play, as of Q2 2020, they have only begun to scratch the surface. Combined they exclusively own 6% of the global top 550 children shows, which can be linear or digital originals.

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Importantly, the majority of content is not exclusively owned by either of these kids consumer product manufacturers. This produces a great deal of noise into the brand, content, and consumer product association. Exclusive ownership will be essential in the future as it provides key brand opportunities for the manufacturers and their streaming counterparts.

How do Lego, Spin Master, Mattel, & Hasbro’s content compare?

Within this 6%, we can examine the state of each of these toy manufacturers.

Is there a clear winner of the franchise battle?

While Hasbro has the greatest number of titles within the top 550 titles, Mattel’s titles have generated the greatest amount of demand in 2020. Below, we use each as a standard to which to compare others' success.

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Our findings indicate there are no clear winners (chart summary):

- Mattel, a newer incumbent into the space of kids content, may be the most advanced given its titles are over-performing.

- Hasbro’s more mature market is currently underperforming: while it contributes more titles at the top, these titles have less demand.

- Lego has few titles in the top 550, low demand, and is slightly underperforming

- Spin Master has neither the same total demand nor number of exclusive titles in the top 550 titles, yet its titles on average have the highest demand (see chart below).

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Thus, all four of the toy makers can aim to improve the presence and performance of their titles across the globe. In order to expand the presence of their exclusive franchises, they may need to reconsider their windowing options, shift their marketing strategy, and find new creative partners to make the next kids hit.

How Will the Franchises Ensure Their Content Breakthrough?

Kids toy manufacturers can not only aim to place their existing content on streaming platforms, but also partner with streamers to create new digital originals that can become local favorites and later global phenomenon.

Why should toy makers prioritize creating new digital originals?

The trends in the top US 500 titles at least suggest that the digital original kids market is growing fast. Kids digital originals have doubled their presence in the top shows in the last year. In other words, kids digital originals are gaining traction and stealing attention away from linear kids content.

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This suggests that digital originals created in partnership with Netflix, Hulu, HBOMax, and Disney+ are likely the best path to gaining more of kids’ attention at least in the US.

Understanding in which markets kids digital originals are increasingly of interest is key for prioritizing markets, titles, and platforms for partnerships. Beyond market reach and interest, platforms differ in the size of the opportunity they may provide based on the amount of on-platform competition amongst content.

Premiering a new title on an unsaturated platform, where there is less competition amongst kids content, can increase its likelihood to become a tentpole or blockbuster. Why? Streaming platforms that have a large catalog of kids content can ultimately overwhelm kids with options and divide the reach provided by the platform. Stated differently, they can deter viewers from seeking or choosing to engage in a title. This may be especially true among younger children who enjoy repetition and often have less of a craving for novelty.

Therefore, a key strategy is prioritizing or timing partnerships with streaming platforms by considering the degree of competition amongst kids titles on that platform.

As of June 2020, Hulu appears to have the greatest headroom or least competition amongst children's content on their platforms. While Hulu caters less frequently to children, its plans to launch internationally and increased success of its digital originals, make it a potentially strategic choice.

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Yet, it is important to note that Netflix and Amazon Prime Video cycle their licensed content on their platform. Thus, month-to-month their degree of saturation may vary.

While there are many other important factors to consider before Mattel, Hasbro, Lego or Spin Master prioritize partnerships, the level of competition in each market and platform provide key information for strategically placing or creating new titles.

Battles Collide

The franchise battle and the streaming wars have crossed into one another’s worlds. While SVODs look to the toy manufacturers for their expertise in creating engaging characters for kids, the toy manufacturers look to the SVODs to provide global reach and stories that will resonate with children. Together, their chances of winning in an increasingly saturated attention economy can grow exponentially as they multiply the impact of each others’ strengths.

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