Connected Toys: Video Games Publishers and Traditional Toymakers Jostle for Market Share

By September 18, 2014

As video games begin to make widespread use of ‘smart’ figurines to create characters, toy manufacturers have been stepping up their investment in connected objects technology. Leading players from both sectors are now looking to take the video-games-with-smart-toys trend to the next level.

‘Smart toys’ or ‘app toys’ as they are termed in a recent report on the subject by France-based international digital economy thinktank IDATE, consist of three inter-connected elements:  a video game, one or more connected objects, and a distribution platform with a display. These three components then interact. For example a character figurine placed on a connected base will then come alive in a virtual on-screen world and meanwhile the player’s progress in the game will be stored by the software in the physical figurine. As IDATE media expert Laurent Michaud explains, toy manufacturers were actually the first players to show interest in the potential of the Internet of Things (IoT) to bring their products up to date for an audience which now plays video games from an early age. However, ‘smart’ toys have had their first blockbuster success with the SkyLanders characters created by California video publisher Blizzard, which have sold over a million figurines since 2013. These toys have set a new standard: a video game that uses figurines, whose characters are built and developed by players adding new information – powers obtained, game statistics etc – while playing the game. Blizzard’s resounding success is now attracting several leading players from both the toys and video games sectors, ranging from Mattel to Disney, into this segment.

Smart toys at the cutting edge of innovation

Smart toys are where video games meet physical objects, embodying a new approach to gaming. Although SkyLanders are aimed at the young adolescent market, several publishers have already launched smart toys for older audiences, such as for the video game Prodigy. Video games publishers have traditionally been up with the state of the art when it comes to hardware, from the first-ever games on mobile phones to smartphone gaming and online games that require greater bandwidth. Today ‘smart toys’ are still a niche market, but in the long term look set to shape the video games market and drive gamers’ habits. In addition to technologies such as voice recognition and motion capture, the surge in tablets also gives smart toys new scope, especially for ‘tabletop’ games based on interaction between a tablet and the game pieces, as developed by French games and toys design studio Éditions Volumiques.

Re-shaping the industry

The video games market has several unique features, as Laurent Michaud explains: “Hardcore gamers accord great importance to the way games publishers segment the market, as these firms have real power to shake up even the most mainstream trends.” Meanwhile the ‘hardcore’ customer base encourages games developers to innovate. Driven by higher growth than the other entertainment sectors – worldwide annual turnover for video games is $70 billion while, by way of comparison, the movie business turns over just $50 a year – the video games sector has moved fastest to invent connected toys with software able to appeal to a broad audience.  Meanwhile the toy manufacturers are keen to get in on the act and use smart toys to capture a decent slice of the video games-related market.  The third group involved in this process, software publishers, on the other hand do not have enough knowhow to create complete toys and need to team up with traditional toymakers. So it seems that the relationship between two industries which have hitherto been at different ends of the entertainment products market is now being re-fashioned and intensified around smart toys. Watch this space.

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