Meet the latest victims of brutal competition with the iPad: Santa’s elves.
Toy makers and retailers are on track for their worst Christmas season in recent memory, and analysts say a key culprit is the surging popularity of tablet devices with parents and kids, whether it’s Apple’s iPad, Amazon’s Kindle Fire or other versions powered by Google’s Android software.
“There are not a lot of compelling traditional toys out there this year, or many specific hot items,” says Gerrick Johnson, a toy analyst at BMO Securities. “But the major problem is that the whole iPad, iPhone, Android and app phenomenon is in the sweet spot of its cycle.”
The US toy industry, which racks up an estimated $20 billion a year in sales, is on track to post a revenue decline of 3 to 4 percent for 2012 — its worst year-over-year performance in at least 30 years, according to data compiled by BMO. The drop is expected despite an easy comparison with last year’s already dismal 2 percent decline, Johnson notes.
Demand for iPads and other tablets, meanwhile, surged 43 percent to 25 million units during the third quarter, according to Strategy Analytics.
Some parents increasingly are gravitating toward tablets as they’ve found them to be an effective way to occupy an unruly child.
Even more troubling for toy makers, hit game apps like “Angry Birds” and “Tetris” cost only a few dollars each, if anything at all.
“This is like what [toy makers] faced with video games,” says Sean McGowan, a toy analyst at Needham & Co. “But it’s a more serious threat because [tablets and apps] are more ubiquitous and cheaper.”
Toy manufacturers led by Mattel and Hasbro — which in most years have eked out steady sales gains between 1 and 2 percent — are suffering in part from self-inflicted wounds.
Clinging to risk-averse strategies in a lackluster economy, most have lately clamped down on research and development and have been cranking out toys licensed from aging movie franchises like Spider-Man and Batman.
Hasbro, meanwhile, is hawking more than 30 different versions of Monopoly, many of them electronic, including versions based on Junior Disney Princess and SpongeBob SquarePants.
Toy makers’ efforts to counter the tablet threat have been especially hit-and-miss. Spin Master’s AppMATes toy cars, licensed from Pixar’s “Cars 2” movie, use the iPad as a moving maze. But the cars have drawn complaints for scratching iPad screens and failing to properly interact with the tablet.
“I am an adult with patience,” one buyer griped on Amazon this weekend, complaining of a poor connection between car and screen. “How is a child that is learning supposed to deal with this?”
It’s not all carnage this Christmas, says Jim Silver, editor-in-chief of Time To Play, a trade magazine. A line of toys based on Doc McStuffins, a TV cartoon veterinarian to stuffed animals, is flying off the shelves. Leapfrog also is expected to have a strong season with its own tablet devices.