smart toys do toys dream of digital lives
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www.juniperresearch.com
SMART TOYS
Do Toys Dream of Digital Lives?
Whitepaper
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1SMART TOYS Do Toys Dream of Digital Lives?
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, Orbotix’s 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
It is important to apply a definition to the smart toy from the outset to
avoid confusion further. Juniper considers:
A smart toy is one that must have embedded
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.
1.3 The Toy Industry Today
Today’s traditional toy industry is, and has been for many years, facing
heavy competition for children’s 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’ (Nintendo’s 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.
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.
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.
The app, therefore, has become a key battleground for players across
multiple industries. With regard to the toy industry, combining the appwith a physical plaything can be seen as a logical, and even
necessary, evolution from the status quo .
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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.
Action Figures, Dolls
a) 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) 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.
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 Rubik’s Cube and the like. NFC tags have begun to be
incorporated into some board games to detect piece movement,
while adding connected elements to moving puzzle games
allows a vast array of games to be incorporated into a single toy.
Figure 1: Google Smart toy Patent #US20150138333
Source: US Patent and Trademark Office
Plush
a) 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.
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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 3’s 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.
Activision’s 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
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 togenerate exponentially higher revenues via the toy ecosystem
than if the game were simply sold as a standalone product.
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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) 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 year’s sales.
Total revenues from smart toy hardware sales and app
content purchases are forecast to reach $2.8 billion in
2015.
Figure 2: Global Smart Toy Hardware and App Content SalesRevenue 2015: $2.8 Billion
Source: Juniper Research
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5SMART TOYS Do Toys Dream of Digital Lives?
Order the Full Research
Smart Toys: Hardware, Apps & Technologies 2015-2020
Juniper’s 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.
Key Features
Key regional analysis of the toy market and prospects.
Segment splits for smartphone-enabled toys, tablet-enabled toys, games
console-enabled toys, connected drones
In-depth study of the overarching trends, hurdles and drivers impacting
the development of smart toys.
Vendor case studies highlighting stakeholder strategies and success
models.
Business model analysis, with insights into how hardware and software
can drive revenue.
Benchmark industry forecasts for size and growth of the smart toys
market.
What’s in this Research?
Key Trends & Market Developments – Key market trends, allied to a
series of strategic recommendations for smart toy players. Strategic
analysis of business models and solutions for monetisation and content
delivery, supported by case studies (PDF).
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).
Publication Details
Publication date: November 2015
Authors: Steffen Sorrell
Contact Jon King, Sales & Marketing Manager, for more information:
Juniper Research Ltd, Church Cottage House, Church Square,
Basingstoke, Hampshire RG21 7QW UK
Tel: UK: +44 (0)1256 830001/475656 USA: +1 408 716 5483
(International answering service) Fax: +44(0)1256 830093
http://www.juniperresearch.com
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