Next winter two of the biggest fantasy movies of the decade will open within days of each other.  New Line's Lord of the Rings: Fellowship of the Rings is based on the classic Middle Earth novels of J.R.R. Tolkien, while Warner Brothers' Harry Potter and the Secret of the Sorcerer's Stone is taken from the contemporary juvenile bestseller by J.K. Rawlings.  Which film will move the most collector merchandise?  It's too early to tell, and public acceptance of the films themselves may play the determining role, but right now it is safe to say that there is trouble in Pottersville.


In fact due to the sub-par performance of the last Star Wars film, licensed material itself appears to be on the wane.  The Harry Potter books are definitely the 'young adult' publishing phenomenon of our day, but so far the bespectacled magician apprentice hasn't moved much more than millions of books.  A trip through the malls today shows plenty of posters, puzzles, and trivia games bearing the Harry Potter likeness available (see 'Harry Potter Licensing Starts Big') with no sign of frenzied buyers.  Mass-market buyers are wary of Harry, and though Toys R Us is likely to have a Harry Potter boutique featuring movie-licensed merchandise and the books themselves, don't expect a Star Wars-like extravaganza. 


This wariness is evident in the licensing deal announced between Warner Brothers, the Harry Potter movie studio, and Mattel.  For starters, master toy licensee Mattel is spreading the risk by sharing the Harry Potter license with hated rival Hasbro -- and Mattel is only guaranteeing Warner Brothers $20 million versus a 15% royalty on Harry Potter merchandise.  Contrast this with the reported $600 million guarantee and 20% royalty rate that Hasbro forked over for Star Wars, and you begin to see how the market for licensed merchandise has changed in the past two years.


None of this is to say that the Harry Potter books don't lend themselves to the production of licensed merchandise.  Mattel is definitely going to get some orders at Toy Fair thanks to its highly detailed Hogwarts Castle playset, its Harry Potter & Co. action figures, as well as its cool dioramas depicting various scenes from the film.  Hasbro has great lineup of gross-out candies as well as a collectible card game based on the film from its Wizards of the Coast division.


However in light of the poor performance of licensed goods over the last few seasons, it is unlikely that the mass merchandisers are going to stock Harry Potter product very deeply, which means that chain stock-outs may occur during the film's thirty to sixty day window of opportunity.  Will this translate into sales opportunities for specialty retailers, or should they take heed of the cautionary signals coming out of the mass market?   Given the lack of a firm demographic fit between the Harry Potter audience and the shoppers at specialty stores, caution may be the word of the day.