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From the Scale Auto website. It's a long read, but skim thru it, there's some good info about the cost of producing a new model and stuff.

Model car makers get the squeeze
Time, money, licensing prove roadblocks to modern plastic car kits
by Fred Jandt of Model Retailer






If dealers have one universal complaint, it's the one where a customer drops in and asks for that single product they don't have and then asks, "Well, why not?"

Arguably the hobby where this is the greatest problem is plastic modeling. Every customer has a favorite vehicle, plane or ship they want to build, one that more often than not simply has never been made as a plastic model kit.

With the tuner craze in full-size cars popularized by such movies as "The Fast and the Furious" now taking hold in the plastic model world, younger modeling fans have begun to notice a void.

With a few exceptions, there are few modern car models available - that is, models of current cars and trucks. Those that do exist are either licensed versions from movies or high-end vehicles such as Ferrari's Enzo.

As Andy Lilienthal, associate editor at Scale Auto magazine, points out: "Most manufacturers are still catering to the core crowd of modelers instead of bringing in new customers. Most cars being made now are the muscle cars ... Most 16-year-olds who are reading Sport Compact Car magazine would rather build a model of a Toyota Supra than a Chevy Camaro.

"Maybe if the model companies offered something that's on the road now, it might help bring in new customers," he says.

Yet Mike Bass of Stevens International, which distributes Trumpeter plastic kits, feels the older cars, such as 1960s muscle cars, still offer the biggest market.

"This is where the interest is. All the new cars and trucks look alike, with square lights and the same grilles," Bass says.

Still, some modelers and retailers wonder why so many plastic car reissues come out every year and why manufacturers shy away from kits of current vehicles.

Bob Hayden, executive director for the International Model-Hobby Manufacturers Association (IMMA), says, "I remember working in a hobby shop 40 years ago, and when the new cars were announced [from car companies], plastic kit companies like JoHan and AMT generally had the tooling ready and we got the cars at the hobby shop the same week the dealerships unveiled them.

"And then a lot of things changed."

What changed?

There are many mitigating factors, but it boils down to two things: time and money.






The High Price of Tooling

Ask any model manufacturer where the greatest cost lies in making a kit, and they all say tooling.

Lewis Nace, Testor marketing manager, says, "New subjects naturally require tooling. And costs remain the major factor. Depending on complexity and tooling source, these vary greatly. So projected amortization schedules become the keys to planning and investment decisions. The tool - and therefore the product - must offer an attractive return on investment within a 'reasonable' time."

Bass agrees. "The cost of tooling a completely new car kit, or any model kit for that matter, is enormous. I don't think the public, nor much of the trade, realizes that to tool a new model car kit in the U.S. takes well over a year of research and costs a minimum of $75,000 to $100,000.

"The market for U.S. model kits does not warrant this kind of investment unless a subject can be proven to be profitable for the maker over a given time. Much of the new tooling is now done offshore in order to keep this cost down, but even at that the quantity needed to be sold to break even is high."

And that quantity is never a guarantee, says Sam Wright, Tamiya America's national sales and marketing manager. "Using muscle cars as an example, the 'Me Too' syndrome limits your share of the pie. Once the licensing issues are taken care of, then you must evaluate how many pieces you will sell to amortize your cost of tooling and fees. In some cases, with so many companies selling the same product, it just does not make good business sense."

Just how big is the plastic car market?

Industry experts estimate anywhere from 100,000 to 300,000 people are modelers now, with roughly one-third interested in, or actively involved in, model car building. A relatively successful kit for manufacturers will sell from 6,000 to 10,000 units. Its financial success is dependent on the total costs of creating that kit.

So why, in this modern age of computers and robotics, is tooling still so costly?

IMMA's Hayden explains, "In many, many areas of the model hobby industry, technology has come in and made new product development less involved and less expensive than it was 20 years ago.

"I don't think that has happened, certainly not to the great extent it has elsewhere, in plastic kit tooling. Although the computer helps a little bit, there is still a good deal of handwork involved. And given that labor costs drive everything now, plastic kit tooling is almost staggeringly expensive."

Licensing Costs, Too
Tooling is not the only issue vexing model manufacturers. The time and money spent on licensing a name-brand car are almost as much as actual production costs.

Tamiya's Wright says, "Tooling is an integral part of any new product; however, licensing becomes a bigger issue. When you must burden a new product with 10% to 15% [in licensing fees], this is passed on to a consumer, creating a much higher cost."

Stevens' Bass says there's also a lot of time spent dealing with the red tape of licensing with the automakers, such as Ford, GM, Chrysler or foreign manufacturers. Trumpeter, which Stevens distributes, is just completing work on a 1960 Pontiac Bonneville kit.

"We have personally seen mounds of paperwork and protocols that need to be signed and followed just to get the right to make a kit, even before a tool is considered to be cut. This, along with the royalty payments demanded by car companies involved, increase the up-front costs of new kits, making some subjects even more prohibitive."

Bass noted that even the box art for a licensed kit must be approved by the car makers, or their representatives. That too takes time.

Getting a Return on Investment
With the exorbitant costs of tooling and licensing, model kit makers inevitably fall back on reissues of preexisting products to turn a profit.

Testor's Nace explains, "Reissues of popular subjects from existing tooling makes sound business sense: Engineering and development costs are already incurred. And as long as consumer demand remains high, margins can prove progressively more attractive with each reissue."

Hoppin' Hydro's president Jeff Shearer agrees that reissues are a good investment, "because a company can bring an old mold back, spruce up the package and offer it up as a limited-edition classic, making it an easier risk financially since the mold has been paid for years ago."

A Global Marketplace
The term "global marketplace" has been bandied about for years. Yet when it comes to the plastic-model industry, and the reason there are fewer model cars in general, that global market has a direct impact.

Ed Sexton, senior manager of product development for Revell-Monogram, relates how the global market has changed the way his company does business: "In Europe the most popular model kit subject matter consists mainly of military subjects such as aircraft and armor. But for us in the U.S., the car is king. We have far more model car kit builders.

"So the structure of Revell was changed many years ago to accommodate this demand. We actually create two separate product ranges, each focused on the demands of their given market. Then we each also offer the other's products to our respective markets. This actually doubles each of our product offerings."

Other manufacturers agree the "car-centric" U.S. market and the military-focused world market are often at odds.

According to Hoppin' Hydro's Shearer, "There are a lot of different styles and tastes around the world compared to that of the U.S. A manufacturer will look at trends around the globe as well as sales in each area and make an educated decision on which new cars to make for a specific area to maximize sales."

AMT product manager Cheryl Reiter agrees. "The U.S. market has a strong interest in American cars. Subject matter is key in selling products worldwide."

Testor's Nace adds, "Global sales can help accelerate a tool's return on investment. But with certainty, subject matter and interests remain quite different. Only U.S. hobbyists and selected international enthusiasts express interest in classic Detroit iron."

Stevens' Bass notes, "The U.S. kit market is difficult to compare to any other. It is my opinion that the American modeler is much more demanding of perfection than modelers of other countries.

"This is a double-edged sword. Modelers certainly have the right to demand an accurate kit. On the other hand, it is a model kit, not the real car. Somewhere in between lies reality.

"One can look at brands like Fujimi and Aoshima in Japan, Revell in Germany and others and wonder why there are so many new kits on their markets while we have precious few," Bass says.

"A closer look will reveal that much of the German Revell is not new tooling, but reboxing of other makers' kits. In Japan, which is one of the largest markets for kits, sometimes even larger than the U.S. with less than half the population, one sees a single new tool made into dozens of variations. While this often makes a new kit rather tiresome in the end, it goes back to my comments [on tooling] - do you want to see new kits or not?

"Often this is the only way to pay for the new tools. The best new tool is one that can serve multiple international markets," Bass says. "For car kits, unlike planes, ships and tanks, this is difficult since so many cars are indigenous only to their domestic markets."

Competing for Leisure Time
As the model industry moves into the new millennium, its greatest challenge comes from outside, as current and future modelers are offered more choices than ever on what to do with their leisure time.

Shearer says, "The youth of today have what I call a 'microwave mentality,' which means they want it now and they want it done. Also, parents seem to be working more than ever to make ends meet and cannot seem to find the time and energy to help their kids build plastic models, henceforth affecting sales of kits and increasing a company's risk on their investment to high."

Hayden adds, "What I think people in the industry understand is that their product has to compete not with another model company's product, but it has to compete with all the other demands for a limited amount of leisure time, and that applies both for kids and adults.

"One thing I see again and again is that when the economy gets soft and people have more time on their hands, we see mini-booms in modeling hobbies, model railroading, scale plastic modeling ... basically, all of those things because the main ingredient in all of these leisure time activities is time rather than money.

"And no matter how much griping you hear from enthusiasts, if they'll step back from their workbench a little ways, they'll realize that they're very well served. There have been really - despite the cost of tooling - over the past 10 years a lot of new interesting and innovative products," Hayden says.

"There's always somebody out there saying that the thing he wants the most isn't being made, but that's never going to change."


Diecast vs. Plastic

Every month there's a shipload of new die-cast vehicles on the market while new plastic car kits are few and far between. We asked the manufacturers why.

Testor's Lewis Nace says the answer is easy: cross-marketing. "Die-cast products fit into multiple market niches: toy, novelty, gift, collectible and hobby segments. From a financial perspective, tooling for the relatively small hobby market remains costly - and somewhat risky. The toy/novelty/collector markets, by contrast, are extensive. Gas stations, gift stores, premium mail order, toy stores, mass market and so on all carry die-cast cars. The bigger the market, the more participants are willing to invest."

Hoppin' Hydro's Jeff Shearer adds, "The die-cast market feeds off the microwave mentality of wanting it done, painted with custom wheels and ready to place on a shelf to be admired immediately. The die-cast market has also stepped it up with a slew of already customized-to-the-hilt cars and trucks that make them hard to resist, even for a plastic model kit builder."

For Revell-Monogram's Ed Sexton, it boils down to size: "The big difference is that the market for plastic model kits is more limited than the die-cast market. The die-cast model for the most part is a fully assembled piece and this appeals to so many more people. A kit requires many different things, such as tools, time and the skill to build it. With the increasing demands on both our children's and our time, sitting down to build a model kit happens less and less. Those that do take the time, however, really do enjoy it."
 

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Poppa thanx for the article.

I can understand some points of it but in my opinion it's not only the customer that "demands" ready made diecast cars...the manufacturer also plays a big part in this. Take a look at Lindberg you can't tell me they are not making profit on their hoppercars...these cars can easily be sold in any toystore around the world.
I think as a company you have to find more creative ways to design and sell your stuff.
Buisness is at a point where there's less and lesser space for "smaller" products only the ones that can be sold BIG...and only BIG are interesting for them.
I see programs where trendwatchers ask kids the most bizar questions just to discover new ways to penetrate their minds in order to sell all kinds of shit to them....scandelous, really.

If you as a manufacturer have a passion for the product you are making there's no need to squeeze yourself in all kinds of ways in search for that extra dime. Ofcourse you have to work to maintain your buisness...but this layes for most in being creative and find ways to interest people.
;)
 

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Discussion Starter #6
Originally posted by jevries@Dec 11 2003, 02:38 AM
Poppa thanx for the article.

I can understand some points of it but in my opinion it's not only the customer that "demands" ready made diecast cars...the manufacturer also plays a big part in this. Take a look at Lindberg you can't tell me they are not making profit on their hoppercars...these cars can easily be sold in any toystore around the world.
I think as a company you have to find more creative ways to design and sell your stuff.
Buisness is at a point where there's less and lesser space for "smaller" products only the ones that can be sold BIG...and only BIG are interesting for them.
I see programs where trendwatchers ask kids the most bizar questions just to discover new ways to penetrate their minds in order to sell all kinds of shit to them....scandelous, really.

If you as a manufacturer have a passion for the product you are making there's no need to squeeze yourself in all kinds of ways in search for that extra dime. Ofcourse you have to work to maintain your buisness...but this layes for most in being creative and find ways to interest people.
;)
from what I understand, Lindberg was bought a few years ago by people who were into the hobby, but not into the business-meaning they didn't really know what they were doing. They managed to crank out a few new kits (Caravan, Crown Vic, 61 Impalas) rerelease a few older kits, and settle for the hoppers now. They got in over thier heads and now they're probably just trying to stay afloat by working with the easiest and most popular models. I still see lots of those hoppers on the shelves though, I don't know if they're really selling, they're usually 15-25 bux

K. Diaz
 

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Originally posted by BigPoppa@Dec 10 2003, 07:12 PM
Most 16-year-olds who are reading Sport Compact Car magazine would rather build a model of a Toyota Supra than a Chevy Camaro.
:angry: :uh: :twak: :guns:
 
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