Advertising and Market Share

[Kooljock1]

Like trying to compare numbers of items on eBay, or sales at any one dealer, comparing numbers of items in ads is purely speculative.

For example, if Charlie Ro, Grzyboski, and Island Trains run ads full of LIONEL items in CTT, and Nassau Hobbies, Just Trains, and Ready To Roll run ads full of MTH items in OGR what have we learned?

We've learned that they have a ton of products sitting on their shelves!

T-Rex/TrigTrax points out that MTH is run by a train guy which is unquestionably true. What effect that will have on the long-term corporate health of MTH remains to be seen. It makes sense that DCS systems are selling now, as TMCC systems have pretty much reached a certain saturation point after being on the market for over ten years. And Nassau Hobbies has a large MTH department and an MTH display layout, so DCS sales are to be expected.

Any far-reaching assumptions made on this is again purely speculative.

Any assumptions made on the health of a single company or the hobby in general based on one company's filings with a bankruptcy court is purely speculative.

If T-Rex/TrigTrax wants to post LIONEL's numbers side-by-side with MTH's privately held numbers, we might be able to draw some conclusions, but only if we can see the numbers over a three to five year period.

Jon [8D]

[nblum]

It doesn't matter what we THINK. The public thinks with their dollars. Their dollars say by a 2:1 margin that the dealers should be advertising Lionel products for sale. And that is how dealers are spending their money on products for inventory and their dollars for advertising in the print media. Lionel no doubt is in difficult financial circumstances because of MTH's lawsuit success, but as a business selling products, it's clear that the last five years have been an utter disaster for MTH with sales dropping by half, and steady as she goes for Lionel.

As a business selling products to the public, Lionel is a much bigger asset to the hobby and industry, literally and figuratively, than MTH. That really cheeses off some people who re ardent MTH supporters or Lionel haters. But it doesn't alter the reality of what dealers are selling and people are buying. Lionel 2:1, when it was pretty much 1:1 back in 1998 or 1999. Maybe it's better to make products than lawsuits :)?

[trigtrax]

I see no point in speculating about which dealers advertise what and where. According to Lionel's court filings their sales are down 10% over this period last year. They've lost another $1.2 Million and they can't afford to advertise anyplace anyway.
It's evident from other forums that people who use Remote control are keeping MTH very busy trying to keep DCS in stock. A fact not lost on Lionel since they are pressed into upgrading their own TMCC.
To me the biggest difference is MTH is run by a "Train Guy". I saw him at Charlie Nassau and he was ready to dig into a GG-1 with a screwdriver while the customers asked questions on a variety of topics. On my brief run in with Lionel's Calabrese at York his major concern was a License agreement with the MTA. That says it all for me.

[Anonymous]

I definitely don't read a whole lot into the volume of ads, or the choices made in terms of product advertised. Seems to me it's kind of natural for ads in CTT to lean toward Lionel, since Lionel has traditionally been the collectors scale. Ditto for the volume of MTH ads in OGR, which has traditionally been an operator-oriented publication.

And I imagine that dealers themselves are left as perplexed about the changing O gauge market as are the manufacturers, and even hobbyists themselves. Things are very much in a "shaking out" phase now, and the days of rampant buying and overproduction that we saw just a few years ago are, I feel, pretty much behind us.

That doesn't mean that the market is drying-up or about to revert to what it was in the 80s and before. It just means that reality is setting in, and that all of these folks in the industry end are going to be far more realistic about what they elect to produce and what they choose to sell (or try to sell).

[Poppa_Zit]

QUOTE: Originally posted by Allan Miller

My guess (and it's just a guess) is that from a bottom line perspective, MTH is probably doing better than any of its competitors are at the present time. In addition to O gauge, MTH also has a corner on the market in Standard Gauge and a growing market share in Large Scale, And they seem to be selling DCS components about as fast as they can produce them, based on reports on various forums from prospective customers and some dealers. Plus, they still have a nice $40M due-bill from Lionel in their hands which, even if the final amount is reduced, puts them in a fairly enviable position.

Allan --
Good points. It is assuming a lot that MTH will make a big score in that $40 million lawsuit, which could drag out for years. While there's a 50-50 chance the decision will be reversed in appeal, let's say the damages are reduced to a more sensible $7 million to $8 million -- or whatever. MTH may end up doing little more than endorsing the back of the check and handing it over to Union Pacific. The only parties that will profit by all this will be the lawyers. And we're the ones that will end up paying, either in increased prices, thinned-out product offerings or a decrease in competition which follows the demise of a manufacturer.

QUOTE: Originally posted by nblum

I received my May issue of CTT, which is only 106 pages, an indication of decreasing advertising revenues.

I wouldn't read anything global into CTT's May issue page count / ad pages. We're entering the time of year where disposable income is being allocated toward vacations and other outdoor activities, and only the hard-core hobbyist is spending a lot of time and money on model train stuff. Most of us on this forum fall into that category.

Manufacturers and retailers on tight budgets know this -- so trying to get the biggest bang out of their advertising buys, the ad revenue at this time of year will sag as they wait for the optimum time -- fall thru pre-Christmas, when the majority of wallets of the masses are open. Maybe one of the Kalmbach crew can chime in and confirm that this is an annual and expected phenomena. The same thing happens with seasonal sports publications.

[Anonymous]

My guess (and it's just a guess) is that from a bottom line perspective, MTH is probably doing better than any of its competitors are at the present time. In addition to O gauge, MTH also has a corner on the market in Standard Gauge and a growing market share in Large Scale, And they seem to be selling DCS components about as fast as they can produce them, based on reports on various forums from prospective customers and some dealers. Plus, they still have a nice $40M due-bill from Lionel in their hands which, even if the final amount is reduced, puts them in a fairly enviable position.

I imagine all of the O gauge manufacturers, large and small, are kind of scratching their heads and wondering where things are heading at this point, so I'm not sure anyone has a decided advantage at this juncture. And it's sure not anything for the hobbyist to be worried about one way or another, because short of buying a lot more product, there's not much he as an individual can do to influence things.

[nblum]

I received my May issue of CTT, which is only 106 pages, an indication of decreasing advertising revenues.

What is interesting to me with all the hanging of crepe in regard to Lionel is the advertising. Aside from Charlie's Nassau Hobbies and Ready to Roll's two pages, there are no dealer ads of any size with MTH in them. Where is all the MTH product being sold? It isn't being sold in CTT. There are at least about 13 full pages from Charles Ro, Trainland, Island Trains,Grand Central, Train Express, and Grzyboski's. So about 6-10 times as much Lionel being advertised as MTH in CTT this month.

Well, maybe the MTH is in OGRR. Yup, that's the place you'll find the MTH dealers. 11 pages of MTH to 3.5 of Lionel. No wonder there is the impression that OGRR favors MTH just a teensy weensy bit ;).

So what's the impact? Well, CTT has twice the circulation of OGRR. So the amount of Lionel being advertised by dealers in April 2006, corrected for audience size, is about 30 pages of Lionel and 15 pages of MTH, effectively, which jibes pretty well with my estimates that MTH has about 1/2 the market share right now of Lionel in dollar volume, give or take. It also jibes pretty well with Mike Wolf's comments that sales were around 25-30 million and we know Lionel's are around 60 million. No wonder Mike Wolf wants to own Lionel, it would increase his sales by three fold :).