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Monday, December 29, 2014

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Wildly successful toy company started in a garage

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From left are Anton Rabie, Ronnen Harary and Ben Varadi

Radio-controlled pilotless vehicles outfitted with video cameras used to be the exclusive domain of high-tech militaries around the world.

Not any more. Joining the CIA and the Israel Defence Forces in employing futuristic surveillance technologies are pretty much any teenager who can afford the $60 to $100 for a video-equipped Air Hog, in particular, the Hawk Eye Blue Sky Air Hog. These radio-controlled beauties are so advanced; all they’re missing is a Hellfire missile to take out that nasty classroom bully at the end of the street.

Air Hogs is the creation of Spin Master. The air-pressure-propelled aircraft have been available in the retail market since 1998, and they continue to be a very hot seller for the company, a leader in radio-controlled toys, said Harold Chizick, vice-president of Spin Master.

The product has helped vault the Toronto-based company into the top tier of North American retail toy manufacturers, according to NPD Group, a market research agency, Chizick said. Only Hasbro (Monopoly, GI Joe), Mattel (Barbie, Hot Wheels, Fisher Price) and Lego are bigger.

While Spin Master is a relatively recent entry in the toy market, and Air Hogs is big contributor to its success, the company really hit pay dirt in 2007 when it introduced its flagship product – Bakugan Battle Brawlers.

Anyone with a five-year-old will recognize the little plastic toy that springs opens into a deadly fighting machine, able to dispatch super-powered bad guys, including the sinister Emperor Barodius.

The toys inhabit a universe all to themselves in which Bakugan ensures that peace has returned to Neathia and Gundalia and Mechtogan has been laid low.

Bakugan – and Spin Master – is a real Canadian success story. The product was launched in Canada and “it immediately took off,” Chizick said. “It was slower to take off in the United States, but it did take off and it’s a hit.”

Likewise Air Hogs, which was quite popular in North America, is starting to catch on in Europe. With offices in London, Paris, Munich, Hong Kong, Amsterdam, Bratislava and two new branches to launch soon in Spain and Italy, Spin Master has obtained a global reach.

The branch offices are important, as each market requires the input and knowledge of local people to ensure the best way to develop suitable products and market them, Chizick said.

The company was started in 1994 by Anton Rabie, Ronnen Harary and Ben Varadi, friends who’d recently graduated from the University of Western Ontario. During school, Harary and Rabie had started a business in which they created a collage of photos taken during frosh week, which were sold to students.

They were searching for a business to start after university when it was practically dropped in their laps by Harary’s mother, who had just returned from Israel with news about a product called Earth Buddy.

It started as a “kitchen project between the three partners,” said Chizick. “It was engineered in the kitchen, and the product was developed in [Ronnen’s mother’s] garage.”

A sort of chia pet that sprouted when watered, it was intended as a Mother’s Day novelty. Five thousand units were ordered, but it proved wildly successful. “Within nine months, we’d sold 1.5 million pieces,” Harary said.

“That was the springboard for the company to design and sell… products,” he added.

When the partners first got into business, they didn’t know much about margins and markups, but even with items retailing at $6 or $7, “there was lots of margin,” Chizick said.

When the frenzy had died down, retailers were anxious to replenish their stock with something new. “What’s next?” they asked, Chizick recounted.

Air Hogs was the next big success, though it took Harary months working with developers in Asia to perfect the first model.

Flick Trix, a miniature die-cast replica of a BMX bike used at the X Games (which focus on alternative sports such as skateboarding), was another success.

“That was a massive hit,” said Chizick. “We sold 300,000 units a week, and it brought the company to the next stratosphere.”

Since then, Spin Master has broadened its catalogue to include food activities (7-11 Slurpee Maker), dolls (Liv), activities (Glodoodle) and foam furniture.

Along with the hits, there were a few misses: Stink Blasters, a collectible action figure with a gross smell, proved even too gross for the target audience of young boys, and Don’t Free Freddy, a toy that was handcuffed and, when freed, would say nasty things.

In 2007 Spin Master began forging licensing agreements with a host of A-list companies, including Disney, Nelvana, Warner Bros., DreamWorks and Marvel. It has working partnerships with Sega Toys, and in 2009, it won Toy of The Year Award for its Bakugan series, which has been turned into a cartoon series on television.

They’ve recently added app toys such as Appfinity AppBlaster, an accessory to iPhones and “finger-play” devices.

Newly launched this year are AppMATes, a toy that allows kids to play the Disney’s Cars 2 game on an iPad.

As a privately held company, Spin Master is reluctant to divulge its financial data, but Chizick said sales are in the hundreds of millions of dollars. “We have had, for the last seven years, double digit growth in sales and revenues,” he said.

When it comes to hits and misses, Spin Master has an advantage over publicly traded firms, which might hold on to a weak product too long over worries about what the street will think. “We’re realistic and we keep our egos in check. If it’s not working, we just move on and not let it be a drag on us,” Chizick said.

Many of Spin Master’s toys are developed in-house, followed by product testing and focus group input. Many still originate with private inventors.

Spin Master recently took 15 top inventors from North America and Europe to Israel, where they met with 27 youngsters from grades 9 to 12. The kids, participants in Hebrew University of Jerusalem’s Science Oriented Youth Program, were brought together for a gentle version of the CBC business show Dragon’s Den, in which they demonstrated their toy and game inventions and heard feedback from the experts.

“Spin Master will certainly carry on supporting this program by providing knowledge, expertise and, most importantly, mentoring to all of the talented youths in the program,” said Odette Levy, director of the company.

“In addition to this program, we also run an annual program at the Bezalel [Academy of Arts and Design], focused on toy invention. Each year the top students in the program are rewarded with an all-inclusive trip to North America, where they complete an internship at Spin Master offices,” Levy said.

Spin Master recognizes Israel as “an innovation hub and have been working hard to foster relationships with Israeli inventors,” she said.

“This trip was very powerful as most of the people had never been to Israel. They had an opportunity first-hand to learn about the country and took with them a new educated prospective to the land and its people.

“We regard them now as ‘ambassadors’ who would spread the ‘re-branding’ program of the Israeli government,” Levy added.

Who knows, perhaps one day one of the youngsters will be ready to burst on the scene with a new Bakugan.

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