Battle of the Fun Factories

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Here's some crucial Christmas advice, kids: Don't let Mom and Dad sneak off to the toy stores until they've done their homework. It's a jungle out there, full of Thundercats and Sectaurs, Pound Puppies and Glo Worms, GoBots and Transformers--in short, no place for the innocent. What could be more embarrassing than to have the old folks, however well intentioned, come home with the wrong stuff! Remember what happened when you sent them shopping for video games a few years ago, and they returned with an Etch-A-Sketch? What they need is at least three hours in front of the tube on a Saturday morning. If they balk, tell them that you're appearing in one of the commercials, or that your friend Freddie's wealthy dad, Mr. ceo, watches every Saturday to pick up business tips. Only when they've put in their tube time will they begin to understand the vital differences between He-Man and She-Ra, Voltron and MASK, Wuzzles and Lots-a-Lots-a-Leggggggs.

The toy business has changed dramatically since the time when Gepetto-like craftsmen turned out spinning tops, dolls and sleds. The onetime humble toymakers have evolved into giant fantasy factories that are battling for the hearts and attention of America's children with marching armies of curious and sometimes fearsome characters. This year the two largest U.S. manufacturers, Hasbro and Mattel, expect to ring up more than $1 billion each in revenues for the first time ever. Total retail toy sales grew 20% last year, thanks to a healthy economy and the excitement stirred by such blockbuster products as Coleco's Cabbage Patch Kids and Hasbro's Transformer robots. That would be a tough performance to follow in any industry, but experts predict toy sales will jump an additional 10% in 1985, to $13.5 billion.

The toy titans have helped stimulate that growth by becoming more marketing-minded. They now invent fanciful personalities for their toys, design cartoon shows to promote them and produce endless follow-up products to keep children coming back for more. The companies aim to make their toys into celebrities so that children will accept no substitutes. The strategy is working. Youngsters now pick out their playthings with the fussiness of a young professional shopping for his or her first Saab. "They are smart kids growing up very fast," says Polly Hallett, marketing director for Fisher- Price toys.

Only a few years ago, when toy companies were smaller, their financial health was notoriously erratic because they rode up and down with the latest fads. Example: Rubik's Cube, which lasted only one season, 1981-82. Now the toy firms want to grow large enough so that they can take part in several trends at once and get a smoother ride. Hasbro, Mattel and Coleco, the No. 3 toymaker, will account for about 35% of this year's industry revenues, compared with less than 15% five years ago. But these big firms now compete with a manic rivalry that resembles that of computer or soft-drink companies.