Tonka needed something to get them out of a $10,000,000 hole. The needed to transform their situation.
Dave Young:
Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Simple is a marketing consultant, story collector and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So, here’s one of those.
[Pinpoint Ad]
Dave Young:
Welcome back to the Empire Builders Podcast, Dave Young here, along with Stephen Semple, and we’re talking about empires. And the one you gave me now is I have to admit, I am familiar with the brand, but I’m not an active participant in the brand. I think I’ve mentioned on here before, I raised four daughters, and so today’s topic is Transformers. And none of my daughters were ever into Transformers as a toy. I was beyond toys when Transformers, I think first came around. So I’ve never even really jumped into the movies. But big, big brand.
Stephen Semple:
Huge brand.
Dave Young:
Tell me how they got started.
Stephen Semple:
Well, and the interesting thing, I almost included my oldest daughter, Crystal, in the recording of this, and I decided that, no, we might do a follow-up episode with her because she is a massive Transformers fan.
Dave Young:
Wow. Okay.
Stephen Semple:
And the interesting thing is she never played with them as a kid, but she found herself into the fandom. And today there’s a whole thing I want to do about fandoms because it really speaks to the role that social media plays with a lot of companies.
Dave Young:
I feel like as a kid, I would’ve loved them.
Stephen Semple:
Because there’s this unbelievably rich storyline behind Transformers that is incredible. And then it’s actually one that is fragmented into the Michael Bay Transformers storyline versus the historic ones, because Michael Bay is the one who made the movies. It’s this crazy world when you dig into it. But, the story of Transformers is actually a story of a battle between two decent-sized companies. So it’s not normally what we do, but it was so interesting, I thought we got to talk about this because it’s a story about a battle between Tonka and Hasbro.
Dave Young:
Oh, man. Just like Wonka and the other guy. Yeah.
Stephen Semple:
Yeah. Exactly. Yeah, yeah. Today the Transformers franchise, I think is a $25 billion franchise between the movies and the toys. It is massive. And the story goes back to we’re in July of 1983, and Tonka is struggling for a new hit. Tonka is being run by Steve Shank, and they’re like $10 million in the hole, and they’re known for trucks. And think back to the ’80s, what’s happening, video games are growing and the market is shifting away from things like playing with trucks. And Tonka did not shift with it. So they’re really, really struggling. And Shank has hired a Mattel veteran, Pat Fellie. He’s the guy who basically helped turn things around at Mattel with He-Man. So he was basically the really a key person with developing of He-Man.
And so they need something quick. And the shortcut is to license existing toys because the development and manufacturing is done. It’s quicker and cheaper to market. So they go out everywhere looking around for something to market, and they come across this toy that Knickerbocker has. Knickerbocker is going out of business, and it’s this interesting toy, which is a car and a robot, but it’s a cheap knockoff. The real one is being done in Japan by Bandai, which is making this thing called a Machine Robo. And so Steve Shank heads to Tokyo to get the rights. And Bandai demands, okay, well, we can make this for you, but you got to buy 800,000 units as part of the deal, and Tonka has never sold that much, and it’s an unknown toy in basically an unknown market.
Dave Young:
800,000?
Stephen Semple:
Yeah.
Dave Young:
Okay.
Stephen Semple:
So this is going on. Meanwhile, enter Hasbro, who’s the number two toy company in the world, and they’re looking for the next big thing because GI Joe is starting to fade and they haven’t yet done the GI Joe reboot. So they’re like, huh. Same thing, trend going on towards video games, some things getting old and tired. And so Henry Orenstein pitches this whole idea of a truck that changes into a robot made by Takara Tomy in Japan.
Dave Young:
So, already two Japanese companies doing kind of a…
Stephen Semple:
Doing kind of a similar… Yeah. And he looks and goes, this is kind of cool because it’s a vehicle, a puzzle, and an action figure. They go to Japan to sign a deal. Now, Tonka and Hasbro don’t know that each other are looking to do the same thing at this point.
Dave Young:
They didn’t see each other in the bar at the hotel?
Stephen Semple:
Not yet. Now, Tomy really wants to sell this remote control car that they have and Hasbro doesn’t want a remote control car because remote control cars have been out for a little while and he doesn’t see it as an innovation. So both of them are in this sort of situation where it’s not a slam dunk deal. But Hasbro decides, we really like this idea. We’ll take both. We’ll take the remote control car and we’ll take the toy. And they decide to call the toy Transformers. Now, here’s the interesting thing. Tonka, it’s been documented, was going through names and had the name Transformers and rejected it. Tonka decided to go with GoBot. So this is how parallel the things that were going on in here.
Now, in Japan, the toys were not focused on the story. But what had been proven in the US is that through Star Wars and He-Man and GI Joe, is that if you make the story, it really helps sell toys. Hasbro decides that they’re going to make two toys, one is a car that transforms and one is a jet transforms. And they’re going to make the car the good guys and the jet, the bad guys. That’s how they’re going to go with the storyline. Now, Tonka finds out, Tonka does now get wind that Hasbro is going to launch Transformers, and Tonka moves up the launch day to GoBots. They push the timeline. They don’t wait for the Toy Fair. They go all in. They buy the 800,000 GoBots that are small and cheap. They make the 17 unit carrier case, that’s like a command center, premium price that for Christmas and quickly create a cartoon.
They work with Hanna-Barbera, who did Flintstones and the JetBots, and they go with GoBots for the name, which is both good and bad because it’s really simple, but at the same time. And they create new names, they create American names for the Japanese names that had been made for these toys, and they create this jingle about GoBots, but the jingle is really bad, they say like GoBots like five times in it. And it’s this really simple storyline. Bang it out there, sell stuff and move up the timeline.
Meanwhile, Hasbro is working with Mattel. See how similar they are? They both knew they needed to create this cartoon to support it, right? Hasbro is working with Marvel.
Dave Young:
Okay. There you go.
Stephen Semple:
And create a more serious, more in-depth story. But they also know that they need to create a word flag for it. Instead of just repeating Transformers, Transformers. Which ends up becoming, Transformers more than meets the eyes, robots in disguise.
Dave Young:
More than meets the eyes, robots in disguise. Yeah.
Stephen Semple:
Yeah. Brilliant. Right?
Dave Young:
Mm-hmm.
Stephen Semple:
Now when Tonka launches, so Tonka launches first remember, the response is huge, massive orders. First year, unbelievably great. And Hasbro is behind. So Hasbro is like, oh my God, they launched. And Hasbro also runs into a manufacturing problem. They find that there’s unsafe levels of lead in the toys from Japan.
Dave Young:
Oh no.
Stephen Semple:
So Hasbro is going to be late and don’t know by how long. So now, if you’re in Hasbro’s shoes, Tonka has launched, you know at best you’re a year behind and maybe even more because of this manufacturing problem. What do you do? You’ve created this cartoon, you’ve created the commercials. What do you do?
Dave Young:
Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.
[Empire Builders Ad]
Dave Young:
Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.
Stephen Semple:
So now, if you’re in Hasbro’s shoes, Tonka has launched, what do you do? You’ve created this cartoon, you’ve created the commercials. What do you do?
Dave Young:
You press forward with the cartoon to just create demand.
Stephen Semple:
That’s what Hasbro does. They stick to the plan. They run the cartoons. They run the ad campaign. The toys will come. And you see, and here’s the interesting thing, is there’s lots of regulation on marketing toys, but there’s no regulation on marketing comic books. And so what they do is they advertise the comic books and they advertise the show. And then in the show, you can then advertise the toys. The kids knew the toy was coming. So in May, 1984, it hits the shelves well after GoBots and explodes. Transformers is the more successful show, deeper story.
Dave Young:
I’m guessing that in the short term, the fact that they didn’t have the toys yet meant that a lot of kids ended up with GoBots. And then once the story takes off, the demand rises again because the kids are like, yeah, I got the Gobot, but what I really want is the Transformer.
Stephen Semple:
What I really wants the Transformer.
Dave Young:
That’s going to be my next toy.
Stephen Semple:
And by 1984 they sell 111 million transformers, which is two times GoBot. Now, here’s the thing, Tonka didn’t understand the problem because in 1985, Tonka decides to look for a new toy to take down Hasbro, and they go back to Tokyo, and they come across this rock that turns into a robot. Rock Lords, rocks that come alive. And they do this feature film, was not great. By 1987 GoBots is discontinued.
What they never, I believe, understood was the Transformers success is the depth of the story. And we’re going to do a follow-on episode where I’m going to go through with Crystal the depth of the story. She’s going to talk about the Transformer story. It is unbelievably rich. It is crazy rich, the Transformer story. Where what they thought was, oh, well, our transforming robot’s not as good. So we’ll have a rock that transforms and we’ll create a feature film. And the film was, again, not a great story. It wasn’t just rich story. And Transformers, by the end of the decade, hit a billion in sales in just the toys.
Now, here’s how crazy powerful it is. Following the release of the first Transformers movie, there’s a character Bumblebee. And Bumblebee is a crazy popular character who transforms into a Chevrolet Camaro. And Chevrolet notices an increase in demand following the release of that movie. By late 2009, Camaro sales were exceeding availability and they were selling at prices above the manufacturer’s sales price. And the most popular color of Camaro yellow, which is what Bumblebee’s color was.
Dave Young:
Of course. What else would it be? That’s great.
Stephen Semple:
And again, when we talk about marketing and measuring things and whatnot, there’s these unexpected things that can happen that can have these big impacts.
Dave Young:
And all tied back to story.
Stephen Semple:
All tied back to story. And not just a superficial story, a story that you can really get involved with, who have characters with flaws and conflicts and all sorts of things, ’cause the conflicts are not just good versus evil. There’s also the inner conflicts amongst the people on each side. And Tonka can never understood that.
Dave Young:
When you have the characters, when you have the toys you can add to the story yourself, the play becomes part of the story, and it becomes a part of who you are. And when you get old enough to drive, I guess you want a yellow Camaro because you’re still part of the story.
Stephen Semple:
And in the world today this becomes even bigger because there will be whole sites on the web dedicated to fan fiction, where it’s fans that are writing their own stories and submitting them in. And so when you get people writing that type of fiction, and it happens with Star Wars and a bunch of the others, think about the involvement that there is now in that thing. It becomes the toy, it becomes the story, it becomes a community of people. That’s the level of involvement that some of these brands have.
Dave Young:
Yeah, I’m glad you brought this up. This is a really cool one. You said that the Michael Bay, that’s a different… How different is it? Does he go off on other stories?
Stephen Semple:
Well, some of the main characters, if you actually did a character diamond on them, which is, as we know, a screenplay writing technique for developing characters, some of the deeper characteristics in that diamond is actually different for some of the characters. He’s taken the characters a little different way, and then as they’ve done more movies, created a slightly different history to what’s going on. We’re seeing the same thing at Star Wars. There’s these little splinter offs in terms of what direction does the story get taken. So the comic books… And Transformers is, look, it’s like the craziest one is Batman, where there’s several different Batman storylines. And Spider-Man, there’s different Spider-Man storylines-
Dave Young:
And they weave that together with the Spider-Verse, right?
Stephen Semple:
Correct. Yeah. But this is what allows, this giving the fandom a little bit of freedom in terms of what direction they want to take things. Again, too often businesses think about I have to control my brand. Brands exist in the consumer’s mind, and no matter what you do, they’re going to make certain things up. So in this case, what these companies are doing is allowing the fandom to actually drive some of the storyline.
Dave Young:
Yeah.
Stephen Semple:
It’s really quite extraordinary when you get into-
Dave Young:
The story and world building.
Stephen Semple:
Story and world building, yes. Yes.
Dave Young:
You see it over and over. Interesting. I’m glad you brought this one, Transformers. I might have to go get one.
Stephen Semple:
And Tonka completely misunderstood this. When they pivoted, they thought we need a different toy. Rather than, what we need is actually something with a deeper storyline-
Dave Young:
A better story.
Stephen Semple:
A better story. A deeper story. An adult story. And the temptation is, oh, we’re just marketing this to kids, so let’s make it this superficial kids story. No, Transformers went to an adult story. It’s a rich, deep story.
Dave Young:
Very cool. Very cool.
Stephen Semple:
Yeah, I thought you’d find this one interesting.
Dave Young:
Thank you for bringing the Transformers to the Empire Builders, Stephen.
Stephen Semple:
All right. Thanks, David.
Dave Young:
Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90 minute Empire Building session, you can do it at empirebuildingprogram.com.
