Funko (FNKO) at 10-Year Lows: Is There a Moat Around Its Pop! Empire?
Funko (FNKO) is currently trading at 10-year low price and in this post we are going to explore whether the company has any moat around its business.
Why?
The company generates 77% of revenue from collectible dolls - 4-inch vinyl collectible dolls called Pop! figures, featuring stylized versions of characters from movies, TV shows, games, and pop culture. It also sells mini figures (Bitty Pop!), blind-boxed figures (Mystery inis), Soda figures (in soda can packaging). Funko holds licenses with major franchises such as Marvel, Disney, Star Wars, Harry Potter, and various anime series, catering to a wide range of fandoms.
Basics: Toy Vs Collectible
Both Hasbro and Funko sell Star Wars products. So how does this work when licensing is designed to prevent competition?
Let’s get the basics right:
- Hasbro holds a license to manufacture toys — traditional action figures, lightsabers, etc. — meant for kids to play with.
- Funko holds a license to produce collectibles — vinyl figures (Funko Pop!) — meant for display and collected by fans/adults.
“Toys” and “collectibles” are treated as separate categories. That’s how both companies can sell Star Wars products — but Funko can’t make action figures, and Hasbro can’t make Funko Pop!-style figures. Each sticks to its licensed category. The license prevents competitors from selling collectible vinyl figures.
Are licenses cancellable? What makes them defensible?
The company is heavily dependent on licenses. But licenses can be canceled, right?
Disney can technically cancel Funko’s license. That risk always exists in theory, but in practice, it usually doesn’t happen. Here’s why:
First, Disney prefers multiple licensees, which enables multiple revenue streams and brand touchpoints. Giving everything to say, Hasbro (EV:$12B), would make Disney dependent on one partner and would reduce competition and innovation. It makes no strategic sense for Disney to give one player the entire pie. Disney’s goal is to maximize reach and revenue — not to create monopoly deals.
Secondly, Funko targets a distinct audience. Funko primarily appeals to adult collectors aged 18–49 who purchase vinyl figures for display rather than play. In contrast, Hasbro focuses mainly on toys for children and families. If Hasbro sold vinyl figures under its own brand, the perceived value and collectibility would likely drop — Hasbro is seen more as a kids’ toy company.
Third, Funko Pop! has built a powerful collector community that is hard to displace. This is reflected in strong social engagement:
i) 3.2M Instagram followers → Funko Instagram
ii) 270K Reddit members → FunkoPop Subredditiii) Active Facebook groups trading Funko Pops:
- Funko Pops Community
- Funko Collectors Anonymous
- Funko Trading
- Funko Pop Worldwide BST
Unique numbering system
Funko’s unique numbering system also creates a moat. Let me explain - Each Pop! figure is assigned a unique number within its product line — e.g. Star Wars #1, #2, #100, #621 — and the number is printed prominently on the box. This fosters a strong collectible mentality: fans know exactly where each figure fits in the broader line and are encouraged to complete the series.
For hardcore collectors, this system is critical. It drives completionist behavior and builds brand loyalty — collectors specifically seek out Funko-branded Star Wars Pops that integrate seamlessly into their numbered displays.
There is a catch - they are collecting Funko’s Star Wars series, not just any Star Wars vinyl figure.
By contrast, if Disney cancels a T-shirt license and moves it to another partner, fans do not care who made the shirt — they simply want a cool Marvel or Star Wars shirt. That is not the case with a section of Funko Pop! buyers. Switching licensees would risk alienating this valuable collector base and disrupting sales.
Fourth - Strong direct-to-consumer (DTC) presence. Funko operates a robust DTC platform via Funko.com, selling both standard and exclusive figures directly to consumers. This allows Funko to engage with its collector base, capture higher margins, and run limited-edition drops that drive fan excitement and loyalty — something licensors value highly.
Finally, there are not many competitors who can match Funko’s distribution system and unique mass-market collector positioning at its price point (sub-$20). Funko provides licensors with a unique combination of mass retail reach, specialty and collector retail presence, a strong direct-to-consumer channel, and deep engagement through conventions and fan communities.
Overall:
Even though Funko has licensing that can technically be cancelled, the license is “sticky” due to the combination of factors discussed above.
Disclaimer: This article is for informational purposes only and discusses the company's competitive advantages (moat). It does not constitute a buy or sell recommendation. The author may have a position in the stock mentioned.