Leading By Example

When the Toy Industry Association decided to move the October Fall Toy Preview to Dallas after multiple attempts to find a new showroom building in New York failed, it felt for many in the industry like the ultimate abandonment by their trade group. They'd be in Dallas with reluctance, they said at the time—but only because they had no choice but to follow the industry there.

Against such a backdrop, Carter Keithley may have been confronted with a bit more than he bargained for when he signed on nearly a year and a half ago to lead the Toy Industry Association as president, its top administrative staff position.

Not only was he entering an industry challenged by a variety of issues—globalization, retail consolidation, competition from consumer electronics and kids aging out product lines earlier—he would preside over the industry's partial move out of the only home it's ever known, the emotionally charged outcome of the failed search for a new toy center.

Keithley was also succeeding two controversial former presidents, the iron-handed David Miller and the outspoken Tom Conley, and taking over the reins of a fiercely independent—some would say factionalized—membership in an industry where consensus was almost always hard to come by.

Undoubtedly, some gave Keithley long odds for achieving tenure, much less success. Those odds may be changing. First, the Fall Toy Preview in Dallas played to positive reviews, even from some skeptics. The association's board was expected to endorse Dallas as the home of the fall show at its meeting in late October, according to those familiar with the sway of the discussions. Right now, negotiations with the Javits Center should be underway to settle on its future as the continuing home of February's Toy Fair beginning with the event's 2011 edition.

“To be only three years out on a show this size is not enough,” Keithley tells Playthings. “I'm inclined to think there's a certain inertia to want to stay in New York, but we need to test that out ... and we need to be sure that Javits isn't under massive construction.”

No less important than the shows, Keithley has led the TIA and the industry through the high-profile recalls of the past several months, winning praise for positioning the industry and its companies on the right side of children's safety issues.

All of it represents a sea change in the association's approach to its role within the trade and the national community at large. The TIA's tone has moderated since Keithley took over the day-to-day management. But while his willingness to stand up and take responsibility for the industry's behavior might seem to be good progress in the public eye, Keithley and the TIA continue to be confronted within the trade by a universe of companies that frequently questions its motives, representation and leadership.

Winning them over remains a daunting task, with increased membership—and therefore, influence and revenue—being the prize. TIA's budget is about $13.2 million this year, roughly flat with 2006. Seventy-five percent of its revenues come from trade shows, 20 percent from dues and 5 percent from other sources.

In Dallas, most key buyers and exhibitors showed—although some felt fewer retailers attended overall, and those that did attend semed to stay for shorter periods compared to the show in New York.

“The bottom line is, the show was a huge success, it's that simple,” Play Along president Jay Foreman, an earlier partisan in favor of a New York “toy district,” tells Playthings. “No doubt people, including me reluctantly, felt Dallas was more convenient all around. My overall feeling is that everyone will definitely want to go back to Dallas in 2008.” Just the same, Foreman also makes the case that the real cost of showing in Dallas (however that plays out) will preclude any cost savings versus had the show stayed in New York City.

“I've gotten maybe a dozen e-mails and they're quite positive, but with some issues—there are some things we've got to fix,” Keithley says, noting complaints regarding the market center's cell phone and WiFi service, and the show's confusing physical layout.

The long-term success of the Dallas show could go a long way toward resolving some of the issues and anger TIA has faced in recent years—certainly over the move out of New York but also extending back to the 1990s, when many of the showdowns among the industry's factions began to explode.

TIA's handling of this summer's toy recalls and their aftermath has also helped its cause. When he appeared before a U.S. Senate subcommittee to talk about toy safety in September, Keithley refused to blame Chinese factories for the recalls of lead-tainted playthings. Indeed, he took pains to make clear that his statements were not singling out any global source.

“For more than 30 years, working with our trusted suppliers in China, our industry has produced billions of high-quality toys that fully conform to our toy safety standards,” Keithley said, and went on to propose a series of broad initiatives intended to reassure lawmakers, regulators and the public that the toy industry will step up to its responsibility to protect the children it is charged with entertaining.

But even more surprising was Keithley's statement, reported from his appearance before the Consumer Product Safety Summit, that the toy industry needs to stand up: “While we welcome any additional layers of safety, the ultimate responsibility of safety of toys is on us,” he said.

It was a clear, unambiguous, non-defensive statement—something the industry just hasn't done before to the same extent. Intending to or not, the TIA's public relations apparatus has in the past come out swinging, sounding defensive and, at times, even combative when dealing with such issues.

“I have acquired a better understanding of the character of the industry; the fact that it is so fast moving that it is more akin to a fashion industry rather than a classic manufacturing industry,” Keithley tells Playthings. “Given that better perspective and understanding of the industry, I am more comfortable to be able to provide some leadership without having to ask for detailed guidance like I once did.”

But with fewer than 500 full members out of a base of more than 1,500 companies that commonly exhibit at Toy Fair (and there are undoubtedly more manufacturers beyond those), TIA still has a long way to go to win kudos from a trade that often hasn't seen the value of its leadership, doesn't understand its style and direction or, at worst, is suspicious and distrustful. Some still question whether TIA acts in the best interests of the entire trade or just those of the largest and most politically plugged-in toymakers.

One of the most common perceptions over the years—one to which the TIA remains hypersensitive and ardently disputes—is that it does the bidding of Hasbro and Mattel, which together command more than 40 percent of industry sales. And that perception exacerbates the suspicious nature of the business.

“There's a lack of leadership in the toy industry,” says Isaac Larian, CEO of MGA Entertainment, who's had a running legal battle with Mattel over his Bratz dolls. Clearly, Larian is not a member of the trade group. “[TIA] is a political organization because there are just a few people who control the TIA board. You pay dues based on the size of the company, so obviously Mattel has more control of the board. What kind of joke is that? Maybe we should go and start our own ITIA, the Independent Toy Industry Association.”

TIA and Mattel have for years flatly denied Larian's assertions as ridiculous. And many in and out of the industry commonly dismiss such complaints as an example of how red hot, and nasty, competition can be. But there may be just as many players who support his view. Mattel and Hasbro have representation, including some chairmanships, on virtually every TIA committee, including the critical nominating, finance and executive committees.

“The difficulty is that those two companies are so big and have such a huge presence, not only in TIA but in the industry, that the perception is that they are controlling what the association does,” Keithley admits. “In reality, eight of our 17 board members are from small companies. My officers—our chairman, Danny Grossman, and our immediate past chairman, Arnie Rubin, are both from smaller companies and they are constantly reminding me to be mindful of the needs and interests of the smaller companies.”

The industry's fierce competitiveness, particularly between Mattel and Hasbro, is legendary. According to one licensing executive, “We can't even get them to sit down in the same room for a preview screening—we have to do it separately. No other business we deal with is like that.”

“It's a very difficult environment in terms of reaching consensus,” Keithley adds of TIA's board. “I don't think it's political in terms of having factions on one side or another as much as it is having a board of very strong individuals with strong opinions. They're very bright, able people who have a depth of experience in this industry and they register their opinions.”

There are more than a few whispered complaints following some decisions, insiders say. And among the industry at-large, the arguments sometimes spill out. That's exactly what happened during the long and painful effort to find new showroom space in New York following the International Toy Center's (ITC) shut down. TIA was involved in the search, then withdrew after a site, 100 Church Street, was selected and its marketing begun during the fall show, but then was suddenly dropped from contention a week later.

“When you have companies ranging from $500,000 to $5 billion in revenue, the hope for consensus is silly,” offers analyst Sean McGowan, managing director at Wedbush Morgan. “But whether it's video games, computers, or home audio equipment, companies far bigger than the major toy companies have found that an open exhibition hall format can work. The main constituent is the buyer, and the only good solution is the one that works for the retailers.”

The search, which ultimately also involved two tenants' groups, another building on Eleventh Ave. and a handful of also-rans, degenerated at times into an acrimonious debate that sparked threats of litigation for liable and slander.

“I think it's incredible that these guys voice their squabbles so publicly and with so much apparent personal bitterness,” notes one long-time industry watcher. “It really reminds you that this industry is bifurcated in so many ways: Big companies versus little; East Coast versus West, or even the rest of the world; old guys versus young guys.”

Even beyond questions about leadership, consensus and fair representation of the entire industry, some in the industry often take pot shots at TIA on several fronts, including claims that: the associate member program offers a “second-class citizenship” to reps and retailers who are not permitted to vote; that in its never-ending bid for larger revenue streams, it has morphed into a trade show association, not a trade association; and that it has been unable to overcome the excesses and missteps of past.

“It's a good ol' boy network,” complains Alan Hess, president of Carerra, and a former board member and treasurer of TMA. “Everyone has a different idea of what they want and no one knows what they want. Until Carter got there, a lot of people really didn't care—they were there for their own interests.”

Are the complaints fair? These are issues common to many trade associations in many industries. Yet, the criticisms in the toy industry have periodically resulted in calls for breakaway shows or associations. While no serious threat has developed in recent years, the mere mention has succeeded at times in getting TIA's attention—and served as leverage on some critical issues, including the debate over the ITC.

Ironically, the TIA was purported to have been at the center of the decision that led to the ITC closing. The industry is rife with accounts of how the association went to ITC owner Anthony Malkin with a demand for a $2 million marketing fee to promote the building and Toy Fair. That fight, which led to the show's registration tables being set up in tents in Madison Square Park after TIA was banned from the ITC, figured in to Malkin's decision to dump the building, selling it to the Chetrit Group for a hefty $350 million.

“We would have liked to continue ownership but factors in the market affecting [the toy] industry and the TIA's interest in moving the shows to a venue which they would control and supplement their income, ruled otherwise,” Malkin wrote in a letter to a former toy tenant, obtained by Playthings. Those events form a large part of the anger and resentment that many in the industry harbor toward the TIA (and Malkin).

Part of Keithley's mission, as he sees it, is grounded in practical aspects and he seeks to not just change the perception about the way TIA serves its diverse constituencies—manufacturers, retailers, licensors, reps and others—but the realities. That has begun through a segmentation process similar to those being used among many marketers. He organized and launched an associate members' council last June, soliciting more voices to be brought into the process.

“We feel, quite frankly, that we've under served that constituency in the past and that we need to do a better job of earning the dues dollars from those people,” Keithley says. “We feel there is fundamentally a huge potential out there for associate members because we currently have only about 70 and we think we could have several hundred if we're doing the right job.”

TIA “hand picked” associates with experience in the various constituencies: Les Friedland of Friedland Associates and Allen Dreyfuss of RLA Marketing, both manufacturers' reps; Matt Nuccio of Design Edge and Bob Fuhrer from NextToy, representing the product and packaging design disciplines; and Jessica Dunn from licensor Disney, who last spring became the first associate to join TIA's board. But that's where the line remains drawn: Associate members will not be full voting members and there are no plans for a change.

“TIA, what used to be TMA, was conceived as an association for the manufacturers,” Keithley points out. “And without question, the manufacturers have a more clearly defined set of needs that are separate and special and particular to a manufacturing entity.”

In the meantime, Keithley is also organizing a toy retailers' council. The approach, however, also lends itself to criticism that it's still TMA with a newer name. “So far it is,” Keithley acknowledges. “And the leadership would have to consciously decide if it wants to change that and welcome others as full voting members. We're trying to evolve the association and reach out to these other constituencies and begin to 'live together.' We don't want to get married yet.”

In the meantime, Keithley says he also wants to thread a middle ground for the TIA, growing in professionalism, the scope of the various services it offers and, of course, membership. That will be particularly challenging for its small staff of 35, which will be tasked to expand absent broader participation. Keithley says the work of the association could easily command the efforts to 45 to 50 people.