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Spin Master Stacks the Deck in Its Favor With Redakai

Wednesday, 22 Jun 2011 | 7:33 AM ET

After five years of more than double-digit annual sales growth, Spin Master has reached the point where it will take more than adding a product line or two to move the needle on the dial.

Redakai hobby store launch
Source: Spinmaster
Redakai hobby store launch

Instead, the company is setting its sights on a combination of acquisitions, international expansion, new licenses and product development to keep pushing the company to new levels. But the real trick is to do this without killing the entrepreneurial spirit the company believes is at the heart of its success.

Spin Master’s story is the kind of tale folks like to tell. The company was founded by three college buddies—Ronnen Harary, Anton Rabie and Ben Varadi—who had one idea and about $10,000 to put behind it. The product, a novelty item called the Earth Buddy, was a surprise hit, and the friends leveraged their first success into selling other novelties, then to selling toys.

Today, the company sets the standard for products in the remote control area with its Air Hogs brand. Their secret has been to pack lots of technology into affordable RC vehicles. They also dominate the boys’ toy aisle with products such as Bakugan and Mighty Beanz, and they have even given Mattel’s Barbie some competition with the success of their Liv dolls.

This year, Spin Master is hoping it can repeat the success it had with Bakugan with a new trading card game, Redakai. The launch of the new brand is a good example of how Spin Master looks at the market these days.

The company sees itself as an entertainment property, and rather than launch the new game by itself, the brand will be supported by a new television series, "Redakai: Conquer The Kairu," which will debut on Cartoon Network in mid-July. The series, co-produced by Spin Master and Zodiak Kids/Marathon Media, tells the story of Ky, a 15-year-old martial arts student who is on a quest to find Kairu, a primordial alien energy force.

In order to rally the support of hardcore game fans, the company recently started selling Redakai in select hobby and specialty stores earlier this month. A rollout to mass-market chains will occur later this summer after the cartoon debuts.

Redakai
Redakai
Redakai

The initial reaction has been positive, according to company spokesman Dale Gago. More than 250 hobby stores have started selling Redakai, and many hosted events at their stores earlier this month.

"The market is ripe for a new game to hit that is focused on getting younger players," said John Donohue, of the ToyWiz in Suffern, N.Y. "Other trading card games have practically ignored younger players assuming they own the market. If Redakai plays smart they can snatch up those ignored kids."

The card game market has been very stagnant, with older games such as Magic, Pokeman, and YuGiOh, remaining the primary card games, according to Donohue. He hopes Redakai can create some excitement to keep kids involved with the category rather than losing them to video games.

So far, it looks like Spin Master is employing the right strategy. Since the game can be played either on a complex tournament level or on a basic level, the age range of Redakai's potential audience is wide. And by releasing the product to hobby stores first, he's won over some key retail fans, who will later sponsor tournaments and help nuture the brand on the tournament level.

"You really need both markets to be succesful," Donohue said. He expects Spin Master's experience with Bakugan will help.

As for Bakugan, Spin Master continues to bring the brand to new countries, while the company's recent acquisitions expand the company into the game aisle with board game properties such as Quelf, Stratego and Hedbanz.

Rabie, who serves as the company’s co-CEO, said his role in the company has changed over the years.

Bakugan Battle Pack
Source: Spinmaster
Bakugan Battle Pack

On one hand he is focused on helping to develop talent within the organization while on the other he is working on the international expansion.

The Internet and social media are making expansion easier in many ways, according to Rabie.

“You have six- or seven-year-old kids who are seeing a lot of similar things…because of globalization,” he said. And because children don’t have the same extensive history that adults do, they tend to adopt globalization even faster.

And acquisitions will become an even more important part of the mix as Spin Master looks to grow.

“We looking at making strategic acquisitions in adjacent industries,” Rabie said. “We’re also interested in international properties and brands that support our existing brands.”

Questions? Comments? Email us at consumernation@cnbc.com. Follow Christina Cheddar Berk on Twitter @ccheddarberk.

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