Where Toys Come From

Selling fun to children is one of capitalism's least predictable pursuits

GKC concluded that only one of the company's 200-plus products satisfied all of these requirements. Thenceforward, he decreed, the company would concentrate on plastic bricks, renamed in 1955 the Lego System of Play.

What GKC conceived in 1954 was the blueprint for a toy line that need never go out of style. The company continued to manufacture a few wooden toys until 1960, but GKC was convinced of the soundness of his vision. The years have borne him out. Today Lego bricks are sold in 125 countries, including the Soviet Union and Israel (which boasts the highest per capita Lego sales in the world). They can be found in roughly 40 percent of American homes with children under the age of fifteen, and have the second highest "coverage" of any toy (the first-place coverer is Crayola Crayons). In some European countries Lego's coverage is close to 85 percent. Some 68 million children around the world spend five billion hours a year playing with Lego bricks.

When the Lego System began, the bricks were aimed primarily at five- and six-year-olds. Over the years the target market has been extended both up and down. There are now Lego products for children as young as three months old. The upper age limit is officially given as fourteen years, but the bricks are very popular with older children and even with adults, who, when bitten, tend to buy enormous quantities. My daughter loves her Duplo blocks, outsize Lego bricks intended for pre-schoolers. (Some of the smaller bricks present a choking hazard for children under three.) Consistent with GKC's notion of a system of play, Duplo bricks, though eight times the volume of standard Lego bricks, can be snapped together with their smaller cousins. The innovation that makes this possible, hollow studs on the Duplo bricks, came to GKC in a dream.

In Denmark, GKC is a figure of Disneyesque proportions. His Legoland amusement park is one of the country's major tourist attractions. Almost everything at Legoland is made of Lego bricks. Popular attractions include models of Mount Rushmore (1.5 million Lego bricks), the space shuttle Columbia (410,000), the Port of Copenhagen (3 million), and Egypt's Abu Simbel temples (265,000). There is also a Wild West town, called Legoredo, where the cowboys eat "twists of tenderfoot bread," speak Danish, and wear clogs. More than 14 million people have visited Legoland since it opened, in 1968.

That Lego has been as successful in the United States as it has been is a tribute more to the fundamental soundness of the toy than to the way it has been marketed here. Executives in Billund like to believe that Lego should sell simply because it's Lego, a notion that runs against the very grain of American civilization. Some toy-industry analysts tend to believe that the company could sell a lot more bricks in this country if it puts its mind to the task.

The Influence of Television

If the Danes ever decide to take a crash course in American toy marketing, a good teacher would be Bernard Loomis. Loomis is a great big man who wears glasses and likes to play tennis. He has been associated with the largest toy company in the world, at the moment it became the largest toy company, on three separate occasions. Almost every time the industry has taken a major, controversial step in the past twenty-five years, Loomis has been in the neighborhood.

Bernard Loomis was born in the Bronx in 1923. His father was a Russian immigrant who dabbled in show business and generally failed to make a living as an itinerant salesman of woolen goods. "Ours was a family whose economics were always confused," Loomis says. There was no money for toys; among young Bernard's few playthings were a Lionel train catalogue, which he knew backward and forward, and a vivid imagination. One year he played a full American League baseball season using a deck of cards. He had developed an elaborate system in which every card he turned over meant something specific: a ball, a strike, a double, a pop fly. In fat notebooks he kept track not only of scores but also of pitching records and batting averages. By the time the World Series rolled around, he had played every game in the schedule.

Loomis attended New York University at night and held down a succession of dead-end jobs. "I fooled around in a lot of things in some kind of search that even I didn't understand," he says. By the late 1950s he was working in New York as a toy manufacturer's representative, having lately retired from the hardware business. At the 1961 Toy Fair he met Ruth and Elliot Handler, of Mattel (who had bought out Harold Matson and now ran the company together). He liked the Handlers and their colleagues immediately and accepted the offer of a job.

Mattel was a small company at the time, but it was on the verge of becoming the driving force in the industry. "Much of what the toy business is today started with Mattel in the late 1950s, " Loomis says. "That was when the industry changed from being a customer-driven business, where the customer decided what he wanted, to being a consumer-communication business."

In a word, television. The first step had come in 1955, before Loomis arrived, when Mattel had bought half a million dollars' worth of commercial time on the new Mickey Mouse Club show. It was, according to lore, the first time that toys—beginning with an item called a Mouse Guitar—were advertised on national television. (The first toy advertised on local TV may have been Hasbro's Mr. Potato Head, which was pitched in California in 1952.)

Television expanded the market for new toys and made it possible for manufacturers to spend more money on new products. It also enabled retailers to cut their prices, since the increased customer traffic permitted narrower profit margins. The new way of life evolved further in 1960, with the introduction of Chatty Cathy, the world's first talking doll and a toy whose marketing strategy Loomis helped devise. Chatty Cathy could never have been produced in the days before television; the potential market would have been too small to justify the cost of developing the doll's talking mechanism. With television, the demand for Chatty Cathy was so great that some retailers began to sell it at less than cost in order to steer the crowds into their stores—a radical step in a business where merchandise had traditionally sold for double its wholesale price.

In 1969 Loomis and others at Mattel undertook what would eventually be seen as an epochal step in the marriage of toys and television. Mattel had introduced a line of miniature cars called Hot Wheels. Instead of simply advertising them on television, why not give them an entire show of their own? The thirty-minute Hot Wheels cartoon show joined ABC's Saturday-morning lineup. The show, developed in close collaboration with Mattel, featured cars from the Hot Wheels line.

The new show didn't catch the attention of children only. It was also noticed by Topper Corporation, a now defunct competitor of Mattel's. Topper complained to the Federal Communications Commission that Hot Wheels violated FCC regulations concerning the separation of programming and advertising. The FCC agreed, and asked stations to log part of the show as advertising time—a move that seemed to deter the formation of any similar alliances between broadcasters and toy companies.

Loomis and Mattel, it turned out, had merely been ten years ahead of their time. During the decade it took their time to catch up, Loomis left Mattel to become the president of the foundering Kenner Products, which was owned by a division of General Mills. Loomis turned the company around with a string of hit toys, including a licensed "action figure" (as most dolls for boys are known) based on the television series six million dollar man.

The six million dollar man doll was a big success, and Loomis began looking for other properties to license. One day in 1976 he noticed a brief item in the Hollywood Reporter about a movie that was being made. Loomis had never heard of the director, but he liked the title: star wars. "I circled the item and sent a copy to a man in our marketing group, and I said, 'Find out about this.'" A short time later he and Twentieth Century Fox Film Corporation signed an agreement giving Kenner exclusive rights to manufacture crafts, games, and toys based on the motion picture.

The agreement didn't cost much. Toys based on movies had seldom sold well, and outer space was thought to be a poisonous theme. But Loomis wasn't interested in the movie; all he cared about was the characters. "I contend that George Lucas is one of the world's great toy designers," he says today. Kenner's line wasn't scheduled to appear until roughly a year after star wars had been released. The characters, Loomis assumed, were strong enough to stand alone.

He never had a chance to find out if he was right. From the day it opened, star wars was a phenomenal success. Children were sitting through it a dozen, two dozen times. "We had a tiger by the tail," Loomis says today. Christmas was just around the corner, and Kenner wouldn't be able to ship toys until spring; the star wars line had been planned for the following Christmas. The toys were being manufactured overseas, and there was no way to speed up production. Could anything be done?

Loomis pondered the problem for a long time, and then had an idea: why not sell the toys before they existed? Kenner could print a certificate promising to deliver toys by a certain date and package it with a picture of the star wars characters. Parents would have something to put under the Christmas tree, and kids could at least hang the picture in their rooms until spring. Loomis presented the idea to his staff. They all thought it was crazy.

Loomis says that he was taken aback. "But I believed that one of my duties as head of a toy company was to lose at least a million dollars a year on things that didn't happen," he says. "So I went ahead." The promotion turned out to be a huge success. Children were happy to receive the pictures. When their toys finally arrived by mail, they took them to school and sent jealous friends rushing to toy stores. star wars eventually generated more than $750 million in toy sales.

star wars confirmed what the six million dollar man had first shown, which was that licensed characters could be the basis for very lucrative toys. But star wars also showed that the logistics of producing such toys could be complicated: there were many factors beyond the toy company's control. If only it were somehow possible to manage the package from beginning to end.

By 1978 Loomis had become the head of the General Mills Toy Group (which included Kenner and Parker Brothers). One day he met with representatives of American Greetings Corporation, a maker of greeting cards. American Greetings owned the licensing rights to a popular cartoon character called Ziggy and wondered whether Loomis might be interested in producing a Ziggy toy.

Loomis said no. Ziggy was already established in the marketplace, with greeting cards, a syndicated comic strip, and other tie-ins. Loomis wasn't interested in simply tagging along. "But I told them, sort of casually, 'If you ever have a project where you want a partner from day one, come back and see me again.'" As it happened, the men had copies of the American Greetings line for the following year. Loomis flipped through the cards, and then stopped. There was a character on one greeting card that looked promising. Loomis pointed to the picture and said, "Mark the time and date. We're going to make history."

Actually, there are several versions of this story. In another one, Jack Chojnacki, who was the director of licensing for American Greetings, discovered that an element common to a lot of successful greeting cards and other products was strawberries. An art director heard this and remembered that one of American Greetings's most successful cards featured a little girl with strawberries on her bonnet. He had an artist add more strawberries. Then a doll was made. Chojnacki and Ralph Shaffer, the director of new-product development, took the card and the doll to Loomis, who looked at them and said, "This is going to be the next major phenomenon in merchandising."

All versions of the story have the same ending: the little girl in the greeting card became a bustling industry called Strawberry Shortcake. What was remarkable was not the character—just a little girl with berries on her clothes but the marketing plan built around it. Loomis had been thinking about the uncertainties of the toy business and had decided that the way to protect against them was to concentrate on lines of toys rather than on individual products. An important reason that Barbie was successful year after year, he believed, was that Mattel had made the doll part of an imaginary environment that, with careful management, could be extended indefinitely. The key was giving the customer a reason to keep buying.

What Loomis had discovered was, in a sense, the 10 Lego Characteristics. Like GKC, he believed that the secret of producing a successful toy lay in finding a concept broad enough for more than one season. Such concepts tend to be simple: plastic building blocks, a dress-up doll, stick-on faces for vegetables. Of course, Lego, Barbie, and Mr. Potato Head (now thirty-five years old) were created through inspiration and luck, not the application of a formula. But the formula could be a useful guide in the development and marketing of humbler toys. Every toy a company produced, Loomis believed, could be a line; indeed, it should be.

For Strawberry Shortcake, Loomis, Shaffer, and Chojnacki envisioned just such a line, with lots of characters and a story tying them together. (Strawberry Shortcake's friends have names like Lime Chiffon and Raspberry Tart; they live in Strawberryland and join together to combat a limited form of evil that manifests itself in things like disappointing fruit crops.) Loomis also wanted to involve the entire Toy Group. The girl on the greeting card would be translated into toys, games, television shows, and hundreds of licensed products, and everything would be created from scratch and centrally controlled. Loomis's idea about the importance of lines would quickly become the conventional wisdom of the industry.

The first Strawberry Shortcake television special, which aired in 1980, revived a controversy that many believed had been laid to rest. Welcome to the World of Strawberry Shortcake was as much a program-length commercial as the old Hot Wheels had been. But the regulatory mood in Washington had changed, and the Strawberry Shortcake special opened the way for what sometimes appears to be the transformation of children's television into a promotional arm of the toy industry.

There are now about twenty toy-based television series. A recent Saturday morning lineup included shows based on GoBots, Wuzzles, Snorks, M.A.S.K., Popples, and others. The shows are typically financed directly by toy companies or their licensing partners, who also control the scripts. Last year the FCC in effect gave its blessing to the new shows by refusing to hold hearings on product-based TV for children.

Shortly after the FCC decision Peggy Charren, the president of a consumer group called Action for Children's Television (ACT), told Newsweek, "We think the FCC has now completely disowned the nation's children." Charren, whose name is almost invariably preceded in print by adjectives like indefatigable, has been fighting broadcasters, breakfast-cereal manufacturers, toy companies, and others since the late 1960s. Her organization has been instrumental in bringing about a number of changes in children's television, including a reduction in the number of minutes devoted to advertising in programs aimed at kids.

ACT's main argument against the toy-based shows is that young children draw no distinction between commercial and editorial content and are thus easy targets for manipulative marketing. Toys based on popular movie and television characters have been around for years (for example, Mickey Mouse dolls); but in the past, ACT has said, the movies and programs always came first. Now the toys often precede the programs, whose scripts are conceived of as promotional tools. Furthermore, according to ACT, the toy-based shows have prevented better programming from reaching children.

ACT has proposed a number of remedies over the years, including the banning of toy advertising from children's television, and the banning of all advertising from children's television. More recently, as the prospects for new regulation have dimmed, ACT has retreated to a much tamer demand—that toy-based television shows be sprinkled with announcements reminding children that they are being pitched.

The toy companies more or less concede that their new programs are commercials; boastful sales pitches to retailers describe the shows in almost the same terms that Peggy Charren uses. When criticized, though, the toy companies also say that being on TV doesn't guarantee success for a toy; three of the most popular children's shows at the moment are the three segments of the ninety-minute cartoon series Smurfs, yet Smurfs toys don't sell well. Toy companies also say that toys are such a big part of the lives of children that there isn't all that much else to make shows about. Furthermore, they say, the question of which comes first, the toy or the show, is irrelevant.

There are many, many other arguments and counter-arguments. The ones cited just sketch the general outline of the debate. In that debate right-thinking people tend to come down fairly quickly on the side of ACT: who can help but be appalled by all that crass commercialism? But the real issues are not as simple as Charren and her supporters make them out to be.

First of all, ACT's proposed reforms seem naive. Banning advertising from children's shows has a certain surface appeal, but the idea is unrealistic. Why not also require toy companies to give their products away? Removing all the money from children's television would not prompt producers to create better shows. ACT's proposal last January that toy-based shows be required to contain disclaimers identifying them as promotions seems counter-productive. If young viewers really can't distinguish between shows and commercials, then the toy companies could probably increase sales by reminding kids that the toys they're watching can also be bought.

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