'Pirates' sizzles for toymaker Zizzle
The fledgling toymaker has officially taken flight into the big leagues with the mega-success of Disney's 'Pirates' sequel.
NEW YORK (CNNMoney.com) -- -- How did a fledgling toy company called Zizzle, created less than two years ago, beat out the industry's big guns to win the master toy license for the record-breaking "Pirates of the Caribbean" sequel?
CEO Roger Shiffman wore a pirate hat. Zizzle's chief marketing officer Marc Rosenberg donned some pirate-like headgear. And Patty Jackson, vice president for product development, got into character as a pirate wench.
This is how Zizzle's senior management appeared before Disney executives last February in a New York city hotel room where they made their "passionate" pitch, said Rosenberg.
"We had scheduled a two-hour meeting and it went to four. We were very prepared," Rosenberg said. "We threw coins all over the room, draped gold and silver fabric over the chandeliers. We had prototypes of 'Pirates' products ready to show them. We really laid out a detailed plan about how we would make it a franchise business."
Jessi Dunne, executive vice president of Disney Toys, who was at the meeting, said Zizzle's team "got it immediately."
Although she didn't name these companies specifically, Dunne alluded to industry leaders Mattel (Charts) and Hasbro (Charts) as other potential key partners that were also considered for the "Pirates" license.
"We picked a partner that we felt shared our vision to develop the 'Pirates' property into a long-term franchise," Dunne said."Roger gave us the confidence he could do that."
It probably didn't hurt either that Dunne and Roger had previously worked together at Hasbro.
"As much as Zizzle is a new company, they have assembled a group of toy industry veterans like Roger who are very product savvy and have the right contacts," Dunne said.
Shiffman, a well-known industry veteran of over 30 years, is credited with launching some of the biggest toy hits over the past decade, including Furby, Giga Pets and Poo-Chi the robotic pet dog.
With the "Pirates" master license, Zizzle has the exclusive right to make "Pirates"-termed action figures, role-play products and electronics for the current sequel and for the third "Pirates" movie which is slated for release next summer.
Catapulted into the big leagues
The privately-held Zizzle, based in Bannockburn, Ill., doesn't disclose its sales numbers.
Even so, some industry watchers said it's not hard to figure out that the sequel's record-breaking $132 million weekend opening, and subsequent run past the $300 million mark, is likely to translate into some big bucks for the young toymaker.
"I think Zizzle will do about $50 million from this license," said Jim Silver, a toy industry expert and editor-in-chief of Toy Wishes magazine. Rosenberg confirmed that Silver isn't too far off the mark.
That's not bad for a year-and-a-half old with just 30 employees in its U.S. headquarters.
Moreover, the toy industry hasn't exactly been all that fun lately as toymakers, including the No. 1 and No. 2 players Mattel and Hasbro struggle to grow sales in the face of stiff challenge from popular electronics gadgets such as Apple (Charts)'s iPod and Sony (Charts)'s PSP.
But Zizzle scored a home-run with its very first product, a wacky-looking electronic, music-playing creature called "Iz" which was named as one of "Toy Wishes" Hot Dozen toys for 2005.
Iz hit the the market at warp speed of only six months after Zizzle's launch, compared to the typical average development time of eight to 12 months for new toy products.
"There are inherent advantages to being small and private. We can cut through the timelines which is critical in our business," said Zizzle's Rosenberg.
Licensed products are risky business
'Iz' success and now the "Pirates" license has officially put Zizzle on the radar, said Silver.
Should Mattel, Hasbro and other more established toy companies be worried about this young upstart?
"I think companies should always take note of all the competition out there," said Silver. "The fact that Zizzle secured widespread distribution in all the mass retail chains in it's second year of existence means this company has already arrived."'
Greg Staley, CEO of toy retailer KB Toys, agreed. "Zizzle is becoming a formidable competitor. The 'Pirates' action toys are the No. 1-selling action figure line at KB Toys right now. That's a testimony to that product line," Staley said.
He added that the company also plans to make "Pirates" products the center theme for the November-December holiday shopping period, a critical time for toy retailers that accounts for over 70 percent of toy shipments to retailers and over 50 percent of all toy retail sales.
"Pirates" is hot right now and no surprise that the movie-related merchandise is flying off retailer's shelves. But as Silver points out, the licensed toys business is risky because its unpredictable.
The danger with movie-licensed goods is that their hot sales period is the four weeks before and after the movie comes out, Silver explained. If it's a summer release, like "Pirates", that means the buying momentum could start to wane even before people ramp up for their holiday gift shopping.
For Zizzle, that could spell big trouble given that the "Pirates" products represent a bulk of its 2006 product offerings.
Rosenberg said Zizzle's gameplan to offset that risk is to keep fresh product coming in for the holidays. "Luckily for us, the movie has a rich character base. So it's easy to do refreshes," he said, adding that the DVD release should help reignite interest in the line in the fourth-quarter.
"Beyond that we're already working on new "Pirates" products for 2007 which I can't talk about yet, he said.