A version of this story first appeared in the Sept. 6 issue of The Hollywood Reporter magazine.
In July, two weeks before Universal Pictures' Despicable Me 2 opened in U.K. theaters, retailers and Thinkway Toys, the master license holder for the animated movie, pulled their TV and print advertising. The entire line of DM2 toys already had sold out.
"Customers were coming in and getting very upset they couldn't get the Minions," says Stephanie Sperber, president of Universal Partnerships & Licensing. "And this is after three reorders and air-freighting in products, which in the toy business is unheard of. People don't air-freight. It makes things exponentially more expensive."
What happened in the U.K. wasn't isolated. Sales for DM2 toys in the U.S., other parts of Europe, Mexico and Latin America were equally robust. In a summer heavy with animated family movies, surprisingly few exploded at the box office and at retail. Despicable Me 2, which scored the biggest opening to date for an animated movie at $293 million worldwide in five days, was a star in both.
"Despicable Me was an absolute blowout," says Jim Silver, editor-in-chief of Playmag.com, a website that reviews toys. "The retailers underbought it in a big way, and they are playing catch-up. Literally everything sold out. It was severely underestimated."
In 2013, U.S. toy sales will hit about $22 billion, according to data from the NPD Group, with a quarter coming from toys based on licenses from movies and TV shows -- the category that in recent years has grown most quickly.
"Kids love to bring their favorite book, movie and television characters to life in the form of toys, games and accessories," says Lisa Harnisch, senior vp and general merchandise manager at Toys R Us, "so our licensed business is very important."
To feature the Talking Dave Minion and other items from DM2, Toys R Us created a dedicated shop in each store and offered exclusive items such as a banana-scented Fart Blaster. "We anticipate sales will remain strong throughout the remainder of the year," says Harnisch.
Along with DM2, the top toys of the summer at Toys R Us, she says, were products from Disney's TV series Sofia the First and Teenage Mutant Ninja Turtles, which was reincarnated last fall by Viacom's Nickelodeon, spinning off boy-oriented merchandise that has been popular with kids, teens and adult collectors.
"Our marketing team made sure we connected with existing fans of this 25-year-old franchise and let them know Nickelodeon was taking care of their baby," says Pam Kaufman, the channel's chief marketing officer. "For the first time ever, we thought we could launch a show and a consumer product line at the same time."
The Turtles benefited from cross promotions and special Turtle programming across many of the other Viacom networks, including Spike and MTV. Target stores report that the Turtle products were among their best-sellers this summer, especially the Teenage Mutant Ninja Turtles RC Shellraiser (about $35 at retail).
DreamWorks Animation had success with Turbo because of the popularity of car toys with boys. “Even if a classic movie property does not perform well at the box office,” says Toys R Us’s Harnisch, “we often find that the combination of classic play patterns, like cars and trucks, as well as lovable characters translate well at retail.”
“It was tough this summer and [Turbo] was also a new [line of products],” says DreamWorks Animation's head of global consumer products Michael Connolly. “It’s always hard to get in front of people, but Turbo has done a lot better than the box office indicates because it’s such a fantastic play pattern.”
Lego had a strong summer with Iron Man 3 and Man of Steel action figures. “We have seen great success and continued consumer demand for products related to superhero properties,” says Harnisch, who credits demand from kids who like to role play and collectors who “will stand in line before the doors open to find the exact item they are looking for.”
Lego's Mike McNally says even The Lone Ranger scored among nostalgic adult collectors with its Western theme, despite the movie's weak box-office performance. “Like Star Wars and Indiana Jones, you have a generation of people who grew up understanding that storyline from when they were young, and they fondly remember playing with Lego,” says McNally. “Now they see that familiar storyline put together with their favorite toy and it’s very appealing to adult collectors and people who want to share it with their kids.”
While Sofia the First went on the air in January, Disney didn’t rush out merchandise for the unknown brand -- waiting six months before rolling out toys, costumes and books to retailers other than its own Disney stores. “It was a smart strategy by Disney to build up demand for the show, let the show have lots of fans and then ship the products,” says Silver.
With Nickelodeon’s Sponge Bob and Dora the Explorer running out of gas, Sofia hit the fast lane with record ratings for Disney Junior followed by fast sales at retail, where it joined other hot-selling Disney toys Doc McStuffins and Jake and the Neverland Pirates. “We are owning the preschool aisle in a really robust way,” says Josh Silverman, executive vp global licensing for Disney Consumer Products.
“Sophia is the baby princess,” says Silver. “The animation is just captivating young kids. She’s the first baby princess, and that hasn’t been done before. It just grabs kids. They love the show, and that’s always the first thing you need for a successful line of toys.”
Some of the Sofia products are part of the new high-tech trend in toys. Along with the 10-inch Sophia dolls there is the Talking Magical Amulet made for Disney by Jakks Pacific that glows when it gets close to Sofia. “It enables a child to read a lesson card,” adds John Blaney, Jakks' executive vp marketing. “They stick a card in the amulet and a princess-in-training reads to them.“
The high-tech sensation of the season are the DM2 toys made for Universal and producer Illumination Entertainment by Thinkway, a company based in Hong Kong that made its mark during the '90s with Toy Story toys, and more recently produced products for Man of Steel and Disney's Planes (whose toys flew off shelves even before the movie took off).
The first Despicable Me in 2010 was a box-office hit, but the only licensed toys were plush animals. About 18 months before DM2, Universal and Illumination made strategic decisions that paid off: They passed on larger toy companies for Thinkway because they felt it could create "cool, innovative products," says Sperber.
They also limited the line to the handful of Minions and a few other characters and related toys. Sperber calls it a “jewel box approach,” meaning they wanted fewer items but each had to be of high quality. They also limited the licensees in each category, so rather than have five T-shirt sellers they had one. In all they signed about 180 licensees (up from about 30 for the first movie) who produced several thousand toys.
Thinkway CEOAlbert Chang, whom Sperber jokingly calls ‘the mad genius” behind the toy company, says before they began his team looked at hundreds of other toys “to explore all possibilities. … Products filled the conference room and spilled over into other areas.”
One unique feature was facial technology. It's an interactive application that allows the facial expression and eyes of the Minion action figures to change as the child moves the head or body. "Add voice and sound effects," says Chang, the CEO of Thinkway, "and the toys become irresistible."
“They never stop developing,” says Gail Harrison, Illumination’s senior vp creative marketing. “They come up with an idea and then make it better and better, whereas other companies cough out a toy and then start diminishing features. Albert and his team kept surprising us and delighting us with more features true to our movie.”
The Fart Blaster had caught kids attention in the first movie and Thinkway was able to bring an improved version of it to market. "It's so rare," says Harrison, "that you can take an artifact like that from now two movies and make a great toy."
Despicable Me 2 wasn't just an American hit, but a worldwide phenomena. "Because the Minions don't speak English or Spanish or a true language," says Harrison, "it transcends countries and culture. That helped make this movie a global sensation."