Meet Dan Flaherty, the man responsible for Bigmouth Billy The Talking Bass, the Dancing Hamsters, and all those inflatable Snoopys and Baby Yodas.
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here are no photos allowed inside the magical menagerie of 200 inflated plastic creatures crowded into the cavernous showroom at the heart of Gemmy Industries headquarters. This is top secret stuff that won’t be in stores for months: a 15-foot-tall animatronic spider with glowing eyes; Santa riding a dragon; Baby Yoda, Minions singing Jingle Bells, Furby. “It’s a fashion business,” says founder Dan Flaherty, 63. “We tweak them every year.” Indeed, Gemmy designs enough models that all their biggest customers — Walmart, Lowes, Home Depot and Target — can have a unique lineup. As a result, this trippy showroom just northwest of Dallas in Coppell, Texas is the only place you’ll ever find all these critters together.
Dan Flaherty (L) and longtime CEO Jason McCann (R)
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In recent years these airblown characters have come to dominate holiday lawn art in the American suburbs. And they are emblematic of one of the biggest consumer trends of the pandemic era: homesteading. That is, peoples’ need to feel comforted and safe, to build an oasis. “After all the pandemic restrictions forced upon people during a season that’s about family and love and tradition, it’s not surprising that for both Halloween and the holidays people felt they just had permission to spend money and have fun,” says Phil Risk, an executive vice president at Prosper Insights, which surveys 8,000 shoppers and found that last year Americans spent a record $15.7 billion on December holiday decorations, and a record $3.4 billion on Halloween. Sales of huggable plush toys also surged by a third during the pandemic; this translated into high demand last season for Gemmy’s 8-foot tall inflatable teddy bear, covered in a lightweight polyester fur. Even Walmart CEO Doug McMillon, on an earnings call last fall, hailed inflatables as easy to sell: “Like, we’re going to blow out of some of those.”
Inflatables are Flaherty’s current hit, but far from his first. Over the past four decades his Gemmy Industries has produced hundreds of toys, and a few cultural phenomena. “If there’s anything I’m good at, it’s seeing product,” says the man responsible for unleashing the silliness of Bigmouth Billy Bass and the Dancing Hamsters on the world. He doesn’t just follow the zeitgeist, he creates it. And in the process he’s created a mini-empire with annual revenues on the order of $250 million and a value of $350 million or more. In a rare series of interviews the press-shy entrepreneur shared some of the secrets of success.
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laherty may belong in the kitsch hall of fame, but says he prefers staying under the radar and flying commercial. He grew up in Kansas City in the 1970s with four brothers and a sister, and worked at the country club, 100 hours a week if he could get it. “Hard work was not a challenge, just something you did.” He went to school at the University of Dallas, where he also got his MBA in 1983. After feeling strangled by a corporate job working with IBM mainframe computers, Flaherty founded Gemmy in 1984 at 23 with the conviction that “If I’m going to work my butt off, I might as well do it for myself.”
The first products he ever imported were high-end pens by Mont-Blanc and Cross. He rapidly moved down the sophistication ladder. By 1989 he had scored with three hot items that boosted sales tenfold to $20 million. The first was called the Blaster, introduced in 1987, which the Chicago Tribune described at the time as: “a dashboard-mounted joystick that lets drivers pretend to shoot, blast or bomb annoying drivers, complete with appropriate sound effects.” Its bizarre success enabled Flaherty to license characters for more dashboard-mounted distractions, including Darth Vader, Pumpkin King Jack Skellingtons and a Homer Simpson who at the push of a button would blurt out, “What is this, National Stupid Driver’s Day?!”
Next came Seymour Buns — a rubber doll with a suction cup on his back that you stick onto your car window: “you squeeze the air bulb and the pants come down and you moon the guy next to you,” explains Flaherty. Soon he was selling to mass retailers like Walgreens and CVS. “I was basically sleeping in the office because if I went home I would never get up.” Suddenly his manufacturers in Taiwan were filling entire shipping containers for delivery direct to big retail chains. He gets wistful recalling Pete the Repeat Parrot — an animatronic bird that talks back to you — and the Pinhead, a box with thousands of pins suspended through holes that you can shape into a sculpture. Expanding his team of artists and designers, Flaherty realized what an incredible business he was in: he didn’t have to carry any inventory, and he got paid as soon as the cargo was on the water. Even today he says, “I don’t like to talk about it too much,” out of fear that someone will catch on.
He admits that his 1992 desktop palm tree (that dances to the beat of whatever music is playing) was a direct rip off of the Dancing Flower, a hit for competitor Takara. His attorney discovered nobody had patented a dancing palm. He likewise had no qualms in hopping on the 1992 water gun craze triggered by competitor Larami’s introduction of the Super Soaker. “Waterguns were hot, so I made a better water gun with a big tank on your back. I destroyed the Super Soaker without spending millions on advertising,” says Flaherty. He called it the ZX 2000.
The watergun craze lasted about a year and a half, longer than average. “The hotter it gets the faster it dies.” He learned about the biggest danger an importer can make is assuming a hot product would stay that way forever. If buyers overordered, anticipating demand that dried up, he could be stuck with the overruns. “All their profit ends up in a warehouse of inventory that is now worthless.”
The Hamsters lasted three years, because Gemmy kept making new versions. The Kung-fu Hamster twirls nunchaku and dances while singing “Kung-Fu Fighting.”
Others do the Hokey-Pokey or sing “Jailhouse Rock” a la Elvis. After the hamsters, Gemmy got out of the toy business. “The pie was so big,” says Flaherty. Then it got smaller, controlled by Hasbro, Mattel, Lego. “Video games took the biggest chunk.”
One hit transcended all categories. Bigmouth Billy Bass, which came out in 2001. It’s an animatronic fish attached to a plaque that hangs on the wall. The fish flapped its tail, and bent toward onlookers singing songs like Al Green’s classic “Take Me To The River” and Bobby McFerrin’s “Don’t Worry Be Happy.” Flaherty says he started showing it to buyers in January 2000 and got orders from top-tier retailers like Dillards and Macys, to whom he gave a window of exclusivity before he began selling Billy at JC Penneys and Kohls. Ultimately the singing bass was found on the shelves of discounters like Walgreens. Flaherty quickly learned how to chart a product’s trajectory. “It only lasted 9 months,” says Flaherty. “I knew it was going to die.”
As he sensed the Billy Bass craze fading, Flaherty remembers telling his VP of sales to cancel their last round of manufacturing runs, even though they still had unfilled orders for several million units. He didn’t want to get stuck with an overflow of Billys. He was right; everybody who wanted a talking bass now had a talking bass. “People get so emotional about their product. Never get emotional.”
In subsequent seasons Gemmy released variations of Bigmouth Billy — fish bones on a plaque, a talking lobster, a licensed great white “Jaws.” You can still find them all on Ebay, in mint condition. In Houston, the restaurant Flying Fish has a wall hung with Billys labled “Adoption Center.” They trade an old Bigmouth for a fresh, hot basket of fried catfish.
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he seed for Dan Flaherty’s inflatables near-monopoly came one day in 2000 when he drove past a Dallas gas station with a purple inflated gorilla on the roof. When he got a closer look he found the material was thick vinyl and the fan they used was expensive. “I have this thing — when I see things that are inefficient it drives me crazy,” says Flaherty. “They overengineered it.” So he asked his team of designers and R&D guys to simplify — make a character with the lightest nylon material and a low-voltage fan (initially a hairdryer) that will fit in a little box and only take 10 minutes to set up. It’s called “halftime decorating,” because you can get it all done in the middle of watching a football game.
There’s a simple reason why Gemmy’s inflatables have had longer staying power than most of Flaherty’s other hits — licensing. Flaherty knew it wasn’t enough just to make inflatable characters lighter and less complicated. He needed exclusive licenses (typically charging royalties of 8% or higher) to name-brand personalities that people recognize.
Dan Flaherty (L) and longtime CEO Jason McCann (R) standing in front of a Bigmouth Billy Bass.
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The first license was Peanuts. “I had to beg for that license, and overpay. They had to trust us to bring him to life.” Today you can get an inflatable Snoopy piloting a biplane with Woodstock, or one where they’re riding on his red doghouse. Disney proved an even tougher cookie, extracting a 16% royalty and assurances. He told them: “I promise, someone will want to buy an inflatable Mickey Mouse.”
Gemmy has inflatable exclusivity for the entire Star Wars franchise, Harry Potter, Beetlejuice, Nightmare Before Christmas, the Grinch, Minions and more. It’s not just for kids; adult collectors drive sales of all licensed goods. According to Juli Lennett at consultancy NPD Group, 60% of the recent growth in toy sales is traced to “kidults.”
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elling fad products but at the same time avoiding inventory risks are key Gemmy operating principles, but Flaherty is not afraid to occasionally break his own rules. In 2013, the entrepreneur was driving around Dallas (where he’s lived ever since college with wife Dannie and three kids), and found it increasingly painful to sit. He would put a tennis ball under his hip in order to alleviate a burning sensation running down his leg caused by a sciatic nerve issue. When he got to the office, recalls Gemmy’s then-CEO Jason McCann — he couldn’t sit down. He put his laptop on top of a box and was just standing all day.
It wasn’t long before they had ordered every standing desk on the market. “It was horrible stuff. Wobbly, took forever to put together. We knew we could make it better,” says McCann, 53.
Flaherty had a network of manufacturers with whom he had toured countless factories that worked around the clock to churn out boxes of Billy Bass, Seymour Butts, and Pinhead. “The guys in China know I pay the bills,” says Flaherty. Of course they would make the Varidesk.
Within months they had a first shipment. But how to distribute? “It shouldn’t have made it. The chances were one in a hundred,” says Flaherty. The office furniture giants, Steelcase, Knoll, Herman Miller, still sell through dealers rather than direct. This was dinosaur thinking, ripe for disruption, thought Flaherty. Against all hard-earned wisdom, they decided to hold the inventory themselves and sell the Varidesk direct to consumers. Their timing was good, in 2014 Dr. James Levine of the Mayo Clinic wrote a book “Get Up!” declaring that sitting was the new smoking. Flaherty decided that a $25,000 advertisement in SkyMall catalog, found in the seatback pouch on most airlines, would be the best way to hit his target market of mid-level executives and up. Within days Gemmy had hundreds of orders for Varidesk. “It was a hot item, but different,” says Flaherty. “Nobody needs a singing fish, but people really needed a standup desk.”
McCann (who started working with Flaherty in 2000 on a doomed startup called icelebrate.com) describes the Varidesk as a “trojan horse” because once one person in an office set it up, demand would spread around the cubicles.
It also enabled Flaherty to expand into the broader office furniture business. The first line extension was into anti-fatigue mats, to cushion the feet of toiling desk workers. Customers kept asking if they made them, recalls McCann, who bought up every single mat that Amazon was bundling for sale with the Varidesk. “We lined them up and down the office and asked, are we going to sell other peoples’ products alongside our distribution channel, or make our own?” Gemmy already had a thriving side business selling millions of polyurethane foam Halloween pumpkins a year to Michaels Stores; so they contracted with the same factories to make mats, and sold millions of those too.
Flaherty spun off Vari into a standalone company with McCann as CEO (and a minority stake). It has since expanded into tables and chairs, room dividers, lighting, and even quiet pods where you can go to escape a noisy office. Vari sold a lot to WeWork and Google before the pandemic, and acquired a million square feet in Dallas – Fort Worth to lease out fully furnished office space and study how workers use the product. Once a year Vari switches out the tenants’ furniture and layout, overnight. The Varidesk is on par with Flaherty’s other big hits, and he says it accounts for a large chunk of his company’s $2 billion in sales over its decade-long lifespan. The rise of work-from-home, says McCann, “doubled our addressable market.”
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hat are these businesses worth? Flaherty will say only that annual revenues are somewhere between $100 million and $1 billion, depending on what’s selling. And that Vari and Gemmy are now of comparable size. According to Dun & Bradstreet, Vari did $125 million in revenue last year. Orbis has them at $195 million. The data on Gemmy Industries shows lower revenues of around $40 million, but this likely does not include the value of numerous Gemmy-affiliated companies. Net profit margins on such manufacturing companies are on the order of 8%, according to industry experts, and Forbes figures that based on enterprise-wide sales of an estimated $250 million, and $20 million in profits, Gemmi and Varidesk might fetch more than $350 million in an auction.
Not all Flaherty hot-product inspirations have a pure profit motive. Working with Catholic Charities he now has a furniture company that is designing a line of adjustable medical-grade beds for frail, elderly people. Geriatric patients “are more delicate than babies” he says. With his brother, a doctor, he’s planning a geriatric specialty hospital in Dallas.
Back at the showroom, McCann shows off a room of animatronics — life-size versions of horror antagonists like Friday the 13th’s Jason Vorhees, Halloween’s Michael Myers and Pennywise the Clown. Last year Gemmy started selling a 12-foot animatronic mummy with light and sound effects for $348. A prototype of a frightful child zombie clown on a unicycle pedals back and forth in the show room. “If we can get an order for 5,000 units, they’ll mass produce it,” says McCann, referring to his Chinese suppliers. “But 20,000 is better.” The key is to not get ahead of the market, says McCann. For instance, they were too early with zombies — preceding The Walking Dead craze by a couple years. McCann predicts big growth for Gemmy’s mini light projectors that cast elaborate moving patterns on the wall.
Could holograms soon displace inflatables? Don’t count on it. There’s no matching the fun and joyful presence of the menagerie of life-sized, airblown creatures cackling, singing, wobbling together in the Gemmy showroom. Then McCann pulls the plug — the lights go out, fans stop running, Minions fall silent, and all you hear is the slow crumple of deflating nylon shells slumping to the floor. There’s a comically odd visceral ache to seeing your bouncy buddies getting snuffed out. Which is just what they’re going for, says Flaherty. “It’s all about making memories.”
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Source: https://www.forbes.com/sites/christopherhelman/2023/02/16/the-gag-gift-tycoon-who-filled-suburban-lawns-with-inflatables/