When Hasbro's Kenner division re-launched 3¾ inch Star Wars figures in 1995, it ushered in the age of the action figure collector. It was a time when comic book speculation had been waning and those in the nostalgia market began turning their attention to old '70s favorites, including original Star Wars toys and Mego superheroes. Many re-launches followed—12-inch G.I. Joe, He-man and the Masters of the Universe, Transformers—in what came to be a fairly predictable pattern; so predictable, in fact, that it got its own name: the "20-year rule." Its tenet: Twenty years after an original children's toy phenomenon, the 20- and 30-somethings who first played with those toys as children will need something to spend their new disposable income on. Next thing you know, nostalgia cashes in.

The toy business will need to rewrite the 20-year rule, because barely 15 years later, Hasbro's G.I. Joe is re-launching again (this time tied into a huge Hollywood movie), He-man is hot on Mattel's collector's site, MattyCollector.com, and Transformers—whose animated movie in 1986 doomed the franchise for some fans—has taken over the summer of 2009 thanks to the sequel to 2007's live-action, explosives-heavy blockbuster. Star Wars, meanwhile, hasn't needed a re-launch at all. The prequels, novels and last year's Clone Wars animated television series for kids have turned it into an evergreen powerhouse.

Action figure collecting in the '90s centered around vintage figures for Star Wars, G.I. Joe, Mego and other nostalgic properties. As the hobby grew, "the desire for new figures to complement the old was a strong impulse," says Derryl DePriest, vice president of global brand management and development for Hasbro. That collecting fervor in turn led to a steady stream of new releases designed to tap into that demand.

Also fueling sales to adults had been (and continues to be) an increase in the social acceptability of grown-ups identifying with "children's" products, be they toys, video games or comic books. "Action figures are a great way to make a statement about characters you love," says Scott Neitlich, El Segundo, Calif.-based Mattel's associate brand manager for DC Universe, Ghostbusters and Masters of the Universe (MOTU). "Owning a figure helps collectors feel a sense of permanence over that character, and this has lead to an explosion in the adult collector market."

Meanwhile, kids have been 'getting older younger,' turning off toys and turning on video games. "As kids age out of the upper end of traditional toy play, the influx of collector spending in the category has effectively replaced some of the volume traded off by older kids—primarily 11- and 12-year-olds," says DePriest.

But while adults support action figures' long tail, kids still rule the action figure aisle. The slice of the collector dollar is still smaller than the kid demographic. It's the reason why "kids and moms will always remain our main focus at Mattel," Neitlich says.

"The primary consumer is and always will be kids," adds Enrique Ruvalcaba, director of marketing for entertainment brands at Malibu, Calif.-based manufacturer Jakks Pacific.

Unlike collectors who look for depth in an action figure assortment, kids look primarily for a property's main characters. "They need a few bad guys to have a battle, but it's the core good guys that they tend to bug mom and dad to buy," says toy consultant Michael Crawford, owner of collectors' site MWCtoys.com.

One solution is splitting lines into mass market and collector assorments. Mattel, for example, has moved a lot of Batman Animated figures, an assortment that highlights the main characters, to mass, while its MattyCollector.com site focuses on better sculpts and a broader range of figures in the DC Universe series for fans wanting more depth.

"Few licenses can offer the demand required to span the spectrum of consumer age groups without getting too watered down," says Rob Mileta, buyer at Midtown Comics, a New York retailer. "Diamond Select's Minimates and Hasbro's Super Hero Squad are great examples of tweaking a product for younger audiences."

Although '80s era Voltron and Constructicons (a Transformers off-shoot) action figure sets each formed larger figures, the "build a bigger figure using the other figures" concept didn't firmly take hold as a mainstay move until more recent times. Since then, toymakers have sent the sometimes subtle, sometimes overt "You must buy all seven" message many times over. You can see its legacy just by scanning the shelves today. Playmates' new Star Trek series allows the dedicated customer to build the Enterprise's bridge a piece at a time. Hasbro continues to roll out its successful 'robot factory' figures, where a whole series completes one of the many droids in the Star Wars universe, and ditto for Bandai's Dragonball Z and Mattel's DC Universe.

Such moves have stamped the collector mindset into the brains of otherwise casual consumers. Previously, where Mom might have picked up a villain and a couple of heroes, she now has to think about completing the whole line between holiday season and a subsequent birthday to give her son a complete figure.

As far as the old-school collectors go, they've arrived "at that point in their collecting evolution where they are more satisfied with an open figure than a carded one," says Crawford. The time is perfect for the build-a-figure concept, he adds. "These same collectors have had enough time to realize that most figures will never be worth any real money, carded, boxed or not. Reality has set in, and the luster of keeping all that packaging around has worn off."

 The trick now, Crawford says, is getting the case assortment right. "When done well, it can drive sales of the entire wave, leaving fewer peg warmers, but having one figure that's harder to find than the others can frustrate consumers trying to complete the set."

Once an enemy of action figure play, video games have "spurred the creation of many new licenses that are some of the most demanded toys today," says Mileta. McFarlane Toys' Halo, NECA's Gears of War and DC Direct's World of Warcraft figures are all based on strong video game franchises that include fans across the age spectrum. Yet finding the toys in mass market stores remains a challenge.

"Embrace the convergence of all these things," says Wills, a long-time industry vet who is currently the senior vice president of sales and marketing at Bandai America, Cypress, Calif. "Leverage the combination of video games and traditional toys. Call them all 'toys.' We're 'Namco/Bandai'; we've embraced it. We entertain through toys and video games. Kids understand. Buying a [role-play] helmet, video, book, action figure and video game? That's an immersive trend and the toy industry has to get its share of that franchise dollar."

One area where smaller companies might have an edge is scooping up some of the licenses that Hasbro and Mattel pass on. "They're walking away from some licenses that are pretty good," McFarlane says. His company is working on Prince of Persia figures based on the upcoming Disney/Bruckheimer flick.

Licensing has also expanded beyond the core action figure category. When Transformers first launched, the action figures were it. Today you can't walk down a store aisle without seeing Optimus Prime on something besides a toy. Once the face of a brand, action figures have become part of a much wider product mix.

"The broadening of product offerings has come from the studios and license holders," says John Blaney, Mattel's director of action play marketing (Warner Brothers and DC). "This larger statement benefits the brand and the licensing partners. We are now able to partner with other manufacturers to cross-promote the entire collection of a particular entertainment brand rather than just one category."

McFarlane paints a less rosy picture. "They're just trying to grab a buck where they can," he says. "They've got Hulk Hands on the brain. They get a success and then they think every toy line has to be that. They feed off the success of one or two items but ignore the reality of why it actually worked."

Retailers, McFarlane says, are focusing on fewer lines than ever. "They're still trying to sell tonnage to the youth," he explains. "They want home runs. Singles, doubles and triples aren't worth it to them." Instead of getting money out of 20 lines, stores are squeezing money out of four to seven, he explains. "They'd rather chase sales," McFarlane sighs. "You saw it with Pirates of the Caribbean. [Retailers] under-bought the first one, hit the sweet spot with the second one, and by the third movie they over-bought."

Action figures spend their lives on living room floors vanquishing evil, but even they have succumbed to economic kryptonite. Costs of fuel, transportation, electronics and raw materials have all increased. As a result, once-pervasive voice chips and light up features have "taken a pretty big hit," says Crawford. "It also appears that paint quality has suffered a bit, particularly in the last 12 months. It's one of the first things to get chopped when a line is starting to go over budget."

The scales have also shifted downward. McFarlane laments the disappearance of the complex sculpts of larger figures as 3¾ inch figures now dominate the market, and notes that retail buyers are looking at price and price only. "They tell me, 'Nice art, Todd, but make it 50 cents cheaper.' They don't care as long as they get price. If it kind of looks like Spider-Man, for them that's great," he says. McFarlane adds, "I used to be able to go, 'Screw it,' because there were a lot of eclectic stores. But today, where am I selling at? Electonics Boutique? They don't exist. Tower Records? [They] don't exist. The places where I used to sell cool stuff aren't even on the planet anymore."

As a result, "manufacturers will need to put more thought into their case mixes," Mileta says. "Case mixes are sometimes the deciding factor on how much depth retailers are willing to purchase. A well-conceived mix not only encourages retailers to stock heavy, but provides customers with more of 'the good stuff.'"

"These challenges force us to work smarter," adds Ruvalcaba. Jakks has been developing and revising its tooling plans earlier in order to keep costs down.

A manufacturer has to ask itself, "Does the feature match the brand positioning? Adding sound effects to our UFC line wouldn't be as relevant to the brand," Ruvalcaba says. Overall, though, he believes toy companies have gotten a lot smarter about which lines should offer these types of features.

On the retailer end, Jon Roman, buyer at Toys "R" Us, recommends manufacturers provide retailers with a point of differentiation from their competitors. That's "the number one way" to get more shelf space and move more units, he says.