SMART TOYS

Do Toys Dream of Digital Lives?

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SMART TOYS Do Toys Dream of Digital Lives?

1.3 The Toy Industry Today

1.1 Introduction
In a world where the concept of applying Internet connectivity has been
considered for almost all physical objects, it is unsurprising that the toy
industry is increasingly involved in the development and sale of
connected, smart toys.
Nevertheless, in that respect the industry is undoubtedly at an extremely
early stage; indeed, Orbotixs Sphero toy can be considered an early
effort at creating an app-enabled, smart toy, with the first version only
having launched in December 2011.

1.2 Defintion

Todays traditional toy industry is, and has been for many years, facing
heavy competition for childrens attention. From the mid 1980s onwards,
the acceleration in popularity of video games and associated games
consoles has created an entire sub-segment of the toy industry, with
smartphones and tablets representing a natural evolution of this
phenomenon.
The rise of the console can be associated with those who buy such
devices owing, first and foremost, to their ability to render high-end
games, ie core gamers (Nintendos Wii console excepted).
The smartphone and tablet, however, represent a class of device that is
likely to be used by casual or mid-core gamers (as well as
non-gamers), and therefore appeals to a much wider demographic.

It is important to apply a definition to the smart toy from the outset to

avoid confusion further. Juniper considers:

Hasbro and Mattel, 2 of the largest toy makers in the world, have
both shown a downward trend in reported net earnings in recent
years, with a disappointing Q2 2015.

A smart toy is one that must have embedded

Indeed, it is interesting to compare year-on-year net earnings for both

companies with the rise in smartphone shipments; the general downward
trend is backed up the fact that both have indicated that the industry is
being impacted by the rise of smartphones and tablets.

communications on board that enable it to interface with a

mobile device or games console, while Internet
connectivity may be used for the purposes of
communications to the cloud.

The app, therefore, has become a key battleground for players across
multiple industries. With regard to the toy industry, combining the app
with a physical plaything can be seen as a logical, and even
necessary, evolution from the status quo.

SMART TOYS Do Toys Dream of Digital Lives?

1.3.1 Traditional Toy Categories

There are numerous types of toy on the market today; below we
elaborate on key categories and their role in the smart toy market.

Toys under this category have classically included those such as

Barbie. Early forms of such toys were enabled with limited forms
of speech capabilities; the smart toy offers a much more
advanced version of this. Meanwhile the action figure can be
enabled with simple connectivity, such as RFID (radio frequency
identification) or NFC (Near Field Communication), to connect
with a reader device at low cost, thus allowing the figure to
bridge the digital-physical divide.

Construction Toys
a)

Figure 1: Google Smart toy Patent #US20150138333

Action Figures, Dolls

a)

while adding connected elements to moving puzzle games

allows a vast array of games to be incorporated into a single toy.

Elements of creativity and education are incorporated in this

class of toy, of which the hugely successful LEGO is a part.
Where some toys have in the past made use of battery operated
motors and other moving parts, adding connected and digital
control elements to this category may offer an enriched
experience.

Source: US Patent and Trademark Office

Plush
a)

Board Games & Puzzles

a)

While Ludo and Battleship could be considered classic examples

of toys in this category, one must not discount other varieties
such as Rubiks Cube and the like. NFC tags have begun to be
incorporated into some board games to detect piece movement,

Similar to dolls, plush toys have traditionally sought greater

interactive possibilities with the user. Indeed, the initial version of
Furby, able to learn rudimentary speech through interaction with
its user, generated some 40 million unit sales across a 3 year
lifecycle. Adding connectivity to the 2012 Furby offered greater
immersive possibilities for the user and expanded on the
previously popular Tamagotchi concept.

RC (Remote Control) Toys

a)

Traditionally, RC toys have been controlled via dedicated

hardware using infra-red signals or other means to communicate.

SMART TOYS Do Toys Dream of Digital Lives?

With smartphones and tablets ubiquitously Wi-Fi enabled, RC

toys can now be controlled directly from the mobile device itself,
as well as offer gameplay statistics and information gathered
digitally.

1.3.2 Smart Toy Market Segments

A companion device is considered a necessity for a product to be
considered as a smart toy.
i. Smartphones & Tablets
Owing to the explosion of smart mobile devices over the last 8 years, it is
not surprising to see these being used as the support platform for smart
toys. Companion apps can be downloaded by the user, offering control
functionality, statistical analysis of game performance and so on.
ii. Games Consoles
Beginning in 2007 with PlayStation 3s The Eye of Judgment game,
consoles have spawned an entire genre of smart toy, dubbed toys to life.
Typically, users purchase figurines that are then incorporated into
gameplay by means of an RFID or NFC reader; a virtual representation of
the figurine is then imported into the game.

guidance systems or can be operated remotely, and is able to carry a

payload.
Generally, UAVs are either:

Fixed-wing - similar in design to an airplane, or

Based on a system of rotors - more akin to the workings of a helicopter.

In the context of smart toys, Juniper includes only those drones that:

Are connected to a companion mobile app

Are sold at under $100 wholesale price

1.4 Key Drivers

For the vendor, the smart toy enables the development of a wide
ecosystem of products surrounding an initial piece of intellectual
property.
a)

This is illustrated by the expansion of the Skylanders video game

franchise, which has not only successfully iterated on its console
releases, but also expanded the number of toys able to integrate
with the game (for example, by recently adding connectable
vehicles to the existing crop of figurines).

b)

Thus a single product (the video game) has been able to

generate exponentially higher revenues via the toy ecosystem
than if the game were simply sold as a standalone product.

Activisions Skylanders game franchise, first released in 2011, has

generated sales of more than 250 million of such smart toys.
iii. Drones
Juniper defines a UAV (unmanned aerial vehicle), or drone, as an
aircraft that is either controlled autonomously by on board computers and

SMART TOYS Do Toys Dream of Digital Lives?

Consumers are entering the connected society age: where access

to PCs and Internet connectivity has been prevalent among adults for
many years, the emergence of the smartphone, tablet, and mobile
broadband services, has meant that the average age of individuals
accessing the Internet via such technology is falling.
a)

Figure 2: Global Smart Toy Hardware and App Content Sales

Revenue 2015: $2.8 Billion

Where previous generations of children engaged principally in

outdoor activities for entertainment, the Internet-connected
mobile device negates this requirement and, indeed, offers many
more distractions than outdoor play.

1.5 Forecast Summary

Smart Toy sales are expected to be driven by the tremendous popularity
of the toys to life segment, with LEGO having entered this space in
September 2015.
Owing to the seasonality of the toy market, Juniper expects Black Friday
and Christmas to have a significant positive impact on the years sales.

Total revenues from smart toy hardware sales and app

content purchases are forecast to reach $2.8 billion in
2015.

Source: Juniper Research

SMART TOYS Do Toys Dream of Digital Lives?

Order the Full Research

analysis of business models and solutions for monetisation and content

delivery, supported by case studies (PDF).

Smart Toys: Hardware, Apps & Technologies 2015-2020

Junipers ground-breaking research into the smart toys market represents
the benchmark for analysis of this burgeoning segment. This research
suite investigates how, following the explosion in smartphone and tablet
use, toy vendors have been forced to use connectivity to smarten toys in
an attempt to compete.

Regional & Sector Analysis Top line forecasts for shipments,

installed base and hardware and software revenues are provided, with
insight into key trends shaping the smart toy market (PDF).

Interactive Forecast Excel Highly granular dataset comprising 5 year

forecasts for smart toy hardware and software across more than 6,400
data points (Interactive XL).

Key Features
Publication Details

Key regional analysis of the toy market and prospects.

Segment splits for smartphone-enabled toys, tablet-enabled toys, games

console-enabled toys, connected drones

Authors: Steffen Sorrell

In-depth study of the overarching trends, hurdles and drivers impacting

the development of smart toys.

Contact Jon King, Sales & Marketing Manager, for more information:
Jon.King@juniperresearch.com

Vendor case studies highlighting stakeholder strategies and success

models.

Juniper Research Ltd, Church Cottage House, Church Square,

Basingstoke, Hampshire RG21 7QW UK

Business model analysis, with insights into how hardware and software
can drive revenue.

Tel: UK: +44 (0)1256 830001/475656 USA: +1 408 716 5483

(International answering service) Fax: +44(0)1256 830093

Benchmark industry forecasts for size and growth of the smart toys
market.

http://www.juniperresearch.com

Publication date: November 2015

Whats in this Research?

Key Trends & Market Developments Key market trends, allied to a

series of strategic recommendations for smart toy players. Strategic