Disney Splits Toy Deals Between Hasbro, Mattel.

BLOOMBERG NEWS

Hasbro Inc., the world's second-largest toymaker, said it signed a marketing agreement with the Walt Disney Co. to make and license toys based on Disney films, television and videos.

Terms of the multi-year agreement weren't disclosed. Hasbro will develop toys, action figures and games for Disney beginning the Disney and Pixar Inc.'s "Monsters, Inc.," an animated feature film due out next fall. The agreement excludes the Japanese market, Hasbro Senior Vice President Wayne Charness said.

Hasbro rival Mattel Inc. in 1996 signed a similar agreement with Disney, which Charness said has ended.

"We split the business, rather than just having one company," said Disney spokeswoman Christine Castro.

Disney and Mattel said in a statement the day of the Hasbro announcement last week that they have an agreement for Mattel to make preschool and plush toys, dolls, games and puzzles based on classic Disney characters. The two agreements come seven months after Mattel won a contract from Time Warner Inc.'s Warner Bros. unit to make toys based on the books and films of popular children's character Harry Potter.

"Mattel's going to be pretty consumed with Harry Potter," said Chris Byrne, editor of Toy Report. "The studios wouldn't want to be in competition."

Hasbro in February received a contract to make trading cards, electronic games and candy based on Harry Potter after losing the coveted toy contract to Mattel. Officials at El Segundo-based Mattel couldn't be reached for comment.

Pawtucket, R.I.-based Hasbro's agreement with Disney also makes it the official toy and game company for Disney resorts, hotels and cruise ships. The two companies plan to build a 16,000-square-foot store at Walt Disney World, and Disney will create large icons based on Hasbro toys such as Mr. Potato Head, Monopoly and Play-Doh for display at Walt Disney World Resort.

Hasbro will have a steady stream of film characters to base licensed toys on, instead of a few blockbuster movies that are made more sporadically, said analyst Hayley Kissel of Merrill Lynch & Co., who rates Hasbro "neutral" and Mattel "accumulate" Hasbro makes toys based on "Star Wars," "Batman" and "Pokemon" films.

Mattel has been a toy licensee of Disney since 1988, when the entertainment and media company granted it the rights to produce a line of infant and preschool toys using Disney characters such as Mickey Mouse and Donald Duck. In 1996, it gained the worldwide rights to make toys based on Disney films and TV programs, some of which weren't as successful as expected, analysts said.

"Mattel's new Chief Executive (Robert Eckert) was looking for a more balanced relationship on the film side than perhaps Disney was willing to give the company," Kissel said.

Merchandise based on classic Disney characters such as Winnie the Pooh and Mickey Mouse account for about 40 percent of Disney's licensing revenue, said analyst Jeffrey Logsdon of WR Hambrecht & Co.

"Mattel is going to stick with what they have historically done well with," said Logsdon.