If you don't recognize the name Funko (FNKO), all you need to know to make the connection is mention of "those toys with the beady eyes."
Once a small business out of Everett, Wash. that started off making bobbleheads, Funko has exploded in popularity since its launch of the Funko Pop! line in 2010, which depicts a highly stylized version of characters from popular films, TV shows, and video games sporting oversized heads and black, round eyes.
Inexpensively priced at about $12, Funko Pops are an affordable collectible, which may have contributed to how popular they've become. The toys are sold everywhere from Barnes and Noble (BKS) to your local mall's Hot Topic. Today there are several hundred in the collection, many of which are limited edition or only sold at conventions.
Not only is Funko doing well, but it just keeps on growing. In its 2021 Q4 earnings call, the company reported a net sales increase of 48% year over year, totaling $336.3 million.
But Funko is looking for a way to expand its business further -- and after a new announcement at San Diego Comic-Con on July 24, it seems as if the company has a plan: moving into the multi-billion dollar video game industry.
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Funko Announces Video Game Partnership
Funko announced that it has teamed up with new video game developer 10:10 Games for a project it describes as a "AAA Action Platformer," due out in 2023.
10:10 Games is led by veteran video game developer and five-time BAFTA award-winner Jon Burton, who previously was the creative director behind the Lego Star Wars and Lego Batman video game series, as well as the founder of studio Traveller's Tales in 1989.
While the game does not have a title yet, it is expected to have a T for Teen rating and will be made for both consoles and PC.
“Creating iconic products that emotionally connect fans to their favorite fandoms is critical to each product portfolio decision,” said Andrew Perlmutter, CEO of Funko. “By partnering with 10:10 Games and utilizing the best creators in the business, we will have the talent to deliver games that reflect Funko’s unique look and feel across its lines and varied products.”
Can Funko Grow in The Video Game Industry?
Funko may be making this move thanks to a recent $263 million investment from The Chernin Group, an investment firm that includes eBay (EBAY), as well as former Disney chairman Robert Iger. TCG will own 25% of Funko once the deal is completed.
The investment also includes a commercial agreement that will designate eBay as the official secondary marketplace for buying and selling Funko products, as well as securing upcoming exclusive collaborations between the two companies.
While Funko's gamble on drawing its large fanbase to a video game featuring its Pop! characters is a solid one, the video game space is more oversaturated with new content than it's ever been before, making this move a potentially challenging one.
However, if the effort succeeds, Funko could see a major growth spurt. Analysts have been giving the stock some love as of late.
