January 2, 2009

Lionel - MTH Tinplate Licensing Deal True

From OGaugeWatch.com:

Yesterday, Lionel's CEO Jerry Calabrese acknowledged that the premature press releases I found on MTH's website were in fact true. Mr. Calabrese summed up the agreement like this:

Lionel and M.T.H. are two, entirely separate companies with entirely different business models and destinies. We fiercely compete, and will continue to fiercely compete, in the core, O gauge segment of the model railroad hobby, especially in the arena of high-end engines and Operating Systems. However, our interests do not conflict, to any great extent, in other gauges and markets. Both companies are equally committed to making great trains and, where we do compete, both companies are equally committed to convincing hobbyists that they do so better than the other. And none of that will change.

The agreement between Lionel and M.T.H. is a conventional and straightforward, multi year license, in which Lionel will be paid a royalty on each tinplate train that is sold. As an acknowledged and acclaimed maker of tinplate trains and accessories, M.T.H will now be able to do so using the historical and authentic Lionel and American Flyer badging that made them historical and authentic in the first place. While M.T.H. will be solely responsible for manufacturing the new line, Lionel will work with M.T.H to select the trains that will be made over the next few years, and will do whatever it can to help make them the success they deserve to be.

The original press "XX3" press release was officially released too with all the XX's filled in.

I find this new agreement interesting in many ways....

  1. Will someone please convey to Mike Wolf of MTH that he needs to pay more attention to how he markets his business over the web! It is unacceptable to me that those press releases were accidentally posted on MTH's website prematurely. They were very very easy to find -- I found them by hitting the search button on their news archive page with nothing in the search box. In my opinion MTH's website does no justice to the products it sells - it's slow, not visually appealing and obviously, is not administered properly. How can the 2008 Volume 2 catalog still be the "current catalog" on the website even though the 2009 Volume 1 catalog was released over 60 days ago? It is pitiful that MTH's web presence doesn't reflect the pride those at MTH have in delivering fantastic trains with what I think is the best digital command control system for the money. Wake up MTH and revise your web presence.
  2. Neither the press release nor the comments from Mr. Calabrese address my biggest question - what control system if any will be in the tinplate trains MTH is producing? Since, according to Mr. Calabrese, Lionel and MTH will "fiercely compete, and will continue to fiercely compete, in the core, O Gauge segment of the model railroad hobby, especially in the arena of high-end engines and Operating Systems." I wonder how MTH will develop a train that can co-exist on layouts running either company's digital control system without sacrificing the cool and different functionality each system offers? I know that MTH's DCS can control Lionel's TMCC equipped trains but what about Lionel's new Legacy system? Will this agreement mean that Lionel will have reveal the technology behind their new Legacy control system to MTH (maybe they already have)? This will be interesting.
  3. What is the real reason for this agreement? In my mind, the tinplate segment of the O and Standard gauge world is tiny. What benefit does Lionel achieve by letting MTH manufacture Lionel's old tinplate trains when MTH was already recreating them anyway? I guess the most obvious reason is $$$ for Lionel, which is ok and leads me to my next point.
  4. To me this agreement solidifies my opinion that MTH is in a position of strength in the world of model train manufacturing (or spread too thin?). MTH is expanding into HO like crazy, creating more and more re-tooled locomotives and already has a great line of tinplate O Gauge and Standard Gauge offerings. The agreement also makes me believe that Lionel's strategy is to survive through licensing agreements. This may be a temporary strategy to strengthen their financial standing but Mr. Calabrese's history with Marvel Comics indicates otherwise. It wouldn't surprise me if Lionel carefully expands its relationship with MTH in the future. Such an expansion just makes good business sense for a company that can make a ton of money from a brand without getting involved in the manufacturing. When you really, really boil it down, isn't the prominent role of both MTH and Lionel in the manufacturing of model trains to manage outsourcing agreements they have with manufacturers in the Far East (OK there may be some ownership stake involved in some cases). If you think of it in those simple terms it is even easier to believe Lionel could become more of a brand management company then a manufacturing management company.
Is this agreement a "Budweiser Turning Point of the Game" for both MTH and Lionel or just a simple agreement between two companies trying to survive and make money in the small world of O and Standard Gauge trains? Time will tell.

What do you think?

You can read Mr. Calabrese's statement and the press release here.

Source: OGaugeWatch.com


Model Train Nut said...

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I build Lionel Train Sets. I started after becoming unable to work. Model Train Hobby has kept me very busy. More than I thought it would.
Thanks for the info. I'm building a model train site, but I'm having a hard time with articles since I'm new to the train model world. Check it out at http://lioneltrainauctions.com

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