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  • 8/17/2019 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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    2SMART 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.

      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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    3SMART 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 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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    4SMART 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) 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:

    [email protected] 

    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 

    mailto:[email protected]:[email protected]://www.juniperresearch.com/http://www.juniperresearch.com/http://www.juniperresearch.com/mailto:[email protected]