By Mark Seavy

Amid a downturn in traditional toy sales, companies like Mattel and Hasbro are focusing on digital games.

Overall, Hasbro is forecasting a mid-single digit percentage decline in the overall toy business this year. Mattel, meanwhile, is forecasting a “modest decline” for the year after consumer demand for toys was “fairly muted” in the first half, according to CEO Ynon Kreiz.

In response to the decline in toys—Hasbro’s traditional toy sales fell 20% in Q2 while its Wizards of the Coast segment, which includes digital games, was up 20%—a number of toy companies are turning to the digital world. This is not, however, unfamiliar territory for the likes of Hasbro and Mattel.

Hasbro formed Hasbro Interactive in 1995 to focus on fledgling video and PC games, only to shut it down and sell it to Infogrames five years later. Mattel’s history in digital gaming runs even deeper. The company introduced electronic handheld games in 1976 and launched Intellivision, a 16-bit video games console, four years later.

This time around, both companies appear fully committed to gaming.

Hasbro, for example, forecast posting $105 million in licensing revenues from Scopely’s Monopoly Go! mobile game in the fiscal year ending December 31. The title generated $35 million in minimum guarantees in Q2 (well above the $5 million forecast), CFO Gina Goetter said. The title has posted $3 billion in total sales since its release in April 2023. Overall, Hasbro has forecast its total sales will decline seven to 11 percent this year, up slightly from an earlier projection for a seven to 12 percent decrease.

Hasbro is also expected to post $30 million in MGs this year from sales of licensee Larian Studios’ Balder’s Gate 3 title on Steam and other platforms. Hasbro will use a mix of internal game development, joint ventures, and licensees when releasing digital games moving forward, CEO Chris Cocks said. Hasbro plans to publish one or two digital games annually starting in late 2025 and digital games will account for about half of its $250 million in capital spending this year, according to Goetter. The company has 150 digital games projects either in the market or in development.

Mattel, meanwhile, has hired new staff to develop mobile games internally. It can cost as much as $10 million to develop a mobile game, with customer acquisition being one of the most expensive elements, said Kreiz. However, Mattel can “stage gate” funding for digital games by only investing in marketing when it becomes evident they are “progressing well,” he said.

Mattel’s Barbie world on Roblox has recorded 130 million visits since October and its Mattel163 joint venture with China’s NetEase for digital games has produced $200 million in revenue since being formed in 2018. The venture’s top title Uno Mobile has reached 300 million players globally since being released in 2019. Mattel also signed a licensing deal with Outright Games earlier this year to develop titles for videogame consoles and PCs. These included Matchbox Driving Adventures, Monster High: Skulltimate Secrets, and Barbie Project Friendship, all of which will be released by year end.

“I think physical products for children will always be important, but when you look at what the megatrends are inside the business, play is aging up,” Cocks said in noting that 60% of Hasbro’s revenue comes from ‘kidults’ aged 13 years and older. “Play is going more international, digital, and direct [to consumers]. Partners are becoming more and more important to be able to extend brands into additional aisles.”

The growth of digital games aside, the slowdown in traditional toys this year is also tied to a weaker film release slate that was hampered by last year’s writers’ and actors’ strikes. The toy business is expected to turn the corner in 2025 amid a stronger slate of film releases.

In the meantime, however, not every company has been able to pivot to digital as easily. Basic Fun, which generates about 70% of its revenue from licensed toys for IPs like Care Bears, Tonka, Lite Bright, and others, filed for bankruptcy in late June. The company was hit hard by the Toys “R” Us bankruptcy in 2017 (the retailer has since been revived under new owner WHP Global), as it produced about $35 million in revenue annually for Basic Fun.

Basic Fun was also saddled with about a dozen acquisitions (including Playhut, Tech 4 Kids, and others) between 2018 and 2022 that failed to deliver the $3 billion in assets that were expected to help the company expand, court documents state. In 2023, consumer demand for toys remained “weak” and produced the company’s lowest revenue since 2020, according to court documents.

Moving forward, more toy companies will have to examine their focus on traditional toys, taking into account factors like the theatrical film slate, declining birth rates, the growth of the kidult market, and continued demand for location-based entertainment.

“We expect the toy industry to decline in 2024, although at a lesser rate than 2023,” Kreiz said. “The anticipated decline is due to a lighter toyetic theatrical film slate and the impact of the shift in consumer spending patterns towards experiences and services, which we believe will moderate over the year.”