How the Hobbico Bankruptcy Effects our RC Hobby

Being sick has its advantages – more time to write and no voice to do videos.  We all learned about the Hobbico bankruptcy filing on Wednesday, January 10th 2018. Hobbico is in dire straights and filed for protection under the bankruptcy laws or Chapter 11.  Hobbico’s intent is to sell the company per a statement you can find here:  www.hobbico.com/company-news.php.

How the Hobbico Bankruptcy Effects our RC Hobby Headquarters

Within 2 minutes of the statement, the social universe was a blaze with woulda, coulda, shoulda’s, arm chair quarterbacks, “what about this company?” statements and on the negative side, the trolls that try and kick someone/company when they’re down.  When I think of Hobbico, I think of the people that work there and enjoy making a living in one of the toughest industries this side of snow chain installation.  I think of the people that make up Hobbico and I’m sad that they and their families might be effected from Wednesday’s announcement.

Who is Hobbico?

Directly from their website:  Hobbico, Inc. is the largest U.S. distributor of radio-control and general hobby products — in fact, the largest model hobby company in the world — and, 100% Employee-Owned.  If you haven’t heard of Hobbico, maybe you’ve heard of Tower Hobbies (their source for retail customers), OmniModels (their source for eBay sales to consumer), Great Planes (their source for over 3,000 independent Hobby Shops) or maybe some of these brands:

Arrma, Axial, Aquacraft, Dromida, Duratrax, Estes, FlightPower, Flyzone, Futaba, Hasegawa, HPI Racing, Italeri, OS Engine, Onyx, ProtoX, Real Flight, Revell, RISE, Tactic, Top Flite and TrakPower.

Hobbico may not directly own all of these companies, but they do have some sort of control through ownership, exclusive distribution, mass market sales or subsidiary influence.

How the Hobbico Bankruptcy Effects our RC Hobby Team Durango
How the Hobbico Bankruptcy Effects our RC Hobby Arrma Nero

Were there any warning signs?

There’s been trouble in the water for a little while now.  Here’s some key events that triggered the Hobbico bankruptcy announcement:

  • Team Durango – Although Hobbico didn’t officially announce the shut down of the racing brand, Team Durango until August 17th, 2017, the brand had been stagnant for over a year.  Travis Amezcua, Team Manager for North America quickly shut down his FaceBook Account affiliated with Team Durango and all of the sponsored drivers announced their departure from the team sometime in the middle of 2016.  Team Durango was Hobbico’s only official surface racing brand.
  • Traxxas/Hobbico Lawsuit – In August of 2016, Traxxas filed a lawsuit against Hobbico and Arrma/Durango Ltd. for copyright infringement.  I’m not an attorney, but after reading through all 89 entries in which Hobbico, Arrma/Durango and Dromida (quadcopters) have infringed on multiple patents held by Traxxas regarding shock positioning, center mounted servo/protection, radio boxes and LED Light arms and E-Boards this had to put a damper on production and sales. The vehicles specifically named in the lawsuit was the Arrma Nero 6S BLX Monster Truck that debuted in May of 2016.  It appears that the lawsuit is still pending.  You can read the official lawsuit details here:  www.scribd.com/document/320063741/Traxxas-v-Hobbico-Amended-Complaint#
  • Tower Hobbies stops selling Traxxas products – Although I couldn’t find any official announcement, sometime in the summer of 2017, Tower Hobbies discontinued all Traxxas vehicles and cancelled all back orders on the popular TRX-4 Crawler that was released right prior.  Tower Hobbies was a long time retailer of Traxxas vehicles.
  • The Tekno-Gate – The long anticipated Tekno EB410 race buggy was hitting hobby shops in fall 2017 and pretty much everyone that ordered through their local hobby shops that dealt with Great Planes  and Tower Hobbies were nearing social media violence.  Local shops were not given much info from Great Planes, and customers were getting impatient as this was easily the hottest race level RC of 2017.  Tekno’s Matt Wolter was 100% professional and issued this statement:

“Hello Guys, kits are in route to Hobbico and should be received by them in a few days. Unfortunately there was an issue (which we are unable to elaborate on) that delayed their shipment. The issue has been cleared up and anyone waiting on kits through Great Planes and Tower Hobbies should be receiving an update from them soon. We have no way of knowing if they are receiving enough kits to fill their customer’s preorders, so you will have to wait and see if you are one of the lucky ones. We apologize to anyone waiting as this looks bad on Tekno but please know this delay was completely out of Tekno’s control.”

  • MIP Announces Split with Hobbico – November of 2017 brought some of the first few brands to say goodbye to dealing with Great Planes, Hobbico’s distribution to over 3,000 independent hobby shops.  Although the announcement was professional from founder and CEO, Eustace Moore Jr., it was a crystal ball looking in hindsight.

“It is with great disappointment that I announce that MIP and the juggernaut Hobbico have parted ways. Although it is unfortunate to part with Hobbico during this period of growth in our industry, we wish them good luck. If you are a dealer who has bought your MIP products from Great Planes and have received a backorder notice, please contact our Sales department at sales@miponline.com for immediate fulfillment. Also, be sure to check out our current list of worldwide Distributors. Additionally, if you are a Tower Hobby customer waiting for MIP Products, please shop at miponline.com. MIP products are always a quick search away.”

More brands followed suit all the way up to the week that Hobbico made the announcement this past Wednesday. Hobbico closes Reno Distribution Warehouse – On January 5th, 2018. Hobbico announced that they closed the 200,000 sq/ft distribution warehouse in Reno, Nevada.  Ironically, MIP broke the news regarding the closure on their FaceBook page.

What does this mean for some of the Hobbico brands?  

Probably one of the most asked questions on Social Media was “What will happen to Axial Racing”  and “What will happen to Arrma?” as these are two of Hobbico’s most successful brands.  The honest answer is: “Who knows??”  Both companies are pretty popular – with scalers on the Axial front and bashers on the Arrma front.  They have quite a bit of brand loyalty with events like the annual decade long running “Axial Fest” and recently the “Arrmageddon” event.  Axial probably has the best chance of survival as Arrma has some serious baggage with the pending lawsuit, as anyone that purchases Arrma will have to deal with that, unless it’s Traxxas…..remember, Traxxas was looking to purchase HPI a while back even with a pending lawsuit against HPI.

My educated guess is that the profitable brands will be snatched up by other large companies/investors and and hopefully stay the course they have proven.  Others may not fair so well and be liquidated quickly to suffice the bankruptcy agreement.

How will it effect you, the RC Hobbyist?

Tomorrow, next week, next month – not many changes will be seen.  The only immediate changes will be seeing how your pending Tower Hobbies / Great Planes order will or will not be fulfilled.

The middle/late 2018 will be eventful and changes will happen.  Some will be for the best and many will be for extreme changes.  Brands will disappear and companies may vanish.  Time will tell and only the fittest brands/companies will survive.

My only fear is that when a large company falls, other companies get greedy.  There’s not much competition of where your Local Hobby Shop gets the goods these days with Great Planes potentially out of the picture.  I hope that the other giants out there consider us, the hobbyists.

Lastly, the Employees at Hobbico

At the RCNetwork, I have dealt with many of the fine folks at Hobbico and I have created friendships with many of them.  I spoke with one of them today and that person was still in shock from the announcement. Obviously, there were warning signs, but the announcement on Wednesday brought the employees the same news that we received via social media.  Many people at Hobbico made the hobby industry their career and time will tell if that career continues.

So what are your thoughts on Hobbico filing for bankruptcy?  I would love to hear what you have to say.

This blog is 100% my own opinion.

See more on some of the Hobbico products:

13 Comments:

  1. in chapter 7 bankruptcy the trustee can sell the brands to the highest bidder

  2. You forgot to mention the other BIG Factor…. HPI Racing went with Amain & HRP for distribution
    … No more Hobbico……….

  3. After sueing JQ Racing for having an energy drink sponsor on their RTR cars whose name sounds like Arrma they deserved nothing less than bankruptcy. I feel for the employees losing their source of income but a company that sues a minor competitor over bringing the first major outside sponsor to r/c racing in order to force them out of business should go bankrupt. It shows the mindset of Hobbico and since karma is a bitch: well deserved 🙂

  4. Very informing, thank you.

  5. Great post and very informative. Thanks Rich

  6. Im pretty concerned with what you said Rich, the greed will start to show. I’m already on the borderline of being able to keep up with new models from the big brands like Associated and Losi and have already had to eliminate brands like Kyosho or Mugan because I just can’t afford to get anything close to a competitive race set up with the price of their new kits if I want even a decent electronics package. Arrma was a godsend for me to be able to get some new brasher rigs but the smaller cheaper companies don’t make 1/10 race kits so I think the prices from the big boys are just going to keep going up and I’ll be stuck with whatever less quality RTRs they come up with like the club racers that are coming out now. That’s another reason I like your budget build series’ so much, it gives me hope I can still Frankenstein a decent rig together lol. Thanks Rich!

  7. interesting times lay a head. It has to be hard on a company like Hpi still recovering from their own issues. An interesting thought is Traxxas trying to grow their business by buying out companies or forcing them under. As to the patents? is it how things attach Parts or the theory behind the approach. There are only so many ways some thing can be done. as to the push rod suspension shumacher used it on the top cat in the early eightes when you look at the overall application it has to be similar. pushord, bellcrank shock absorber.

  8. When talking about greed, the consumer holds the cards (of the credit variety) in this case. We can choose not to spend exuberant prices for kits and eventually, just like we see now, price drops will happen. This will certainly be a shake up but it will even out over time. If the major players start to hike up prices that will leave an opening for a new budget minded brand to form. This is a cycle folks. As long as us hobbyist remain interested, the hobby will be there.

  9. Great article Rich. I agree with you on the people factor. Too often people will slam these companies and say good riddance to a brand. What about the employees and their families. This is a sad reality for too many people these days. I was a thirty year employee of Sears Canada so I know exactly how this situation feels. The times sure are changing and not for the better.

  10. This is just an indication of things to come. I see this as a few things all at once. The outside pressure from china and direct to consumer selling of brands. Which by the way is probably how it will be done across the board in less than 5 years. Hobby shops can’t compete with their online counter parts. No matter what distributer they were using. And finally Traxxas a company I once loved in the late 80’s early 90’s has gotten too big. And they are not happy that consumers are finding that they are selling things at premium prices that are sub quality. And then force people to only buy their own branded accessory products. It is for this reason, I believe, if you love being a hobbyist or an rc racer it’s time to boycott Traxxas. And not just a little boycott hobby shops should start sending all the products back immediately and let them know in no uncertain terms that people do not want an “Apple” type company in RC.

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