Tuesday, April 29, 2008

Zizzle: Immaturity makes toymaker a winner


You never know when a life-changing moment will seize hold. For Roger Shiffman, it arrived in the mid-1970s, shortly after he graduated from college. Long a toy lover and already a veteran (since age 15) of the retail industry, Shiffman had begun working at a toy wholesaler just as electronic games were being embraced by the masses.

It struck him, Shiffman says, that two things he loved — toys and electronics — were about to forge an indelible match.

"I wish everyone could have an epiphany like this," he says.

In time, his twin passions led Shiffman to build, in separate phases of his career, two highly successful toy companies. The latest, Zizzle, scored a smashing victory in 2005, shortly after its creation, when it won coveted rights to make toys based on the movie Pirates of the Caribbean: Dead Man's Chest and any sequels. One toy Zizzle eventually developed, the Dead Man's Chest play set, was named one of the top toys of 2006 by the Toy Industry Association.

A shrewd and competitive businessman, Shiffman has nevertheless had to tap into a child's imagination to achieve his stature in the toy industry. And at 54, having survived a brain tumor, he's keenly aware that a sense of humor both enriches life and helps you navigate an industry geared to children.

"You're only young once," he says. "But you can be immature forever."

From the start of his career, Shiffman wanted to run his own shop. In 1978, with a partner, he created Tiger Electronics, which developed electronic handheld games. Among the high-tech toys it created was Furby, which ignited a public sensation. In three years, Tiger sold more than 41 million of the cuddly robotic toys that talked.

In 1998 Tiger was acquired by Hasbro (HAS) for $335 million. Shiffman stayed on with Hasbro, doing marketing and brand development. But in 2001, he decided to leave.

"I just found that I needed a break," he says.

For a time after he left Hasbro, Shiffman was subject to a non-compete pact, which barred him from working for a direct rival. Mainly, he played golf and did work for charitable groups.

Then, in 2002, he discovered he had a brain tumor. It was benign, and the surgery was successful.

Afterward, Shiffman was visited in the recovery room by Marc Rosenberg, his friend and a former executive at Tiger.

As Rosenberg recalls, "I looked at Roger and said: 'You're really a crappy golfer. Can we please get back to work now?' "

Not surprisingly for a man who had just endured an operation to remove a tumor, Shiffman needed some prodding, and some time.

"I never felt that I had anything to prove," he says. "We had such great success at Tiger, and who knows if you can ever repeat that?"

Yet not much later, Shiffman, Rosenberg and two other members of Tiger's powerhouse team spun their entrepreneurial zeal into another toy company they called Zizzle, based in Bannockburn, Ill.

"It was a very risky thing to do," says David Scher, executive vice president of sales at Zizzle. The industry had grown more competitive, with less room for upstarts to take root. New companies had to struggle to find shelf space.

Yet Zizzle lunged quickly out of the box with new products. And it didn't fall back on the high-tech electronic toys its creative team had produced so successfully at Tiger. This time, Shiffman favored action toys. And he wanted a licensing agreement with Disney to create Pirates of the Caribbean toys.

"I said, 'Are you nuts? We don't do action figures,' " says Rosenberg, who is chief marketing officer. "He said, 'Of course we can.' "

They did.

"As real entrepreneurs, they relaunched the magic again," says Jonathan Samet, publisher of The Toy Book, an industry publication. "Pirates turned into an unbelievable franchise."

Zizzle's success has come even as toy sales overall have remained sluggish. Last year, the industry generated $22.1 billion, according NPD Group, a research firm, down 2% from 2006.

As a privately held company, Zizzle doesn't release its revenue figures. But Chris Byrne, an independent analyst, estimates that a movie toy line like Pirates of the Caribbean would generate about $100 million a year. Given licensing fees and other costs, he says, the profits would probably amount to $50 million annually.

Zizzle's management team has zeroed in on the most robust retail categories. Among all toy sales, action figures produced the biggest sales increase in 2007. And the video-game industry exploded last year, with nearly $18 billion in sales, up 43% from 2006, NPD says.

Many toy companies, including Zizzle, now face a heavier financial burden because the cost of labor in China has risen sharply. And testing for lead paint is arduous and time-consuming.

Nor do toy concepts last very long. "The amount of information kids get now and the speed in which it comes is like light speed," Rosenberg says. "Their wants and needs change faster."

Which is why Zizzle's creative team is perpetually on the hunt for ideas likely to connect with kids. It was one of the first companies to develop products linked with High School Musical on the Disney Channel. Among them: a karaoke microphone, which lets kids sing along with the songs, and an interactive dance mat.

"It was very successful," Samet notes.

In vying with such titans as Mattel (MAT) and Hasbro, Zizzle tries to size up the competition and act quickly. Occasionally, it stumbles. In 2006, it introduced Lucky, a robotic dog. It sold for $50, which was a bit too pricey, especially as the technology didn't work perfectly, Byrne says.

Rosenberg says Zizzle, which was just getting started, couldn't get enough of the robotic dogs made. "So it kind of died," he says.

The company isn't giving up: It will relaunch Lucky this fall. By exploiting better technology for less money, it will charge $39.99 this time.

In the meantime, industry experts say Shiffman can rightly claim to have built two companies into runaway successes.

"He's a legend in the industry, particularly with the work he did at Tiger with Furby," says Joe Lawandus, a former vice president of Disney Toys who is launching a new toy company.

Shiffman tends to avoid self-promotion. His colleagues are less reticent. "Roger is able to see a product or idea that others can't see and then help develop it," says Patty Jackson, executive vice president of product development. "He's a visionary."

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