28 SECTOR SPECIAL VIDEO GAMES The next level
Lewis Tyler explores the future of the relationship between toys and video games at retail, finds out why the number of toys based on video games is expanding and takes a look at the first property to truly bridge the gap…
Statistics released by NPD at London Toy Fair revealed that toys were worth more than computer games at retail in 2011, with toy sales increasing three per cent to £2.96 billion. At physical retail gaming sales came to £2.52 billion – the industry’s third consecutive year of decline. Some of the biggest names in UK toy retail like Toys R Us, Smyths and Hamleys are stockists of video game software and hardware, but the UK’s biggest independent chain, The Entertainer, has opted out. “We don’t sell consoles or games
and it’s for one reason: margin,” says Stuart Grant, buying director at The Entertainer. “We struggle to gel the business model that we’ve built around selling toys with the traditional games industry business model.” “There’s no margin in the product, or the retailer is not allowed to earn a sufficient enough margin to survive. The reality is, GAME is in a lot of trouble, as is Gamestation and HMV. The internet has just completely chopped the legs off the volume that they had.” With fortunes reversed for the first time in years, can our industry still view video games as the enemy? “I think we’ve learnt to co-exist together,” says Grant. “We’ve lived through the pain and moved on.” He analogises: “When the TV first came along people said ‘well kids are going to stop playing and they’re just going to sit in front of the TV’ – and we’ve managed to get the two to gel and work together. The two drive each other from a toy perspective.” The reference to the way in which kids’ TV buoys the toy business with a constant supply of lucrative licences is a pertinent one. Last year, toys based on video game brands were worth £60 million in the UK, according to NPD – while small in comparison to traditional character licences, it is a growing figure. Sega has seen revenues in its licensing programme increase by 700
Above: Kids playing with Activision’s Skylanders; Top Right; A costumed Skylanders character Bottom Right: Minecraft creator Notch with a Lego set based on the title
per cent in the financial year so far, after a significant number of partners were signed in new categories. This year Sonic will be spun into a number of new toys, including a construction range from Meccano and talking plush from Underground Toys. So what’s behind the growth? Sissel Henno, Sega’s head of brand licensing for Europe, explains: “We’ve seen a lot more interest in the past year as so many retailers have started seeing rapid growth on video games brands. With the realisation of the increased presence of games in kids’ lives, it is natural that these IPs get more shelf space.” Worms, the classic British strategy franchise from Team 17, is looking to take advantage of a more open minded retail with multiple toy lines launching this year. Simon Kay from agent ATNewmedia, says: “Decision makers and buyers are of a
generation that has grown up with this evolution and are accepting of the sector and penetration the brands have. I think retailers are beginning to understand that certain brands like Worms may actually have the longevity they are looking for.” We have reached a watershed in terms of the legitimacy of video games brands at retail. If you consider Sonic celebrated its 20th anniversary last year, this means someone who played the first ever Megadrive title when they were 15, is now 35. For the first time, we are in a position where most people have enjoyed a gaming experience. “One of the great aspects of a
brand like Sonic is the heritage factor – most parents have fond memories
of playing the games themselves,” explains Henno.
Another factor which helps a brand like Sonic at retail is the level of engagement with the character. As Henno points out: “Kids spend hours guiding Sonic through different levels of challenges and obstacles.”
This interactivity and the process of overcoming enemies and completing levels creates a strong bond with the character, which
MARCH 2012
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