Shoot the Moon – Going For It All Since 1985
by Michelle Spelman, for ChiTAG
We all know Silicon Valley is synonymous with innovation in the American lexicon.
But, an association with toys is less obvious.
And yet, in the early 1980’s, as the region was becoming the epicenter of all things high tech, fate was busy aligning a small group of stars in its midst, to make toy history.
A young engineer, named David Small, was fresh from college, working at various computer companies and startups. He landed at video gaming pioneer, Atari. He led various engineering activities that gave him a front row seat for the company’s rise and subsequent fall, after the infamous Video Game Crash of 1983. He was one of the last employees left when the doors closed.
His next job took him to a company that was making early multi-user computer systems and growing at a steady pace. As Director of Engineering, this company and position allowed him to settle down and take care of his young family. Life was good!
Meanwhile, Paul Rago had earned his BA in Human Biology and Master’s degree in Educational Psychology at Stanford, and was well on his way through medical school. In a turn of events that would shock most people, he abruptly walked away from medicine. A creative calling in his heart that he could not ignore came over him. And he suddenly knew with certainty that he wouldn’t find his calling as a doctor.
The Bear at the Barbecue
In 1984, David and Paul’s paths would cross in a way that no one could have predicted.
Paul’s childhood friend, a former Atari executive, approached Paul with a talking plush bear concept under his arm called, “Teddy Ruxpin.” The idea had been shopped around the toy industry, but no one wanted it because it was too expensive and complex to produce.
Paul thought the Teddy was fantastic, so they hosted a dinner party for a small group of business friends and former Atari executives to discuss starting a new toy company around the bear. Nearly everyone at that first meeting was excited enough by the idea to decide – on the spot – they would form Worlds of Wonder (WoW) and launch Teddy Ruxpin.
Paul is incredibly creative and the group wanted the very best people. He was tapped to head product development and marketing, and the company quickly started to take shape.
Many of the initial WoW founders had worked with David at Atari. The very next day, those former colleagues showed up at his house with Teddy Ruxpin in a black trash bag. David was skeptical.
When they asked him to join the company to lead engineering, David vehemently said, “No way.“ He had just been promoted to Director of Engineering at a high-tech computer company and was not about to walk away from something more stable for a risky start-up.
Undeterred, they said to him “OK, but just keep Teddy overnight and think about it.” That evening, after seeing his children’s and neighborhood kids’ reaction to the toy, David quickly changed his mind.
“Those children were mesmerized,” he said, “I knew it was going to be a hit, and I decided to leave a very good position and take the gamble.”
Launching Worlds of Wonder
At the beginning of WoW, everyone used personal credit cards for expenses, on faith they would get funding, which they did.
David and his team re-engineered the original Ruxpin concept from $150 price point to $70 and secured the necessary tooling and multiple factories to launch production.
Paul and a few others from the executive team made 40 presentations in eight weeks, raising $15.5 million in financing.
They staffed up quickly, going from about six original employees up to 1,000 people within two years. This included offices in Honk Kong to oversee manufacturing.
Everyone treated their area of the business as if they owned it. They worked with a tireless, entrepreneurial sense of urgency to get a quality product to market as fast as possible. Everyone worked nights and weekends.
Amazingly, this band of workaholics started the company in April of 1985 and began shipping the bear to retail in August of 1985. Teddy Ruxpin was a runaway hit for Christmas 1985, with over $100 million of product in the market by the end of the calendar year, and $125 million by end of fiscal year and with 100% sell through.
At the end of the first year, WoW was heralded as the fastest growing company in the history of the world!
All Engines Go: Lazer Tag
Riding the Teddy Ruxpin wave into 1986, an impromptu brainstorming session took place around the childhood game of “tag” at a company BBQ. A timeless game with global appeal, they wanted to capture its magic in a new toy with a high tech vibe.
“Lazer Tag” was born.
But there were technology challenges. It leveraged infrared light, which was still emerging for consumer applications. Could it be played in sunlight? What about increasing its distance? After all, very early models of electronic tag games had a range of only about 30 feet. David’s engineering team was able to solve those hurdles, perfecting the idea. Another feverish burst of product and brand development ensued, and Lazer Tag reached store shelves in August, powered by a world class advertising campaign, and soared to #1 at Christmas in 1986.
Meteoric growth and devastating collapse
With the instant success of Teddy Ruxpin and Lazer Tag, WoW had momentum and respect in the industry as early roboticists.
They quickly obtained licensing rights for Disney, Muppets and Snoopy properties for animatronic characters. They animated everything and took concepts, which had previously only been seen on a large scale in theme parks, and engineered them down to toy size.
Two back-to-back #1 winners right out of the starting gate was unheard of in the toy industry. Nonetheless, in their second year, they grossed over $300 million in product sales between the two smash hits.
A Perfect Storm
Uncontrolled growth, overly ambitious sales projections, a rush of competition into the marketplace, and the stock market crash of 1987, spelled disaster for WoW.
As fast as it came onto the scene, the company careened spectacularly into bankruptcy, imploding from its dazzling high in a matter of less than a year.
David and Paul stayed with the company until the very end in order to help with the liquidation of the company assets. As they were devastatingly forced to personally lay off dear friends and close colleagues, product rights and properties were sold.
Worlds of Wonder vanished, almost as quickly as it had appeared.
For three years, they went their separate ways. Paul went to work as VP of Product Development with a company called Intelligy, making educational preschool products. David joined Galoob as Sr. VP of Product Development.
Galoob was in the middle of a restructuring, when David suffered a severe broken knee injury playing basketball. As he was being wheeled into surgery, Galoob called to say they were laying him off because he could not perform his duties, due to the injury. He threatened to sue, and they backed off. He knew they desperately needed someone to do his job, so it was a difficult situation all around because his recovery would be long.
When he was coming out of surgery, still on morphine, his friend from WoW, Paul Rago, walked into the hospital room. “I heard you got layed off,” he said, “We’re going to start our own company.”
The goal was to invent toys without worrying about the day-to-day headaches of running a toy company, focusing exclusively on product development, creativity and innovation.
The two launched Shoot The Moon Products in January, 1991 and spent a year developing concepts.
With David still on crutches, they went to New York Toy Fair, in February 1992, with their first three concepts in hand: a miniature RC car, Kitty Kitty Kittens and a word game. Those first three prototypes, were quickly licensed during presentations at the Fair: Miniature RC cars and the game were licensed by Mattel, the plush concept, “Kitty Kitty Kittens,” by Tyco. The advances paid for these products were key to helping kick start Shoot the Moon and allow for the addition of another employee.
Their second year in business brought Bandai knocking in search of creativity. David and Paul storyboarded a dozen concepts, flew to Tokyo for the pitch, and Bandai loved three products: a color video camera technology, a TV interactive Teddy Bear, and video baby monitor. Bandai paid for the development of these three products over a year’s time…and just like that, Shoot the Moon had cash flow for their second year.
In the end, Bandai did not go forward with any of the three products, and allowed Shoot the Moon to license the ideas to other toy companies.
TV Teddy was licensed to Yes! Entertainment, the video baby monitor to Safety 1st and the color camera fostered yet another seminal moment that bares some discussion…..
Glimpsing the Future of Video Tech
As Shoot the Moon was working on their version of a toy grade video camera (1993), they were approached by two University of Edenborough video technology researchers.
How and why they got that call remains a mystery to both Paul and David…but the call came in. The pair had new video technology that they had shopped to every toy company that would listen, and been rejected by all. They came to Shoot the Moon and presented a C-MOS imager, claiming it would be the future of video imaging for the world. But the image quality of their new sensor was poor, AND they were showing their advance technology in hopes of getting funding.
David suggested a new imager spec and told them if they could deliver to that spec, Shoot the Moon would license a PRODUCT to a U.S toy company and they would make a lot of money. Eventually, Shoot the Moon abandoned its own camera and adopted the C-MOS technology.
With a new prototype imager in hand, Paul and David set up a meeting with Tyco Toys’ CEO and their executive staff. The product worked perfectly and in 5 minutes, Tyco’s CEO said “we’re doing this product and we’re showing at Toy Fair (just 5 months away).”
The product was a success and C-MOS imaging was on its way to being the imaging standard in the world. It’s in your iPhone right now and it all started in the toy industry. Amazing!
Almost A Toy Company
For a fleeting moment in 1993, Shoot the Moon considered whether to become a toy company or remain an invention company.
In a déjà vu moment, a few of the former executives from WoW were looking to start another toy company, but needed a great product to start it. Shoot the Moon had the (now completed) TV Teddy from the Bandai deal. Everyone wanted David and Paul to join the new company with TV Teddy as the flagship! That new company became Yes! Entertainment .
Paul and David decided to stay inventors and licensed TV Teddy to Yes! But they did help their old friends hire a core group of marketers, engineers and sales people.
TV Teddy was very successful, and everybody was happy with more products in the market and more success.
Rekindling Lazer Tag
Clearly Lazer Tag was an amazing and successful product, but when WoW sold, the real focus was on Teddy Ruxpin and the possibility of more and more large doll animatronics. The new buyers weren’t interested in Lazer Tag.
In 1995, Paul suggested that Shoot the Moon get the rights to the Lazer Tag trademark from the new owners of WoW, (since they were not doing anything with it, and it had not been sold after the breakup of WoW). Negotiations went smoothly. Shoot the Moon got the trademark and all the brand assets. That was the beginning of a “new life” for Lazer Tag.
The new version was quickly licensed to Tiger Electronics. A few years later, Hasbro purchased Tiger, and to this day, Hasbro has enjoyed the fruits of multiple Lazer Tag technology advancements, developed by Shoot the Moon.
Quick as a Flash
In 1999, Paul and David mused that RC vehicle battery re-charging was too slow, and wouldn’t it be amazing if batteries could be re-charged in 10 minutes instead of 4 to 12 hours?
Shoot the Moon embarked on an aggressive R&D effort, applied for numerous patents and made prototypes of 10 minute battery chargers for RC car batteries and regular batteries along with a miniature RC vehicle that would use a 10 minute battery.
This was a bold vision, but not really a toy. Thinking that no toy company would want to be in the battery business, Shoot the Moon decided to bring the products to market themselves instead of licensing. They built a booth at Toy Fair, arranged meetings with all the retailers, and started taking orders. They used that same booth to show their other toy inventions, but as it turned out, both Hasbro and Mattel wanted to see their battery line.
Mattel wanted the line and aggressively negotiated a deal that Shoot the Moon couldn’t refuse. “Flash Chargers” was licensed to Mattel and in the market the following year.
Mattel never could bring the bigger vision of owning the battery business for toys (and beyond) to fruition. But, as you can see in the marketplace today, fast charging is the new normal and it started in the toy industry by Shoot the Moon.
It’s frustrating, but not uncommon to conceive and pitch an idea, only to discover that the company you pitched already has a similar concept in the works.
That very thing happened when Shoot the Moon developed a preschool book reading system, one that used a stylus, in early 1998.
One of Paul’s friends was getting Leapfrog up and running with preschool educational products, so Paul invited the Leapfrog people for a visit to show them their new idea. They made an in-depth presentation that spoke to all of the benefits of a reading system like what they were showing. Unknown to Paul and David, Leapfrog was in the throes of buying a company that had just launched a talking world globe and used a stylus to touch countries and announce information about the country. Leapfrog did purchase that company, and set out to use the globe’s technology for a book reading system.
Knowing what Leapfrog was doing, Paul and David shelved their pen-based system and created an even better technology… that used a child’s finger to touch words instead of a stylus.
With a patentable system and working prototype in hand, Paul and David invited Fisher Price to fly out to California to see their technology. Fisher Price loved it, deciding to license it and compete against Leapfrog. This was Shoot the Moon’s chance to get a piece of the preschool reading business that they thought was lost.
Fisher-Price called the product “Power Touch” books and it was the first touch-sensitive system used in a consumer product. This technology is similar to what is found in an iPhone today and Shoot the Moon engineered it for a toy.
Elmo, Elmo and more… Animatronics Evolve
From 1996 to 2007, Elmo products, largely from the inventor community, were somewhat single concept products. They vibrated, they danced, they could be posed, and they always did one really cool thing.
In 2008, Shoot the Moon designed an Elmo that acted just like the character on TV, with real Elmo talking, expressive arms, sitting on and off a chair and telling stories. Now, Elmo could be the same character children saw on TV with funny stories and jokes. Fisher Price loved it and brought it to market as “Elmo Live” with lots of open-ended interactive play. The next year, “Elmo Encore” was launched as another fully animatronic design. “Dance Star Mickey” followed the next year, another hit in the line of full animatronic characters. Three more amazing Elmo’s followed in short order for Hasbro: Let’s Rock Elmo, LOL Elmo and Play All Day Elmo.
It was an amazing run of expert animatronic products, coupled with engaging play patterns, which truly made these best loved characters come to life, at home, as a toy.
But over time, the marketplace changed.
Animatronics were becoming too expensive for the market to bear, so Shoot the Moon quickly pivoted to miniature animatronic products, finding a home for their concepts with Moose Toys.
Working together, many of their miniature animatronics were combined with products from Moose to start a line of toys called “Little Live Pets,” which included miniature butterflies, birds, turtles, mice, puppies, unicorns and the newly released Wrapples. Five years later, Little Live Pets is still going strong!
Using The Force: Yoda and BB-8
The best was still left to come from this powerhouse inventing company.
At the request of Spin Master, Shoot the Moon developed the most amazing and energetic battling Yoda the world had ever seen. The people at LucasFilm were blown away by this lifelike animatronic character that behaved like a CGI Yoda in the Star Wars films. The next year, it was time for a BB-8 that really worked like the BB-8 in the film. Yoda and BB8 were two very complex toys, requiring both companies to work together over a few years.
Hatching a Global Phenomenon
At the end of this long development cycle, Spin Master knew they could count on Shoot the Moon. So, they called with a third product that they wanted developed.
Without telling Shoot the Moon what it was, they sent an early prototype of a mechanism that pecked out of an egg. They said, “Make this into a toy with a play pattern… and do it with one motor, thank you very much!” They accepted the challenge, and put a seasoned team of robotic, mechanical and electrical engineers on the job.
That product turned out to be Hatchimals, and through brilliant marketing by Spin, was launched globally. The Hatchimals line ended up being a worldwide phenomenon!
Landing Among the Stars
Shoot the Moon has rocketed to a stellar reputation in the industry for engineering-driven toy design. Clients come to them when they need breakthrough technology, that can be coupled with creative play patterns, to turn a product into a mega hit.
They work through manufacturing challenges and develop product concepts and that go beyond creative ideas, engineering prototypes until they are almost factory-ready, saving clients time and money.
Under the guidance of David and Paul, Shoot the Moon has developed and licensed hundreds of product lines into the marketplace accounting for billions of dollars in retail sales. The company holds an extensive IP portfolio of utility patents, trademarks and copyrights.
2019 and 2020 will debut the next generations of Hatchimals and a number of other new cutting edge toys yet to be publicly announced. But you can count on one thing for sure: If Shoot the Moon is your partner on new product development, you’ve got great odds that the product is going to be a SUCCESS.
“Shoot for the moon. Even if you miss, you’ll land among the stars.”— Norman Vincent Peale
Note from Editor: This article originally ran in ChiTAG’s Business of Play section.
Michelle Spelman is co-founder of Flying Pig Games LLC, creators of the patented, award-winning Jukem Sports line of family card games, published by University Games. An independent marketing strategist providing early stage, pre-launch brand development services, strategic creative direction and execution for innovative clients in toys, fashion, real estate and luxury goods industries, she’s in her sweet spot working with businesses who are focused on family-oriented products and services.