Counting the Gifts of Our Labors

Among our most successful and lucrative endeavors toward diversification has been our pursuit of key licensing agreements. Beginning most notably with our World Wrestling Entertainment™ (WWE) action figures, we established ourselves as a viable partner in the development, manufacturing and merchandising of toys and games to capitalize on evergreen entertainment brands.

Such agreements provide us with products that have long-lasting, deep-seated appeal; remain especially compelling and engaging to our target customer groups; and enjoy the marketing expertise of their innovators—premier companies such as Nickelodeon, Disney, WWE and NASCAR. We continue to work closely with our licensors, committed to our joint and long-term success, and we’ve proven our capabilities so thoroughly that JAKKS now boasts relationships with major players in children’s entertainment, sports marketing and many related industries.

Today we are working under a master toy agreement with World Wrestling Entertainment, and we have master activity licenses for Hello Kitty, Nickelodeon and Disney. In addition, we recently signed a master toy license for Nickelodeon’s “The Fairly OddParents,” currently the #2 television show among kids aged 2-11. This agreement, our first master toy deal with Nickelodeon, greatly expands our relationship with the children’s cable network and, we believe, further demonstrates its confidence in our team. The new line will feature plush toys, dolls and accessories, play sets, role-play activities, handheld electronics, and novelty items.

We also recently signed a multi-category licensing agreement with FremantleMedia for American Idol™, one of the most successful reality shows on television. Targeting “tweens,” our Flying Colors division launched a full line of fashion and beauty products based on the show in early 2003 and intends to introduce related stationery items such as portfolios, binders and writing instruments in time for back-to-school.

As evidenced by the successes of our top licensed properties, we are adept at maintaining the integrity and unique individuality of established brands while developing appropriate and innovative products their respective fan groups respond to.

Our lines extend product life cycles, too. For example, to keep our WWE fans excited about our products and hungering for more, we introduced action figures and accessories that take the Superstars out of the ring and into other settings. We created a line of off-road monster trucks with just as much style and attitude as their Superstar owners. We incorporated our molding compounds and other technology into the ring gear, play sets and accessories for added realism and play value, making our WWE product line more compelling to fans. Such enhancements have revived customers’ imaginations and purchasing decisions.

Since 1999, we have released 14 World Wrestling Entertainment video games through our joint venture with THQ. Those titles have already generated $34.2 million in profit for JAKKS, and we look forward to the migration to Sony’s PlayStation® 2, Microsoft’s Xbox™, Nintendo Game Boy® Advance and other new platforms fueling profits through the end of the decade.

Products featured in the Winter pages include: Atari® TV Games™, SpongeBob SquarePants™, Dora the Explorer™ and Blue’s Clues® slumber bags, Nick-tivities Skraaap™, NASCART 1:10 radio controlled vehicle, WWE® figure, Singing Starz™ Video Karaoke Machine, Strawberry Shortcake Tongue Tape™ and The Storm™ helicopter.