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It's Christmas Eve. And that means presents, and that means toys. This shopping season had its own special craze as Charles Krause reports.

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TICKLE ME ELMO: (laughing) That tickles.

CHARLES KRAUSE: It's red, it's furry, it laughs a lot, and it's become one of the hottest toys in America this holiday season. The toy is known as Tickle Me Elmo, a popular character on Sesame Street who laughs when he's tickled.

TICKLE ME ELMO: (laughing) Oh, boy. That's tickles.

CHARLES KRAUSE: In the 26 shopping days since Thanksgiving parents across the country have been scavenging through store after store, trying to find one of the few remaining Elmos in stock. Most stores ran out weeks ago, but that hasn't stopped parents from looking for Elmo anyway.

CHARLIE MAJDI, Toy Store Owner: On average, we get about thirty, thirty-five calls a day, people looking for it.

CHARLES KRAUSE: Tyco, the company that makes Elmo, expects to sell more than one million Elmos by the time the Christmas season ends tonight. And Tyco says it's been trying to produce Elmos as fast as it can. But for many parents of the preschool set, it wasn't nearly fast enough. There have been reports of mothers running alongside delivery trucks, even mothers fighting with one another to get their hands on Elmo.

ROSEANNE TAYLOR, Chicago Shopper: I grabbed it, and as I was taking it to me, another lady tore it out of my hand. It's ripped. And she ran off in the store somewhere. I was so upset.

CHARLES KRAUSE: Other parents have resorted to throwing money at the problem. Elmo's typical retail price is $28, but in recent days the doll has fetched far more, sometimes for charity. For example, Washington Post columnist Bob Levey auctioned off two Elmo's just today and raised $1,500 to benefit Children's Hospital in Washington.

BOB LEVEY, Washington Post Columnist: This is by far the most that I've ever raised by way of auctioning a Christmas gift, sure, way, way out there.

CHARLES KRAUSE: Indeed, Elmo became so chic this holiday season that he even ended up modeling diamonds at Cartier's on 5th Avenue in New York. Clearly, Elmomania caught the toy industry off guard, but there have been toy crazes like Elmo before. In 1983, Cabbage Patch dolls sparked an even bigger hunt. Then who can forget the nearly overpowering demand for Power Rangers in 1994? But Cabbage Patch dolls and Power Rangers belong to Christmases past. This year it's Elmo who'll light up the lives of a million kids across America, the lucky ones whose parents managed to get ticklish little Elmo home and wrapped and under the tree for Christmas.

ELIZABETH FARNSWORTH: For more on Elmo and the toy market we're joined by Gary Jacobson, a toy industry analyst and senior vice president at the New York investment firm Jeffreys and Company. Thanks for being with us on this Christmas Eve.

GARY JACOBSON, Toy Industry Analyst: (New York City) Thank you very much.

ELIZABETH FARNSWORTH: How did this toy--how did Elmo become such a phenomenon?

GARY JACOBSON: Well, it started off by being in short supply, and then the media hopped onto it and really made a tremendous promotion out of it, and that's how it all happened.

ELIZABETH FARNSWORTH: Why in short supply? Didn't the toy company anticipate that it would be a big seller?

GARY JACOBSON: Not really. Tyco initially started to ship Elmo back in the September-October time frame, and it was on the shelves, and it was selling reasonably well. And then all of a sudden, right after Thanksgiving, it just took off, and the hysteria started.

ELIZABETH FARNSWORTH: But it wasn't quite all of a sudden, was it? Wasn't it the result also of a very intelligent promotional campaign?

GARY JACOBSON: Absolutely.

ELIZABETH FARNSWORTH: Tell me about it. How did it happen?

GARY JACOBSON: Well, Tyco started doing the talk show route where they sent Elmos to everybody and Rosie O'Donnell put it on her show, and it got a great reception on the show. And then it really took off from there. Everyone had to have an Elmo.

ELIZABETH FARNSWORTH: Is this different from other toys? I mean, all toy companies, I would think, try to promote their toys on talk shows. So why did this one make it, and some other toys don't?

GARY JACOBSON: Well, what's different is that it did make it, and it got on the air, and people liked it. It started with a great product. You know, Elmo is tickley, and he's red, and he looks like fun, and, you know, after you tickle him and he starts to shake, kids love it, and it was a good product, and people just seemed to take to it. And that's why it ended up on the show circuit.

ELIZABETH FARNSWORTH: So not just any product can be promoted and get to be a big item. It has to have something intrinsically attractive?

GARY JACOBSON: Absolutely. All the countries try, and it's very few that actually succeed to this level.

ELIZABETH FARNSWORTH: What else is big this year?

GARY JACOBSON: Well, Nintendo 64 is sold out everywhere. That's even rarer than Tickle Me Elmo.

ELIZABETH FARNSWORTH: Tell us about Nintendo 64.

GARY JACOBSON: Well, Nintendo launched its next generation of video games, the Nintendo 64, and it's been a tremendous, tremendous success. And, again, they started off with a great machine and great games, and you can't find it anymore. It's in very short supply.

ELIZABETH FARNSWORTH: Did they--again, did they not anticipate, or did they do this on purpose, keeping it in short supply?

GARY JACOBSON: Well, actually it's a combination of the two. They knew that demand would probably be over 5 million units. They just couldn't make it fast enough. They could only make about a million, two hundred thousand units. That's what they've shipped. That's what they sold through. And hopefully sometime in 1997, they'll be able to catch up with demand.

ELIZABETH FARNSWORTH: And what else is big?

GARY JACOBSON: Well, Holiday Barbie is a perennial favorite. She's already in the certificate area, where, you know, you can't buy Holiday Barbie anymore, but they'll give you a beautiful certificate and Mattel will mail Barbie to you during the first quarter.

ELIZABETH FARNSWORTH: Anything else?

GARY JACOBSON: That's about it. You know, there are some Star Wars figures in the boy's action area, but it's generally been a good holiday season.

ELIZABETH FARNSWORTH: How does Barbie remain a perennial favorite? I gather that Monopoly is another favorite. How do they do it?

GARY JACOBSON: Well, Barbie is 36 years young this year, and, you know, what's happening now is little girls who played with it as a kid are now moms, and they want to look to buy things for their children that they played with, and Barbie fits that. It also has good play value, and Barbie does lots of lots of different things, whether it's a teacher, or an astronaut, lots of role playing that Barbie gives to a small child.

ELIZABETH FARNSWORTH: How important are these toys to their companies, starting with Tickle Me Elmo?

GARY JACOBSON: Well, Tickle Me Elmo, despite all the press, is not that important to Tyco. It represents about 5 percent of its revenue this year. It'll be about 35 or 40 million dollars in revenue. Tyco is the third largest toy company in the world, should do about 800 million in revenue. So it's nice, but it's not critical to Tyco's success.

ELIZABETH FARNSWORTH: How about Nintendo 64?

GARY JACOBSON: Well, Nintendo 64 is what Nintendo's all about. The success of that product is crucial to Nintendo's long-term survival. And it looks like it's going to be a great success for Nintendo.

ELIZABETH FARNSWORTH: And the toy industry worldwide, how big is it? How important is it? GARY JACOBSON: Worldwide the toy industry is about a $35 billion industry. About 1/3 of that is in the United States, which is always amazing because the U.S. only has about 4 percent of the children, so there really is a huge global market that these toy companies are going after. Nintendo is all around the world. Its biggest market is Japan, and the Nintendo 64 is very important to its success.

ELIZABETH FARNSWORTH: What's changed in the toy market? Is something driving toy sales differently than in the past?

GARY JACOBSON: Yes. It really has. The toy industry is becoming very much kind of two different successes. One is the perennial hits like a Barbie and a Monopoly, and then the other is the adventure of phenomenons, like a Star Wars or a Batman that are, you know, you have a movie and you have a TV show, and there's a tremendous amount of promotion, there are tie-ins, and it becomes one, big huge event, and that leads to some really incredible numbers for some of these toys.

ELIZABETH FARNSWORTH: Can you predict for us what the big seller will be next year?

GARY JACOBSON: Well, next year I can give you a couple. I think there are some good boys action products in 1997, Star Wars, Batman, and Jurassic Park. For girls I think we're going to see “Anastasia,” which is a new animated movie, in November that should be big for them. Also, “Little Mermaid” is being re-released. There's going to be a lot of great product out in the marketplace in 1997.

ELIZABETH FARNSWORTH: And tell me what happens to Tickle Me Elmo now.

GARY JACOBSON: Well, I will predict that by February you and I and everyone will be able to buy Tickle Me Elmo for $28 at every Toys R Us store in the country. But I think Tickle Me Elmo will be around for a number of years, and who knows, maybe again next Christmas, he'll be in very short supply again.

ELIZABETH FARNSWORTH: Is the Cabbage Patch doll the most direct antecedent of Tickle Me Elmo?

GARY JACOBSON: In a much bigger magnitude it probably is, and believe it or not, Cabbage Patch is still around doing some very, very good numbers ten, fifteen years after it started. Cabbage Patch should do over $100 million in revenue this year, which is three times what Tickle Me Elmo will do.

ELIZABETH FARNSWORTH: And I gather that people shouldn't get rid of their old dolls or even their old Tickle Me Elmos or anything else. The original Cabbage Patch dolls are selling for many thousand of dollars, I hear.

GARY JACOBSON: Absolutely. There's a tremendous collector market across all toys out there, and it just keeps growing and growing.

ELIZABETH FARNSWORTH: Well, thank you very much and have a wonderful holiday.

GARY JACOBSON: Thank you, and a happy holiday to you also.

ELIZABETH FARNSWORTH: Thank you.

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