In response to concerns about its relationship with Hong Kong-based Toy Biz Worldwide Ltd., Marvel has revealed its licensing deal with the company, disclosed details of Toy Biz Worldwide's ownership and business model, and broken out revenues from Toy Biz Worldwide. An article in Barron's last weekend (see 'Barron's Wonders -- Can Marvel Keep Growing?') was a recent high-profile source of questions about the relationship.
Marvel is getting around 40% of the wholesale toy sales of Toy Biz Worldwide. That's because in addition to a 15% licensing royalty (a typical percentage), Marvel also gets 24.5% of U.S. sales as compensation for the services it performs for Toy Biz Worldwide. Those services include toy design, sales and marketing, and maintaining an EDI system for interacting with major retailers. Marvel employs 22 people to perform those functions on a full-time basis, and also draws on executives from other divisions, including Avi Arad, who was the top toy designer at Toy Biz before becoming Marvel's point man in Hollywood.
Toy Biz Worldwide Ltd. is owned by Jeff Hsieh, who according to the release 'had built a strong track record as a high-quality vendor with Marvel's Toy Biz division since 1990.' Marvel also announced that 'neither Marvel, its officers, directors nor personnel have any loans to or interest in that company.'
Hsieh explained why the deal with Marvel makes sense from his perspective. 'This license agreement enabled me to optimize the capacity utilization of my manufacturing facilities and purchase raw materials more efficiently while leveraging the proven toy design, development expertise and brand of Marvel's Toy Biz division.
Marvel's licensing and service revenues from Toy Biz Worldwide have totaled nearly $60 million in the first nine months of 2003, vs. $29 million in all of 2002, attributable in large part to the unexpectedly robust sales of Hulk toys (see 'Hulk Licensing Bigger than Spider-Man').
Marvel's innovative restructuring of its toy business, which trimmed its balance sheet, simplified its business, and lowered its risk, is one in a series of smart deals that have converted the bankrupt toy and comic producer into a licensing powerhouse.