MTH took on big competition and is still chugging along

Mike Wolf has heard all the gloom and doom about model railroading, and he doesn’t buy it.

Derailed interest? He doesn’t see it.

Aging collectors? Not the case.

Declining business? No way.

Wolf, the founder and owner of MTH Electric Trains in Columbia, Md., has plenty of reasons for his optimism. The MTH Railroaders Club has more than 10,000 members, and MTH products are carried by about 800 dealers.

His company is one of the largest toy train manufacturers in the United States. And he recently reached a settlement with a major competitor, Lionel, after suing the well-known firm for millions of dollars. Wolf accused Lionel of appropriating some of his train designs through a Korean subcontractor.

Competition, Wolf said, is his biggest challenge today, and he even takes a glass-half-full approach to that. “It makes you have to do everything as best you can,” he explained.

Wolf has been honing his product since he was a boy. Raised in a home that appreciated model trains but wasn’t obsessed with them – “We had one train under the Christmas tree” – Wolf began working for a neighbor’s basement business at age 12. “I had a job assembling couplers for standard-gauge engines” for the small company, Williams Reproductions.

“Eventually I started running the company, and then bought the tinplate train business.” From his parents’ home, the young Wolf launched a mail-order business, Mike’s Train House, and in 1983 began manufacturing his own line of trains. In 1987, Lionel, the American train giant, contacted the new upstart, and Wolf made products under the Lionel Classics name.

In 1993, he began turning out his own tinplate and O-gauge lines under the MTH Electric Trains banner.

The company now reaches hobbyists around the world and is known as one of the most technologically advanced model train makers. Its catalog of engines, cars and accessories grows every year and is aimed at every level of operator and collector.

Industry observers who talk about the graying of the hobbyist don’t see the full picture, Wolf believes. “Back in 1987 the average age was 52, and it still is,” he said. “When a guy retires he has more time, more room in the house and more money. A model train set was always two weeks’ pay – it was never a cheap, throw-away toy.”

The average consumer “shared the hobby with his son, but it was really for dad; it was always a man’s hobby. You’ll find starter sets still sell to people in their 30s, who pass down the same experience they got from their fathers,” Wolf said.

In their teens, they “got involved in girls, cars, video games – those are the things that are important to you until you get back into the family. Then the whole hobby, if you were exposed to it, comes back to you.

“It’s not true that the hobby is dying away. There are more people participating than ever before,” Wolf said. While many hobbyists were collectors in the past, most are operators now, building their own layouts and sets from a vast array of options. “There is so much new stuff and new technology coming along,” Wolf said.

The resale value of trains from the 1980s and 1990s has declined, he continued, because they were overproduced. “Guys were buying 10 engines and selling nine to cover the expense of buying one for themselves,” he said. Many of those collectors have left the hobby, and it took a while before the “overflow of product was absorbed.”

“But the number of trains being made today is more than ever in history, including the 1950s. Look at the catalogs from MTH and Lionel. … This is the greatest time for operators because there is so much variety, and so much competition.”

Some of the greatest train manufacturers in Europe have not fared as well. Marklin was taken over by a British investment firm last year, and LGB went bankrupt and was purchased by the new Marklin owners last summer.

Wolf sees big differences between the American and European markets. A weaker economy in Europe worked against the German toy makers, who exported much of their product to the United States. “Here, their products went up in price. And these guys were slow to move offshore,” he said. Their large workforce and the tight economy in Germany pushed them to the brink.

“It was not because they don’t have people buying trains in Europe. At the Nuremberg show there are just as many people as the early years.” But the cost of trains made by the German companies had doubled, Wolf said. “Every time you raise that price, there are fewer people you can get into the hobby.”

MTH has worked to keep its products affordable and to focus on improvements to its lines, including a $5 million investment in its new Proto-Sound 2.0 and Digital Command System. In the command mode, operators can use a single remote to run multiple engines, switches and accessories. The sound system uses the authentic chuff of steam engines, roaring diesels, whistles, bells and horns. New tooling at MTH has also expanded the choices and detail of electric engines, cars and buildings.

Wolf is proudest of his line of tinplate trains. “I love that we’re bringing back the metal.”

But his favorite trains include those that have come with expansion of licenses and exclusive rights, including the Harley-Davidson, NFL and Coors Light lines. “We’re selling trains to bars, who are putting them up on their shelves. And Coors is selling our trains. So we’re getting exposure outside the regular hobby shops and clubs, and getting new people introduced to model railroading.”

Wolf cannot go into detail about his lawsuit against Lionel. The dispute was over patented computer technology that synchronized a train set’s sound, smoke and speed, according to recent Associated Press stories. The settlement reportedly includes a cash payment to MTH and a pact regarding future technology uses.

(Toy Collector Magazine contacted Lionel and offered them the opportunity to comment on the lawsuit and settlement but had not received a formal response by press time.)

“We have settled with contingencies that the court has to approve. We have an agreement,” Wolf said.

Tough competition is inevitable, he acknowledged. “Everybody is going for the same customer. So you have to do everything you can as far as quality and variety.”