Thoughts on the O/O-27 Gauge Market Today?

[tgovebaker]

Hi everyone,

I recently rediscovered my train hobby (now that college, grad school, etc. are over) and have a lovely wife who let me colonize a large corner of the basement. My civilian job is in market research and strategy. As I sat in a boring meeting today, it struck me that so much has changed since I last ran the trains: the market then was really just Lionel. Mike Wolf was just a whippersnapper.

I'm curious about how the market has evolved. I would love to hear your insights and thoughts about the different companies and manufacturers (specifically, Atlas, K-Line, Lionel, MTH, Williams, Weaver, and even Gargraves and Ross). If you had to summarize in a sentence each company's overall image or identity, what would it be. I have my thoughts, but you've been paying attention longer than I have. Who, for example, is the real innovator? Who is the mass marketer? Are there differences in focus (i.e. do some manufacturers focus more on western v. eastern RRs?).

Obviously the MTH/Lionel decision has shaken things up, so I'm also curious about where you think the market will go.

This is strictly for fun -- I am only curious and have no ulterior motives.

Best,

Tom Baker
San Francisco (Last stop on the Grand Lake, Alta, and Truckee)

[brianel027]

In no particular order of importance:
1) All the "manufacturers" (more accurately, importers) are currently playing a game of "keeping up with the Jones." Hence the duplication of features, roadnames and specific product types.
2) There is more product, in more variety with more advanced features than ever with most of it in the area of scale sized and detailed items.
3) There are not enough buyers for the product that is being made.
4) There are more than enough catalog releases for the existing market. But don't expect less... the company that puts out smaller and fwer catalogs will immediately be rumored to be in trouble.
5) The economy is still in shaky condition. Buyers are waiting for blowouts due to their own finances and in part because of the high (in some cases, too high) list prices for many items.
6) The train buying demographic is mostly older and mostly well to do - at least as far as those buyers who purchase frequently and in quantity - and therefore get listened to by the importers.
7) Roadnames are farily well imbedded in the past postwar era, since this is the where the greatest numbers of buyers are in their interests.
8) Lionel and MTH have stated very strong sales in starter sets and related starter items... K-Line states to holding their own. Yet one would never guess this from the emphasis on scale sized, advanced product aimed at established adult buyers. It will take years to see the effects from the increases in starter sets on the hobby overall as to whether there are actually new customers, or many existing hobbiests buying up deals on starter sets (I suspect a little of both).
9) The hobby itself faces some challenges from the overall common perception than it is one for the wealthy (that anything with the Lionel name on the box is worth its weight in gold). And that the younger customers that need to be reached will not hold the same job for 30 years, and will likely relocate several times in their lives... meaning permanent layouts need to be moveable and less permanent.
10) I won't mention the legal haggling and lawsuits.

But the hobby has survived hard times before. Not all the previous companies survived the hard times before, but the hobby still survived. And ironically, despite what the price guides and greedy experts would have you believe, not every train ever made is worth a ton of money.

They are worth a ton of memories and fun though. It's just that folks thinking about dollars only seldom think of any other value! That thought could even include some of the current train importers, who are thinking of dollars for their sheer survival. Money may talk, but it shouldn't be the only voice in the crowd.

[3railguy]

Lionel trains regained it's popularity amongst adult postwar baby boomers throughtout the 1980's offering reissues of their postwar classics such as F-3's, trainmasters, hudsons, etc. and added new models such as the SD-40, GE Dash 8 B and C, and standard O cars. During the late 80's, Williams, Weaver, ROW (Right -O-Way Industries), and Lionel began to introduce scale models that run on three rail track and pioneered the hi rail market we know today. During this period, MTH (Mikes Train House) was a major dealer of these products and was also a middle man between Lionel and Samhongsa who made scale steam engines for Lionel. Lionel and ROW also introduced digital sounds During the late 80's too. The hi rail trend really caught on in the mid 90's and MTH went on its own importing Samhingsa models. At the same time, Lionel introduced command control and later, MTH followed with their own version of command control. Even though these models were scale, the detail was still a bit lacking. mainly for ruggedness and cost. Atlas decided to take a plunge and raised the level of detail and crispness of graphics. Thus Atlas O was formed. They were a success and Lionel followed Atlas's lead and introduced new scale models with detail like Atlas. Due to high American labor and tooling costs, Lionel was forced to move all of their prodution overseas to compete with Atlas and MTH. Soon, K-Line followed suit with highly detailed models. Apparently, MTH is in the process of refining detail. In a nutshell, this is pretty much how things evolved.

[brianel027]

Good synopsis John. To add and clarify to what you've contributed, I think the invention of Railsounds and TMCC by Neil Young and their introduction by LionTech/Lionel has had much more to do with the expanded growth of the hobby and the subsequent demand for more realism. We all know the new wireless control has offered operating possibilites never dreamed of before. And you would have to be a rock to not appreciate the realism and utter coolness of Railsounds. (I'm not into Railsounds as much, but I have to admit, it is pretty awesome.)

Modelers now had realistic sounds and advanced control and wanted locomotives (and rolling stock) that met the higher standards of the new electronic features. It was the former baby-boomers (now adults) who had the money to spend on these more expensive features. Also consider that when RS and TMCC were introduced, the hobby was still on the tail-end of the "collector fever" that had gripped the hobby during the 1980's into the early 1990's. Some of the newer electronic laden trains (although expensive) were no more costly at the time then typical powtwar locomotives without the new operating features.

Also for clarification, K-Line Trains had been made in Chapel Hill, North Carolina until somewhere around the 1989-1990 period when all their production was moved to China. Quality improved in their current less-than-scale offerings, but it wasn't until 1996 that their first F-series scale locomoitive came out. I remember the headline at the time... "K-Line gets serious." What? They weren't serious before? What it was is that the hobby was going scale, and K-Line certainly did their part to raise the bar and do it at competitive prices.

MTH has always been made overseas, and it has been my understnading that part of the reason for so much new tooling from MTH has to do with a personal relationship with relatives of the overseas contractor.

We all know that MTH's massive amount of product introductions raised the bar on this hobby in a big way. But I don't doubt for one minute that Mike's bitterness over his parting with Lionel has much to do with his personal drive and fire. Along with his favorable situation with his foreign vendor.

I think if you read between the lines, Lionel's move overseas has more to do with cutting labor costs, not to reduce prices of their then current line (which were - and still are - more expensive than everyone else) but to be able to put more captial into the tooling up of new products. Lionel needed to introduce more scale sized / detailed products in order to compete with others. Lowering actual production costs and start up tooling costs was, I think, the main motivation for going to China. Notice that very few of Lionel's prices have actually come down even though their actual production costs are probably cheaper than they have been in many, many years.

Anyone may correct me if I am wrong, but it is my understanding that a normal, traditional box car can be manufacturered and gotten to the US mainland for under $2.00 actual cost. Put a $44.95 list price on that item and there's lot's of room for profit, provided there are American's still working who can afford to pay $44.95 for a box car. There are obviously still a few who can afford it, but judging by the quantity and short-time frame that items go to blowout prices, obviously not enough buyers.

[nblum]

The general consensus is the market is contracting due to too much product in too short a period of time and the continuing aging of the baby boom and previous generations, for whom three rail trains hold special attractions and significance. Advertising pages have dropped noticeably in the last five years, perhaps partially due to the stagnant economy, but other forces appear to have played a role.

The market is also very difficult for dealers, working with margins of 40% and sometimes much less for a very small cotery of hobbiests (most estimates are 150,000 or less). TCA membership, one indicator, has for the first time in half a century started to trend slowly downward. One of the manufacturers has chosen to make war constantly since their early days on the other manufacturers, and the result has been and will probably be in the future, more money spent on lawsuits than is healthy for the industry. The presence of two largely incompatible control systems (TMCC and DCS) has split the marketplace and made life for dealers even more difficult, and left many hobbiests confused. From a product availability standpoint things have never been better, but the future of the hobby and industry is quite clouded, in my opinion. This is a product of unfavorable demographics, competition for the entertainment dollar, the weakening of the dollar (likely to continue) versus the producing countries currencies, and the fraticidal warfare going on in the industry between the largest importers. But don't worry, there will always be lots of new and old trains to play with, and magazines or on-line places to learn about and discuss three rail trains.

[daan]

I'm relatively new to the 0 scale hobby, but what is appearing to me are the prices asked for the trains. A pricetag of 899 dollars is normal, and almost every month there is a new review of such expensive machines in CTT. In the mean time I noticed K-line getting cheaper.. (They manufacture GP7's for $50 dollars, a diecast 4-6-2 with whistle tender for about 80 dollars). They have the Lionel postwar level of detail, which is good enough for beginners. They have metal trucks and electronic e-units. Because they use a simple motor truck in all of their "low end" machines which is easy to build, (has a cheap but good motor in it and is easy to repair,) they can keep production costs extremely low that way.
I think K-line is going to set a new standard and slowly others start to follow. Lionel offeres a nice switcher (tankengine) under 100 dollars now they see that low priced machines bring in money if sold in high quantities.
If a manyfacturer is trying to survive, they have to find new markets and leave the top end items for a moment. One new market is making 0 gauge in the price range of h0 (K-line proves it can be done) and with that draw people into the larger scale.. (which is much nicer then h0[:D])
Lionel and MTH are too much focussing on the high end, fully loaded top models. Only insiders know what the possibilities are and what it can do. Someone leaving h0 to get into 0 doesn't care in the first place about railsounds, they didn't have it in h0 either. They look in the first place to the price in comparison to h0..
I think that is the new policy which will be hot for the next time. Trying to get more people into the hobby by making good quality trains for low prices; those people starting with that will buy the expensive ones later in life.

[3railguy]

Prices today aren't bad compared to 12 years ago. Those $899 steamers were $899 then (or more) and weren't as well detailed and didn't have command control and the sounds were nowhere near as good as they are today. A Lionel 700E Hudson was around $1,200 discount in 1991. Weaver 6 or 8 driver imports were $900 discount. A ROW Berk was $1,200. Lionel diesels with just a motor or two and reverse unit were around $250 to $400 discount. F-3 sets were $500 discount. Today, a K-Line scale hudson with more features is around $600 w/TMCC. F-3 sets today with all the new features are still around $500. Inflation has not been a factor here so many of today's trains are actually cheaper. Overseas production has a lot to do with it. If Lionel were make a scale Hudson today in the States, it would probably be $1,800 or maybe $2,000 discount.

Todays selection of great $100 engines is fantastic compared to what we had 12 years ago. Lionel's 0-6-0 saddle tanker, K-Lines $99 EP-5, Williams $125 geeps, just to name a few are great values.

[brianel027]

Bear in mind, for any company today to have sales, low price is a big factor. In the case of the K-Line KCC offerings, there's no wholesaler or retailer. It's "factory direct" so-to-speak. Even with that, I'm sure these "loss leader" prices are designed to get people to try the product.

I personally am a news junkie. So it helps to bear in mind that I've just read that currently 28% of all American families are in the poverty income bracket by government standards (ABC). And almost 60% of all people who have been out of work a year or more and are finding new work, are accepting jobs that pay 50% less than they were making at their previous job (NPR, AP). That doesn't spell anything good for retailing in general, especially buying non-essential items like trains. The numbers of Americans working 2 or more low-paying part-time jobs is also at an all time high - because the economy has turned so heavily to a service-oriented economy. Anyone wondering why the R-M-T "Beep" is selling so well????

Also bear in mind that with the overseas production, the companies actual production costs are lower than they have been in decades! It is the development and creation of vast amounts of new tooling and the additional electronics that are adding costs. The trains should actually be a lot cheaper in price than 10 years ago with the savings in overseas production. And still the trains aren't selling as they should, hence the fast and furious amounts of blowouts.

These blowouts won't stop either because even though production numbers are already being lowered, they still have to make a certain amount to justify the run. Multiply this by all the product in one single importers catalog and then multiply that number times all the other companies making trains (sometimes the same identical products) and it's inevitable the blowouts will continue. Not until the US economy really picks up, or one or more of the train companies goes under. And now that seasoned train buyers are aware of the blowouts and how quickly they happen, they now wait for them. What's the big deal of waiting only a few months to save 40%-60% (even more) off the original price - especially when the original list price was so high anyways. Even the once so-hot Lionel $60 MSRP scale milk cars are now blowouts.

Overseas production may be wonderful for train prices and quality... it needs to be. It's not just trains... everything is being made overseas. And although the loss of jobs has hurt the US manufacturing sector particularly hard, these losses have a domino effect of the whole economy. When unemployment numbers are high, other sectors of employment take advantage of the high numbers of available workers with lower salaries and fewer benefits (skyrocketing heath costs don't help here either). I could give examples of salaries (even with 4-years of college) that would make you sick. Maybe it's just my area. It was also recently reported that NYS ranks behind the entire nation in both job creation and salary level (AP). But I know this is also going on in other areas of the nation.

Okay. Enough with that. Time to turn off the news and watch some Daffy Duck cartoons!! Woo-hoo, woo-hoo, woo-hoo!

[nblum]

If you want to see two hobbies going in opposite directions, compare radio control cars and three rail toy trains. The December issue of R/C Cars is about 320+ pages which is more than both three rail O gauge magazines put together. If you walk into the average hobby shop, you're almost surely going to see R/C cars for sale, whereas three rail trains remain relatively uncommon. This hobby has peaked, IMO, due to demographics and "scorched earth" policies amongst the manufacturers/importers that have turned off and damaged both dealers and consumers to some extent.

[Anonymous]

Hey Guys:

Let's face reality, yesterday I visited the Allentown First Frost Train Meet and the old pot- bellied guys with grey hair, white hair or comb-overs out numbered the kids by at least 10 to 1.

Later I visited a big local Hobby Shop. In the rear of the store they have two large slot car tracks, and the place was filled with youngsters, non of which were involved with 3-rail trains.

Fact is that Atlas, K-Line, Lionel, MTH, Weaver and Williams are singing to a shrinking audience.

BillFromWayne

[douellet]

Lets face it there is a large variety of O gauge trains out there. It can be really hard to decide what one wants to purchase. Look at all the many cataloges some of the manufactures produce every year. I really think it's overkill.

I think that Williams is the one company that has stayed pretty true to the era when 3 rail trains were dependable, fairly simple toy trains, not high end scale stuff. There are a lot of us who like our toy trains but either refuse or are unwilling to spend several hundreds of dollars for an engine.

I draw the line in the area of $100 to $200 range, maybe a little more for something really special. For this amount of money you can get a dandy Williams engine that runs great and often comes in a large variety of roadnames. I live in Maine and they have offered several engines for New England railroads. Not just the same old roads over and over again. I must confess that I do have a soft spot for the Santa Fe.

Also look at all the different types of track that is being produced, much of which is incompatable with other brands. What a pain in the neck. I think the hobby would have been better served by sticking to 027, 0 and Gargraves type and offered track items that would work with these track systems at a reasonable price. I have no interest in paying $40 and more for a good working turnout. I think this cost factor hurts the hobby.

Any way, lets hope the hobby gets itself in order so that in the future there will always be an interest in toy trains.

douellet

[jkerklo]

Great posts! Good insight into our hobby.

As I was reading this topic I recalled a mention in the Lionel/MTH lawsuit discussions that the target production for an engine design was 1,000 units. The reference was hazy, but I thought this was rather a small number, what with all the tooling, start-up production, and marketing costs that had to go with the new design.

So, I just realized that I have never seen any company or industry business data. How big is the hobby, in terms of revenue. I went to my usual source for this information, "edgar." (Goverment site for public company reporting).

Nothing. None of the companies, and I looked for all I could think of, were listed. This means they are all privately held.


Anyone ever seen any company data for the train hobby?

John Kerklo
TCA 94-38455
www.Three-Rail.com

[nblum]

Lionel's sales (not sure whether retail or wholesale) have been thought to be in the 60-100 million dollar range in their better recent years. My guess is that their current sales and licensing fees are no better than the lower end of that spectrum now. MTH sales were said to be in the 50-60 milion range before dropping by about half in the early years of this century. It's fair to say that the entire three rail market is probably less than 150-200 million dollars per year at retail, perhaps much less. All the major and minor firms are privately owned, as you say.

[brianel027]

Bill from Wayne and douellet have hit a couple of good points. Go to any train show that isn't advertising display layouts and it is mostly an older group. Of course, many families with kids who might have trains are not hopping off to every train show as devoted older train guys are. But as an exception, the Syracuse, NY show at the Fairgrounds is one show that does seem to attract many kids. Of course, there are activities for them including a ride around train, diplays and lots of layouts.

The diversity in the hobby is both a blessaing and a curse. I can see how it would be utterly confusing for any newcomer: so many track types, some stuff that can run on this but not that, the different control systems. Scale and traditional sizes, nevermind the prices. Douellet's price ceilings are not that uncommon, yet one might never guess it from looking at the catalogs and what is being offered.

In my estimation (and here comes the Frankenstein mob with their flaming torches and pitchforks) Lionel made a huge blunder by trying to replicate what MTH had already done with their scale models. It was a game of catch up, instead of setting their own course. So now in addition to Weaver (who has always made scale models from square one) now we have everyone getting in on the act, with some doing it better than others. Sure, the gang at YORK was saying "MTH and K-Line are making this, so why aren't you Lionel?" This is not what the dealer networks or the hobby needed... more duplication of existing products (other than some do prefer TMCC over DCS). It is no wonder small dealers are going under... too much product, too low wholesale margins, too few buyers, no national advertising, no co-op advertising and blowouts that undermine their existing stock - no wonder small dealer are grouchy.

Lionel should have focused more on what isn't being done - which is how you succeed in business - by doing something no one else is doing - and doing it right. The very thing Lionel can do better than anyone else... starter sets and related items. No other company is in the position namewise to grow this hobby like Lionel: not K-Line, not MTH, not Williams. I sincerly hope they don't miss the current opportunity they have with all the attention and sales of the "Polar Express" set. Of course, there's the "unknown" factor of how the lawsuits play out. That's not to say Lionel should ignore the scale audience... but instead of setting the lead, Lionel was following everyone else. Not a good place to be in business.

I also think FasTrack was a blunder other than its advantage of immediate ease of set up. And to think that scale modelers would flock to FasTrack in droves is silly... they are too many other choices available. And FasTrack needs to be in a tighter radius curve, not wider. I don't know what the FasTrack system cost to design, develop and tool up, but I'm certain the money could have been better spent making improvements to the existing 027 track system:
1) Turnouts with smaller footprints and smaller control boxes.
2) Turnouts and control tracks wired for ease of auxiliary power operation instead of direct track power... a big drawback to the current 027 turnouts.
3) Insulated curve track sections.
4) An intermediate track radius between 27" and 42", like 32-36."
5) Snap on prejoined ties, designed to have one piece work in either curve or straight sections.
6) There are other possibilities too... those are some obvious ones.

This is hardly rocket science. Rather than each company trying to duplicate everything the other company is doing, they need to focus on what they each already do best. No one company is going to be able to offer everyone everything: a quick read of the various train forums proves that point. And if they think they can, they're probably going to die trying because there's not enough new growth in the hobby to sustain several companies all making the same exact stuff, albeit with a different color box (or in the case of MTH with their DCS).

Yep, it is a wonderful time to be in the hobby if you are already there and understand the different types of trains and control systems. It's not so wonderful I would guess, if you are a company making trains... unless your intentional plan was to have trains manufactured, marketed at a certain price, and then blow them out for 40-60% off retail in a few months after release (undermining your dealer network) because you desparately need operating capital.

If that's the plan, then everything seems to be working just fine.

[Back2Trains]

I don't entirely blame the manufacturers. There was a demand from hobbyists for highly detailed scale offerings with all the sound and command goodies, so that's what they produced. I think, however, that there is a disconnect between kids today and trains in general. I am 60 years old and my grandchildren, two boys ages 4 and 7, do not see trains the way I did at their ages. I received my Lionel set for Christmas when I was 6. At that time, trains were much more a part of the community. We lived near the tracks in a small town, my Dad worked at a lumber yard and knew all of the local train guys, a switch engineer lived across the street and the C&O brought my aunt in from Detroit on Friday and took her back on Sunday. Besides that, a train was the top Christmas gift for a boy in 1950. Look at the competition today: computers, video games etc. Today's kids have a very different perception: if they have any contact with trains at all, it is usually listening to their parents complain while they are waiting for a barely moving 100 plus car freight to clear the crossing.
I have a Lionel postwar layout which highlights operating cars and accessories and those are the things which really capture the boys' attention, but not for very long. They were here today and I have to pickup spilled coal, un-jam the milk car and find all the barrels, which I don't mind doing. The 7-year-old likes the 182 crane the best, but I think it's because that is the item whose controller most resembles a video game controller.
My conclusion, from taking the boys along to several train shows is there needs to be some action on the layouts. Add some operating cars and accessories and let the kids operate them. Give them something to do besides watching a steam engine smoking its way around an oval with 5 or 6 cars in tow. How many of today's kids can relate to a steam engine anyway? Or a caboose either??
But, is anything going to capture their interest for more than a short time at best? I personally doubt it.
Jim

[3railguy]

I'm not real concerned about the future of the hobby. I enjoy it for what it is today. No matter how small the number of fans becomes, the trains themselves won't evaporate and will still be around for the few of us to enjoy. In great numbers at great prices I'm sure.

[douellet]

I've got to agree with everything Agent 027 said. He hit the nail right on the head when he wrote about the cost of developing the Fastrack system and the fact that the money could have been better spent on improving the existing 027 system with improved turnouts and an intermediate track radius with matching turnouts. A blacked center rail and some extra ties would be nice. Williams is adding extra ties to their track, now if they would add some smaller footprint turnouts there is no question what I would buy. With such a system you could run most any affordable loco that is likely to be produced.

If you really want scale trains then 3 rail trains really aren't the answer. I believe the vast majority of 3 railers want sturdy, dependable trains that give the impression of looking similar to the prototypes without having to be an exact replica. They also want them at an affordable price. Who wants to take out a bank loan for a hobby.

Where I live there are no hobby stores that carry 0 gauge trains. I travel 50 miles to the shop where I buy CTT and other model magazines. They carry HO and N and I buy a few cars from time to time. The price of a good Atlas HO car is around $20. If the same shop could sell a quality O gauge car for a little more I'd be tickled. I wouldn't be expecting the same amount of scale detail just something reasonable. Price does matter! How many small hobby shop owners can afford to stock big buck trains and how often can he expect to sell them? Unless O gauge trains can compete in the market it is not going to succeed. It's time for manufacturers to get back to the basics and really start to grow the hobby.

[daan]

what comes up in about every post concerning the "kids" in the hobby are RC cars, gamecomputers etc. Keep in mind that a top of the bill RC car costs only about $400, a gamecomputer like the x-box or the playstaion are for sale in holland for $150. Games are from about $20. For that money you have a new, top of the line gamecomputer with all options possible.
Emagine the cost of the toytrains. A turnout at $40, an engine of $899 and every additional car costs $49.99 too. To get something interesting going it costs a huge amount of money.
I have a good job for dutch standards, my girlfriend works parttime and we have a daughter. The money left over after paying everything is about $500 a month, From that we have to pay the dentist for our daughter, clothes, pay the horsies and do all extra things. The money left over for trains is about $100 a month.
In this situation I'm not the only one. A lot of others are in the same position. If I want a nice amount of engines rolling on my layout, I have to search e-bay and trainshows for something affordable. Guess what comes up most; K-line. Followed by postwar Lionel which is hard to sell in Holland and is affordable too.
If trains want to compete with other "toys" they should be in the same pricerange and being kept in prices which are affordable for a lot of people without saving for months.

[nblum]

The reason computer games and R/C cars are less expensive than trains is simple. They sell millions of the former and tens of thousands of the latter. A typical run of O gauge three rail locomotives or rolling stock is a few hundred to a few thousand. The economies of scale work against lower costs. There are hundreds of millions of kids who play video games, in all likelihood, and millions of kids and adults who do R/C cars. There are probably only 150,000 or fewer three rail hobbiests of any seriousness in the world. Do the math, as they say.

[brianel027]

You are absolutely right Daan. It's long been a common thought that Lionel is overpriced and that you are paying for the name as much as the actual product. While the blowout pricing is an exceptionally bad business practice as far as holding your perceived product value (from a mfger. viewpoint), truth is most of the stuff starts looking more affordable at the blowout prices.

$44.95 for a box car and $59.95 for a flat car with a tractor is just ridiculous and highway robbery. They want folks to support local hobby shops, but I've had Lionel reps tell me (when I talk about high prices) to buy from Train Express. Yeah, so much for the local dealer.

I show the Lionel catalog to people with kids all the time. The reaction is nearly always one of shock when they see the prices. Nevermind that they have to look through 140 pages of stuff they'll never afford to find the 10 pages of stuff they may be able to buy.

Of course, everyone's prices have been creeping upwards for the past few years. It's not the price oil (though it may soon be) nor the price of shipping from the pacific... it's selective pricing. All the companies are doing an incredible amount of new product tooling on the scale end. I'll bet nearly none of this development pays for itself, so prices are increased on everything to help subsidize the scale product development.

In the case of Lionel with statements from former company heads, they are far too concerned with after-market collectible prices. I don't doubt the typical average price of $50 for a postwar reissue car has a lot to do with this... they don't want to help drive prices down too much on the older original items.

This hobby for far too long has worried far too much about the needs of the few, instead of really growing the hobby. Though Back2Trains makes some valid points, I disagree. They were kids in the 40's and 50's who didn't get into trains much either. I knew kids (when I was also a kid) who got Lionel train sets and never played with them much. BUT I still see interest today. It may not be what it once was, but the interest is STILL there. It's marketing and pricing!! People cannot buy what they cannot find and will not buy what they cannot afford - simple as that! If kids never see Lionel trains, then they will not ask for them.

Bear in mind, parents aren't entirely stupid, at least the ones I talk to. They know there are other cost in addition to the actual train set: extra track, the board, the paint, the wire, the screws and nails. Can it be done on a budget? YES! But the companies or someone needs to let the folks know. And when one flips through the train catalogs today and sees average prices of $400+ for a loocomotive and $40+ for a train car, the concept of "budget" flies out the window.

Yes gang, I know. There are some affordable items. Decent items too of good quality. Lionel, K-Line and MTH all have a few affordable items. These items should be in their own catalogs aimed at the beginner audience. I'm telling you from many first hand observations, people are FRIGHTENED away from this hobby when they look at ANYONES catalog and see 9/10ths of the offerings are expensive and out of reach. Mother's say this a lot: "Oh this isn't a hobby for children. It's a hobby for wealthy adults." I hear that so many times, it's sad.

The train companies (if they even want to have a future) need to stop listening to the few at YORK at the train forums (a manufacturered weathered Polar Express set... what a bad idea! Weather it yourself!) and start listening to COMMON sense. This hobby will never grow by catering to just the established modelers who only want to see high end scale detailed products being made. Even those numbers are just not there, both on a human end and on the money they can possibly spend.

I've been saying for 14 years that Lionel needs to take their 14 inch sheet metal engine frame and develop a Dash-9 type loco shell for it. It hasn't happened yet. Or just imagine if the new K-Line club loco was a non-scale 14 inch model for $100 built to take some beginner handling, aimed at kids! Instead kids get a nearly all plastic version of an engine that hasn't been made in 50 years in roadnames to match.

Oh, I shouldn't have suggested that last one... here comes the mob from the Frankenstein movie again with their pitchforks and this time they're chasing me... again the wants of the few are being met while the growth of the hobby is being left behind. But that's okay. The kids can see how cool toy trains and dinosaurs once were on the History Channel.

[nblum]

For those of you who weren't there in the 1950s and before, three rail O gauge trains have always been expensive. $2.00 for rolling stock and $15 for a locomotive translates into prices 10-20 times that today given the much smaller market and inflation. Most families could not afford toy trains, but some spent the money anyway because they were the premier toy for boys. Many a family spent 50% of a week's wages on a train set and that bought the bottom of the line. That's why most families probably settled for Marx (about half or less the price). These have always been expensive toys and probably always will be compared with other available items of interest. Even $100 is a lot for a locomotive for many families, considering that you cannot build a layout for much less than $400-500 using new equipment. Compared with a video game console, which requires little effort to set up and more variety of play for most kids, toy trains are never going to appeal to any but a tiny segment of the population of adults and children, considering the effort needed to build a layout.

[waltrapp]

One of the more level-headed discussions that's been had on any forum lately!! Congrats to the contributors.

I actually DO have strong feelings on this topic and have had them for years but never express them figuring it's "just me".

I've always felt, as was mentioned earlier, that the few big-time players are being catered to too much leaving us non-big-time players to fend for ourselves. Excellent point.

I've always felt that having non-compatible track systems was, excuse the word - it's one that I don't care to use unless it applies - "stupid". I understand the business theory behind it but it just doesn't make sense for the hobby as a whole. I bought an MTH set and it eats at me knowing that I'm just going to ignore the track that came with it since it's MTH's brand. But yet I paid for it. Don't think for a minute that non-toy train people don't factor stuff like that in.

Last week 2 fellows that I work with asked for a suggestion about buying a starter set for their sons. I went thru the little that I know about such things and when they asked about what came with it they were both second guessing the notion once we got to the track part of it. Both already had some traditional tubular and didn't much like buying track that they couldn't use. But what really turned them off was when I compared the price of additional track to complement the track in the set as to the price of tubular. Neither was too excited about spending that kind of money on toy track.

Then we talked about minimum diameters, advanced electronics in these engines, and on-and-on.

By the time we got done their heads were spinning.

I showed them a K-Line catalogue because I think K-Line is producing some sets that have true play value. But when asked where they could buy the sets I couldn't direct them to any hobby stores that I deal in because they don't seem to carry K-Line sets. Mail order is not real enticing - these people want to SEE and TOUCH it first.

Then we talked about Williams and when they asked where in Pittsburgh they could go to buy Williams and I said I don't know, they might have to mail order, they looked like "what the heck, it's too complicated". I think I was able to salvage them though and bring them back!

Good topic.

- walt

[cnw1995]

I like re-reading past issues of CTTs to recalibrate my sense of the hobby - as others have cogently noted, our hobby is a minor subset of model railroading in general - a bit fractured amongst lots of individual interests...scale, tinplate, post-war... to name a few segments - and frankly seems accessible only to those with some past connection to toy trains or trains in general - and significant discretionary income (which is getting rarer these days...) While there are examples of how great the hobby can be for those of us without a lot of 'lettuce', I think ours will always be a sort of 'boutique' hobby of 70,000 or so nationally - (I think CTT's circulation is something like 57K) and like everything related to baby boomers, it'll morph as that demographic continues to age. My hunch is it'll show growth for another decade - then shrink dramatically. I continually to be dramatically impressed at the power of the Lionel brand - it's still something that means something to a great number of people like 'oh yeah, we had those trains around the Christmas tree growing up' or more hilariously 'oh yeah, I got my dad's old trains and we're going to sell 'em to put the kids through college...'

[Anonymous]

Folks:

Regarding RC cars. My kids were interested in them when they were younger - I was to for awhile.. However, they eventually outgrew the interest. One of them is still into trains. IMO there many more aspects to model railraoding then RC cars (NASCAR aside!). Model Railroading has morphed into an adult hobby. However, we still need to expose kids to trains so they know the possibilities when they get older.

I bet not many kids are buying the holiday ceramic village buildings, but the desire for a minature town is definitely a continuation of the interest in the Christmas Garden with which trains were originally associated. Kids do like minatures of all types.

Finally, again just my opinion, but I think MTH has had a positve effect on the hobby, BUT it has also had some very significant negative effects.

Al

[railfanespee4449]

I am on a budget as i am 12, but I love Lionel. As long as they retain their "Traditional" line of trains, I can handle it. As for the bigger products, I try to wait. As soon as they're gone from the catolouge, they pop up on Ebay for half the price
P.S. I relate to steamers- My dad and I talked our way into the U.P. Steam roundhouse when I was about 7

[Big_Boy_4005]

QUOTE: Originally posted by jkerklo

Great posts! Good insight into our hobby.

As I was reading this topic I recalled a mention in the Lionel/MTH lawsuit discussions that the target production for an engine design was 1,000 units. The reference was hazy, but I thought this was rather a small number, what with all the tooling, start-up production, and marketing costs that had to go with the new design.

So, I just realized that I have never seen any company or industry business data. How big is the hobby, in terms of revenue. I went to my usual source for this information, "edgar." (Goverment site for public company reporting).

Nothing. None of the companies, and I looked for all I could think of, were listed. This means they are all privately held.


Anyone ever seen any company data for the train hobby?

John Kerklo
TCA 94-38455
www.Three-Rail.com

You know John, the only hobby related business that I ever saw go public was The Great Train Store chain, and they are long gone.

[Anonymous]

I have what I think might be a rare O-gauge UPS box car from the late 80's. I am pretty sure they are very rare, and the fact that I have one has me curious if it is worth anything, if any one has any information on this box car please let me know about it. Thank You.

[garyseven]

nblum says:
"For those of you who weren't there in the 1950s and before, three rail O gauge trains have always been expensive. $2.00 for rolling stock and $15 for a locomotive translates into prices 10-20 times that today given the much smaller market and inflation."

To be accurate and not inflate inflation.[;)]and to keep honest people honest, what cost $2.00 in 1955 would cost $13.08 in 2003. What cost $15.00 in 1955 would cost $98.09 in 2003
(Source - the pre-1975 data are the Consumer Price Index statistics from Historical Statistics of the United States (USGPO, 1975). All data since then are from the annual Statistical Abstracts of the United States. )

Neil, just how did you calculate for "a smaller market?!?"

[nblum]

Compare an automobile today with what one cost in 1955. It's not a six fold increase in cost, it's more like 10-20 fold increase, because the products are not the same. Likewise, in 1955, Lionel probably made a few hundred thousand locomotives of some types. The number today is probably more like one-tenth or one-hundredth of that. Strict use of the CPI is probably not appropriate when both the volume of the product and the technology in the product are so different.

In addition, $20 was a larger proportion of the median salary in 1955 than is $120 or even $200 today. Unless I'm misremembering, a median salary in 1955 was a couple of thousand dollars, so $20 was perhaps half a week's salary. Today the median salary is more like $40,000, so $120 is more like a fifth of a week's salary.

In summary, Lionel (or American Flyer) trains were much more expensive, especially compared with incomes, in 1955, than they are today, even corrected for inflation by whatever formula one chooses.

[garyseven]

In 1955 the median income was $3,400 per year
In 2003 the median income was $30,941 per year
Given the $15 locomotive in your example, based on a 40 hour work week, the median worker in 1955 would have to work 9.17 hours to afford that engine.
A 2003 median income worker, based on a 40 hour work week, working 9.17 hours could afford a $136.50 engine.

Neil summerizes:
"Lionel (or American Flyer) trains were much more expensive, especially compared with incomes, in 1955, than they are today, even corrected for inflation by whatever formula one chooses."

Is my math incorrect or dId I choose the wrong formula?!?