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Toys ‘R’ Them

Sota Toys is the place that every kid wants to work for when they grow up. A hodgepodge of intricately designed action figures, arcade machines and life-size statues of video game characters, the Van Nuys space feels more like a clubhouse than an office. Sota’s workers banter freely wearing T-shirts and have long hair, listening to the music of their choice, surrounded in a sugary sea of fast food and empty soda cans. Once a month, the company rents out a paintball field for the staff to bond while conducting a faux war. On top of everything, there are no set hours. However, while the environment might seem lax it seems to have paid dividends, as Sota’s revenues have grown significantly each year and net income has grown $200,000 to $300,000 per quarter. Founded in 2001, the company originally started as a movie special effects house. But soon film studios began asking if the company could do sculpting for the studios’ licensed action figures. Things really began to take off when the company’s President Jerry Macaluso obtained the license to produce the action figure for the Lara Croft character from the popular film “Tomb Raider,” starring Angelina Jolie. Sota spun off from its parent company and full operations began in 2002. An expert at sculpting but a neophyte in the toy game, Macaluso brought in company vice president and toy industry veteran, Jess Bansal to run business affairs for the firm. The Croft action figure became a huge hit for the company, earning a best female action figure award from the toy industry fan base. After that, business began to accelerate, with Macaluso handling the artistic side of the company and Bansal handling all business, sales and marketing concerns. “Everything we do is driven by the fan base. To us, it’s the only thing that matters. We ourselves are fans of the products that we make,” Bansal said. “After the Croft figure, studios started approaching us to make figures for other properties such as “Charmed,” “Planet of the Apes” and “Alien Vs. Predator.” Video game companies started coming to us like Blizzard and Capcom. And We’ve just been approved by Nintendo to do some collector based stuff.” Making collectibles The company’s focus is on making collectibles for the film, television, music and video game industries. In addition to the above properties, Sota has gained licenses for the “Street Fighter” video game series, the “Dark Stalker” video game series and the “Warcraft” computer game series. In addition, the company is about to obtain licenses for several major rock stars. Understandably, the company caters to a niche of primarily male 18 to 34 year-old collectors who find quality of design paramount. “Currently, the trend in the collector’s base is definitely going towards more higher-end pieces with a lower retail price. Fans are demanding more articulation, more detail and a lot more action than your normal action figure, but they still want to pay $13 for it,” Bansal said. “We are in a very niche-based, trend category. We have been lucky in that we’ve been a little bit ahead of the curve on the trends.” North Hollywood-based retailer Earth Entertainment Inc. sells entertainment toys, action figures and miscellaneous collectibles from its website and a catalogue that reaches 250,000 people. Jeff Howard, the company’s vice-president, claims that Sota’s items do a brisk business for the store. “Their line appeals to our client base: guys in their twenties, thirties and forties, who collect action figures. That’s what Sota does and they do it well,” Howard said. “They sell very well in our stores. It’s a combination of their licenses and their quality. We carry all of their figures and have for years. They’re great people and they are easy to deal with. They’re a good company.” Perhaps the company’s greatest success to date came this year at the annual New York Toy Fair, the biggest event in the toy industry. 2004 was Sota’s first year at the show and while the company’s products sold relatively well, it was no match for their performance in 2005. “The first year was an eye opener. We were on the fence of making really cool stuff. It was a pretty good year although our sales peaked towards the end of the year when people saw the product on the shelves, rather than just buying it at Toy Fair,” Bansal said. “This year at Toy Fair was the opposite. We had an 85 percent sell through on products that hadn’t even come out yet, that were still in the prototype and design phase. We had buyers buying right on the spot. We are 85 percent sold out for the year which is pretty good for a small company.” Crediting quality Bansal attributes the company’s recent success to its reliance upon quality, rather than slavishly trying to cut costs. He acknowledges that the company could save money by switching to a cheaper manufacturing factory in China, but believes that ultimately producing quality items is the single most important factor that leads to success. Currently, the company’s items retail at small independent collectible shops and cannot be found at large mass market outlets such as Wal-Mart or Toys R’ Us. Bansal believes this strategy has helped the firm preserve the strength of its brands, but ultimately acknowledges that to reach a great level of success Sota will have to one day begin selling to the big boys. “We value the properties as much as the license owners do. We strongly feel that mass-marketing a product can devalue the property, not just the price point but the item itself. In certain categories, going mass-market is a property killer,” Bansal said. “Within a couple years, we’re going to look at doing certain mass market items, but only where it makes sense. Obviously, our meat and potatoes is the collector base. But to grow the business, we will have to look at the mass market.” In addition to toying with the idea of one day making selected items for the mass-market, the company is also in the early stages of expanding internationally. Bansal has begun making contacts in the United Kingdom and India to obtain licenses and manufacture product exclusively tailored to those locations. We’ve made connections with various companies in each country and various license holders. We’re lining up several licenses in the United Kingdom and taking a serious look at obtaining licenses in India,” Bansal said. “We’re taking it country by country, specifically targeting specific demographics. We’re looking at tapping into the collector base.”

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