Those who lose the turtle lose the world. Can PLAYMATES TOYS walk through the dark valley?

The Teenage Mutant Ninja Turtles will soon terminate their exclusive licensing agreement with PLAYMATES TOYS, which has lasted for 37 years. The breakup of this long-time partnership reveals the structural challenges faced by traditional toy manufacturers in the new industrial cycle. Key Points: Licensed products accounted for approximately 77% of PLAYMATES TOYS' revenue in 2023, and still reached 36% in the first half of 2025. The company's revenue in the first half of 2025 decreased by 58% year-on-year to HKD 186 million, resulting in a loss. Li Shida The "Teenage Mutant Ninja Turtles" are a childhood memory for many children around the world, accompanying generations as they grew up. For PLAYMATES TOYS LIMITED (0869.HK), it holds even more special significance. Since 1988, PLAYMATES TOYS has been producing "Teenage Mutant Ninja Turtles" series toys. Over the past 30 years, this IP has accompanied PLAYMATES through the golden age of Hong Kong's manufacturing industry, not only propelling the company to the peak of the global toy market but also earning Hong Kong the title of the "World's Toy Factory" for a time. However, the story of PLAYMATES and the four ninja turtles is about to come to an end. Every story has an ending. Recently, PLAYMATES TOYS announced that the licensing agreement related to the "Teenage Mutant Ninja Turtles" will not be renewed after it expires on December 31, 2026, marking the official countdown of this nearly 37-year licensing relationship. The company stated that after the agreement expires, PLAYMATES TOYS will continue to seek and evaluate potential licensing opportunities that align with its strategic considerations and will remain committed to developing and managing its existing product lines, including "Power Rangers," "MonsterVerse," and "Winx." Father of the Ninja Turtles Looking back, in the 1960s and 1970s, Guangdong Chaoshan businessman Chen Dahe founded PLAYMATES in 1966 in Tuen Mun, Hong Kong, with a cabbage doll that brought fame to the company. By 1987, PLAYMATES acquired the global exclusive toy licensing rights for the Teenage Mutant Ninja Turtles, allowing it to create and promote the Ninja Turtles series toys. Two years later, the Hong Kong film production of the live-action English movie "Teenage Mutant Ninja Turtles" made PLAYMATES TOYS even more popular, driving the company's profits to soar over tenfold to HKD 1.21 billion the following year. Chen Dahe was dubbed the "Father of the Ninja Turtles," and PLAYMATES was recognized by Forbes magazine as the "Most Profitable Toy Company in the World in 1990," also being the first toy company in history to earn over USD 100 million in annual profits. In 2014, the Hollywood movie "Teenage Mutant Ninja Turtles" was released, leading to a new peak in PLAYMATES' toy sales revenue, reaching HKD 2.16 billion, with Ninja Turtles products accounting for as much as 95% of total revenue. The importance of the Ninja Turtles to PLAYMATES TOYS is self-evident. On the first trading day after the announcement, PLAYMATES TOYS' stock price fell by 14.71%, closing at HKD 0.435, a cumulative decline of about 30% year-to-date. What truly stings the market is the weight of the "Teenage Mutant Ninja Turtles" on PLAYMATES' revenue. PLAYMATES TOYS stated in the announcement that the sales revenue from licensed products accounted for approximately 8%, 13%, 77%, and 47% of its total revenue from 2021 to 2024, while still reaching 36% in the first half of 2025 In the first half of this year, PLAYMATES TOYS saw its revenue decrease by approximately 58% year-on-year to about HKD 186 million, turning from a profit of HKD 91.458 million last year to a loss of HKD 25.61 million. The company stated that this was mainly due to the lack of major entertainment content driving demand for its core licensed brands, leading to a significant weakening in product demand. During the period, there were no new movies or animations released for "Teenage Mutant Ninja Turtles," resulting in insufficient sales momentum. Additionally, products exported to the U.S. were affected by tariffs, compounded by rising mold and development costs, as well as the clearance of discontinued products, which negatively impacted gross profit performance, putting pressure on both revenue and profitability. This reflects the vulnerability of its long-term profit model, which relies on content-driven licensed products, especially in the absence of external support, and in some ways foreshadows the outcome of parting ways with the Teenage Mutant Ninja Turtles. Early Signs? For the Teenage Mutant Ninja Turtles, as an IP licensor, the development strategy is continuously evolving. With the evolution of content platforms, streaming media, and global marketing methods, licensors' requirements for toy partners have expanded beyond manufacturing capabilities to include channel scale, digital marketing, and cross-category integration capabilities, making long-term, single licensing relationships face restructuring. At the same time, cost and tariff pressures have also changed the negotiation landscape. PLAYMATES TOYS' gross margin dropped from 56% to 43% in the first half of 2025, making it more challenging to reach a mutually satisfactory balance in licensing terms amid a compressed profit pool. Looking at the current market, the competitive environment faced by PLAYMATES TOYS is vastly different from what it was in the past. The toy and trendy toy industries in mainland China have rapidly expanded in recent years, with BLOK (0325.HK) focusing on building blocks and assembly IP, entering the market with high-frequency updates and domestic IP; MINISO (9896.HK) under Top Toys has quickly established a presence with its strong retail network and pricing advantages; and POP MART (9992.HK) has built higher gross margins and user stickiness through its own IP and blind box model. In contrast, PLAYMATES TOYS still centers on traditional licensed toys, with product rhythm and IP dominance relatively constrained by partners, making structural differences increasingly apparent. If the Teenage Mutant Ninja Turtles were to announce a partnership with the aforementioned mainland companies in the future, it would not be surprising