The toy and game industry isn't much fun this year.
Local toy and game company executives say that although their companies have grown during past recessions, there is evidence that consumers' concerns about the sagging economy and the possibility of war in the Middle East is squeezing gift budgets this year.
A few hits, such as Barbie dolls and Nintendo video games, are expected to sell well. But the Toy Manufacturers of America Inc., a trade association, said two-thirds of its members are likely to have lower sales and profits this year.
Already, many of the best-known toy and game manufacturers, ranging from Hasbro Inc., the Pawtucket, R.I.-based maker of G.I. Joe, to Baltimore's Monarch Avalon Inc., maker of the Diplomacy board game, have had profit problems and some have even laid off employees.
To survive, many area toy businesses are diversifying to find more stable markets -- either searching for new products to win customers' hearts or expanding their lines to lessen their reliance on the whims of childrens' Christmas wishes.
At Monarch Avalon, President Jackson Dott hopes his timely launch of a specially developed game called Desert Shield will help end his company's three-year money losing streak.
Although sales of its sometimes expensive and complex war gameshave sagged over the past few years, Monarch Avalon sold out its run of Desert Shield just a few weeks after it was launched this fall. A second printing is hitting store shelves now, Mr. Dott said.
But Monarch might need more than a one-time winner, since the long-term outlook for its board games is cloudy.
"Nintendo hasn't helped us. You've got to be literate to play our games," he said, explaining that he has received angry letters from customers that read something like this: "Christ! You need a Ph.D. to play these games."
The family-run company is betting on the future of board games, however, in the belief that traditional, non-electronic home entertainment products will return to popularity in the 1990s, and that perennial favorites such as the Diplomacy game will always sell well, Mr. Dott said.
Besides closing its New York office, selling off the assets of its toy division and cutting costs such as inventory, Mr. Dott said his company is expanding into more peaceful and easier-to-play games to win new customers.
"There is no reason this company should be losing money," Mr. Dott said. "It's got too much going for it."
Other toy companies are steering away from anything timely on the theory that busts always follow booms.
At Lifelike Products Inc., a privately held Baltimore-based maker of toy train sets and toy-car tracks, managers say that although they envy winners such as the Teenage Mutant Ninja Turtle products -- which are expected to tally $350 million in sales this year -- they would rather stick to products that will sell moderately well every year.
"I always equate the toy business to the fashion industry. It is so fickle," said Edward Weiss, vice president of marketing at Lifelike Products.
Instead of building up manufacturing capacity for a hot item, then watching sales dwindle and costs soar as the fad dies, Lifelike Products sticks to stable, strong sellers such as wooden toys. And the company is diversifying out of Christmas-oriented toys to protect itself against getting the business equivalent of a lump of coal in its stocking.
1% As a result, 1990 won't be a stel
lar year but will be "OK. . . . We are in a good position," Mr. Weiss said.
Even successful game companies say they are trying to diversify into new markets.
Bill Stealey, a co-founder of MicroProse Inc., a privately held manufacturer of computer games based in Hunt Valley, said the recesssion has cut the 8-year-old company's annual sales growth from 35 percent last year to 25 percent this year.
But most of MicroProse's $25 million in revenues comes from sales of vividly colored computer-screen simulations of fighter plane and submarine battles. Mr. Stealey is scrambling to protect the company against the kind of anti-war backlash that prompted Hasbro to pull its G. I Joe doll off the market after the Vietnam War.
Although military games are doing well, Mr. Stealey said he and his 230 employees are searching for games unrelated to war.
The fast-growing video game company "came out of a peacetime environment. Military games are much cooler when no one is actually getting shot at," Mr. Stealey said.
He and co-founder Sid Meier "are ex-military officers. We lost a lot of friends in Vietnam," he said.
So MicroProse is branching out into adventure games and is developing its first cartridge for Nintendo systems in an effort to widen its audience beyond the male-dominated MicroProse customer list, he said.
In addition, MicroProse is trying to lessen its reliance on Christmas shoppers by introducing arcade games for the first time. More than half of the company's sales come in the fourth quarter, Mr. Stealey said, half-jokingly calling his company's ability to bring in as much as $15 million in the three winter months "disgusting."
The toy and game makers who succeed will be the ones who "make sure the fun quotient never goes out of their toys," he said.