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10/28/21, 1:04 PM Helping One Big Client, but Wanting to Spread Out – The New York Times

https://www.nytimes.com/2012/03/22/business/smallbusiness/tied-to-one-big-client-but-wanting-to-cut-the-cord.html 1/3

https://www.nytimes.com/2012/03/22/business/smallbusiness/tied-to-one-big-client-but-wanting-to-cut-the- cord.html

CASE STUDY

By Gregory Schmidt

March 21, 2012

THE Four Horsemen Toy Design Studios is a toy company based in New Jersey that creates highly detailed action figures for Mattel while making its own toys that are sold online to adult collectors.

THE CHALLENGE Making the transition from a small team of freelancers with one big client to a real business with multiple revenue streams — without losing that one big client.

THE BACKGROUND The Four Horsemen — Chris Dahlberg, H. Eric Mayse, Jim Preziosi and Eric Treadaway — met while working at McFarlane Toys, a maker of action figures. Wanting to create their own line, the four men left McFarlane in 1999 to start their own company.

But creating a toy line, getting it to market and making it profitable can take years. To be successful, action figures generally need a story supported by movies, TV shows or comic books. Rather than focus on creating content, Mr. Preziosi said, the men decided to build their reputations as designers.

At the time, Mattel was looking for an outside team with a distinctive design sense. The Four Horsemen pitched the idea of bringing back the Mattel characters He-Man and the Masters of the Universe, which had been highly successful in the 1980s. Mattel liked the idea and offered the team a contract. “There was a financial guarantee,” for a year, Mr. Treadaway said. “It allowed each of us a salary.”

From their new workshop in Bloomingdale, N.J., the team began designing the toys, then sending the molds to Mattel, which handled manufacturing and sales. The workload was modest in the beginning, about 20 toys a year, Mr. Treadaway said. But as their relationship with Mattel grew and their contract was extended, the Four Horsemen picked up other assignments.

The Mattel work kept them busy, but their intent had been to design their own toys. And yet, without content or a story line, it would be hard for Four Horsemen to establish its own product line. Still focused on Mattel, they tried their first independent effort in 2004, a line they called Magma Corps. They produced 1,000 figures, selling them for $20 apiece to collectors at comic conventions and on the company’s e-commerce Web site. But interest was slow to build, and they were able to sell only a few hundred figures.

For their second effort, they posted sketches of a fantasy line called 7th Kingdom on their Web site and let fans decide which figures and accessories would be made. The first figure produced was given a limited run of 1,000 and sold for $20 apiece. Mr. Treadaway said the plan was to keep the price as low as possible. “As long as we were breaking even on it, we’re pretty happy about it,” he said. “It’s an investment.”

When the second 7th Kingdom figure was ready for production, it was offered for presale over the Internet, and all 1,000 sold out in a few days. But production hit a snag. To manufacture their lines, they had used their industry connections to find small factories in China that could produce the toys quickly and cheaply, a plan that backfired when one of the factories closed before production had finished.

Helping One Big Client, but Wanting to Spread Out

10/28/21, 1:04 PM Helping One Big Client, but Wanting to Spread Out – The New York Times

https://www.nytimes.com/2012/03/22/business/smallbusiness/tied-to-one-big-client-but-wanting-to-cut-the-cord.html 2/3

“We paid for production, and it was half-done,” Mr. Mayse said.

The company lost money, but its contacts in China were able to retrieve some molds used in production, and the Horsemen sent the molds to another factory to finish the run. “The fans were great,” Mr. Mayse said. “They stood by for a year and a half, waiting patiently for their figures.”

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The Horsemen were eager to produce more, and teamed up with online retailers to sell limited-edition variations of the 7th Kingdom figure to help reduce production costs. When the figures were offered to fans, they quickly sold out.

The team tried the same concept with two more characters from the 7th Kingdom line and had the same success. The company’s annual revenue surpassed $500,000, and the men believed they were ready to expand. They had already hired two workers to help with molding and painting, and in 2009, they moved into a larger studio and hired a third employee.

They have also sought to focus on creating content to support their toy lines. In 2008, the men met with a production company, 4Kids Entertainment, about creating an animated television series, a process the four found daunting. They came close to signing a deal, but the financial crisis hit, and the deal fell apart.

For the Four Horsemen, having a client like Mattel has been both an opportunity and a burden. They design more than 100 action figures a year for the toy maker. “Mattel put us on the map,” Mr. Mayse said. “They are bread and butter.”

But the work they do for Mattel also makes it hard for them to devote time to building their own lines — and a diversified company that could withstand the loss of its biggest customer. Their annual revenue is well above $500,000 now, but it fluctuates depending on their workload for Mattel. They would like to sell their own toys through a mass-market retailer like Toys “R” Us or Target, but their work for Mattel keeps them too busy to develop story concepts.

THE OPTIONS Despite their struggles, the men would still like to pursue an animated series. But they are taking a more cautious approach to the entertainment industry. They are looking for smaller ways to build their concepts, like through comic books and graphic novels. For now, they are talking to a brand developer in New York about representation. They

Figures from the company’s Symbiotech line. The Four Horsemen would like to sell their products through a mass marketer. Richard Perry/The New York Times

6 minutes ago

10/28/21, 1:04 PM Helping One Big Client, but Wanting to Spread Out – The New York Times

https://www.nytimes.com/2012/03/22/business/smallbusiness/tied-to-one-big-client-but-wanting-to-cut-the-cord.html 3/3

are also building a style guide for their characters, with the hope of handing it off to a writer who can develop a story concept. And they have broadened their partnerships to include two online retailers in Japan, a lucrative market for toymakers.

WHAT OTHERS SAY Bernard H. Tenenbaum, a managing partner at China Cat Capital, a strategy and investment firm in Princeton, N.J.: “This is an industry that’s hard to make money in. They have design and creativity and imagination. To get from where they are, which is making a high-end, very sculpted, very sophisticated collectors’ product, is the difference between couture and mass market. The challenge they have to face is in transforming from couture to prêt-à- porter.”

Paul Budnitz, the founder of Kidrobot, a maker of designer art toys and apparel based in Boulder, Colo.: “Here’s the real issue: I can’t remember the last time I’ve heard of someone becoming successful as an entrepreneur while holding down a full-time job. It happens occasionally, I’m sure. But frankly, building a business requires a lot of time and focus — and luck. You will only make miracles happen when you have to. An even less polite way to say it is, if you want to be successful, you need to get off your butts, stop playing it safe and make a leap of faith.”

Bruce Stein, an entrepreneur and consultant based in Los Angeles: “Make a deal with Mattel to launch X, Y and Z properties in a first-look deal. Tell Mattel, ‘We’re going to be doing the work you give us, and we are going to be developing our own property lines.’ If Mattel passes, they can hire some other people to develop it.”

THE RESULTS Offer your thoughts on the Four Horsemen on the You’re the Boss blog at nytimes.com/boss. Next week, on the blog and in this space, we will publish an update on how the company is doing.