We may know quite a bit more after next week. That's when the annual Toy Fair is held in New York City. But I don't think so, not this year. There will be tons of product shown, but I suspect even less than usual will make it to a peg near you.

There's really three areas to consider whenever discussing the industry - manufacturers, retailers and customers. We'll break it down one by one, and discuss trends and the effects each has on the other.

If you have any questions, comments, or suggestions, you can always reach me at mwc@mwctoys.com. If you enjoy this review, take a minute to check out my other site at Michael's Review of the Week, and let me know what you think. Now on to the review!

"The State of the Industry - 2006"

This year, the big discussion is around the retailers - or lack thereof. We all know the woes of the mass market retailers like Toys R Us, K-mart, and Kaybee Toys, all hanging on by a thread or two at this point. But they aren't the real story this year.

No, this year it's the specialty market retailers. These were the brick and mortar stores that carried the lines intended for adults, the very lines that you've seen reviewed here for over three years now. These are often lines based on movies or television shows not considered kid oriented, like Frank the Bunny, Jason, or Cartman.

These retailers have taken a huge hit in the last year. Many stores that once carried specialty market figures, like Electronics Boutique and Gamestop, have dropped them altogether. Other retailers haven't been so lucky. All the Media Play stores were recently closed, and now Sam Goody and Suncoast will be closing close to 400 more stores in the next few weeks. This cuts the brick and mortar retailers down heavily, leaving just a few Spencer's stores, some Hot Topics, and the online world.

While you might think the online stores could pick up the slack, you'd be greatly overestimating the online market. People still hate paying shipping, especially for something that costs $15 or less. Book, CD and DVD retailers figured this out pretty quick, and learned the lesson that they had to sell enough quantity of these cheaper items to make free shipping offers possible. Unfortunately, there isn't the kind of volume in collectible action figures as there is in DVD's, making it pretty much impossible for the small mom and pop e-tailers to keep shipping out of the equation. Add in fears of identity theft and credit card theft, and you have a community that's still reluctant to go the online route.

So what does that mean to manfacturers? Well, it means that selling enough quantity of a $15 action figure to make it just break even is going to be tough, let alone trying to make a profit. Some companies will be going in a different direction over the next year or two, avoiding this problem altogether.

If I had to pick one company best suited to not just ride out the current situation, but actually boom during this period, it would be Sideshow Collectibles, makers of high end 12" and 18" figures, along with busts, prop replicas, statues, and other assorted goodies. Sideshow realized several years ago that their retailer base would dry up, and made the move to selling their own product online. By going toward a high quality, high price, low production run niche market, they have themselves in a position to do extremely well.

Other companies may very well follow this pattern. SOTA Toys has talked about it, and appears to be doing it with items like the 18" Pumpkinhead and 18" Legend of Darkness figures. These are low run - only a few thousand instead of tens or hundreds of thousands - but at a very high quality and high price point. It's easier to convice 5000 people to spend $60, than 20,000 to spend $15.

There's a downside to some of this behavior however. Selling to a niche market is all fine and dandy, but often hese retailers tend to cut out the middle man, keeping as much profit for themselves as possible. By offering their product direct to the customer, and making it difficult for their retailers to compete, they end up squeezing them out. Instead of the retailer being the customer of the manufacturer, they become the competition, and the manufacturers are putting an additional squeeze on the small retailers.

Other companies are sure to be far less lucky. We've already seen the fall of two well known companies - Toybiz was eaten up by Hasbro in a deal with Marvel, and Palisades has closed their doors, selling off their remaining inventory to a new company. Other well known companies like Art Asylum and Plan B Toys get by mostly through doing sculpt and design work for other manufacturing companies. And the number of new companies entering the market has shrunk to a handful.

There are three other important players after Sideshow and SOTA - Mcfarlane, NECA, and Mezco. There are some other companies in the same boat, such as Playmates, but I suspect we'll continue to see them get further and further away from action figures as the overall market continues to shrink due to the effects of video games. Video games and action figures both serve the same play purpose - adventurous role playing - but we have to be honest...video games do it better.

Mezco is likely to lay low, dropping their overall output, and sticking with their core licenses. Family Guy, South Park, Hellboy - these are things we'll see them produce this year, but in far less quantity. Mezco is a small company that appears happy with remaining small, at least for now. But small companies are often in it for fun and fulfillment as much as money, and what will they do if the tiresome nature of the current market wears them down?

NECA is perhaps in the most dangerous position. They have many, many licenses and lines set up for release this year, and no brick and mortar retailers to carry them. Oh, they'll get some out through Spencer's and Hot Topic, but nothing like it once was. They also have more overhead than a smaller company like Mezco or SOTA, further complicating issues.

Ah, and then there's Mcfarlane. Quite simply, their business lives and dies with the Sports Line. It's the one line they have in many (relatively speaking) brick and mortar mass market stores, and it's one that has the best legs. However, all has not been well there either, with a large number of figures hitting dollar stores and liquidators at the end of 2005, and Target dropping them from the winter planogram. There are rumors swirling that they will be producing far fewer figures in 2006 than originally planned, both in quantity and breadth.

Without the Sports Line, they are truly in the same stew as NECA and others. More R rated lines, especially those of the tortured variety, won't sell at Wal-mart. They are trying to move to more 'mainstream' figures with the Simpsons, Napoleon Dynamite, and Hanna-Barbera, but will these sell well enough to make a difference?

There's the big boys too, Hasbro and Mattel, and they continue to jockey for position. Last year Mattel took the DC license from Hasbro, just in time for the Batman Begins line and this year's Superman Returns. But just when it looked like Hasbro was giving up the boy's action figure aisle entirely, they swooped in and made a deal with Marvel to take over the design, manufacture and distribution of their superhero toys. Of all the action figure lines, I can tell you superheroes still sell, something that will make DC Direct remain viable (along with their tight connection into all the comic shops both online and off) through the next couple years, no problem. I wouldn't be surprised to see one of these two - Hasbro or Mattel - make a play for the other again this year. It's become such a regular dance for these two.

Ah, but what about us, the poor customer? For awhile, we'll have disposable income to spend, and won't have any place to spend it. For a company like Sideshow, poised to hit hard this year with Lord of the Rings, Star Wars and Marvel product, that could be a very good thing. But that disposable income is only going to be around so long before it gets spent on DVD's, or video games, or the economy makes it no longer disposable.

It appears that the crash of the collectible market that has been predicted for the last two or three years is in full swing, and it will be a very rocky year. Who will fall? It's tough to call which ones specifically, but you can be sure that some will, and that the list of companies in the running for Best of the Year for 2006 is going to be a whole shorter.