Hot Toys Article - Star Wars License cost over 6 figures to obtain

[Pixelpiper]

Royalty rates are also probably based on sales, aka the wholesale price, not MSRP. According to the WSJ in an old article from 1997 (Toy Makers Offer the Moon For New 'Star Wars' Licenses - WSJ) rates were already estimated at between 12 and 14% before the new deals were made for the prequels. More speculation had wild offers from Mattel pushing rates up to 20% during negotiations.

BOM & production, $50, wholesale for $100, $20 goes to LFL. 60% margin, not bad. Licensing fees will increase for direct sales, but so will the margin. Example: $50 -> $200, $40 to LFL. 320% margin.

 

[SwedishHeat]

The run sizes are probably much higher. It's not really worth doing a licensed 1:6 figure unless you do at least 2000 and I'd imagine characters like stormtroopers the numbers are much higher. And Star Wars is the most expensive license, but I'd be surprised if it was as high as 20%, although that is conceivable.

I've only worked on a few licenses, some TV shows were 10%, but bigger franchises (video games) were 20%. When you're a big player, you can probably negotiate that, we couldn't, so I just go with what I know.

Run sizes, again I only have the foggiest clue. SSC's Boba Fett was 5,000, and that was at $160. As price goes up, qty sold goes down, just a basic economic principle (yes, I understand there's caveats there). Budget Stark said the Stormtroopers weren't very popular. I also know that if you're making 10,000 pieces your manufacturing cost is going to drop by a good margin, and I don't think at 10,000 pieces, a Darth Vader is still going to be $300. I know what things cost to make when they're around 1,000-2,000 pieces, so I just reversed the logic. In 2012, a licensed TV show character at 1,000 pieces was going to retail for $175, and it wouldn't have been very good. . . or at least the quality it needed to be for us to sell those 1,000 pieces. It just wouldn't have been a good value in the marketplace.

To be honest, I'm completely confounded by production quantities. On one hand, I know that as expensive as these things are, there can't be that many people out there buying them. I just can't wrap my brain around Hot Toys selling 6,000 Igors, as niche as that thing is, I can barely imagine them selling 1,000. At the same time, as intricate and detailed as they are, the cost to make them has got to be astronomical, unless the quantities are so high, that they can drive unit production cost down. At the same time, I was looking at it from a US-centric perspective, trying to pay American salaries, and it just wasn't worth it. If I was living somewhere, in which our cost of living was much less, it's easier to make it work.

I adjusted the royalty rate from 20% to 14%, and added 1000 pieces to all the quantities and came up with $587,300, so pretty much the same number. In any case, even if the number was 7 figures, HT could easily make it.

Royalty rates are also probably based on sales, aka the wholesale price, not MSRP.

My calculations reflect that.

20% * $110 = $22

 

[Pixelpiper]

My calculations reflect that.

You're right, they do. If HT isn't producing 5000 Stormtroopers, I'd be surprised. I don't know how many of these things get produced either, just guessing. Sideshow changes and increases their edition sizes all the time - and that's for the ones they even list a number for. Even their Dewback, which was a very niche item, had an expanded edition size - listed at 3500 on the site now, but I can't remember if it started at 2500 or if they took it to over 4500 (they were serialized on the base).

Trying to amortize tooling on low production numbers is a big challenge and definitely responsible for higher prices of collectibles versus mass-market toys. The manufacturers still get some discounting based on their cumulative production capacity with many common resources (plastic granules, screws, etc.), mold re-use where possible, etc. But sometimes there's that odd-ball piece you have to wonder about, such as Sideshow's Probe Droid - that thing has a crazy number of moulded parts which adds up to a significant tooling cost. Because of the lower run rate you can get away with cheaper molds that won't last 10k units, but still, that's a lot of moulds for all those different parts. What would cost Hasbro $10-20 suddenly costs a company like Sideshow $100+ (amortized, not strictly BOM and excluding any licensing).

Fascinating, but there's always going to b a lot of speculation. No company is going to break everything down for all to see, whether they're public or private.

Personal note: If anyone is involved in production manufacturing and injection mould making (not necessarily toy based), drop me a PM.

 

[Qrest Fourstar]

So they paid something in the millions last year for the license and are still offering Obi-Wan for less than SSC's X-Wing Luke.

I'm actually thrilled to know that they paid through the nose for this license. Guarantees that they won't stop after 6-8 figures.

 

[Pixelpiper]

Oops, forgot about this part.

Budget Stark said the Stormtroopers weren't very popular

Nice guy, but not a SW insider by any means. That quote, which has been repeated numerous times, is also taken out of context. SW itself is not as popular in Asia as it is elsewhere in the world, he wasn't speaking about North America. I'd argue that Stormtroopers are one of the most popular "characters" from all of Star Wars and I'm sure these figures will sell very well. $200/ea is a little rich, so I'd expect that to be the driving factor limiting sales, not the popularity of the character. To increase sales in Asia they should probably think about a gold edition.

IMO, the Stormtrooper is at least as Iconic as Darth Vader. Either can stand on its own as universally accepted icons of "Star Wars"

 

[SwedishHeat]

Nice guy, but not a SW insider by any means. That quote, which has been repeated numerous times, is also taken out of context.

Agreed. . . my intent was to be conservative in my estimates, which still showed that Hot Toys could comfortably satisfy the royalty requirements of the license.

At "6 figures" they can make that in one year, at "7 figures" they can make it in two years.

 

[ebor]

Who's to say how many figures Hot Toys will make, I bet the farm they delve into 1:12 scale. Imagine the ships, diorama possibilities. Imagine the cost.

 

[Invictus Sol]

Yep, I'm really looking forward to HT making some ships in 1:12 scale, where appropriate (some might have to be smaller still). I think it's a nice scale to integrate into displays with 1:6 figures (like for instance, Boba Fett with a ~1:12 Slave I), while still being large enough to have a ton of details. I'd be really surprised if we didn't see ships from HT, given TDKR got the Bat.

 

[Pixelpiper]

Who's to say how many figures Hot Toys will make, I bet the farm they delve into 1:12 scale. Imagine the ships, diorama possibilities. Imagine the cost.

They announced having only a license for 1/6 and 1/4 collectibles.

 

[ebor]

They announced having only a license for 1/6 and 1/4 collectibles.

Damn, my wallet just gave a huge sigh of relief. My inner child cried a little.

 

[Invictus Sol]

They announced having only a license for 1/6 and 1/4 collectibles.

With Batman, though, do they have a specific "1:12" license or is it just something they hammered out on the side for vehicles? No-one's better placed than HT to make a killing on SW vehicles. Even once I feel satisfied with characters and can drop out of 1:6, I'll want those vehicles. Doubt they or Disney will leave that potential cash on the table.

Damn, my wallet just gave a huge sigh of relief. My inner child cried a little.

Really wanted a couple 1:12 TIEs and Slave I.

 

[Pixelpiper]

No idea about Batman, I'm just referencing what they announced for SW. Hasbro are still doing 1:12 figures, among others as well. WRT to ships, aren't there already a few companies doing high end SW vehicle collectibles? That's not really my thing, so I don't follow it, but I'm sure I've seen a lot of high end ships in people's galleries before - can't be certain of scale though.

 

[Taibhse]

No idea about Batman, I'm just referencing what they announced for SW. Hasbro are still doing 1:12 figures, among others as well. WRT to ships, aren't there already a few companies doing high end SW vehicle collectibles? That's not really my thing, so I don't follow it, but I'm sure I've seen a lot of high end ships in people's galleries before - can't be certain of scale though.

I think a lot of those vehicles were made by Master Replicas or eFX, and were copies of the ILM models.. not too mention eye-wateringly expensive now, on the aftermarket.. if eFX still have that licence (they appear to have a Millenium Falcon 'in development' according to their website), then it might be more complicated for Hot Toys to make SW vehicles.

 

[Niltusk]

The only 6" Star Wars I got was Fett and Troopers, nothing else interested me enough, but if HT did 6" Star Wars, I'd be all over it, especially if it looked half as nice as 3A's Fett.I know cost is a factor, but I would have taken the 50 to 60 buck Fett over the Hasbro one.