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The Rise and Fall of Funko Pop!: Understanding the Business Model Behind the Popular Collectible Toy Brand

23. March 2023

By Eliany Perez Barradas. Patents Paralegal.

Funko Pop!, a company that creates big-headed collectible figures, is facing financial trouble due to excess inventory and a decline in the collectibles market.

Funko Pop! has recently faced a market decline and a reduced to inventory

Funko Pop!, a company that creates big-headed collectible figures of various characters, has recently faced a market decline, according to a statement from the company’s CEO. The company has reportedly decided to eliminate around US$30 million in inventory in the first half of 2023 due to the low demand for collectible toys and the excess inventory they have, which is causing them financial trouble.

But how did Funko Pop! become such a popular brand in the first place? The company’s story began when Mike Becker, a graphic designer and toy collector, became obsessed with finding a piggy bank with the image of a famous American restaurant’s mascot. After finding that the piggy bank had a high price on eBay, Becker decided to buy the brand’s license and produce his copy at the same price. Later, along with artists Rob Schwartz and Sean Wilkinson, he founded the FUNKO company.

Initially, the company sold piggy banks and figures like Popeye. However, the turning point came when they obtained licenses from DC Comics and began producing big-headed dolls of their characters, launching their now-popular Pop! line. The company soon obtained licenses from Marvel and Star Wars, among others, and expanded to different collectible products such as Funkoverse strategy games, Pocket Pop! keychains, a Funko clothing line, and Vinyl sodas, among many others.

Funko’s exponential increase in earnings led them to manufacture more of these figures every year, resulting in a 48% increase in inventory by the end of 2022 compared to the previous year. However, in a statement on March 8, 2023, the company reported a loss of US$46.7 million in the last quarter in the United States compared to the profit twelve months ago. CEO Brian Mariotti reported that the company intends to eliminate this inventory to reduce maintenance costs, as Funko’s warehouses are full of unsold dolls.

To understand Funko’s business model, it’s important to understand their license purchases.

To reproduce famous characters, Funko must pay a royalty for the use of the intellectual property of these brands. The licenses they acquire must also consider various aspects, such as trademarks and industrial designs, as well as copyright. These licenses are usually non-exclusive, allowing the licensing company to grant concurrent authorizations to other companies and maximize their profits.

Funko’s success has been a win-win situation for both toy manufacturers and large entertainment companies, who obtain additional income without losing control over their brands and characters. However, the decline in the collectibles market, which has been affected by the rise of digital entertainment, has affected Funko’s business.

Funko’s financial problems

Funko’s financial problems have not only affected the company but also its shareholders.

The company’s shares have fallen by more than 50% in the past six months.

The company is now working on strategies to revitalize its business, such as expanding its product line to include items beyond collectibles and collaborating with other brands to create new merchandise.

Funko Pop! has become a beloved brand among collectors and fans of popular culture due to its creative and unique products. Despite the challenges, the company’s loyal fanbase and collaborations with other brands may provide opportunities for Funko to reinvent itself and thrive in the future.

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