Interview with Carter Keithley, President of the Toy Industry Association

By Justina Huddleston
April 2012

TDmonthly Magazine had the great honor of conducting an interview with Carter Keithley, president of the Toy Industry Association. Mr. Keithley took time out of his busy schedule to tell us what toy industry trends to look out for in 2012, why the toy business is one of the most difficult and fast-paced he's ever worked in, and why the industry has what it takes to weather our difficult economy.

Q. We've heard a lot of good news coming from toy manufacturers who said business was up at this year's Toy Fair. What do you predict for the toy industry in 2012?

CK: This year’s Toy Fair was a tremendous success – attendance numbers increased for buyers, licensors, and entertainment execs, and in nearly every other category of the toy trade. 27,000 industry professionals from countries all around the world came to New York to view, buy, and sell the latest toys and games originated by our creative American toy industry. Both on the show floor and after the event wrapped up, we heard from many happy exhibitors… Several said it was their most successful show in many years and that they wrote a dramatically increased amount of orders right on the spot.

We think this may be the “starting gun” for a new level of energy and prosperity in the American toy industry. Based on what we saw at Toy Fair and what we’re hearing within the industry, some really exciting, innovative and creative products are going to start rolling out between now and the holiday 2012 shopping season. Kids and parents alike will be excited by the innovations – some toys will have amazing add-ons, like glow components and interactivity, and others will incorporate many challenging, educational and fun elements within a single toy or game.

Q. This year at Toy Fair we saw the rise of the "app-cessory," along with several other toys that integrate digital platforms with physical toys. How do you think these new innovations will affect the toy industry?

CK: The toy industry embraces new technology with open arms. Our inventors and designers are constantly on the lookout for the latest emerging technologies that are safe and affordable enough to incorporate into toys. It is very, very affordable to incorporate Apps with traditional toys to enhance the interactivity and play value at little additional cost. This is one of the main reasons that Apps have entered the toy space in such a huge way. We have already seen some pretty great stuff in this area, so there is no doubt in my mind that the industry will continue to deliver evermore creative and fun app and toy combinations.

Q. You have a background in law, and have worked as chief executive for many different industry associations. How is the Toy Industry Association and the toy business overall different than others you have worked in?

CK: The toy industry is the most challenging and fast-paced industry that I have ever served. Unlike many other industries in which product lines sell for many years and provide an on-going revenue stream to support new product development, toy products are often short-lived, and toy companies must be constantly developing new ideas. New products that are huge hits, generating a fortune in revenues in one year, might be a bust the next year unless they are constantly refreshed. Talk about pressure!

Toys are also a surprisingly complex and heavily regulated product category. Our market is children, so we are rightly held to a much higher standard of care and excellence than many other products. It is not enough just to have a good idea and be a good salesman to get into the toy business. Toy developers and manufacturers must be very knowledgeable about conforming to safety standards and material specifications and regulations that have been developed over decades to assure children’s safety. Of course, all of this must be done at an affordable price point. Apple can bring out a new tablet every two years and get $600 for it, but the average price of toys has remained steady at about $8 for a long time.

With all of these challenges, the Toy Industry Association is especially important to companies in the business. TIA helps to develop sensible standards and prevent unwarranted regulatory intrusions. And we provide assistance to our members in navigating the regulatory landscape and entering new markets. We are also here to protect the reputation of the industry by telling the world about the conscientious job we are doing to keep children safe.

Challenging? Yes. Exhausting? Sometimes. Exhilarating? Always. I am fortunate to have had the opportunity to serve this great industry.

Q. A hot topic this year was China's expanding economy, and the hike in worker's wages, transportation costs, and the price of raw materials that is going along with this growth. With this in mind, how do you think US toy makers' involvement with China is going to change in the next 5 years?

CK: Our Chinese factory suppliers have become very knowledgeable and sophisticated in the toy business and very reliable partners with our toy brands. We are proud that our toy industry has developed the most highly regarded program among any industry for improving the conditions for workers in our factories. So while costs are increasing for toy production in China, I do not at present foresee a mass migration of toy production to other areas.

It is also important to remember that as its prosperity increases, China becomes a vast new market for creative toys. There are 10 million new Chinese babies born every year, and American toy companies will want to maintain their relations with Chinese factories to help them enter that market.

Q. Is there any current pending legislation that could affect manufacturing that toy companies should be especially aware of?

CK: This may be a quiet year for new legislation, because of Presidential election politics. But there is a huge agenda of on-going regulatory challenges at the federal, state and international levels with which our External Affairs team is wrestling on behalf of the industry. Here are some of the most urgent concerns:

Impending amendments to the Children’s Online Privacy Protection Act (COPPA) could impose severe new requirements on toy company websites directed at children.

Environmental initiatives requiring elimination of some materials in packaging or restriction of materials used in toys are gaining traction.

States are proposing “product take-back” legislation that could require toy brands to accept end-of-life return of toys.

Individual chemical bans emerging in Europe and at the U.S. state level must be addressed to assure that they are science-based and not driven by hysteria or unproven allegations.

There is a long list of other legislative and regulatory initiatives – like small business taxes and regulations – that affect businesses in general, for which toy companies need to be able to turn to their trade association for assistance. There is never a shortage of issues for our External Affairs team to tackle.

Q. What do you see as the toy industry's greatest strength in the face of economic uncertainty?

CK: Our greatest strength is that despite economic hardships, parents will always buy toys for their kids. They will forego a new TV, new clothes or eating out, but they will not deprive their children of the joy of a new toy. So our industry has durability in economically trying times that many other industries do not share.

But while the toy industry in the aggregate has very mild economic cycles, individual companies can suffer dramatic shifts in prosperity. So, as is true in every enterprise, the greatest asset of any toy company is its people. The energy, ingenuity, creativity, loyalty and determination of a toy company’s team of employees are the source of their success.