The Toys and Games Industry - Essay Example

The Toys and Games Industry The Toys and Games Industry is emerging as a key and profitable industry throughout the world, with UK being no exception to this trend. This industry consists of toys and games belonging to varied types or genres. In the earlier times, traditional toys and games like infant toys, construction toys, outdoor sports toys, etc., which are made up of non-electronic components, were the main selling items, until technology incorporated electronic based toys and games made the appearance. Although, electronic based toys and games are spreading extensively, the appeal for the traditional toys does not wane and are still being preferred, thus facilitating the evolution of a toys and games industry, where all these items coexist and even complement each other, thereby optimizing the toys and games business. Thus, the key aspect or theme that could optimally impact the toys and games industry is the technology based innovation, and that is applicable to the UK market as well. UK toys and games industry is witnessing effective growth, after a slump in the recent times, and aided by certain external factors, it is posed for good growth. Thus, this report will start off with the discussion of the UK toys and games industry, followed by a critical evaluation of the impact the theme of innovation could have on the industry, and ending with a recommended strategic response to the issue. Toys and games industry in UK generates sizable incomes and contributes a key part to the country’s GDP. When the sales of both the toys and games industry is combined, it could be close £5 billion, however in the industry circles, the sales or revenues of these industries are calculated in a separate manner. On those lines, the overall size of the toy market in 2013 was £2.9 billion, which is down 1 per cent compared to 2012. (Williams 2014). When one focuses on the video games market, the 2013 sales of video games in the UK totalled around £2.19 billion. (Gilbert). Although, these 2013 figures are slightly lower when compared to the previous years, there is good potential for future growth including in 2014, when external factors like release of summer blockbuster Hollywood movies, start of FIFA World Cup, etc., could play a major role. (Toy World 2014). This prospect of increased growth in the coming years was pointed out in the research done by New Key Note, as they stated that the toys and games market in UK, bucking the international trends, is expected to grow around 10 percent in the next 3 years. “The report claims that between 2008 and 2017, the total UK market for toys and games is expected to rise in value by 10.1 per cent, with the majority of this growth occurring between 2012 and 2017.” (Loveday 2013). In the study, titled Toys & Games Market Report Plus, certain market trends regarding the demographics of the target segment (children aged 14 and under) of the toys and games industry was visible, and that provides key inputs regarding future potential as well as strategic responses. That is, according to the report, between 2008 and 2012, the greatest growth of number of children was in the “one to four year old age group, up 9.3 per cent during the period.” (Loveday 2013). In addition, the number of children aged five to nine also increased by 6.3 per cent, while the population of children aged under one rose by 4.8 per cent. (Loveday 2013). Considering this increase across all age segments, it is clear that UK’s toys and games industry has good potential for further growth. The theme of innovation particularly backed by technology is a very relevant theme to the toys and games industry, considering that fact that this industry needs to keep on updating or evolving itself constantly, so it can come up with newer and enticing products to attract its target customers. Thus, the basic and key point is, for some time now, the target segment of children plus the youth as well as adult are favouring electronic toys over traditional games. “In recent years the market has been influenced by changing consumer tastes, with children opting for more sophisticated video games and electronic toys….with the industry also benefiting from a growing adult consumer base as this group takes a greater interest in games as a popular leisure pursuit.” (Report Linker 2013). This focus on both the children and adult segments of the population mean that industry has to come up with varied as well as unique toys and games, thus necessitating more incorporation of innovations. Importantly, due to exposure of various media from TV to web, children are seeing as well as hearing about varied and high number of toys and games, and that is making the children to change their toys more frequently. “This means toy and game manufacturers are obliged to introduce new products on a regular basis, and focus on innovation and technological advancements.” (Finance Yahoo 2013). Although, technology based innovation appears to be the key driving force for the toys and games industry in the coming years, certain issues need to be ironed out, and thereby achieving an effective strategic response. The fundamental issue is regarding how much the toys and games manufacturer need to adopt technological innovations, by forgoing their focus on traditional toys. There is constant appeal for traditional toys, but that still technology based toys are selling in high numbers. “Tech toys are among the best selling toys in Europe, with value increasing by 27 per cent in the UK in 2013 compared to 2012, but at the same time, collectible figures such as Lego Minifigures, Moshi Monsters and Ninja Turtles all appear in the top 10.” (Chahal 2014). The traditional toys particularly for the infants and the pre-schoolers are still popular, with parents buying it in large numbers. Due to the parents’ emotional affinity to those toys and also because of their safety nature, traditional toys are sold. (Kendra 2010). In addition, with these traditional toys providing more physical activity than the electronic ones, it is favoured and so it will continue to make its presence. Stuart Grant, Buying Director at toy retailer The Entertainer had this to say: “Traditional toys will never go away and there will always be entrants and exits or people stealing focus from our core demographic. Things come and go.” (Chahal 2014)). However, at the same time, as discussed above, technology based or electronic toys and games are optimally enticing not only children but the adults as well, thereby necessitating the makers of traditional toys and games to adapt accordingly. This being the case, Grant adds to the above perspective by stating, “It’s about how the industry moulds itself around the trends that the outside world is experiencing. We have to work out ways that we can deliver that experience of a product in traditional toys.” (Chahal 2014)). Thus, the strategic response could be adopting a balanced approach, where the makers without doing away with the traditional toys, and also by adopting technology, can reach a common ground. Even in the case of technology or electronic games, there are appears issues due to the advent of online gaming. Although, electronic toys and games are liked by the prospective customers, in the current times, challenges to them have come from online gaming. The online games are maximally free as well as inexpensive, and also easier to access through computers, tablets and phones, as opposed to buying expensive gaming consoles as well as other traditional games. (Werbach and Hunter 2012). The data according to Global Industry Analysts validate this point of how people are maximally moving to online gaming. Online games market continues to record strong growth, with more than 210 million internet users using online game sites, with those numbers expected to record yearly growth in excess of 15% over the coming years. (Report Linker 2013). Considering these issues, it becomes important to come with a strategic response taking into consideration the key role of innovation and technology. The strategic response that could be initiated on the part of the toy and games companies to aptly manage the above issues is to innovate and come up products in multiple platforms. That is, instead of coming up with products or services on just one platform, manufacturers can manufacture products or services, which can be played through various platforms. On those lines, makers of traditional toys, based on their success, can bring out an electronic version or electronic toy, followed by videos games, mobile games, etc., and in the opposite direction, video games makers can come up with mobile game versions, followed by action figures as well as traditional toys and games based on it. . “The recent rise of cross-over toys that combine video games and mobile games and apps with traditional toys offers new market and technological opportunities for traditional toys and games to benefit from the rise in popularity of modern communication technology.” (ECSIP 2013). It looks like that leading toy and games companies are acting on the above lines, as they have understood that standalone toys and games lack scale as well as versatility, and so they are going for products that can span multiple platforms. “Franchises that span multiple platforms—from cartoons to video games to films to physical toys—are a better bet.” (The Economist 2013). In that direction, toy and games company Hasbro entered into a partnership with the video games developing company Ubisoft, with the intention to bring their successful board games to the screen as video games. In addition, Hasbro recently purchased a 70% stake in the mobile gaming company, Backflip Studios, for $112 million, again with the aim to take their games to the mobile phones. (Jasko 2013). This strategy of Hasbro in a way implies that toys and games companies can adopt this multi-platform model, to ensure that they come up with all types of products including traditional, electronic, video games as well as mobile games, so they cover all their bases. Thus, by this strategy, companies can manage the above discussed traditional vs. electronic issue as well as the issue of advent of online gaming. Although, not all the companies can come up with products for all platforms, they could try to reach to maximum platforms. “Manufacturers must become cleverer at creating high-value, multimedia properties.” (The Economist 2013). To create such products, the companies needs to maximally innovate by investing sizably in Research and Development (R&D) and also by acquiring relevant sources like acquisition of apt companies. (Rabowsky 2010). When the companies do that as strategic response, the toy and games industry can effectively manage the issues, even while increasing the sales and revenues. Personal reflection Working on the projects is always an enriching experience, as I get to know new things about key topics in an in-depth manner, as the research and the resultant analysis provides varied and rich learning. Although, it may seem to be a challenging as well as tedious process, when I start the project and also during the project, at the end it appear to be a rewarding experience. When the topic of toys and games industry was given, with the need to understand the industry, followed by analysis of it using a particular theme taught in the course and finally end with a recommendation, I was sceptical. However, when I broke down the necessities into simpler task, I got a clear idea or blueprint on how to proceed. On those lines, I firstly searched for information regarding toys and games industry in UK. When I read many sources ranging from books, reports, websites, articles, etc., it provided an overview of the industry, its financial results as well as potential, followed quite prominently by how the issue of technology and innovation is impacting that particular industry. Then, I selected the theme of Innovation, and then again did research to find more information about the role of innovation and technology in the toys and game industry. After finding the relevant information, initiated the writing process and finished it in one go. I feel my performance in writing the project was apt, as I was able to do in-depth research, find relevant information and write according to the project requirements. In this process, I was able to learn a lot about the toys and games industry and importantly how it may function in the near future. References Chahal, M., 2014. Toy sector hopes for Easter holidays boost. Available from http://www.marketingweek.co.uk/trends/trending-topics/shopper-behaviour/toy-sector- hopes-for-easter-holidays-boost/4009861.article(accessed on May 7, 2014) ECSIP., 2013. Study on the Competitiveness of the Toy Industry. Available from http://ec.europa.eu/enterprise/sectors/toys/files/reports-and-studies/final-report- competitiveness-toys-ecsip_en.pdf(accessed on May 7, 2014) Finance Yahoo., 2013. FBC Holdings Begins Prototypes of Interactive Toys, Chooses International Sourcing Company to Speed Products to Market. Available from http://finance.yahoo.com/news/fbc-holdings-begins-prototypes-interactive- 132400345.html(accessed on May 7, 2014) Gilbert., 2014. Video Games Sectors Tax Relief given Full Approval by EU. Available from http://www.gilberts.uk.com/site/news/801711075.html(accessed on May 7, 2014) Jasko, J., 2013. Hasbro Inc. acquires majority stake in Backflip Studios. Available from http://www.gamezebo.com/news/2013/07/08/hasbro-inc-acquires-majority-stake- backflip-studios(accessed on May 7, 2014) Kendra, F., 2010. What to Look For When Buying Toddler Toys. Available from http://www.topzinearticles.com/rss.php?rss=278(accessed on May 7, 2014) Loveday, S., 2013. UK market to reach £2.45 billion by 2017. Available from http://www.toynews-online.biz/news/read/uk-market-to-reach-2-45-billion-by- 2017/041262(accessed on May 7, 2014) Rabowsky, B., 2010. Interactive Entertainment: A Videogame Industry Guide. Game Industry Book. Report Linker., 2013. Toy and Game Industry: Market Research Reports, Statistics and Analysis. Available from http://www.reportlinker.com/ci02218/Toy-and-Game.html(accessed on May 7, 2014) The Economist., 2013. Childs Play. Available from http://www.economist.com/blogs/schumpeter/2013/09/toy-industry(accessed on May 7, 2014) Toy World., 2014. BTHA predicts Toy Trade Growth factors for 2014. Available from http://www.toyworldmag.co.uk/news/2014/01/btha-predicts-toy-trade-growth-factors-for- 2014(accessed on May 7, 2014) Werbach, K and Hunter, D., 2012. For the Win: How Game Thinking Can Revolutionize Your Business. Wharton Digital Press Williams, R., 2014. Toy Fair 2014: the Technological Toys of the Future. Available from http://www.telegraph.co.uk/technology/news/10587272/Toy-Fair-2014-the- technological-toys-of-the-future.html(accessed on May 7, 2014) Read More