State of the Industry Q&A 2026: Jonathan Cathey, The Loyal Subjects

A customer base starved for 40 years came out to enjoy and celebrate the new release of M.A.S.K. It was a big D2C and dotcom play for us. People are stoked, psyched, and it’s Christmas morning 1985 all over again. People are also psyched on My Pet Monster. Had a couple of production runs that sold out quickly. We’re stoked for what’s to come. Also, we’re refocusing on owned brands … writing and designing our own stories, characters, and motifs. We’re looking good on launching in 2026, but the items were born in 2025.

I think everything at retail is nostalgia — Star Wars, G.I. Joe, Jurassic Park, Transformers, LEGO, Barbie. What’s out there that hasn’t been around for more than 40 years? But in that Island of Misfit Toys lane of nostalgia, the toy industry, writ large, is still rife with competition. There are some good players out there.

The real issue is that the venues are shrinking. There are fewer and fewer retailers where a good, proper statement or campaign can be launched. At the same time, IP is consolidating under four or five studios with preferred partners that have been in place for decades, so the opportunities are narrow. You have to be sharp to wedge your way in.

Remain nimble, have a little swagger, be ready to do the song and dance, stay hungry, and come to compete. You’ve got to sell yourself and your capabilities. TLS has done a good job of that, but not with the intention of being the company that resurrects and dusts off old IP from the basement or attic toy chest. Our focus also isn’t to be the commodity, import/export, plastic-and-plush-by-the-pound guys. We want to be toymakers, creatives, and good storytellers.

We make sure our items have that shine, that the stories are relatable, and that people can connect. If the products are good and the IP resonates, then we’ll get the time of day. That’s the sole focus. That’s the magic: Is the IP hitting, and are the products good? If you marry the two, you should have some success.

Step one is getting the gatekeepers — the retail buyers — to give you the old “You shall pass!” If that happens, bring your A-game. Make sure the product is good, and make sure the IP stakeholders are talking to retail and making it known why their brands deserve shelf space. There’s only so much magic a toy company can do; the IP owners have to step up, too.

But yeah — loads of competition, a lot of folks chasing the same carrot, slicensing.

Nothing on the manufacturing side is really changing — toys are still too custom, too nuanced. There’s no major signal that most toys are moving to full automation. Maybe you get a NERF dart or a COG off an automated line, but the bulk of it is still hand-processed.

Where innovation has shown up is on the design end. AI is helping teams get across the finish line faster — whipping out decks, color codes, STL files, engineering solutions, presentations, you name it. It’s definitely speeding up workflows and cutting development time in half in some cases.

But we’re in 2026, and nothing in toys is cheap. Labor costs are going up. Raw materials are going up. Anything with nuanced assembly and heavy decoration stays expensive. Deco is where some of the automation is creeping in — direct-to-surface print tech, soft PVC foam processes that simplify runs, and even tampo has taken on a more automated feel (though it still needs an artisan’s touch).
At the end of the day, the supply game is still quantity, quantity, quantity. Nothing crushes pricing better than limiting the deco hits and stacking a mega opening order. That’s the “innovation”: pay the supplier — a lot.

Honestly, a good question for Nick [Mowbray] over at ZURU. They’re vertical, they’re hunting for automation, and he’s got that tech-brain. I’m just a surfer/skater/punker/artist from Laguna Beach who ended up owning a toy company. The ZURU bros are out here 3D printing houses, so who knows — maybe one of their machines will bust out a flying Buzz Lightyear that lights sparklers and strafes the dog from 20 feet in the air. But who actually wants that?

“Pew pew pew” is still cool. With old-fashioned deco, haha.

Outside of blaster darts? I haven’t seen true automation scale. In this business, “water slide” still counts as innovation.

IP diversification is really about self-reliance. Licensing is too expensive, and the economics are getting aggressive. Even the guys who haven’t rolled out their cute little bear in 40 years are suddenly asking for double-digit participation. It’s gotten a little ridiculous, a little out of control. Tariffs and added costs mean everyone’s taking more money out of the system except the manufacturer — and at some point, that has to level-set.

There are good partners, though, and that’s where the real strategy begins. Step one: choose licensors and collaborators who share your vision and are willing to roll up their sleeves. Step two: if you’re licensing, make sure the story actually matters, connects, and that it has a reason to exist. Step three: Pick licensors who will regularly show up at retail and make the case for why this stuff matters, and that there are customers ready to grab everything the partner procures. And step four: just tell the truth. If the product is a truth-teller, people respond. If it’s a “wannabe poser,” you get diminishing returns.

I think proven winners tend to be stories rooted in excitement, imagination, and basic truths. It doesn’t matter if the IP is 100 years old or three days old — if you’re telling the truth in a deep way, you get to play. If not, you ride the pine.

And if you’re a good toymaker, chances are you already have stories and experiences you want to share — stories that resonate. That’s the future. Licensing is stale in many places, and IP consolidation across four or five major studios hasn’t helped. At some point, you have to trust that the stories you want to tell are actually pretty awesome. If they hit basic truths, they’re hard to drown out.

Pop Mart is a great example: weird, collectible, cute, [people] totally get it. Just being its true self — and it works.

One of the biggest challenges for toy and collectibles retailers right now is staleness. Shelves get stuck on the same junk, the same safe bets. TLS solves that in a few different ways — through format, size, price point, IP, and a little FOMO. We make really great products, and even a splash of something other than the Big “D” diversifies the assortment and gives people a reason to visit. A store filled with great items sells great items, and we put ourselves in that mix.

But the real challenge for retailers is risk. How far do you lean in? Who’s the audience? What does your customer’s cart look like? What’s their max spend? How do you balance casual consumers vs. hardcore fans? Can you make your store a destination, an authority? How much does it cost to operate that section? What’s the dollars-per-square-inch return? And the most existential question: is there something more useful that should occupy this shelf?

TLS answers those questions with white space opportunities, sharp price points, and bang for your buck — more experience for the dollars you pay. We bring beloved brands, quality procurement, marketing support, a sales team that wants to own the relationships and provide white-glove service, best-in-class creative and product development, a tight SKU offering with trending formats, and stories/IP that hit emotionally. We’re a solution because we’re not just suppliers — we’re tastemakers and trendsetters. Sometimes, to a fault, TLS shows up early. We were doing blind boxes 16 years ago — now they’re everywhere. We keep our finger on the pulse and use that insight to help improve our partners’ businesses, putting more money in their pockets because the items we procure resonate with customers who want to participate in TLS products.

Retail shelves are competitive — capital C competitive. There’s a wave of Disney films incoming, Pokémon is hitting its 30th anniversary, and a couple of behemoths like Spider-Man and Avengers are going to suck a lot of oxygen out of the room. But we’ve got strong cards on the table too: Hunger Games (Thanksgiving movie), Angry Birds 3 (Christmas movie), Palworld (hit video game), My Pet Monster (who doesn’t love this?), Popples (same question!), M.A.S.K., plus some owned brands we’ll be revealing soon.

It’s not easy, but if you’re bringing value, bringing quality, and you’re intersecting with the zeitgeist trends, you’ve got a real shot. From the looks of it, we’re going to have solid business this year with Walmart, Target, Amazon, specialty, and the independent ma-and-pa channels.
Collectors is a tough category as well. It’s tribal. People already have their favorite companies like soccer teams, and if they don’t know you, it’s a very cold first handshake. TLS is intersecting with other styles and formats via M.A.S.K., My Pet Monster, etc. That crowd calls you to the carpet fast. They’re not easy to please, but you have to stay steadfast in your choices and follow that unmoving north star: focus on the best procurement possible. Make great toys.

And the toy business itself? It’s hard. No big box Toys “R” Us, no KB, no Sears, no J.C. Penney, no Best, no Montgomery Ward. The opportunity to showcase a proper selection of toys is getting smaller and smaller. Walmart and Target are grocery and apparel stores with a few toy shelves — they’re not toy stores. The big five studios have most of the licensing locked up, LEGO has its undeniable gravitational pull, and the math gets tight. COVID-19, tariffs, shrinking shelves, consolidation — it’s like Zeus throwing lightning bolts nonstop.

But here’s the thing: TLS has reached a place that only about 0.005% of American businesses ever reach. That means, through our existence and experience, people value what we bring to the table: talent, creativity, passion, will, drive, focus, know-how, experience, and the unshakeable need to compete. As long as we stay focused, nimble, and open, customers will have the opportunity to boogie with us — and that outlook is pretty f’in sweet.

LFG!