Walk into my bedroom in early 1977 and you found a museum of Mego action figures.
Not dolls. My sisters played with dolls. I played with action figures.
And Mego was the champ. Oh, I had GI Joe, the Six Million Dollar Man, Big Jim and their comrades and playsets. But in my pre-teen world, Mego was king. Within six years, the king was dead.
From Wikipedia: Mego was founded in 1954 by D. David Abrams and Madeline Abrams. The company thrived in the 1950s and early 1960s as an importer of dime store toys until the rising cost of newspaper advertising forced Mego to change its business model. In 1971, the Abrams’ son Martin, a recent business school graduate, was named company president.
Under Martin Abrams’ direction, the company shifted its production to action figures with interchangeable bodies. Generic bodies could be mass-produced and different figures created by interposing different heads and costumes on them.
In 1972 Mego secured the licenses to create toys for both National Periodical Publications (DC Comics) and Marvel Comics. The popularity of this line of 8″ figures — dubbed “The World’s Greatest Super Heroes” — created the standard action figure scale for the 1970s.
Mego began to purchase the license rights of motion pictures, television programs, and comic books, eventually producing action figure lines for Planet of the Apes, Star Trek, and the Wizard of Oz. Mego also obtained licenses from Edgar Rice Burroughs for his creations, such as Tarzan.
Beginning in 1974 Mego released the Planet of the Apes action figures, the first such toys sold as film tie-ins. 1974 also saw the release of figures from Star Trek: The Original Series, which was steadily gaining fandom in syndication. The Planet of the Apes and Star Trek figures proved popular and inspired the rise of action figure series based on popular culture franchises.
During this period, Mego was known for the lavish parties the company threw at the annual New York American International Toy Fair. In 1975, Mego launched its Wizard of Oz film dolls with a gala whose special guests were every surviving member of the film’s main cast. Mego’s party at the Waldorf-Astoria with Sonny and Cher introducing their dolls drew a thousand people. Both dolls were formally unveiled on The Mike Douglas Show. The Cher doll was the number-1-selling doll in 1976, helping to make Mego the sixth-ranked American toy manufacturer, based on retail sales.
In 1976, Martin Abrams hashed out a deal with the Japanese toy manufacturer Takara to bring their popular lucite 3″ fully articulated Microman figures to the United States under the name “Micronauts.” David Abrams, meanwhile, rejected a deal to license toys for the upcoming motion picture Star Wars, reasoning that Mego would go bankrupt if they made toys of every “flash-in-the-pan” sci-fi B movie that came along. This decision seemed of little consequence to Mego at first, because the Micronauts figures initially sold well, earning the company more than $30 million at their peak. On the other hand, the Star Wars film was extremely popular and competitor Kenner Products sold substantial numbers of Star Wars action figures.
Following Star Wars’ huge cultural impact, and Kenner’s great success with its action figure line, Mego negotiated licenses for the manufacturing rights to a host of science fiction motion pictures and television shows, including Moonraker, Buck Rogers in the 25th Century, The Black Hole, and Star Trek: The Motion Picture. Although these lines of Mego figures were of much higher quality than Kenner’s 12″ Star Wars figures, none were as successful. The widespread success of Kenner’s Star Wars 3-3/4″ toy line soon made the newer, smaller size the industry standard, shifting sales away from the 8″ standard popularized by Mego.
In the late 1970s, Mego was earning about $100 million in sales. Around this time, Mego began shifting their focus toward electronic toys like the 2-XL toy robot and the Fabulous Fred hand-held game player, but sales were not commemsurate with the company’s investment, and Mego went deeply into debt. In the fiscal years 1980 and 1981, Mego reported combined losses of $40 million. In fiscal year 1982, the company reported losses of between $18 and $20 million.
In February 1982 the remaining staff was let go and the Mego offices were closed.
On June 14, 1982, Mego filed for Chapter 11 bankruptcy in the Southern District of New York, case number 82-11117.
From the New York Times; 6/16/1982:
Some analysts interviewed mostly blamed the company’s line of toys. ”There was a lack of exciting new product,” said David S. Leibowitz, vice president of the American Securities Corporation, a New York brokerage firm.
But there is also a legal cloud over the company. Its chairman, Martin B. Abrams, and two former Mego executives and a current vice president, are scheduled to go on trial in Federal District Court in Manhattan on July 6 on charges of defrauding Mego and its stockholders of more than $100,000 over a 10-year period. Fraud Charges
The grand jury indictment, issued in January, charged that Mr. Abrams and his associates sold company inventory and used the proceeds ”to bribe others and to enrich themselves,” according to Scott Campbell, the Assistant United States Attorney handling the case. He refused to specify the exact amount involved. The accused have pleaded not guilty and are free under bond.
One analyst familiar with the company was critical of its management. But the analyst, who refused to be quoted by name, also said that Mr. Abrams was ”the creative genius of the company.”
Mego, founded in 1969 and based in New York, had fallen to about 14th place among American toy manufacturers in 1981 as measured by retail sales, according to the Toy Market Index compiled by NPD Research Inc., of Floral Park, L.I. The company had been ranked sixth in the mid-1970’s.
The immediate problem contributing to Mego’s bankruptcy filing was an ”overburdence of debt,” Michael Bauer, the company’s executive vice president, said. Mego, which reported sales of $73.7 million for the fiscal year that ended Feb. 28, has more than $50 million in debt, Laurence Usdin, its senior vice president for finance, estimated.
The company said its problems came to a head for three reasons: Bank creditors in Hong Kong, where Mego manufactures 60 percent of its toys, filed court documents on April 30 seeking liquidation for Lion Rock Ltd., its manufacturing subsidiary in Hong Kong; Mego failed to meet a Sunday deadline set by the Irving Trust Company for payment of interest on debentures due last Feb. 1, and the General Electric Credit Corporation, which provided its short-term financing, refused to continue to do so.
A General Electric Credit spokesman had no comment. Neither did the Irving Trust Company, which Mego said was owed $14 million. Two Bad Years
The debt mounted because of two years of weak sales, in 1980 and 1981, which led to combined losses of more than $44 million, company officials and analysts said. Toy manufacturers borrow money early in the year to produce the goods that are sold in retail stores for Christmas, Mr. Leibowitz, the analyst, explained. If the toys are not sold, the company must close out the goods at a low price and may be unable to repay its debt, he said.
In 1980, Mego lost money on Fabulous Fred, a hand-held baseball game, and other electronic toys, because ”the bottom dropped out” of the electronic toys business, Mr. Bauer, Mego’s executive vice president, said. ”Mego was left with considerable inventory,” he said.
One analyst said that Mego had made the right move by moving away from dolls linked to personalities who could be popular one day and forgotten the next. ”But they came a little late in electronics with some of the wrong items,” he said.
The company, Mr. Bauer said, also suffered a ”major hit” on spinoffs from the ”Star Trek” movie and space age dolls called ”Micronauts” that were outclassed by competing ”Star Wars” toys.
(end NYT article)
On September 2, 1982, Mego’s President Martin Abrams and other company executives were convicted on their federal wire fraud charges: selling returned merchandise to vendors and not reporting the profit over a period of nine years.
After filing for Chapter 11, Mego operated as a debtor-in-possession. As part of its reorganization effort, Mego decided to stop manufacturing toys and concentrate solely on selling and distributing them. This strategy was hampered by potential customers’ resistance to doing business with Mego in light of the company’s chapter 11 status and its pre-filing contractual breaches.
To hopefully overcome this problem, Mego contracted PAC Packaging Corporation (“PAC”) on January 7, 1983. This Mego/PAC Agreement provided that Mego would organize a new subsidiary, and this new subsidiary would enter into a second agreement with PAC.
The second agreement provided for appointment of the then-nonexistent subsidiary as PAC’s “exclusive marketing representative” within the United States for all of PAC’s “…toys, games, puzzles and dolls of all kinds and descriptions.”
Mego sought Bankruptcy Court approval under § 363(b) of the Bankruptcy Code for this agreement. On January 25, 1983 the Bankruptcy Court, after a hearing at which PAC was present, approved both the creation of the new subsidiary, Ojem, and the terms of the sales-representatives agreement that were set out in the Mego/PAC Agreement.
On January 26, 1983, Ojem entered a sales-representative agreement (the Ojem/PAC Agreement) with an affiliate of PAC, Packaging & Assembly Manufacturing Corporation; and P & A subsequently caused the Ojem/PAC Agreement to be assigned to another PAC affiliate, appellant Phoenix Toys, Inc.
In a related agreement also entered on January 26, 1983, Mego granted PAC various trademark and copyright licenses and sold to PAC certain molds used for production of toys involving the licensed trademarks and copyrights, and was approved by the Bankruptcy Court on February 4, 1983.
Mego and Ojem claim that, although they had fully performed all of their obligations under the Ojem/PAC Agreement, Mego received a letter
PAC agreed to contract with a nonbankrupt subsidiary and to pay the subsidiary reasonable and fair compensation for services as a sales representative. PAC also agreed to pay fair consideration ($37,500 plus royalties) for licenses and molds for certain Mego toys. In fact, PAC was the only company Mego could find that was willing to buy Mego’s licenses and molds.
However, on April 7, 1983 PAC sent a letter to Mego/Ojem terminating the agreement. The Bankruptcy Court refused to enjoin PAC from termination on appeal.
Taken from In re MEGO INTERNATIONAL, INC. and Mego Corp., Debtors; MEGO INTERNATIONAL, INC., Mego Corp. and Ojem, Inc. v. PACKAGING & ASSEMBLY MANUFACTURING CORPORATION, Pac Packing Corporation and Phoenix Toys, Inc., 30 B.R. 479, S.D. New York. (1983).
Mego officially went under in 1983.
From Wikipedia: In 1986, Martin Abrams co-founded Abrams Gentile Entertainment (AGE), in order to retain and manage Mego’s licensing contracts, rights and deals. In October 1995 AGE attempted to reclaim the Mego trademark. In March 2002, they abandoned the effort. In early 2009, Martin Abrams announced that AGE had reclaimed the rights to the name Mego; no specific future plans for Mego products have been disclosed to date.
Long live the king…
Note: the Mego toy company was not the only “Mego” to file for bankruptcy: On March 9, 2010, Mego Financial Corporation went out of business as per its Chapter 7 liquidation filing under bankruptcy. Mego Financial Corporation engaged in vacation ownership sales, resort operations, land sales for vacation and second homes and travel services.
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