Lionel - MTH Tinplate Licensing Deal True
Yesterday, Lionel's CEO Jerry Calabrese acknowledged that the premature press releases I found on MTH's website were in fact true. Mr. Calabrese summed up the agreement like this:
Lionel and M.T.H. are two, entirely separate companies with entirely different business models and destinies. We
fiercely compete, and will continue to fiercely compete, in the core, O
gauge segment of the model railroad hobby, especially in the arena of
high-end engines and Operating Systems. However, our interests do not conflict, to any great extent, in other gauges and markets. Both
companies are equally committed to making great trains and, where we do
compete, both companies are equally committed to convincing hobbyists
that they do so better than the other. And none of that will change.
The
agreement between Lionel and M.T.H. is a conventional and
straightforward, multi year license, in which Lionel will be paid a
royalty on each tinplate train that is sold. As
an acknowledged and acclaimed maker of tinplate trains and accessories,
M.T.H will now be able to do so using the historical and authentic
Lionel and American Flyer badging that made them historical and
authentic in the first place. While M.T.H. will
be solely responsible for manufacturing the new line, Lionel will work
with M.T.H to select the trains that will be made over the next few
years, and will do whatever it can to help make them the success they
deserve to be.
The original press "XX3" press release was officially released too with all the XX's filled in.
I find this new agreement interesting in many ways….
- Will someone please convey to Mike Wolf of MTH that he needs to pay more attention to how he markets his business over the web! It is unacceptable to me that those press releases were accidentally posted on MTH's website prematurely. They were very very easy to find — I found them by hitting the search button on their news archive page with nothing in the search box. In my opinion MTH's website does no justice to the products it sells - it's slow, not visually appealing and obviously, is not administered properly. How can the 2008 Volume 2 catalog still be the "current catalog" on the website even though the 2009 Volume 1 catalog was released over 60 days ago? It is pitiful that MTH's web presence doesn't reflect the pride those at MTH have in delivering fantastic trains with what I think is the best digital command control system for the money. Wake up MTH and revise your web presence.
- Neither the press release nor the comments from Mr. Calabrese address my biggest question - what control system if any will be in the tinplate trains MTH is producing? Since, according to Mr. Calabrese, Lionel and MTH will "fiercely compete, and will continue to fiercely compete, in the core, O Gauge segment of the model railroad hobby, especially in the arena of
high-end engines and Operating Systems." I wonder how MTH will develop a train that can co-exist on layouts running either company's digital control system without sacrificing the cool and different functionality each system offers? I know that MTH's DCS can control Lionel's TMCC equipped trains but what about Lionel's new Legacy system? Will this agreement mean that Lionel will have reveal the technology behind their new Legacy control system to MTH (maybe they already have)? This will be interesting. - What is the real reason for this agreement? In my mind, the tinplate segment of the O and Standard gauge world is tiny. What benefit does Lionel achieve by letting MTH manufacture Lionel's old tinplate trains when MTH was already recreating them anyway? I guess the most obvious reason is $$$ for Lionel, which is ok and leads me to my next point.
- To me this agreement solidifies my opinion that MTH is in a position of strength in the world of model train manufacturing (or spread too thin?). MTH is expanding into HO like crazy, creating more and more re-tooled locomotives and already has a great line of tinplate O Gauge and Standard Gauge offerings. The agreement also makes me believe that Lionel's strategy is to survive through licensing agreements. This may be a temporary strategy to strengthen their financial standing but Mr. Calabrese's history with Marvel Comics indicates otherwise. It wouldn't surprise me if Lionel carefully expands its relationship with MTH in the future. Such an expansion just makes good business sense for a company that can make a ton of money from a brand without getting involved in the manufacturing. When you really, really boil it down, isn't the prominent role of both MTH and Lionel in the manufacturing of model trains to manage outsourcing agreements they have with manufacturers in the Far East (OK there may be some ownership stake involved in some cases). If you think of it in those simple terms it is even easier to believe Lionel could become more of a brand management company then a manufacturing management company.
Is this agreement a "Budweiser Turning Point of the Game" for both MTH and Lionel or just a simple agreement between two companies trying to survive and make money in the small world of O and Standard Gauge trains? Time will tell.
What do you think?
You can read Mr. Calabrese's statement and the press release here.
Related posts:
- MTH Debuts Catalog Cover in Newsletter
- Another Premature Press Release From MTH
- www.lionelcorporation.com?
- Da Da-Da Daaaa: Introducing The Lionel Corporation
- BREAKING NEWS from MTH…
« BREAKING NEWS from MTH… | Main | Da Da-Da Daaaa: Introducing The Lionel Corporation »
6 Responses to “Lionel - MTH Tinplate Licensing Deal True”
I think it reflects the differences in business models. Lionel wants to make products in the thousands of each item. MTH is quite happy making products in runs of 50 or 100 or so if there is a market. Tinplate clearly fits in the MTH model and not the Lionel model. MTH has been making models that, potentially illegally, borrow Lionel’s trade dress, but could not put the most important thing on these models, the Lionel name that made it a true reproduction. Now they can do so, avoid any future legal challenges to their past and future use of Lionel’s trade dress, and probably sell twice as many or more models because they will carry the Lionel or Flyer name, not MTH. Lionel gets revenue it wouldn’t otherwise get, and retains ownership of the trade dress and MTH’s tacit admission that Lionel owns that trade dress.
Posted by: Neil | Jan 2, 2009 at 9:49 AM
The link to the 2009 v1 current catalog is flacky. Sometimes it goes to the 2008 page, other times, it show the current 2009. Here is the link to the 2009 v1 catalog.
http://www.railking1gauge.com/catalog/current2.asp
Posted by: Lou | Jan 2, 2009 at 2:02 PM
Thanks Lou. It works but why would the catalog show up on the railking1gauge domain? That’s MTH’s Garden Scale product. It is also interesting (but not suprising) that none of the links in the left sidebar on that page work for me. The flakiness just proves my point that MTH is failing when it comes to web marketing.
Posted by: Dave | Jan 2, 2009 at 8:21 PM
Hi Neil, I’m not sure I agree with the “potentially illegally” comment. Williams Electric Trains’ business model was to reproduce Lionel’s post war models and I don’t recall them having a licensing deal with Lionel (maybe they did or do but the Bachmann web site doesn’t indicate one). I do agree that Lionel seems to excel at the top of Mr. C’s “sales funnel” by making thousands of trains like the Polar express aimed at the entry level market. I used to feel that MTH was missing the entry level market until I realized that MTH should let Lionel play in that space then scoop up those that move down the sales funnel and go to the hobby shop instead of Target to get their next train set. If I’m MTH I’m requiring that every hobby shop have some type of display showing off Proto Sound 2 and DCS because for a few bucks more than a Polar Express you can get train with cool sounds and functionality that gets even better when upgrading to DCS. When I upgraded to DCS all my DCS locos became even more fun while my Polar Express became a dust collector.
Posted by: Dave | Jan 2, 2009 at 8:39 PM
“Hi Neil, I’m not sure I agree with the “potentially illegally” comment.”
Well, if you expropriate another company’s visual appearance and designs, especially those with known brand recognition and historic collector value, it’s very likely a federal judge will suggest that you are in violation of the law. But it hasn’t been tested. Williams was equally “guilty” of this infringement and I did not mean to single out MTH in that regard. Lionel was negligent in defending their intellectual property in the past, but appears, under Jerry Calabrese to be quite intent on protecting their rights. If I’m Williams by Bachmann, I’d have my lawyers looking into the issue prophylactically as I expect their Golden Memories series is due to either be officially licensed to them by Lionel or the subject of inquiries by Lionel’s attorneys.
Posted by: Neil | Jan 7, 2009 at 12:28 PM
OK, I’ll agree with there. By the way, I must admit that I’ve never seen the word prophylactic used as an adverb before.
Posted by: Dave | Jan 7, 2009 at 7:27 PM