Does The Impending Growth Of The Metaverse Threaten The Toy Industry?

Any further immersion of human beings into the virtual realm tends to create concerns and worries about whether that will negatively impact on the toy industry, which is a real-world consumer products business.


At this stage we don’t really know just where the Metaverse is going to take us, but we can presume that this is going to be yet another gigantic tech revolution. Facebook’s change of name to Meta is a serious statement from a company worth $500billion+ (at the time of writing). Tech companies across the world from the U.S. behemoths like Facebook, through to China’s mighty players including ByteDance, Tencent & Alibaba are researching, investing and acquiring to try to maximise their future participation in and profit from the Metaverse. So, we can fairly certainly predict that this thing called Metaverse is coming in a very big way.

But what does this mean for the toy industry? The first point to note is that despite the massive advancements in technology in the lives of children, despite the massive growth in screen time addiction and gaming time, the toy business has thrived nevertheless. How can this be? Surely children have less play time available to toys due to all their screen time, and surely they want to be gifted in the virtual realm nowadays? The reality is that children still love being given toys and playing with them, even if they spend less time with their toys versus past generations. For parents, toys are ever more important as they offer a potential antidote to screen time and aid their child’s development.


The nature of big technology companies is to build up huge data on users and general usage, and then to maximise the elements which create maximum usage and engagement. The Metaverse, in essence, is going to add additional elements of immersive virtual reality and interaction to what we already have. While children can have Netflix playing and still play with toys, it is less likely they will be able to be lost in a VR world and play with normal toys simultaneously, so that may represent a further loss in potential play time for toys, but toys developed specifically to be immersed in the Metaverse could be huge. We only have to look back to Activision’s Skylanders, which sold more than 170m toys to see the potential of toys immersed with a digital experience. No doubt there will be a company who absolutely cashes in on integrating toys with the Metaverse.


In conclusion then humans remain rooted in the real, physical world. There may be a future where we are fully lost in digital worlds like the Na’vi people in the movie Avatar, but we are a long way from that yet. Both children and parents value toys, and the more deeply children immerse themselves in virtual worlds, the more affinity they feel for the characters, worlds and brands they experience in the digital realm, which in turn can be expected to translate into sales of related merchandise, especially toys. Moreover, it is very likely that one or more companies will absolutely nail the execution of toys in and for the Metaverse. Overall then, the toy industry should view the Metaverse as both a threat and an opportunity – if we can keep on creating compelling and attractive toys, based on themes and characters kids love and exploring how toys can interact with the Metaverse, then we may be able to grow alongside.

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

THE CRITICAL ROLE OF ACQUISITIONS IN TOY COMPANY GROWTH

Mattel purchased Mega Bloks for approximately $460m USD back in 2014. Hasbro acquired Power Rangers for $522million USD in 2018 and E1 (including Peppa Pig) for around $4billion USD in 2019. But it isn’t just recently that these long-established behemoths of the toy business have been on the acquisition trail, the history of both companies is littered with acquisitions.


Looking at other companies – MGA Entertainment acquired Little Tikes back in 2006 and of course Spin Master have made numerous purchases over the last decade or so with Rubiks being among the most notable of those.


Here’s why acquisition is always a big part of growth strategies for toy companies – it takes years, if not decades to build strong toy brands. Once a toy company gets to the size where they can access more advanced financing options, it often makes more sense to buy another brand or company than it does to proceed with a risky new launch in a category not previously entered.


For those building companies and brands with a desire to eventually sell up and cash out, there are many companies out there looking to buy ready made opportunities. If you’ve only recently started, you would need something quite special to get a quick sale most probably, but anything is possible!

Did you know we offer an acquisition Consultancy and agency service? For established businesses with something to offer that companies will want to buy we can potentially help. For more information, or to get in touch: www.KidsBrandInsight.com

WHAT ELECTRONIC ARTS DITCHING FIFA CAN TEACH US ABOUT BRAND LICENSING…

FIFA has been a massively successful video games franchise for decades now for Electronic Arts. In fact, your author once interviewed to manage the brand, back in the early noughties, coming a close second to the winning candidate!


FIFA delivered $1.6bn in revenues to EA in the financial year ending March 2021. That’s a big chunk of their revenues, and so to make such a fundamental change, and to drop the FIFA name has to be seen as a major financial risk. However, FIFA were reportedly demanding to double their receipts from the game to a whopping $1billion.


Needless to say, there have no doubt been all kind of conversations behind closed doors to try to get a deal done that worked for both sides, but in the end, EA have decided to go it alone. This seems to offer a big lesson on brand licensing, which could be that Licensors can kill their own golden goose if they are not careful. EA already reportedly have deals with the major national leagues & with UEFA for the Champions League, and so the question is what is the value of the FIFA brand & IP? Football is a massively tribal sport, and fans care first about their teams and star players, and the video games player cares about that plus perhaps the glamour and kudos of the top players in the world. In the end, there may not actually be that much value in the FIFA name, or at least not enough to merit $1bn.

That is not to say that EA won’t face risks with their new ‘EA SPORTS FC’ title. For those old enough to remember, FIFA (the game) once had major competition from International Super Star Soccer, which morphed into Pro-Evolution. Looking back in time, Pro-Evo was a far better game, but they didn’t have the license or the star players, which FIFA did, and over time EA fixed the gameplay to make it as good as Pro-Evolution, and maybe better. The key thing to note here is that a worse game with branding and star players won a head-to-head battle.


The key question going forward will be whether the star players, national leagues & UEFA champions league will be enough to propel EA to ongoing success versus whatever official FIFA versions EA’s competitors are willing to pay to produce.


In the end, FIFA can’t fail but to lose out though, because at the very least the effect of these changes will be to split up the video console football (soccer!) revenues between multiple titles. And it seems unlikely any other company would stump up $1bn, when EA will be directly competing. The Golden Goose may be about to downsize, and in that should be a lesson for Licensors in general, a lucrative bird in the hand, is often the best option.