He's figured it out

Playthings recently had the opportunity to chat with Todd McFarlane of McFarlane Toys, Tempe, Ariz., about the action figure market and the philosophies that drive his company. In an extensive interview, McFarlane discusses the strategies around his success and the future direction of his company.

Playthings: Is the marketplace for highly detailed action figures growing, shrinking, stable? What's your take?

Todd McFarlane: I think, in reality, the market is in perpetual flux. And the reason I say that is in the sort of collector-based lines we have, if you give it that definition, there are very few things that have longevity. Star Wars is one of them, maybe some of the stuff Marvel has done over the years, but you can almost count on your fingers the properties that have achieved longevity. There have been some starts and stops on the way [with properties], but they are few. Like us, we are in our tenth series of football—do I think there are some long-time fans there? Yes. Do I hope for some new fans? All the time.

But for something based on a movie or a TV show, it comes and goes. You're just grabbing the moment; you're not really getting any Batman or Star Wars follow-up from it. You really don't know who the fan is, and probably never will.

Playthings: How do your protect yourself from having too many products that turn out to be just temporary hot market items?

TM: The big answer is you can't insulate yourself from a crash, but there are a couple of things we do have in our control. [Mainly], don't go public because that forces you to maximize return; you sell and gouge pricing-wise, and you have to put a ton of product out there. The big boys can do it because they have 10,000 other items that they can sort of allow the failures. They have other items that will float their boat. But for smaller companies like me, I just can do it.

One of the conversations that I had with the sports people was about me not being a public company. So, this may sound kind of weird, but my job is not to maximize [profit] every single waking second, because if I do that I think it is going to hurt long term -growth and or stability.

Playthings: What is the most difficult part of your business?

TM: The big hurdle for us just getting product to shelf. The art is actually the easy part. “Wow, look at my art.” Now that you have art, what are we going to do? Go to Wal-Mart, Target and Kmart and say “put this on the shelf.” Then they will just push something aside? That's the constant battle.

Because we are a small company, every item that sells is our resume. If I get three lines in a row that fail, then [the buyers] have a serious talk with me. If I have three that sell, they say, “Hey, Todd, what else do you have.”

The business part is necessary, though. Do I do it with a smile on my face? What are you out of your mind? When I'm sitting in a bankers meeting would I rather be drawing? Yeah. But I also know that if I don't do this business stuff, that drawing will never see the light of day. It's all about [getting my art to the consumer]

To me the consumer is the key. That's my audience. Wal-Mart's just somebody in between us. What am I going to do? What am I going to say? How am I going to act so that the consumer gets the product? And then it's just a dance.

Playthings: Where do you see McFarlane Toys' future growth coming from?

TM: Sports. The growth can come from that by just going into different sports. [For example], we haven't done things like some of the old boxing guys, or some of the hot golfers, or whomever is a hot athlete in some sport. There's still potential there.

The growth on a day-to-day basis comes in the performance of the athletes themselves. So somebody sets some kind of big record and the media gets into it and the guy has an MVP year—bam! You've got something hot. A new player comes into the league and all of a sudden—boom!

Playthings: If all your properties except sports dried up, would you still be in business?

TM: Probably not with the same size staff we have today. Sports is probably pushing 40-50 percent [of our business] today. The nice thing about the sports is that it regenerates itself from year to year.

A new hot player, an exciting rookie or an MVP—it won't just go away like a movie property, where you have limited time to cash in while the movie is hot.