The It Toy

Early one Saturday morning in August of 2005, Don Fardie hopped into the Jeep Cherokee parked in his driveway in southeastern Massachusetts and began the 26-hour drive to Bentonville, Arkansas. Fardie, a friendly 54-year-old with thick hair, is a manager with 22 years on the job at Hasbro, the world's second-largest toy company. He's the kind of reliable employee entrusted with high-stakes tasks. In the back of the Jeep was a 4-foot-high crate housing the prototype for a toy Hasbro hoped to launch for Christmas 2006. The prototype consisted of some hunks of white plastic and a bunch of small, cheap motors, all covered with the kind of plush fabric you might find on a stuffed animal. Estimated worth? Well over $100,000 and counting.

Fardie was headed to Bentonville because that's where Wal-Mart has its headquarters. And when the world's largest retailer, which controls nearly one-third of the domestic toy market, offers a private audience, consumer-products companies big and small tend to drop what they're doing and hop a flight to Arkansas. That's exactly what executives at Hasbro, a $3 billion company based in Pawtucket, Rhode Island, were doing. But when they realized the pony wouldn't fit in the luggage compartment of the corporate jet, they quickly had a crate built and tapped Fardie to be its escort. The prototype was simply too valuable to let it out of Hasbro hands.

Butterscotch would be a boundary-buster: an animatronic life-size miniature horse. Hasbro gave Wal-Mart an estimated retail price of around $300, which was a neighborhood that both the giant toymaker and the giant retailer had traditionally seen as too rarefied for their blood. Still, Hasbro argued that Butterscotch, geared for girls ages 4 to 8, would be well worth it. The toy would marry the latest technology that its engineers had developed for the FurReal Friends line – interactive plush animals in a dozen species – with the timeless, instinctive connection little girls have with ponies. While some of the FurReal Friends can talk, that would not be the case with Butterscotch. A talking pony would kill the magic. The programming would make the 3-foot-tall pony so realistic that it could chomp convincingly on a plastic carrot and respond to a little girl's voice by raising an ear, whinnying, and moving its head. Well, at least that was the idea.

At this stage, the programming was still pretty crude. So demonstrating the pony's full functionality to Wal-Mart's top buyers would require an acting job by Sharon John, Hasbro's general manager for marketing, who had taken the corporate jet to Arkansas. She would deliver a carefully choreographed presentation, with the prototype hooked up to a laptop manned by a design engineer. When John called out Butterscotch's name, the engineer would use the computer to control the pony's response. During her presentation, she would also be giving Wal-Mart its first look at another toy to be launched for Christmas 2006: T.J. Bearytales, an interactive teddy bear that would read stories to a child but, at this point, also needed a laptop to function.

John, a blonde 41-year-old mother of three, has an effusive personality and rounded Tennessee accent that mask her Columbia MBA seriousness. Standing before two dozen people in a bland conference room, she smiled and turned to the pony, saying, "Well, hello, Butterscotch. So good to see you!"

A boy's voice answered back, "Well, hel-lo there! My name is –"

Stunned, John looked up to see the 22-year-old engineer behind the laptop diving horizontally toward the pony, like Tom Cruise in Mission: Impossible, disconnecting the wiring while he was still floating in air. Turns out, the computer files for T.J. Bearytales had accidentally been activated rather than those for Butterscotch. A slip-up like that could have proved fatal for a new product. Since so many toys are launched every fall – Hasbro alone introduces about 3,500 worldwide each year – buyers for retailers like Wal-Mart and Target don't have time to offer many second chances. So new product pitches take on the feel of the Roman Colosseum, with a thumbs-down from Wal-Mart being the equivalent of letting the lions loose. As it turned out, the Wal-Mart executives got a kick out of the miscue, cracking Mister Ed jokes while the engineer straightened out the wires.

When Butterscotch performed the way it was supposed to, the Wal-Mart gang was blown away. "That is every little girl's dream," said Andy Prince, the buyer responsible for selecting all the plush and action-figure toys carried by all 3,000 Wal-Marts across America.

Hasbro engineers had long known they had something special with Butterscotch. Yet, for most of that time, they figured they would be making a niche product, something with a "wow" factor that could garner good PR at trade shows and be sold in limited quantities at high-end retailers. That began to change in the months leading up to the Wal-Mart presentation, as Hasbro's senior executives saw mass-market potential in the pony.

With kids leaving the plush and action-figure aisles earlier and earlier in favor of iPods and Xboxes, and profit margins squeezed by increasingly powerful retailers, toy companies are hungrier than ever for high-buzz products. They want their plaything to be the one dominating the post-Thanksgiving conversation between persistently wistful children and their wearily compliant parents. Given the costs and complexities of producing such a large, intricate toy, it was clear Butterscotch could never hit the surreal sales numbers posted by the runaway hits of the past: Cabbage Patch Kids (more than 3 million sold in 1983), Tickle Me Elmo (more than 1 million in 1996), and Furby (more than 1 million in 1998). For this season, that crown would go to the new incarnation of Mattel's little red profit center, T.M.X. Elmo. Even before Butterscotch could get into the running, Hasbro had to find a manufacturer in China willing and able to produce herds of little horsies at a cost that wouldn't eat up all of the product's profits. Still, if the company was able to sell 100,000 Butterscotches – and in the process bring attention to the rest of the inexpensive FurReal line – the toy industry would consider the high-priced pony one of the certifiable stars of the season. If Butterscotch the boundary-buster failed to take hold, it would be considered a high-profile flop for Hasbro.

The follow-up question from Wal-Mart, however, made that less likely: "How many of these can you make in time for next Christmas?"

IT ALL STARTED WITH A SKETCH. Hasbro launched the FurReal Friends line in 2002 with a lifelike cat, packing gee-whiz technology into cozy plush. The line could trace its ancestry back to Furby, Hasbro's squeaky-voiced, taxonomically ambiguous, interactive ball of fur. The FurReal cat was followed up with everything from Luv Cubs to Cuddle Chimp. The technology continued to be refined, but the essential engineering challenge had been met.

That prompted Leif Askeland, who has thinning blond hair and a distinct Norwegian accent, to think big. Instead of producing just another small animal, Askeland, Hasbro's vice president of engineering, had the idea for a large FurReal pony with an attached buggy, which a little girl could ride in. The Toys "R" Us aisles were filled with "ride-on" jeeps designed to let boys tool around the yard. The girl versions were essentially boy ride-ons with a picture of Barbie or Dora slapped on. But how about a ride-on designed expressly for girls? (Despite the efforts to de-emphasize gender in toyland in the 1960s and '70s, the pink and blue aisles are as segregated as ever.) In late 2003, Askeland sketched the pony and buggy in his notebook and eventually showed it to his FurReal design engineers. They were intrigued but didn't think he was too serious. "Sure, Leif," Richard Maddocks, a senior engineer on the team, told him. But what he was really thinking was "This is pie-in-the-sky stuff."

Maddocks is a slim, soft-spoken Brit who began his career designing chassis for General Motors. When that contract dried up, he got a job offer to be an automotive draftsman. It came from Matchbox Toys. He wanted to laugh it off, but with no other options, he took the post to pay the bills until a real automotive job came along. That was 35 years ago, and the 61-year-old engineer has been bouncing around the toy industry ever since.

Maddocks and the rest of the team work around a big conference table in a corner of Hasbro's Pawtucket brick headquarters, where Mr. Potato Heads and G.I. Joes were once manufactured, before that action moved to Asia. When they started working on the pony, they quickly concluded the buggy would have to go. It would be too complicated, and the prospect of a little girl riding in the buggy down a flight of stairs could block approval from Hasbro's safety department.

In the fall of 2004, Maddocks brought in some trusted freelancers: One did a preliminary engineering design; another produced a full-size model using foam and clay; a third got started on aesthetic choices like fabric. (The wrong plush can kill a product's lifelike illusion and, by inhibiting the ease of its movements, shorten battery life. Butterscotch would ultimately require six D's.) In December of that year, the whole team took a field trip to a nearby farm. They rode horses, recorded sounds, and studied every equine movement. They had planned to program the pony's mouth to chomp up and down while eating the carrot but changed that after noticing the horses' lower jaws moving in a more circular pattern.

In January 2005, the team presented the concept, among many others, during an early "line review" – an internal Colosseum where Hasbro higher-ups, gathered in a 50-seat amphitheater called "the tank," get their first looks at what's coming. At this point, all Maddocks's team had was the stationary "looks-like" model of the pony and a poster board listing the functions they hoped to be able to offer. But the higher-ups loved what they saw and decreed that the pony should be on store shelves in time for Christmas '06.

Now the key player in Butterscotch's development became a 22-year-old who had recently advanced from intern to design engineer. Don – Hasbro views him as a hot enough commodity to insist that his last name not be used – is quiet, with a faint goatee and an occasional Bob Newhart-style stammer. But he has a commanding ability to combine computers and aesthetics to create toys with stunningly realistic movements (and, when necessary, to fly through the air Mission: Impossible-style). The foam model was scanned in, using a sort of MRI for toys, and then Don worked with a freelance programmer to determine the location of various sensors and tiny motors controlling when the pony batted its eyelashes or moved its head to meet someone's hand. Hasbro's model shop got involved, building several "breadboards," which are rough, undecorated, alien-looking models that show the mechanical movements of a product.

Meanwhile, engineer Jeff Olson was working with Hasbro's Hong Kong office to line up a manufacturer in China. There weren't many takers. The Chinese toy manufacturers are set up to mass-produce manageable products. Making a life-size animatronic pony would require tedious tool-building and lots of trial and error before they could get the assembly lines humming. So the Chinese vendors did what overbooked contractors do when homeowners ask them to bid on a renovation project. They came in with sky-high price estimates. Only if Hasbro was prepared to fork over lots of dough would they upend their schedules and take on the job.

As the design team worked to whittle down the cost – deep-sixing Butterscotch's plaid blanket and the plan to shoot a blast of air out of its nostrils each time it neighed – the pony became a featured performer in Funlab, Hasbro's in-house focus group for children. Visiting the company's kid-themed but kid-free Pawtucket headquarters is like watching Grandpa Joe and Mr. Beauregarde amble through the set of Willy Wonka & the Chocolate Factory with no sign of Charlie or Violet. The only exception to this is Funlab, where a bank of managers with notepads are hidden behind a one-way mirror so they can observe kids playing with the prototypes put before them. A dark-haired woman named Maria Silveira guides the children through their play, eliciting feedback from them and their parents. Like anyone who works with kids for a living, she's learned to go with the flow. On the morning I observed Funlab, a bawling 2-year-old boy named Billy hurled a wooden stick across the room at a girl playing with the toy he wanted. A Hasbro engineer monitoring the action from behind the glass drolly announced, "We have a meltdown."

During Butterscotch's Funlab run, Silveira sat on the floor with two girls – a redhead and a blonde, ages 8 and 9 – and tackled a chief concern of Hasbro's marketers: After the pony's novelty has worn off, will kids continue to play with it? Or will it just sit there, hogging family room space? "After a couple of months," Silveira asked the girls, "what would encourage you to want to keep playing with her?" "Maybe if you sell separate accessories?" the redhead said hesitantly.

Silveira liked where she was going. "Good! Like what?" "Maybe a plastic saddle?" "How about hair accessories?" Silveira asked.

"Ribbons?" the redhead answered hopefully.

Behind the mirror, people were no doubt scribbling furiously.

The Funlab trials showed the designers that no matter what warnings they put on the box, little girls would not be able to resist sitting on the life-size pony. So they adjusted the leg positioning to ensure stability. The marketers were salivating at the chance to promote the product with an image of a little girl "riding" the pony.

On June 15, 2005, Butterscotch got its first standing O. Maddocks wheeled the working prototype into a follow-up line review and, with the help of the laptop, delivered a show. Sharon John, who worked at Barbie behemoth Mattel before coming to Hasbro, had never seen such an enthusiastic response. But she knew that the wow factor would be wasted if Hasbro didn't hit all its marks leading to launch.

A few months after the memorable meeting with Wal-Mart, Hasbro made sure the headline generators in the toy biz got an early peek at Butterscotch. Top on this list was Jim Silver. He runs a niche magazine for parents called Toy Wishes that has taken on outsize influence, because so many journalists and TV-segment producers turn to his "Hot Dozen" list every fall for predictions on what will be the most talked-about toys that Christmas. When Silver saw the Butterscotch prototype, his mind jumped to another character from Willy Wonka, the petulant Veruca Salt: Daddy, I want a pony! He thought to himself, "What little girl wouldn't want a life-size pony?" The expected $300 price tag concerned him. But his industry sources told him Hasbro planned to keep its production in the range of 70,000 to 100,000 units, and he figured the company would have no trouble selling that many. (Meanwhile, Hasbro could expect to sell hundreds of thousands of units of more conventional items like Littlest Pet Shop and Monopoly Here & Now.)

In early 2006, Hasbro revved up the PR machine. Several trade shows in Europe garnered the pony good press. In London, Tony Blair's wife was photographed hugging Butterscotch. That all served as the buildup to Toy Fair, the gathering in New York every February. Since the big retailers have already seen the new product lines, Toy Fair is designed for the press, which helps spread the word about new products, and for financial analysts, who talk directly to Wall Street about the prospects for Fortune 500 companies like Mattel and Hasbro, the heavyweights in an industry that has seen flat or falling sales for five years.

Butterscotch's Toy Fair performance was such a hit that Hasbro was given the chance to reprise it on Good Morning America and Live With Regis and Kelly.

There were some doubters, for sure. Gerrick Johnson, a research analyst who tracks the industry for BMO Capital Markets, worried that, besides sheer size, Butterscotch wasn't that different from earlier – and much cheaper – FurReal Friends. Since most of Hasbro's toys sell for under $20, he was expecting more for something with such a steep price tag.

But in general, everything was falling into place, especially after senior executives at Hasbro and a Chinese manufacturer hammered out a deal to produce the pony. Still, those dragged-out negotiations, combined with the lengthy ramp-up process for such a complicated toy, meant the Chinese vendor would be getting a dangerously late start for a Christmas '06 item.

So much in the toy business boils down to space. Companies outsource the manufacturing to Asia to save money on labor and materials. But they have to pay for space on container ships to get the toys back to these shores. Because so many products are coming from China in the months leading up to Christmas, the big Pacific Coast ports get jammed up. In peak times, getting merchandise from China to US store shelves can take more than three months.

Space also takes on enormous importance once the product reaches the store. Wal-Mart calculates profit by square foot, creating "plannograms" every January and August that dictate which products will go where in each store, how many centimeters tall the packaging can be, and how many items will be stacked on each shelf. But because Wal-Mart and the other retailers knew Butterscotch was going to be such a big, unique item, Hasbro was given special allowances. Wal-Mart agreed to a "stack-out" – a piling of the product in a prominent spot on the floor – and Target offered end-caps, the display shelves at the front of aisles that are a store's most valuable real estate. Back in 2005, Hasbro had put in its request with Target for end caps and had begun creating an elaborate "try me" display that would make the pony a star in the new performance art of shelf theater.

Early on, Hasbro planned to ship the pony fully assembled. But that would have meant a giant box, 39 inches tall, to accommodate the head. When John told her boss they would need to remove the head for shipping, he waved her off, fearing the prospect of children seeing a decapitated horse. "You can't do that!" he said. But when the final estimates came in, the added cost to ship it in one piece was staggering. John took the eye-popping figures to her boss. "Ship it with the head off!" he said. "Ship it with the head off!"

IN AN AIRY, PASTEL ROOM, A 6-YEAR-OLD girl with pink-and-blue clips in her hair sits at a table, coloring. "I wish I had my very own pony," she says. That cues her mother, who crouches down beside her and points to the surprise sitting across the room. "BUTTERSCOTCH!" the girl cries, before hugging her mom and then running to hug the pony. She looks on with delight as the pony comes alive, turning its head and batting its eyelashes. After a hypnotically chipper jingle comes a voice-over: "Meet Butterscotch Pony. You love her, and she loves you back." The spot ends with the girl sitting atop the pony, exclaiming, "My wish came true!"

Like most effective children's advertising, this TV commercial has all the subtlety of a punch to the nose.

But as they review the rough cut of the ad on October 27, 2006, two weeks before its scheduled debut on Nickelodeon, Hasbro's marketing executives feel something is missing. So Valerie Jurries, Hasbro's vice president of marketing, has a conference call with Mark Mazut and Dan Lombardi, the creative directors for the New York agency Uproar!, which produced the spot.

Jurries is dramatic, with a look and a voice that call to mind the actress Wendie Malick, who played the just-past-prime model on the sitcom Just Shoot Me. She begins the conversation by relaying concerns that Sharon John had raised earlier that morning. Despite all the good press about the pony – a few weeks earlier, it had made Toy Wishes' "Hot Dozen" list – Jurries explains that John is still nervous. "She feels that [parents] are really going to have sticker shock when they see $300." (The bigger retailers planned to discount it slightly – Wal-Mart selling it for $268.88 and Target for as low as $249.99.)

"I don't disagree about sticker shock," Mazut replies. "But it's a big toy."

Lombardi pipes up: "People will drop 300 bucks for an Xbox or a PlayStation for their kids at Christmastime without even thinking twice about it."

Jurries waves that off. "Because they know what the technology is. But this is a fantasy we're selling."

On that last point, all parties agree. The debate boils down to this: Hasbro wants the ad to be clearer about the lifelike functionality, so Butterscotch can't be mistaken for just any big pony. But the ad agency worries that too much clarity could spoil the magic. "When we shot this," Mazut says, "we treated it as though Butterscotch was a real horse. And if I was telling you about a real horse, I wouldn't say, 'She turns her head, and she blinks her eyes.'"

Jurries counters that being more specific doesn't have to be so clunky. "I want the girl to say" – now Jurries inhales deeply and puts on her best little-girl voice – " 'Oh, she heard me!'"

The ad guys agree to call the little girl back in to replace the adult's voice-over with her own.

Although "reserve" orders on Hasbro.com and retailer websites are brisk, John won't really know how good a performer Butterscotch is going to be until the commercial starts airing in mid-November, joining the toy industry's insufferable end-of-the-year ad onslaught. After the spot has been running for a week, she can plug point-of-sale figures into Hasbro's modeling programs and tell whether Christmas will be kind to the pony. If demand is brisk, there will be little for Hasbro to do, since the Chinese manufacturer is already pumping out as much product as possible. But if Butterscotch looks like a clunker, John says, "we will move very quickly." They might ratchet up the advertising or go the other way, shutting down production and selling the bulk of the inventory to one retailer at a slashed wholesale price. "It will cost us a lot more money after January 1 than before January 1 to correct an inventory issue."

That's why she's taking no chances with the TV commercial.

TV advertising upended the centuries-old pattern of parents being in control of the toy-selection process for their kids, says Gary Cross, a history professor at Penn State and author of Kids' Stuff: Toys and the Changing World of American Childhood. Until the 1960s and 1970s, when ads aimed directly at children became more sophisticated, parents gave "memory toys" – electric trains and Erector Sets, Raggedy Ann dolls and wooden dollhouses. These classics reignited the parents' own wonder from Christmases past. There were "fad" toys long before TV – teddy bears at the turn of the 20th century, Shirley Temple dolls in the 1930s. But the fad toy didn't explode until toymakers perfected the approach of using TV to market directly to children. That turned the little ones into pesky lobbyists, wearing down their parents through repeated requests, and preyed on the parents' fears of being left out of a phenomenon.

In 1971, just shy of my third birthday, I would go nuts every time I saw a commercial for the Mighty Casey ride-on battery-powered train. I was elated to see it under the tree Christmas morning; it broke after about 12 minutes. We had to ship it back for repairs so often that I was in middle school before I realized that the men driving the big brown trucks worked for UPS and not the Mighty Casey company.

Cross argues that we parents have become so jaded by the consumer culture that we're desperate to evoke a sense of wonder in our children's eyes. But because our children have already been exposed to so much, the only way we can evoke that wonder is by turning to that same consumer culture for the latest and greatest.

In late October, I decide to test things out in my own focus group at home. My wife, Denise, and I have three daughters, then 6, 4, and 22 months.

Before going to my car to get the sample Hasbro has loaned me, I tell our girls they will get to play with a toy that isn't even available in stores yet, but that they must promise not to ask to keep it. I set the toy down, turn it on, and call out "Hi, Butterscotch." It raises its ear, turns its head to me, and neighs. The girls are immediately smitten. While the older two take turns climbing on the pony, the 22-month-old picks up Butterscotch's little brush and begins smoothing its mane.

Going into this tryout, Denise had been skeptical that the big pony would be able to sustain the girls' interest after the novelty had worn off. But she has to admit, "It's nice how it's big enough for all three of them to play with it at the same time."

"I like that it can move," the 4-year-old says. "Is it a real horsie?"

Her older sister tries to feed Butterscotch its plastic carrot – the only other accessory besides the brush – but initially has trouble getting it to chomp. "Maybe it doesn't like carrots," says the 4-year-old. When the 6-year-old pats Butterscotch's hind legs, the pony starts to make a galloping sound, to the delight of all three girls. Remembering the condition I had laid down at the outset, our oldest smiles and says, "I wish I could ask you something, but apparently I can't."

The 4-year-old, as always, is less nuanced. "I wanna keep it!" she says.

After watching an hour of nearly continuous play, Denise begins to wonder if her doubts had been exaggerated.

Then the 6-year-old announces to no one in particular. "I just wish it could walk." The 4-year-old pipes up, "Can I watch TV now?"

WHEN THE BUTTERSCOTCH TV COMMERCIAL airs on November 13, the visuals are the same as the rough cut, but it has a new voice-over from the girl: "Butterscotch, you're so special. When I pet you, you really turn to me."

In the week following the ad's debut, Hasbro sees a more than 20 percent spike in sales. By the end of November comes word that the pony had received nominations for Toy of the Year in two categories. For toymakers, the awards are the industry equivalent of the Oscars. Given the limited production numbers, it will be surprising if there are many Butterscotches left in stores on December 26.

Even Gerrick Johnson, the analyst who doubted how well Butterscotch would perform, revises his forecast after touring retail stores in mid-November. Although he hears it isn't a big seller in working-class neighborhoods, retailers in more affluent areas tell him they can't keep the modest quantities they have on the shelf. Eventually, the affluent parents, searching for one to put under their tree, will probably see to it that shelves everywhere are left bare.

Wal-Mart buyer Andy Prince predicts there will be no way to meet all the demand. "There are going to be a lot of little girls who unfortunately are not going to get a Butterscotch this Christmas."

Neil Swidey is a Globe Magazine staff writer. E-mail him at swidey@globe.com.