Spin Master also gave investors an update of how production on their portfolio of shows, including PAW Patrol is going during to the lockdown due to the global COVID-19 (coronavirus) pandemic:
"Our entertainment team is working on our third-party animation -- is working with our third-party animation studios to keep the production of all our TV shows and movies on track in a work-from-home environment, and we are fortunate that the animation production lends itself more easily to virtual work environment, unlike live action, which has been severely disrupted by COVID-19."
Spin Master also gave an update on how the upcoming PAW Patrol movie was progressing:
"We also announced PAW Patrol: The Movie, which will be launched in August 2021 in association with Nickelodeon Movies and distributed by Paramount Pictures. The entertainment team is working on completing the voice talents, and we hope to share an update on the exciting cast soon."
However, it's not all good news. The COVID-19 pandemic has hindered sales of PAW Patrol merchandise globally:
"In many countries, since mid-March, consumer demand for our products has been impacted by the disruption caused by the virus. However, we began 2020 with a strong start with double-digit POS growth in the first quarter. Areas of strength included the launch of the new DC Comics toy line, Bakugan, Monster Jam, Kinetic Sand and Games & Puzzles.
At that point, from a brand and product perspective, we observed very strong demand for categories such as Games & Puzzles and activities, which includes arts and crafts, given the new imperative of parents to keep their kids occupied while indoors. Kinetic Sand was already seeing exceptional sales increases early 2020, and the entire line has further benefited from stay-at-home guidelines. We saw similar trends following 9/11, and a lasting positive effects on the category were felt for years. We are leaning into these categories, and we believe that demand will continue throughout 2020 and going forward.
Keep in mind that we are the second-largest games and puzzle manufacturer in the U.S. and are a major player in activities.
Where games, puzzles and activities benefit from stay-at-home, other product categories across the industry has struggled. First is driven by events such as birthdays, a decline, and kids cannot get together in the current environment. This has affected PAW Patrol. Collectibles and action figures are also categories that are seeing declines, which has adversely affected Bakugan and DC Comics, both of which had a very strong start to the year."
[...]
PAW Patrol, which was down for the quarter, saw pressure from the combination of high inventory carryover from the 2019 holiday season, meant for media airing, and in particular, COVID-19, as the cancellation of birthday parties and other event-driven sales affected the brand later in the quarter, leading up to Easter.
We are still seeing -- or selling well across many markets outside of North America, including the U.K., Germany, Russia and Mexico, where we saw POS growth in the quarter.
The Remote Control and Interactive Characters segment continued to show declines, led by Hatchimals, offset by growth in PAW Patrol RC and Monster Jam RC. Gross product sales in Outdoor declined by 15.5%, driven in part due to supply chain disruptions and beach and outdoor area closures later in the quarter.
[...]
In the U.S., POS for the quarter was up 11%, including Hatchimals and up 19% excluding Hatchimals. In the U.S. and globally, Activities and Games & Puzzles POS was up triple digits, led by Kinetic Sand and Cardinal. PAW Patrol POS was down for the quarter for the reasons I described earlier.
Current global POS remains up mid- to high single digits and is bifurcated by region. In the U.S., POS in the last 4 weeks is continuing to grow at even higher rates than we saw in Q1. Activities and Games & Puzzles POS is showing continued strength. We are encouraged to see that recent POS for PAW Patrol, Bakugan and Monster Jam is now turning positive, together with Outdoors as the weather warms up.
However, in Europe, except for Russia and Germany and in countries such as Canada, we are seeing a decline in POS over the last 4 weeks due to the impact of retail closures in these countries. We are observing several trends, which affected our shipments and POS.
[...]
Other revenue, which primarily reflects licensing and merchandising royalties, television distribution revenue and app revenue, declined by $7 million in Q1 compared to last year. The decline resulted from lower licensing and merchandising royalties from PAW Patrol and Hatchimals, and was partially offset by increased revenue from Toca Boca and Sago Mini. We expect this trend to continue for the balance of 2020.
[...]
Mark L. Segal, Spin Master Corp. - CFO & Executive VP: So PAW Patrol for the year has largely been down in North America. In Europe, it's been stronger. But overall, PAW has been down from both a sales and a POS perspective. The good news is that, in the last couple of weeks, though, we've seen a fairly material rebound in PAW from a POS perspective, and so that's starting to trend more positively. The reason PAW is down for the year is really in relation to inventory carryover that we saw from 2019, the full TV driver for PAW Patrol, which was The Jet, did not do very well. It's not as well as we expected. And so that actually relate -- that caused some to carry over into the first quarter. We also had our marketing start later in the first quarter. And probably most significantly of all, the reality is that a lot of PAW Patrol purchases are more events-driven around birthday parties or Easter or other kinds of events. And so PAW has suffered from COVID. But overall, long term, we still feel very comfortable with PAW. We're very excited about it, the new content that Ronnen...
[...]
Ronnen Harary, Spin Master Corp. - Co-Founder, Chairman & Co-CEO: Just to build on that is that the Preschool category is down, David, across the board as a result of COVID. I would put it in the harder hit category side of the ledger. But from a franchise perspective, we're super, super excited about our new theme, which is Dino Island. I'm extremely proud of our team for producing in our, seventh season such an incredible theme. Very excited for you guys to see it. It is probably one of our best productions to date. And the new character, which is Rex, who's the handicapped dog is coming, is a great aspirational character. The Dino Patroller, which is extremely aspirational. We have a new headquarters, which is looking on Dino Island, which is an aspirational. We have the dinosaurs next in -- with the pups, which is a whole view of unique world for kids who -- to really enjoy, and dinosaurs are classic play pattern for kids. So I think it's quite amazing that we were able to blend those worlds together.
And then looking forward, obviously, the movie for 2021, and that is currently on track. It's on schedule and working very closely with Paramount currently now and what are the marketing plans for that. Very, very engaged with their teams well in advance of the movie seem to market properly. And we also realign all our licensees to make sure that they are getting all the collateral material so that they can start their product development processes early on now to make sure that, for fall 2021, we have a very fresh, new dynamic look in PAW Patrol line or the movie that's very different than the traditional TV theme line.
###
More Nick: Nickelodeon Launches PAW Patrol Safety First! Global Campaign!
Originally published: Friday, May 8, 2020.
Follow NickALive! on Twitter, Tumblr, Reddit, via RSS, on Instagram, and/or Facebook for the latest Nick Jr., Nickelodeon Preschool and PAW Patrol News and Highlights!
