Train transformers have one pair of screws for each output, which is generally enough for a simple layout, but once you have more than one accessory or building with lights in it, you’ll find it’s difficult to attach all of the wires to the transformer posts.
On one of the train forums I frequent, a legitimate question quickly degenerated into brand wars. And brand wars are one thing, but when people hold their preferred company to a different standard than the other company–in other words, one company is evil because it does something, but their preferred company does the same thing, it isn’t productive.
Actually, I see very little reason for brand loyalty as it is. I drive a Honda and I use a Compaq computer. Do either of those companies have any loyalty to me? No. To them, I’m just a source of income from yesterday.I don’t like the categorization of companies as "good" and "evil." Companies don’t exist to be good or evil. Companies exist for one reason: Make money. And one thing to remember is that companies will always do exactly what they think they can get away with.
In the case of the toy train wars, the two antagonists are Lionel and MTH. MTH is a scrappy underdog that got its start building trains as a subcontractor for Lionel. A business deal went bad–in short, Lionel left MTH high and dry on a multimillion dollar project, so MTH decided to go on its own and sell the product Lionel decided it didn’t want, but Lionel didn’t like the idea of one of its subcontractors competing with it while also making product for them, and understandably so.
MTH and Lionel have been mortal enemies ever since.
A few years ago, MTH accused Lionel of stealing trade secrets. The specifics are difficult to sort out, but someone with intimate knowledge of some of MTH’s products started designing equivalent products for Lionel. MTH sued and won, to the tune of $40 million. The case is now in appeal.
There’s no question that Lionel benefited from this contractor’s knowledge of the competing product. The question is who knew this was going on, who authorized it, and what an appropriate punishment would be. The only people who are questioning guilt have blinders on. There is no innocence here–just possible degrees of guilt. The other question is appropriateness. Lionel doesn’t have $40 million in the bank. Arguably the company isn’t worth a lot more than $40 million. So that $40 million judgment is essentially the corporate death penalty.
MTH is anything but perfect and holy, however. The thing that bothers me most about MTH is its attempt to patent elements of DCC (Digital Command Control), a method for automating train layouts. It’s an open industry standard, widely used by HO and N scale hobbyists. So MTH was seeking to collect royalties on something that’s supposed to be free for everyone to use. That’s a particular pet peeve of mine, and it’s the reason I haven’t bought any MTH products since 2003.
I came close to relenting this weekend though, when I saw some people bashing MTH while holding Lionel up as some kind of perfect, holy standard. It made me want to go buy a bunch of MTH gear, photograph myself with it, and post it on some forums so I could watch these guys have a stroke about it. Fortunately for them, I have better things to do with $200 right now. I also looked on my layout, and I don’t know where I could put the things I would have considered buying.
I’m more familiar with the computer industry than I am with anything else, and if you mention any computer company, I can probably think of something they did that would fit most people’s definition of evil. HP? Print cartridges that lie about being empty. Lexmark? Same thing, plus using the DMCA to keep you from refilling them. Dell? Nonstandard pinouts on power supplies that look standard, but blow up your motherboard if you try to use non-Dell equipment. IBM? Microchannel. Microsoft? Don’t get me started. Apple? Lying in ads.
As far as I’m concerned though, the most evil company of all is Disney. Disney, of all people? Yes. Disney is the main reason for the many complicated rewrites of copyright law that we’ve had in recent decades. Whenever something Disney values might fall into the public domain, Disney buys enough congressmen to get the laws changed. Never mind that early in its history, Disney exploited the public domain for its gain as much as anyone (which was its legal right), even to the point of waiting for The Jungle Book to fall into the public domain before making the movie, in order to avoid paying royalties to Rudyard Kipling. The problem is that now that Disney is the biggest kid on the block, it’s changing the rules it used to get there, so that nobody else can do it.
Unfortunately I’ve even seen not-for-profit corporations, companies that exist mostly to give away money, do dishonest things and essentially steal. If a charity can and will do these things, you can be certain that a for-profit corporation will.
So I don’t see any reason for brand loyalty, aside from liking a product. If you buy a company’s products and you like them, fine. Keep buying them. But that doesn’t make the people who prefer a competitor’s product evil. They didn’t sign off on the decisions, and your favorite company has done its own share of underhanded things too, whether you know it or not.
And there’s certainly no reason to go to war for your company of choice. It wouldn’t do the same for you.
It was all over the various news sites, but Lionel, the train maker, filed Chapter 11 yesterday.
A lot of the news stories got a lot of details wrong.This is the first time Lionel, LLC has filed for bankruptcy. The original Lionel Corporation, which is the company that made the trains your dad’s and grandfather’s friends had, if not the trains they had, in all likelihood, filed bankruptcy three times. The first time was in 1935, when the Great Depression had wiped out most of Lionel’s competitors and the aristocratic J. Lionel Cowen kept on making trains for millionaires’ kids when there weren’t any millionaires left.
Lionel emerged from bankruptcy with a two-pronged approach. On the low end, they started selling $1 windup handcars featuring cartoon characters like Mickey and Minnie Mouse. Today’s hirailers do everything they can to argue that Disney didn’t save their beloved Lionel, but at the very least it made a significant contribution.
Lionel also started paying more attention to hobbyists, making diecast trains that were modeled after real trains, rather than hiring Italian designers to design elaborate, ornate, and some would say gaudy toys that looked like trains. Hirailers say this was what saved Lionel. Whatever.
At any rate, Lionel emerged from bankruptcy and survived the Depression, something only one of its other competitors from the 1920s managed to do. That competitor was Hafner. Heard of it? Probably not. Hafner made cheap windups. Attractive windups, but basically forgotten today. The American Flyer brand name endured, but only because the Coleman family gave it to A.C. Gilbert, of Erector construction toy fame, in exchange for a royalty against future sales. There was also that upstart Louis Marx, who actually made money during the Depression and used some of that money to buy a toy train line, but that’s another story.
Toy production of almost all kinds stopped during World War II because the metal and the production capacity was needed for the war effort. Those who couldn’t make war munitions and other such things made things like bottlecaps. Lionel made nautical equipment. They sold a paper foldup train one Christmas because they were still allowed to do that, but it required the patience of a saint and the coordination of a surgeon to assemble, and once assembled, it served only as a reminder of what kids wanted in the ’30s but the parents couldn’t afford and now that the parents could afford it, it was next to impossible to get (unless you happened to live in New York City and knew about Madison Hardware, which, again, is another story).
So the pent-up demand for toys exploded after the war, and toy trains became a huge fad, giving Lionel, Gilbert, and Marx a license to print money until about 1956, after which the general public decided slot cars would be the next big fad and the people who really liked trains decided they wanted to go to HO scale because they were a lot cheaper, a lot more realistic, and in some cases took up less space.
J. Lionel Cowen decided to retire in 1959 and sold out his share of the company to his grand-nephew. He didn’t mention this to his son, who was only on board because Dad wanted him to be anyway, so he sold his shares too, while they were still worth something. Ray Cohn sought to diversify and make the trains less expensive by using more plastic and less metal, but at best he only slowed the bleeding. By 1967 A. C. Gilbert was being liquidated. Cohn bought the American Flyer brand name and tooling but didn’t have the money to do anything else with it. Later that year, Lionel Corporation filed bankruptcy itself.
Two years later, Lionel decided its chances were better selling toys rather than making them. It sold its train line to General Mills, the cereal people, who also had some toy companies. Lionel opened a chain of toy stores on the east coast, and for a time was the second largest toy store chain in the United States, behind the behemoth Toys R Us.
General Mills kept the Lionel train flame alive, selling O and HO trains branded with the Lionel name throughout the 1970s and early 1980s. In 1979, it even located the old American Flyer tooling and brought those trains back as well. But in the early 1980s it tried to move manufacturing the Mexico, which angered a lot of Lionel fans. It reversed the move, but started looking for a buyer, shuffling the company around within itself and then palming it off to Kenner Parker, and then, in 1986, a Lionel collector who had made his fortune selling real estate in Detroit bought the company and started operating it as Lionel Trains Inc.
Back to Lionel Corporation. Remember them? In 1991, Lionel Corporation found its toy store chain just couldn’t compete with Toys R Us’ economies of scale, and filed for bankruptcy. Starting in 1993, it liquidated. It sold the trademarks to Richard Kughn, the owner of Lionel Trains.
Kughn sold controlling interest in Lionel Trains in 1996 to Wellspring and Associates, a holding company. Rock star Neil Young also purchased a 20 percent share. The new company was called Lionel LLC.
In the late 1990s, Lionel LLC started using Asian subcontractors more and more. Its biggest competitor (and former partner) MTH Electric Trains had been doing the same thing, and undercutting Lionel in price. By 2001, Lionel was manufacturing none of its own trains, and even outsourcing the design of some of them.
In 2000, MTH sued Lionel for misappropriation of trade secrets. A designer who had worked for MTH’s subcontractor did work for Lionel’s subcontractor as well, and the result was what some call an uncanny similarity between some of Lionel’s and MTH’s locomotives. Not having seen them myself–just like many of the people who call the similarity uncanny, no doubt–I don’t know. What I do know is that MTH and Lionel have had bad blood since the early 1990s, and that Lionel’s executives and financial backers conduct themselves in a much more professional manner in public than their MTH counterparts. That may or may not say something.
At any rate, the jurors who saw the evidence agreed with MTH and awarded it $40.8 million, which was more than MTH had sought. Then, on November 1, a judge upheld the jury’s findings and ordered Lionel to stop production of certain locomotives. Lionel then filed bankruptcy two weeks later. Looking over the filing, it’s easy to see why. They have $43 million in assets. They have substantial debt–including $30 million to what appears to be a South Korean subcontractor, not a financial institution like some news reports are saying.
MTH owner Mike Wolf and his buddy, Washington D.C. trash hauling magnate Tony Lash are hopping mad and accusing Lionel of trying to dodge justice by hiding behind Chapter 11. Considering the amount essentially amounts to the corporate death penalty, one would expect them to do whatever they can to appeal. It’s silly to expect a company to not want to stay in business.
In case you haven’t figured it out, my sympathies lie with Lionel. But it’s more out of a dislike of MTH than a love for Lionel, which has basically reduced itself to an importer. It farms out design and manufacturing to the lowest bidder, slaps its name on it, prices it for trial lawyers and heart surgeons, and wonders why nobody buys its stuff.
But MTH is the Rambus of the train industry. Or SCO. Take your pick. Starting in the 1970s, train enthusiasts started using electronics to control them. Eventually these efforts got combined and led to the creation of an open industry standard called Digital Command Control (DCC). Every major maker of HO and N scale trains uses it, and has been using it for years. MTH came along, and while it was developing its own proprietary train control standard called Digital Command System (DCS), patented some elements of DCC. Then it started suing selected companies who made use of DCC.
J. Lionel Cowen was a ruthless businessman and made a lot of enemies, but he had ethics and was proud of them. Not that that’s relevant because the Lionel he founded went out of business in the 1990s and has no direct connection to Lionel, LLC, as much as Lionel, LLC tries to make it look otherwise.
I’d like to see Lionel, LLC survive but I won’t lose sleep over it. Anyone can contract with Asian firms to design and manufacture trains, and to slap the Lionel name on it, all you need is the trademark. If someone other than Lionel, LLC ends up owning that trademark, I don’t see that it makes one iota of difference.
Unless that person happens to be Mike Wolf.
But Mike Wolf isn’t going to steal my hobby away from me. I buy mostly old stuff anyway. Why should I let the Rambus of Trains ruin my fun?