Toy train operating and collecting

 

I’m not sure the hobby is in peril, but this much I do know. My kids have no history of model trains or real trains from the 30's, 40’s, 50’s, 60’s, 70’s, 80’s, 90’s, or beyond. They only know what I can teach them, and that's limited.

However, if they could buy boxcars and engines with big colorful IPOD signs on the sides, or pictures of Mr. House with his cane or Miss. Bones with her staff of skeleton diggers, then they would ask me to buy the stuff for them. In fact, what if a engine could send an instant message to your kids email address or a boxcar could functions as an alarm clock as well as rolling stock? Show me a boxcar that advertises the Gap, Best Buy, Sears, or some of the other favorite stores where kids like to shop.

Imagine an engine decked in 'gothic' or 'Emo', and a set of boxcars that come with cell phone and mp3 loads instead of dirty coal. What if three rail track came in pink for girls or even jet black for the gothic movement taking place among young teens? What if the train industry advertised on TV during saturday morning shows where half the kids in the world are watching?

In my humble opinion, I think if you want to market trains to kids, you have to link the products to the present culture in which they live.

 

 

 

Brian, I just don't think running down the other guys' interests works to further the hobby whether it's the scale guys sniping at stuff or you making derogatory remarks about the scale guys' stuff.  Both have a place in the hobby, you just want a bigger place at the table.  Unfortunately, mass marketing of toy trains ain't happening, even though Lionel is going to give it a try with their NASCAR sets and using department stores, and MTH is making a wildly popular beer train :).  Money talks and everything else is secondary.  The guys who are buying the Big Boy are those spending thousands per year on the hobby and their needs and interests will carry more weight than 10 guys spending 1/10 as much, it's simple economics.  The companies would not be making stuff they can't sell for very long. 

Parenthetically, MTH's sales appear to have dropped by about 1/2 or so, but that had more to do with the PS1 to PS2/DCS transition fiasco than anything to do with their hi-rail models or changes in the hobby.  Even if command control users are only 40% of the serious hobbiests, they probably account for 50% or more of sales, excluding sets, which are sold heavily to the Christmas tree layout only crowd.

perry1060 wrote:

In my humble opinion, I think if you want to market trains to kids, you have to link the products to the present culture in which they live.

Great point.

However, it would never fly in practice. Or not be allowed to fly.

Those who have decided to put themselves in charge of our hobby had a cow when someone posted pictures of the controversial "Grafitti cars" being sold in the toy aisle at Wally World. All of the grumpy old men chimed in like a choir.

nblum wrote:

Brian, I just don't think running down the other guys' interests works to further the hobby whether it's the scale guys sniping at stuff or you making derogatory remarks about the scale guys' stuff.  Both have a place in the hobby, you just want a bigger place at the table.  Unfortunately, mass marketing of toy trains ain't happening, even though Lionel is going to give it a try with their NASCAR sets and using department stores, and MTH is making a wildly popular beer train :).  Money talks and everything else is secondary.  The guys who are buying the Big Boy are those spending thousands per year on the hobby and their needs and interests will carry more weight than 10 guys spending 1/10 as much, it's simple economics.  The companies would not be making stuff they can't sell for very long.  Parenthetically, MTH's sales appear to have dropped by about 1/2 or so, but that had more to do with the PS1 to PS2/DCS transition fiasco than anything to do with their hi-rail models or changes in the hobby.  Even if command control users are only 40% of the serious hobbiests, they probably account for 50% or more of sales, excluding sets, which are sold heavily to the Christmas tree layout only crowd.

Neil, I keep reading on forums a lot of postulating over how much MTH is making, how much Lionel's numbers are down, blah, blah, blah. Since both companies are privately held, where are these "insiders" getting the sales figures they keep referring to as if they were cut in stone? How did you derive the information to make the above statement?

Am I the only one to find it ironic that the same posters who claim model train prices are unaffordable and should be discounted are the same high financiers who chastize MTH and Lionel for not spending enough money on advertising, marketing and promotion? You can't have one without the other.

The divisiveness I've experienced on these forums between the MTH supporters and Lionel loyalists is palpable, much worse than the Ford vs. Chevy arguments of my teens. And so many "legal experts" have offered their differing opinions on the outcome of MTH v. Lionel, all colored by their personal allegiance. I'm neutral, being an S gauger. Frankly, I'll be glad when it's over.

Pop Z 

"How did you derive the information to make the above statement?"

From an interview that Mike Wolf gave in INC magazine some time ago, 2004 I believe.  It's also based upon MTH laying off over 50-60% of their staff during the first few years of the new century,  and the claim that their sales were in the $40 million range in the late 1990s and in the $25 million range around the time of the interview, if I recall correctly.  I won't vouch for the exact numbers or the "about 1/2" being precise, but it's probably close enough.  Maybe it's 30%, maybe it's 60%,  adjusting for inflation, but the details come from Mike Wolf's interview.

nblum wrote:

"How did you derive the information to make the above statement?" From an interview that Mike Wolf gave in INC magazine some time ago, 2004 I believe.  It's also based upon MTH laying off over 50-60% of their staff during the first few years of the new century,  and the claim that their sales were in the $40 million range in the late 1990s and in the $25 million range around the time of the interview, if I recall correctly.  I won't vouch for the exact numbers or the "about 1/2" being precise, but it's probably close enough.  Maybe it's 30%, maybe it's 60%,  adjusting for inflation, but the details come from Mike Wolf's interview.

Oh. Mike Wolf. I thought you had a reliable source.

Seriously, I personally would not put a lot of stock in numbers given to an interviewer from a publication like that, as most glib entrepreneurs seize any public opportunity to further an agenda. Trust me on this, as I've been on both sides.

Consider this: could he have been downplaying the numbers to paint himself as the sympathetic figure, i.e., the Poor Little Train Guy Who's Been Wronged By The Big, Bad, Corportion Lionel?

And if he went the other way (braggadocio) and talked about his success in building his company and how much money he was making, he'd stand to alienate all of his loyalists who'd take that as solid evidence he's been overcharging them for his product.

Just a thought.

MTH RULES! (Just kidding)     

 

 

Agree on all your points.  That's one reason I also referred to more objective data such as the massive layoffs that occurred around the time of the purported sales decrease.  No one knows exactly who has what market share, but I think most in the industry will agree that MTH's has dropped significantly, and Lionel's has dropped less or is relatively stable.  K-Line made some inroads, but I think the major factor was simply a drop in total sales in the hobby across the board.  Since Lionel has the cushion of the seasonal Christmas time set sales, they have been less affected than MTH.

nblum wrote:

Agree on all your points.  That's one reason I also referred to more objective data such as the massive layoffs that occurred around the time of the purported sales decrease.  No one knows exactly who has what market share, but I think most in the industry will agree that MTH's has dropped significantly, and Lionel's has dropped less or is relatively stable.  K-Line made some inroads, but I think the major factor was simply a drop in total sales in the hobby across the board.  Since Lionel has the cushion of the seasonal Christmas time set sales, they have been less affected than MTH.

Gotcha. So maybe the business becoming oversaturated with manufacturers contributed something toward hurting the hobby, as so many companies making sales pitches can be downright intimidating. Not to mention confusing.

I'm not thinking rolling stock as much as electronic train control. Everybody seemed to have their own system (DC-AC-TCC-TMCC, et al), each of which I believe was incompatible with competitor's products (remember, I'm an S guy).

It's like the old, old days of railroading, where each railroad set it own track gauge and designed its own coupling system. When the government finally called meetings in an effort to standardize these things, of course Railroad A wanted its competitors to adapt Railroad A's standards.

You can guess where that went. 

 

Poppa-zit, I like your attitude!  If more people could kick back and enjoy life, like you probably do, there would be less uptight people out there, just looking for offenses.

Poppa_Zit wrote:

perry1060 wrote: In my humble opinion, I think if you want to market trains to kids, you have to link the products to the present culture in which they live. Great point. However, it would never fly in practice. Or not be allowed to fly. Those who have decided to put themselves in charge of our hobby had a cow when someone posted pictures of the controversial "Grafitti cars" being sold in the toy aisle at Wally World. All of the grumpy old men chimed in like a choir.

Or the Infamous Pink Lionel Engine.

pgtr wrote:

In 1953 Lionel did $33M in sales. US population was around 160M. I don't know how many sets they produced off hand but they had a pretty darn impressive market penetration at the time. 2006 - care to guess what they'd need to do in sales to rival 1953? About 250M give or take a few depending upon the inflation or index calculator your subscribe to. Today's population? About 300M. I'll hazard a hunch that compared to the 1953 population penetration Lionel is waaaaaay off that mark.

Points to consider before making the above comparison:

1) In 1953, less than 20 percent of U.S. homes had a television set;

2) The 33M you say Lionel did in sales in 1953 means nothing unless you have the figures for net profits, so here they are, corrected:

In 1953 Lionel did $28.1 in sales, with earnings of $1.6 million; while in the same year A.C. Gilbert Co. (American Flyer) did $18 million in sales with earnings of $536,000. Source: http://www.rit.edu/~tbbeqa/SalesAF.html, among others.

3) There were two main choices in 1953 -- Lionel, or American Flyer -- and the two were totally incompatable; in the heyday of both companies (1946-1959) Lionel sold $250 million (65% market share) worth of trains while Gilbert sold $134 million (35% market share) worth of American Flyer. This does not include 1960-1967, when both companies posted net losses for the eight-year period when interest in trains started to slide among youth.

4) It is therefore obvious in 1953 Lionel wasn't competing with MTH or any other strong contender for 3-rail dollars. It had cornered the 3-rail market with 65%; the other 35% was S gauge;

5) In 1953 Lionel and American Flyer didn't waste ... er, expend huge dollar amounts on attorneys while suing each other over nebulous issues.

So, if the margins are the same today -- roughly 4.5% -- MTH on $40 million in sales would have had roughly $1.8 million in earnings.

Guess the model train biz ain't the pot o'gold some people think it is.

Pop Z    

 

The state of the hobby, with all things considered, is remarkably healthy considering how long it has been around and the fact that it models a facet of fading americana that, as a shadow of it's 19th century leading edge, has no toy industry national advertising campaign to support it as it did in the 40's and 1950's, some 50 years + ago. Not too shabby for a scale that was for all purposes "dead" in the 1960's. Whither the slot cars..hula hoops..slide viewers.. all wildly popular buying fads that are only footnotes in popular culture. This hobby will be around in my lifetime and beyond...these are golden years part 2..enjoy it while it lasts.

Being in the hobby with my own company, I will say that there is no shortage of consumers. I have a very small buisness with limited resources, but have no problem with demand.  There is season for trains, summer not being one of them. Fall, winter, and spring are what I call "the silly season".  Calls pick up, orders get bigger, demand goes up. Summer comes and I am lucky to get one order a week. I am sure the big companies go through the same thing. The hobby is strong, and in no shape hurting.

I imagine we can all pretty much agree that this segment of the hobby will likely never again be as strong and robust as it is today.  Any disagreement with that?

And I would further argue that this segment of the hobby, as it exists today, is not as strong and robust as it was at the start of the current century.  Again, any disagreement there?

So what's that all indicate?  I'm not sure, because I can't predict the future any better than anyone else here, but I do have my suspicions.  All I know for sure is that I'm going to enjoy my trains while I can, regardless of how many manufacturers there are and how much (or little) product they produce, and will leave the hand-wringing to some other folks who seem to really enjoy worrying about what can be seen in that clouded crystal ball.  My sincere hope is that most others here will elect to do the same.

mrclean351 wrote:

Poppa-zit, I like your attitude!  If more people could kick back and enjoy life, like you probably do, there would be less uptight people out there, just looking for offenses.

Thanks for the kind words.

You're dead on about kicking back and enjoying life and not being uptight, although I still put in some long hours on the business I own.

I do look for offenses, thought -- people who make up "facts" to support their ultra-thin arguments, closed-minded people with biases, bigots, liars, people who have one set of standards for themselves and another for everyone else, bullies, people who use forums like this to enhance their faux feelings of superiority by belittling others, people who have a personal political agenda and try to force it down the throat of others.

But for me, that's fun too.