Disney's 'Force Friday' Marketing Should Be Duplicated By Other Toy Companies

Summary

• Walt Disney takes an epic approach to marketing Star Wars: The Force Awakens.
• Toy holidays, such as “Force Friday”, can build consumer excitement outside of traditional holidays.
• Toy holidays could build revenue growth opportunities year round if executed properly.

Entertainment conglomerate Walt Disney (NYSE: NYSE:DIS) decided that the first Star Wars film released under its ownership is so epic that it deserves its own merchandise holiday. September 4, 2015 has been dubbed "Force Friday". This will represent the start of a merchandise wave such as comic books, toys, books, games, and more feeding people's anticipatory hunger for Star Wars content. This toy holiday represents sheer marketing genius that toymakers, such as Hasbro (NASDAQ: HAS), should take note of for their in house products. Let's examine why.

Why is this important?

First of all, releasing comic books, video games, books and toys reinforces the cinematic universe concept in the minds of the consumers. Moreover, it allows the consumer to start interacting with the Star Wars: The Force Awakens saga, building rapport and anticipatory excitement for the franchise way before the movie starts. By the time consumers go to see the movie, they will possess a heightened appreciation for what it has to offer.

It also gives Walt Disney's merchandise partners the chance to get an early start on the holiday season, giving them more time to sell. This will also allow them to slowly release different merchandise through the extended season. For example, in Hasbro's earnings call, analysts were rightfully worried about market saturation, but Hasbro's management indicated that they will introduce new characters and "play patterns" as they get closer to the film release date to hold the interest of consumers.

What could the toymakers learn?

Toymakers, such as Hasbro, typically bring in most of their revenue around the 4th quarter during the holiday season (see chart below).

HAS Revenue (Quarterly) data by YCharts

I previously discussed Hasbro's Transformer's cinematic universe potential. Hasbro could set up a merchandise-content blitz much like Force Friday. Hasbro could call it something like Transformers Tuesday around the fall or late summer of the year leading up to its next big release. Moreover, toy manufacturers in general could do a marketing blitz earlier in the year. They could release a movie prefaced by a toy release around tax refund season, when people possess a little more money in their pockets, compelling them to spend more on luxury items such as toys, comics and books. This would give toy makers an opportunity to grow revenue outside the traditional holiday season.

Possible downside

This display of marketing prowess represents one of the many reasons I am long Walt Disney. The company believes in doing everything on an epic scale. My only concern is that consumers will tire of the endless onslaught of merchandise and content and will stop going to these movies. If this happens, the fundamentals of companies like Walt Disney and Hasbro will suffer immensely, destroying shareholder value.

Conclusion

Walt Disney recently went through a correction and currently trades at a P/E ratio of 23 vs. 19 for the S&P 500, according to Morningstar, meaning that it still resides in the slightly overvalued range. However, given Walt Disney's market dominance and fundamentals, I definitely remain bullish on the company.

Moreover, investors place a great deal of hope in Hasbro's plans. As a result, the company currently trades at a P/E ratio of 24, putting it in the overvalued range as well. But, I believe that Hasbro's work on a Transformers' cinematic universe, and other initiatives to engage consumers, will bode well for shareholders over the long-term.

Analyst’s Disclosure: I am/we are long DIS, HAS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.