
Why are toys such a bad business? - cjbest
https://diff.substack.com/p/why-are-toys-such-a-bad-business
======
sillysaurusx
_This locks toy companies into a challenging bet. Every year, they have to a)
predict trends, b) invent them, and c) commit capital to them. All without
knowing how the rest of the year will turn out. Since toy trends exist, but
don’t last for very long, they have to invent new products every year—but the
technological state of the art doesn’t advance very fast. It has all the
volatility of tech, without the progress._

Insightful post. This succinctly explains why most toys are movie-related.
It's the easiest trend to predict.

EDIT: This article keeps getting better and better. I had no idea Skyrim was
almost set in Game of Thrones. [https://www.tor.com/2011/09/16/how-skyrim-was-
almost-set-in-...](https://www.tor.com/2011/09/16/how-skyrim-was-almost-set-
in-westeros/) It left me wanting more.

The author is apparently Byrne Hobart, and they've written a variety of
things: [https://diff.substack.com/people/112633-byrne-
hobart](https://diff.substack.com/people/112633-byrne-hobart) Looks like I'll
be spending too much time reading them.

They also write a post ... _double checks_ ... every day?! For a week
straight, sometimes? Wow.

Sadly, most of their work appears to be locked behind a $20/mo paywall. It all
looks very interesting though: [https://diff.substack.com/p/dropbox-
information-asymmetry-an...](https://diff.substack.com/p/dropbox-information-
asymmetry-and)

~~~
mysterydip
Agreed, got some good insights in the article and I will be reading more as
well.

Also explains the sequelitis of the video game industry: while new ideas/IP
can succeed, it's a risk. People really want more of what they know. Consider
a random platformer, or the exact same game reskinned as Super Mario.

~~~
aikinai
A tangent, but this is one reason Nintendo is so successful; they know the
characters sell, while at the same time understanding it’s not the characters
but the quality of the game and that really matters and brings customers back
for more.

That’s why they first experiment and develop a lot of game ideas looking for
the most fun mechanics. Then after something is shaping up into a great game,
they look at the IP catalogue and see what skin to put on top.

Edit: In general, but not 100% of the time. The Zelda team is mostly
consistently the Zelda team and does set out with intent to make the next
Zelda game, for example.

~~~
gumby
> A tangent, but this is one reason Nintendo is so successful; they know the
> characters sell, while at the same time understanding it’s not the
> characters but the quality of the game and that really matters and brings
> customers back for more.

I think you undersell this comment: it’s far more than a tangent.

Nintendo and Bandai the only companies I’ve worked with who I’ve Consistently
heard the term “fun” discussed at the executive suite level, or a level below.
Back in the Ken Kutaragi days at Playstation (SCEI in those days) this was
true as well.

Hasbro seems to value playfulness, but in my more limited experience The
higher up the chain the less relevant it was. Could be that the execs took it
as a given?

Never came up in any AAA titles I talked with folks about at the companies
(but big disclaimer: I never worked on one!)

You don’t have to be Marvin Acme, but “fun” seems like a pretty basic value,
while objectives like “engagement” I’d see as a consequence,not a primary
goal. I think understanding this is what has made Nintendo so successful for
decades, and has allowed them to survive flops.

~~~
aikinai
Oh, I just meant a tangent in the discussion. It’s definitely critical to
Nintendo’s success!

Also, very interesting to hear your experience with the other companies.

------
ethbro
Because most toy companies don't / can't understand vertical integration and
increasing value capture.

Or, in other words, they don't have their own version of this strategy chart:
[https://johnaugust.com/wp-
content/uploads/2014/07/disney_cha...](https://johnaugust.com/wp-
content/uploads/2014/07/disney_chart.jpg) (Disney corporate synergy, dated
1957)

Your primary consumer has the attention span of a 10-year-old, and no
disposable income. Why are we surprised this is a terrible industry?

A smarter approach would be what Tim Sweeney is talking about with Fortnite
(and Amazon infamously does): you have to do everything you can to pivot any
initial success into a durable advantage, by aggressively expanding into
adjacent opportunities, even if they're very different businesses (e.g. movie
theaters).

They've made token moves towards this with the physical toy + computer game
mash-up genre, but from an external perspective I don't think any of them
quite _get_ how it's supposed to work. Efforts seem under -capitalized /
-resourced / -inspired.

~~~
watwut
The customer is adult parent, grandparent or aunt. They have disposable income
and average kid has more toys then the kid needs.

~~~
ethbro
I'd disagree. The purchaser is an adult, but the customer is not. Who gets
excited about a _particular_ toy? That's the customer. (Note: I'm not talking
about the edutainment market here)

~~~
aflag
Phrase it as you might. The adult is the one making the decisions. The
children's excitement and desire is only one of the things the adult takes
into consideration when buying a toy. That's a big deal for the parents, but
much less so for the grandparents, uncles, aunts, etc. Obviously they want to
make the kid happy, but they are distanced enough that they will probably not
know what the kid actually considers the hot things. That's why when you were
young you had many toys, but not always the ones you really wanted to have.

~~~
daveFNbuck
The adult isn't always the one making the decision. When I was a kid, I'd
often be set free in the toy store and given some limit on how much I was
allowed to spend. It was usually a low limit, but there was a good variety of
toys under it.

The adult set the budget, but as the kid I had control over how that budget
was spent, unless it was a toy my parents found objectionable.

~~~
aflag
Exactly, they had the final say. They were merely making their decision
simpler. And that's the best experience you'd get. If you have family and
friends, it's likely a good chunk of your toys were bought by them too. Toy
makers have to appeal both to kids and adults.

------
mensetmanusman
Demographics is a big one.

As the population pyramid changes to a rectangle, the latent toy:child ratio
continues to increase.

Every day I see piles of free toys around the neighborhood being given away
for free.

People with 1-2 kids are drowning in toys.

~~~
Pxtl
Yup. I always say - we are post-scarcity for plastic. I have 3 kids, and we
accumulated plastic stuff at such a horrifying rate that I started thinking of
it as a liquid.

~~~
airstrike
Honest question: how about buying less toys?

~~~
watwut
Most toys are not bought by parents.

~~~
airstrike
Well, parents still have final say. My parents won't give my kid anything I
don't approve.

~~~
traes
So, if their best friend wants to give them a toy, you just tell them no? I'm
sure that won't make them resent you at all...

That works fine for adults, but it's sketchier with kids. Maybe a better
system would be to make them trade toys and choose which ones they keep?

~~~
airstrike
No, I'll tell their best friends' parents to tell their kid to only trade toys
with my kids but not give them out. I recall my parents and a good childhood
friend's parents having a similar conversation when I was 10 or so

------
cosmodisk
It also doesn't help that 80% of toys is cheap plastic tat. There's a lot of
stuff but most of it is junk. For those who reach London at some point, I
can't recommend enough V&A Museum of Childhood. It's a large museum with a
substantial collection of toys,some as old as 300 years or so. It has it all:
from PS1 to some wooden doll house an affluent Victorian family would have
spent a small fortune on. The older toys are fabulous and nicely made. I think
it's probably better to have a few quality ones than some 20 transform er cars
that brake after 10 days of playing with them.

~~~
contrapunter
_> It also doesn't help that 80% of toys is cheap plastic tat_

Yes. Amazing how many people are content to makes presents of such dross to
their young friends and relations.

Alternative approach: get the _adult versions_.

e.g. don't buy the $20 binoculars endorsed as 'educational'; get $40 dollar
binoculars which last much longer and are actually useful

e.g. don't buy a plastic spade, give a gardening trowel instead

etc.

~~~
crazygringo
Except that kids tend to destroy things (the binoculars obviously, not a
trowel), tend to be violent with and throw things (a real gardening trowel is
heavy and could injure their sibling for life), and quickly lose interest in
things (they forget about the $20 binoculars long before their lack of quality
is apparent).

I mean it depends on the ages of your kids... but there are _very good
reasons_ most toys are cheap plastic. It didn't just happen accidentally. It's
a feature, not a bug. (Except for landfills, of course.)

~~~
drewboo
It seems like the most responsible choice as a parent would be to buy fewer,
more durable toys. But is that a realistic expectation?

~~~
em-bee
i don't know if it's a realistic expectation for everyone but i absolutely
loathe getting new toys because with the exception of lego and compatibles and
a few other constructable toys and plastic animal figures none of toys we ever
got survived beyond a few weeks.

i once bet my son that the toy he wanted so badly would not survive two weeks.
and if i won, he'd have to promise me to never ask for junk toys again, but
focus on lego and compatibles.

the toy survived 3 weeks.

~~~
drewboo
That sounds like a great way to teach your son the meaning of value, nice work
:D

~~~
em-bee
and it seems to have worked. we were looking at toys in passing. and when i
pointed out the quality of the material of one particular toy that he was
looking at, he agreed, and said he didn't want it anyways.

he may soon be ready for a new brick set then...

------
pier25
As a kid in the 80s I would get excited each Christmas by watching ads with
new toys on the tv.

Do kids still watch regular tv? My youngest nephews only watch YouTube and
Netflix. They only want iPads and consoles for Christmas.

~~~
EricE
As a kid in the 70's and even into the 80's it was the Sears Wishbook. Nothing
beats the tactile experience of flipping through those pages of _potential_. I
wish I would have kept some of those from back in the day - they would be
amazing time capsules now.

------
amelius
I don't understand this. I'd prefer to give children the same things that I
enjoyed as a child. (E.g. meccano, technic Lego). But the problem is that
these companies "modernize" their offerings to such extent that I don't like
them anymore.

Also most of the good Lego sets are either cars or airplanes. This gets a
little boring after giving these sets for a few years in a row. Lots of good
sets become retired, which is a pity.

I think I will be moving away from Lego for my next gifts because there is
only very limited choice left in the $50 price range.

~~~
moultano
When I was first looking into buying Lego sets for my kids I felt the same
way, but I've completely turned around. Legos are _way_ better than they were
when I was a kid. Check out the 3-in-1 line. They're brilliantly designed. A
few of my favorites:

[https://www.lego.com/en-us/product/deep-sea-
creatures-31088](https://www.lego.com/en-us/product/deep-sea-creatures-31088)

[https://www.lego.com/en-us/product/mighty-
dinosaurs-31058](https://www.lego.com/en-us/product/mighty-dinosaurs-31058)

[https://www.lego.com/en-us/product/underwater-
robot-31090](https://www.lego.com/en-us/product/underwater-robot-31090)

[https://www.lego.com/en-us/product/riverside-
houseboat-31093](https://www.lego.com/en-us/product/riverside-houseboat-31093)

[https://www.lego.com/en-us/product/outback-
cabin-31098](https://www.lego.com/en-us/product/outback-cabin-31098)

I also used to be bummed that Lego retired their standalone fantastical space
ships line, in favor of making everything about starwars, but instead they've
now based their space line on actually realistic spaceships, and it feels like
a much better fit. When my son builds Lego rockets now, it makes him want to
learn about all the NASA missions they're based on. He ends up learning about
the parts of real rockets that are reflected in the Lego models.

[https://www.lego.com/en-us/product/deep-space-rocket-and-
lau...](https://www.lego.com/en-us/product/deep-space-rocket-and-launch-
control-60228)

~~~
crazygringo
Wow. That it... so cool. I had no idea.

I've heard the "Lego sets are worse now" meme for so long I just assumed it
was true.

But all those sets look utterly fantastic, and you're right -- even _better_
than when I was a kid. I would have killed for all those.

Thanks for the info. For whatever reason, that just put me in a great mood to
start my day. :)

~~~
wtracy
The "Lego sets are worse now" meme seems to be a combination of people having
overly rosey memories of how good Lego used to be (80s Lego was not as amazing
as people make it out to be) and people checking in during one of Lego's
slumps (they've had a few) and never checking again.

I'm pretty happy with where Lego is today.

------
acdha
There’s an interesting angle about which definition you use for constitutes a
good business. There is robust demand for good quality toys (e.g. LEGO, Brio,
Melissa & Doug) but it’s relatively stable because not everyone wants to buy
in the higher price ranges, demand is finite, and making quality toys means
you’re competing against yourself because many toys are passed down to
siblings and resold or gifted locally.

If you’re a parent that’s good, but if you’re trying to serve market
expectations of constant growth you’re always under pressure to cut corners,
and thus the long-term future of your brand, since the business can’t grow
rapidly without a baby boom. LEGO clearly hit escape velocity but they seem
more like an outlier.

------
fny
Toys are /not/ a bad business. If you're an investor looking for 10x returns
on millions in capital, sure. If you're a maker/designer, it's a GREAT
business for as long as you embrace the holiday sales cycle and can command a
healthy margin.

I designed a game with my brother a few years ago, and we've been growing
steadily every year.

[https://llamadrama.com](https://llamadrama.com)

This business only required a few thousand dollars to get started. If you're a
maker, go make your toy/game!

If you're an investor, go away. You'll probably ruin the business. It's so
incredibly cheap to get an idea into the market place, we don't need you
anymore.

~~~
wtracy
I'm going to say that the business of selling card games is _very_ different
from the business of selling injection-molded plastic toys. A mold can cost
thousands of dollars, and is useless once you have to make something different
for next year's toy line.

------
tehjoker
Don't forget that large manufacturers also manufacture trends as well as best
as they can. That's the easiest way to sell. Someone I knew that worked in
clothing design said that all the big manufacturers decide either by
observation, discussion in industry journals, or collaboration that e.g. olive
green (not the current example) is going to be the thing this year so
customers are essentially forced to buy the newest "trend" due to lack of
choice.

~~~
tennineeight
Why is this any different than collusion? This sounds like multiple
competitors deciding together to reduce market competition.

~~~
tehjoker
It's different strategies for collusion, but it's more illustrative to discuss
how they're doing it. Talking about collusion in the abstract makes it sound
like a conspiracy theory. Also, the difference between collusion and
collaboration is whether you think parties having discussions is bad or good.

------
netsharc
> TV ad campaigns, too, tend to be purchased in advance. About half of TV ad
> spending is allocated to the upfronts—booked March through May to be
> delivered by the end of the year.

I wonder how that's been in this game-changing year...

~~~
wtracy
That will be interesting to see.

I could see kids being cooped up and bouncing off the walls generating
additional demand that could offset some of the overall economic slowdown.
There's also reduced competition from secondhand toys with parents avoiding
garage sales.

My prediction: board game companies will do ok. All-ages board games tend to
be cheap, and they give the whole family something to do for a few hours.

------
ilamont
_With Amazon Prime, the Christmas shopping season starts on December 22nd or
so._

Starts, or ends?

~~~
netsharc
It does say "Prime", with same (or next)-day delivery.

I can't imagine how many extra delivery drivers they need to hire to meet this
demand from last minute shoppers. Amazon would be clever to incentivize with
pre-Christmas discounts (I guess they probably do that, with "Black Friday"
and "Cyber Week" offers...).

------
musicale
> Video game prices have been declining in real terms, in part because of
> cheaper manufacturing and distribution

and competition from "free to play" and mobile games

------
coronadisaster
They don't talk about cardboard boxes (most kid's favorite toy)?

and they don't talk about the plastic waste from mainstream toys?

------
draklor40
I would like to call BS on this entire "analysis" and presume that dropping
fertility rates (and child births) across all of the developed world with
enough discretionary money to spend on toys might be the single biggest reason
why toy businesses are stagnating and perhaps reduce over the long run.

------
KaoruAoiShiho
It's not though, see TSLA.

------
snarfy
Video games are doing pretty well.

~~~
ShamelessC
As was mentioned in the article.

------
hamilyon2
So, shorting every toy company would be a viable market strategy?

Someone should run the numbers and find out.

~~~
smabie
No, probably not. If your thesis is: toy companies perform worse than the rest
of the market. Then you would need to short toy companies and long the rest of
the market. You would want to construct it to be market neutral: the same
proportion of stock is held both long and short.

Just shorting toy companies would not work. Or it might work over some short
period of time, but it's not the sort of portfolio you would want to construct
for the long haul.

