Lionel K-Line Law suit

[Warburton]

I'm not a big K-Line customer (I have a Coke Bears handcar and a GN EP-5 from their club -- both very nice), but I think they have been innovating more than the other Big 2. As an example, their new line of motorized vehicles which are to run on a special 3-rail track (a la trolleys) is the brightest new idea I've seen in the market in a long time. I suppose that line is now in great jeopardy. Too bad.

[FJ and G]

I'm surprised that there hasn't been a toy train bankruptcy court train yet produced, which carries bevies of lawyers and boxcars filled with reams of paperwork.

Perhaps one of the toy train companies could comply, with at 2005 Bankruptcy/Lawsuit commemmoration series.

[brianel027]

Dangrr, I won't disagree with you. I do believe that the digital control and scale detail end of the hobby has enticed folks (mostly adults though) into the hobby, or to switch the scale of the trains they buy.

It's common sense that most folks would rather buy a nice luxury loaded automobile, but look at the budget and then buy a Kia. I have found that kids who get digital controled trains tend to have a father who is already in the hobby, runs command, and isn't adverse to spending the extra money. But there is a element of sticker shock to newcomers to the hobby. Maybe it's just this area of the country, but I have been told by many parents that they don't (or won't or can't) want to spend more than $200 on a train set - and most prefer to spend less. Mother's in particular would ask questions on how much the layout board costs, and how much are all the needed extras - which can easily add up fast. There aren't many complete digital control train sets that fall under the $200 price. The layout I had was designed and built on a shoe-string budget on purpose to show folks that it can be done.

Again, common sense... most folks when they go hunting for a house are obviously attracted to the nicest house... big rooms, finished basement and garage, big yard, new furnace/heater, etc. Home and Garden magaizines are full of pictures of the kinds of places many people dream of having, but probably never will. The reality is there are rich and poor, but they all need a place to live. Those will less money to spend will not have the biggest house and the biggest yard.

On a national level, maybe I'm wrong. But with more than 10 years of doing trains shows, with the variety of different people I talked to from all walks of life, I found my observations to be pretty consistant. Most shows I did featured other layouts that were much bigger, with newer more scale oriented trains and featured digital control. People will impressed with that no doubt. But then they'd walk back to my display and tell me they did like what they saw on the other layouts, but that my layout and what I had done was within their financial reach. The other layouts were not. People have to get started someplace... again, like purchasing a house: most young couples start with a small house and then gradually move up to a bigger more costly home.

Young families typically don't make as much money and tend to have the increased expenses of a new family like an unfinished mortgage and jobs with fewer benefits that American's only a generation ago enjoyed. There is definitely interest in trains - especially from kids, but not a willingness to spend hundreds upon hundreds of dollars on them. I think the train companies pretty much picked the audience they wanted to woo. And in the long term, I think it was a huge mistake.

As far as my other comments on K-Line product... it's hard to argue with the facts. K-Line consistantly reissued the same exact paint schemes and roads on cars. Former classic cars just became Train-19 releases.... save a dime but lose a dollar. Most folks are going to buy the same exact car over and over again unless they really like that one railroad.

I suppose this is all a moot point anyways. The train companies have had plenty of time - and I believe the finances too at one time - to put more effort and creative thinking into growing the hobby with youngsters. Now a couple are in a fight for their corporate lives and have more immediate concerns.

[Anonymous]

In terms of what is happening in the O gauge segment of the hobby, there's blame enough to go around. I agree with Brianel that neglecting the lower-end market in favor of the costly higher-end product line in recent years will eventually prove to be a strategic mistake that resulted in this segment peaking and starting to decline far earlier than it otherwise might have. Only history will let us know for sure, but I would bet that I and some others will be proven correct.

And the hobbyists themselves have, in large part, created the mess that exists today. There's absolutely no doubt in my mind about that. Yes, the industry is in a state of turmoil, but who REALLY put them there? My guess is that most or all of these firms significantly overextended themselves in their haste to meet the perceived needs of an increasingly demanding and finnicky market (one that I don't feel any of the manufacturers truly understand or have measured). I say "perceived needs" because my personal feeling is that, more often than not, they have paid far more attention to what they think is their existing market--meaning those demanding/finnicky forces noted above--while sacrificing the potential of a broader market for their products. There are exceptions, of course, but overall they have dug themselves into a hole that they will now find very difficult to climb out of. Adding to the problem, we now see indications that even those erstwhile consumers of the high-end stuff in recent years are feeling somewhat tapped-out by product saturation, and are tightening the purse strings. Yes, there are exceptions, but those exceptions are not significant enough in number to reverse what is obviously a gradual but steady decline.

Will K-Line survive this mess? Well, with a mere $50,000 in assets and God-knows-how-many secured creditors barking at the door to the tune of some $9+ million, things sure don't look good. All I know is that a company that lists annual sales of only $7 million and assets of $50,000 in a legal filing is either (1) skillfully hiding something in some way, or (2) in very deep trouble. Short of becoming some sort of a subsidiary operation of Lionel LLC, I don't see much of a future for them. Too bad, because they, perhaps more than any of their competitors, were finally starting to see the light, and they were offering innovative new products of the kind needed to give the hobby a beneficial shot in the arm.

Interesting times in this segment of the hobby, to be sure!

[Anonymous]

[:)]Thanks for your very informative input. I designed the command and control system that uses DCS and TMCC for the San Diego Model Rail Road Museum, San Diego 3-Railers. The comments about the layout are that the people like scale trains and that layout is pretty much scale.

I came back into the hobby because of the scale trains being put out and moved up from HO to O scale / Scale 3-rail (HighRail) as that is the draw for me others. When I show trains to children they like the command control aspect and not to be tied down to a transformer.

I do not buy into the fact that Lionel is all right or is MTH, K-Line, Weaver, etc but the product that is bring younger people into the hobby is the scale look of the trains. I have had Lionel for a long time since I was very young and do have a fondness for that manufacturer but I have a reluctance to put all my eggs in one basket, to speak.

I repair trains and do command control upgrades and what I see on this side of the track is people wanting to have scale and remote control. I know what the expenses are in tooling and design work. I have been in computer since 1963 and have seen them come and go as with other electronic devices. Change is going to happen in any business and do we really know what the customer wants or are we trying to tell them what they need. I remember a statement that Brady made about Lionel’s TMCC that Lionel wanted to control the spread of the technology, or words to that effect in CTT.

I do not believe that returning to the toy side of trains is going to save the hobby just look at the O scale and it almost died on the vine because of the lack of items out there for that side of the hobby. Look what DCC has done for HO, N scale it has give the modeler a change to run his or her own railroad. That is a very good way to get people thinking of real railroads and what they can do for us.

There are times that I wish I was young again and had less stress in my life and when my son was a live we had great times running trains but those times are gone. All the law suits have done is brought everything to a head and it is now up to the courts to figure things out and that is a shame.

I look back at ham radio and the changes there, as I have been a ham since 1963. People said that to reduce the code would bring on device operators and not hams but that has not been the case. They also say that no one would be willing to build their own radios and that also has proven to be false.

We shall see where this all leads and we can agree to disagree. I know that at the San Diego layout MTH, Atlas, Charles Rowe and a few others donated items for the layout and Lionel flatly refused to do anything.

[brianel027]

Dangrr, while the lawsuits have the potential to hurt the train consumer (with higher prices), the fault of these problems lies squarely with the train companies themselves. They are all extending their budgets with all this new scale product tooling. Bear in mind that even in China, tooling/development costs for a new detailed locomotive can be anywhere from $100,000-$300,000. MTH spent by their own admission millions to develop DCS.

Instead of reaching out to new customers with innovative, affordable quality, new beginner products, the companies have opted to go after each other's throats by trying to woo the same exact customers. And the market has willingly gone along: I've read comments on the train forums like "I would buy that K-Line engine if it had the same advanced features as the other company."

When K-Line first came out with the diecast cars, everyone else followed suit. When K-Line put the new hidden coupler tab on their upper line cars, I knew it was only time until someone else followed suit. The typical train customer today fully expects other train companies to match and outdo another company's advancements. Which is all fine, but these advancements come with a heavy cost given that the train market is not really growing and like it or not, digitial command has not taken off the way of the companies hoped it would - even though when reading the various forums you get the impression everyone uses some kind of digital control. The best estimates are only 40% and by the folks I know, it is well under 20%. Among the folks I know, traditional non-scale buyers make up the majority - and I suspect it is like that nationwide too.

K-Line has made some huge mistakes IMO over the years. They should have slowed the development of the scale cars substantially and continued making improvements to the very products that put K-Line on the map in the first place. I suspect K-Line made more profit on the non-scale items although those items brought no respect from the die-hard adult market.

K-Line should have focused on marketing and distribution improvements and worked on innovations to the existing product line. I have several prototype locos I had intended at one time for K-Line relying heavily on existing components. K-Line should have made improvements in their original die-cast trucks and tooled a different plastic freight truck. Improvements in 027 track should have been made years ago. Their improvement to the 027 switch was long overdue, but didn't have nearly the innovation it should have.

K-Line made a big deal on having the most powerful transformer in a starter set. Yet the transformer had no stop down voltage. Meaning the basic DC truck mounted motored locos included in most sets were still going to run like jack rabbits. The Lionel 1033 is still the very best transformer ever made for a kid's train layout... there is none better. K-Line could have save money by simply putting 2 of the cheaper transformers in every set.

And I'm sorry, but those cheap husky line cars and locos were an after-thought with the only selling point being the cheap price. Even worse were the battery power sets - again the only bonus being the cheap price. How do you interest kids in the hobby with a loco that is a 50 year old model in roadnames just as old. And the husky cars were from the turn of the century. K-Line put those out because they were "something different" and could be "run on Dad's layout." Right there is what is wrong with the hobby in 4 words. There was a time when the train layout belonged to the son, not the father. There was little or next to nothing spent on tooling or development of those battery and husky items ... those dollars were all being spent on trains for dad.

The Train-19 cars were mostly repeats and reissues of exact paint schemes that had been offered previously on the Classic line cars. You don't increase sales from traditional buyers by offering the same exact cars over and over again. Same goes for the 027-type cars that were included in train sets... these cars were forever the same exact cars. Even the 027 5-pack which has been reissued a couple of times has been the identical cars. Why would someone want to buy the same exact cars twice? Yet K-Line put some beautiful paint schemes on the same exact car bodies for the "S" gauge cars. And I'm not referencing "collectibility." I referencing to sheer business common sense... if you reissue the same cars over and over again you lose out on sales. They saved a few bucks on paint masks but shot themselves in the foot. I never bought any of the cars that were reissued after they were first put out, though I would have had they been something new and different.

And K-Line like everyone else pretty much ingnored putting modern road names of traditionally sized beginner products. I can't tell you what I mistake I think it was that all those Conrail employee-only sets weren't catlaoged and available to the general public - I would have bought every single one of them. No one else has offered the Conrail inspection passenger cars in that smaller size. Why? If you want to entice today's train enthusiasts, try putting out cars in today's railroads.

K-Line has spent the past 7 years or so trying to outdo themselves every year. Which would again be fine, if you had the majority of the market. And as much as the KCC offerings were a very good deal and an innovative way to get consumers to try K-Line products, I'm sure they had the effect of slowing sales on other offerings. Example, why would you want to buy a normal cataloged GG1 for several hundred dollars when you got the one advertised in the KCC for around $100. Same goes for the new SD70M for $100 in the KCC. It certainly would have to be more than that in the regular catalog.

Technology is not everything it is cranked up to be. I've spoken to far far too many parents and kids who were interested in getting train sets, in part because of the simple nostalgia of the hobby itself. In all the years I traveled to shows promoting the hobby, I never once had a parent or kid ask about command control. Never. the kids were thrilled to run trains the old fashioned way and to pull strings and levers and make things happen. And they liked seeing my custom painted Conrail and Norfolk Southern engines over any NYC or Pennsy loco... that was no contest. It was so overwhelming I can't believe the train companies continue to offer the bulk of starter sets in those 2 names when it is so obvious that CR and NS had so much more appeal (at least to kids here in the northeast).

Had I been running K-Line I would have done things very differently and I'd be willing to bet that we'd be at the top of our game. Maybe not number one, but in what we offered, we would have been number one no doubt. Look at Williams and RMT... basic trains, no frills... good quality, good prices and upgradeable by the customer should the customer want it that way.

Hey, just my opinion. The hobby will go on with or without a couple of companies. But there's no doubt in my mind that all this new scale detailed product development is going to slow down dramatically or get a lot more expensive. And unfortunately, a lot more emphasis and some new tooling should have been done for the starter end of the hobby years ago when the hobby was more visable and had more going for it in sales.

[Anonymous]

[:(] It is a shame that we are seeing so many law suits in this hobby. When I read that Lionel was suing k-line it was upsetting. I believe that the law suit will only hamper any more advancements of TMCC and that is why I am converting my three rail engines to operate on DCC. [:)]I am using the NCE DCC system and for that part if I wanted to use Digitrax decoder it would work with the NCE base and so forth.
I am tired of the proprietary systems that leave me cold when I look at the future for repair parts. Just look at QSI there system is very hard to get parts for and is not upgrade able to DCS and the TMCC versions leave options out because of possible law suit's. It would be nice to have it upgradeable to DCC and you could still use there sounds aand features.
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