Connected Toys Market

Connected Toys: Transforming Playtime in the Digital Age

In today's digital era, technology has permeated every aspect of our lives, including the realm of play. Connected toys have emerged as a fascinating intersection between traditional toys and modern technology, offering children an immersive and interactive play experience. These toys, equipped with sensors, connectivity features, and interactive capabilities, have the potential to enhance learning, creativity, and social development. This essay explores the impact of connected toys on children and their playtime, highlighting the top factors that influence their adoption. Additionally, we will touch upon relevant government policies that shape the landscape of connected toys.

Impact of Connected Toys on Playtime

Connected toys have revolutionized playtime, presenting children with new opportunities and experiences. Here are some key impacts:

• Enhanced Interactivity: Connected toys enable children to engage in immersive play experiences, interacting with the toy itself, other children, or even remote players. This heightened interactivity fosters engagement, imagination, and problem-solving skills.
• Educational Value: Many connected toys are designed to be educational, incorporating interactive learning elements. These toys can facilitate the development of cognitive skills, such as problem-solving, critical thinking, and creativity, making learning more enjoyable and effective.
• Personalized Experiences: Through advanced technologies like artificial intelligence (AI) and machine learning, connected toys can adapt to individual preferences and provide personalized experiences. This customization enhances engagement and tailors learning to the specific needs of each child.
• Collaborative Play: Connected toys can facilitate collaborative play experiences, encouraging children to interact, cooperate, and communicate with their peers. This social aspect promotes teamwork, empathy, and communication skills, contributing to their overall social development.

Top Factors Influencing Adoption of Connected Toys

Several factors influence the adoption of connected toys among children and parents alike. The following factors are particularly impactful:

• Safety and Privacy: As connected toys collect and transmit data, ensuring the safety and privacy of children is paramount. Parents and guardians are concerned about potential security breaches, data misuse, and unauthorized access to personal information. Toy manufacturers must prioritize robust security measures and transparent privacy policies to address these concerns.
• Educational Value: Parents are increasingly seeking toys that offer educational value to their children. Connected toys that promote learning and skill development are more likely to be adopted, as they align with parents' aspirations for their children's growth and development.
• User-Friendly Interface: Intuitive and user-friendly interfaces are crucial for connected toys. Children, especially younger ones, need toys that are easy to operate and understand. Manufacturers should focus on designing toys with clear instructions and accessible controls to enhance the overall user experience.
• Cost and Affordability: The cost of connected toys can be a determining factor in their adoption. Parents evaluate the cost-benefit ratio and consider the long-term value of the toy. Manufacturers need to strike a balance between affordability and quality to make connected toys accessible to a broader demographic.

Government Policies and Regulation

Governments around the world are becoming increasingly aware of the impact of connected toys on children's privacy, security, and well-being. As a result, various policies and regulations have been implemented to address these concerns. Here are some key areas of government involvement:

• Privacy and Data Protection: Governments have introduced or strengthened regulations to safeguard children's privacy and protect their personal data. These regulations often require toy manufacturers to adhere to strict data protection practices, obtain consent from parents or guardians, and provide clear information regarding data collection and usage.
• Safety Standards: Governments have established safety standards to ensure that connected toys meet specific quality and safety requirements. These standards encompass aspects such as electrical safety, material composition, and age appropriateness.
• Advertising and Marketing: Governments regulate the advertising and marketing practices surrounding connected toys to protect children from misleading or harmful content. These regulations often aim to ensure that advertising accurately represents the toy's features and benefits without exploiting children's vulnerability.
• Cybersecurity and Vulnerability Mitigation: Governments work to enhance cybersecurity measures in connected toys, preventing potential hacking or unauthorized access. They encourage manufacturers to incorporate robust security features and regularly update software to address vulnerabilities and protect children from online threats.

Dynamics of Connected Toys Market

Drivers in Connected Toys Market

Shift toward two-working-parent households giving rise to the need for monitoring and tracking toy devices has become a significant driving force in today's interconnected world of IoT. Our smartphones provide us with unrestricted access to various aspects of our lives, from banking and GPS to social media and online shopping. However, technology has extended its reach beyond screens and into our homes, cars, and even our children's toys. With the changing dynamics of working culture, where more heterosexual couples adopt two-working-parent households, the time spent between parents and children has considerably reduced. In such a scenario, connected toys serve as multipurpose gadgets that parents can program for learning exercises and as event trackers to ensure their children's safety. Take, for example, CogniToys' Dino, which utilizes Wi-Fi connectivity and IBM Watson's natural language processing technology to provide tailored responses based on the child's age group and skill level. As parents always strive to find products that assist in their children's intellectual development, the demand for connected toys is expected to increase over the forecast period.

The adoption of connected toys in enhancing children's skills, particularly in the STEM (Science, Technology, Engineering, and Math) field, is another significant driver for the connected toys market. These toys are being used to cultivate professional skills like coding and engineering. Wonder Workshop's Dot Creativity Kit, for instance, offers a trio of interactive robots that encourage children to explore coding. Connected toys like Dash (for 6+-year-olds) and Cue (for 11+ years old) also contribute to this trend.

Restraints in Connected Toys Market

However, the rise of connected toys has raised concerns regarding privacy. Many children's toys now come with internet connectivity as a key feature. While the connection can be made through cables or apps on smartphones and tablets, these toys often have functionalities such as cameras and microphones that can gather and handle personal data. Since they are used by individuals of various ages, including very young children who may not be supervised by adults, ensuring transparency and addressing privacy concerns becomes challenging. Connected toys have the ability to listen and engage in conversations, which, while providing valuable benefits to parents and children, also pose security risks. Regulations play a critical role in ensuring the safety of these vulnerable customers and mitigating potential risks. Additionally, the outbreak of COVID-19 has disrupted the supply chain, leading to variations in supply and demand for connected toys.

Opportunities in Connected Toys Market

Increase in research and development investment in robotics and toys

Programmable robots offer students a valuable opportunity to acquire a wide range of skills, such as designing and constructing robots, programming, and gaining a comprehensive understanding of robotics concepts and principles. Robotics encompasses various disciplines, including computer programming, engineering, mathematics, physics, and other branches of science. Numerous institutions and organizations are conducting research on the application of robotics in diverse fields such as manufacturing, healthcare, agriculture, aerospace and defense, security, and entertainment. Additionally, there are several reputable vendors offering advanced hardware and software toolkits for connected toys. These connected toys provide a heightened level of interactivity and engagement compared to traditional toys. They can respond to voice commands, gestures, or touch, creating a more immersive play experience for children. Connected toys have the potential to enhance learning and skill development by incorporating educational content, interactive games, and quizzes. Through these toys, children can improve their cognitive abilities, problem-solving skills, and knowledge in various subjects. Furthermore, connected toys can personalize the play experience based on individual preferences and abilities, adapting to a child's progress, offering customized content, and providing tailored recommendations. This promotes personalized learning and increased engagement. Additionally, connected toys facilitate social interaction and connectivity among children. They enable multiplayer games, communication with friends and family members, and even connect children from different locations, fostering socialization and collaboration. The data generated by connected toys regarding children's play patterns, preferences, and interactions can offer valuable insights to toy manufacturers. This data can help in product improvement, understanding consumer behavior, and developing targeted marketing strategies.

Challenge in Connected Toys Market

Adverse effects on children's cognitive development

Research indicates that the decline of unstructured play over time can lead to developmental deficiencies in problem-solving, flexibility, and coping abilities among adults who were not encouraged to engage in self-initiated play during their childhood. These characteristics are crucial for success in later life; however, smart toys may not necessarily promote their development. Excessive screen usage among children has been found to negatively impact their physical and mental health. Brain scans from a study revealed that children who spent significant time on screens showed less growth in areas associated with cognition and language compared to those who prioritized reading books. Preferring tablets or smartphones over books could hinder a child's development. Connected toys often collect and store personal data, including children's interactions and behaviors. Safeguarding the privacy and security of this data poses a significant challenge. Insufficient data protection measures can result in unauthorized access, data breaches, or misuse of personal information. To ensure children's privacy, stricter regulations and robust security protocols are necessary. Connected toys that enable communication or interaction with other users also carry risks related to online safety. There is a concern about children's exposure to inappropriate content, cyberbullying, or interactions with strangers. Implementing effective parental controls, content filtering, and age-appropriate safeguards can help mitigate these risks. It is crucial to design connected toys considering the child's age and developmental stage. Ensuring that the content, features, and interactions are appropriate for the intended audience is of utmost importance. Inaccurate age targeting or insufficient content filtering may expose children to unsuitable material or experiences. The rapid advancement of technology can render connected toys obsolete. If the supporting software or infrastructure becomes outdated or unsupported, the toy may become unusable or its functionality compromised. Toy manufacturers should consider future-proofing their products by providing updates or compatibility measures to extend the lifespan of connected toys. The use of children's data, advertising targeting, and the impact of technology on play and socialization raise ethical concerns regarding connected toys. Striking a balance between commercial interests and child well-being requires careful ethical considerations and adherence to responsible practices.

Ecosystem of Connected Toys Market

During the forecast period, the offline segment is projected to maintain its position as the largest market share holder in terms of distribution channels for connected toys. The offline distribution channel provides various avenues for vendors to connect with their consumers. One common approach for connected toy providers to engage with local distributors and retailers is through participation in trade shows. Establishing effective partnerships and understanding the preferences of local distributors and retailers are essential for successful market entry, which may be challenging to achieve solely through online channels. Department stores cater to a wide range of customers and offer a diverse selection of both domestic and international toy brands for consignment.

On the other hand, the online stores segment is expected to capture a significant market share. This can be attributed to the increasing consumer preference for online toy and game shopping from the convenience of their homes. Additionally, the availability of discounted toy products and subscription box services provided by online retailers will further boost the revenues of the online stores segment.

In terms of target age groups, the 5-12 years segment is projected to hold a major market share. School students within this age range exhibit significant demand for educational and puzzle toys, as they contribute to their creativity and cognitive development. Moreover, teenagers' growing interest in sports and recreation-focused smart toys, including remote-controlled drones, helicopters, cars, and others, is expected to drive the growth of this segment.

Moving on to the interfacing device, the smartphone segment is anticipated to dominate the market during the forecast period. The integration of connected toys with smartphones has greatly contributed to their rising popularity. These toys leverage the capabilities of smartphones to offer enhanced play experiences. By connecting to smartphones, they can unlock interactive features, educational content, and multiplayer capabilities. Children can control and personalize their toys using smartphone apps, expanding the realm of creativity and engagement. This seamless integration opens up a world of imaginative play, learning opportunities, and digital connectivity, making connected toys an appealing choice for tech-savvy children and their parents.

Furthermore, the Wi-Fi segment is expected to hold a significant market share throughout the forecast period. Connected toys with Wi-Fi connectivity have transformed the playtime experience. By leveraging Wi-Fi technology, these toys can connect to the internet, providing access to a wide range of interactive features. Children can enjoy online content, engage in multiplayer games, and even communicate with friends and family members. Wi-Fi connectivity enables connected toys to remain updated with the latest content, ensuring a dynamic and ever-evolving play experience. With seamless integration to the internet, these toys offer limitless possibilities for fun, learning, and exploration, captivating children's imaginations and keeping them engaged for extended periods of time.

Regional Insights

North America is poised to dominate the market share during the forecast period, demonstrating substantial growth in the adoption of connected toys. This upward trajectory is expected to continue until 2027. The region benefits from the presence of key players such as Sphero, Mattel, and Hasbro, as well as numerous startups that are actively offering advanced connected toys to cater to customer demands. Notably, collaborations between solution vendors and startups, universities, and schools are further propelling the growth of the connected toys market in North America.

On the other hand, Asia boasts a thriving digital entertainment industry encompassing gaming, animation, and digital media. The integration of connected toys with popular characters, franchises, or gaming platforms has garnered immense appeal among children, capitalizing on the region's enthusiasm for digital entertainment. Countries like China, South Korea, and Japan have been at the forefront of technological innovation and entrepreneurial endeavors. In these nations, both startups and established toy manufacturers have developed an extensive array of connected toys, harnessing cutting-edge technologies like artificial intelligence, augmented reality, and the Internet of Things (IoT) to create engaging and interactive play experiences.

Dominating Companies in Connected Toys Market

• MATTEL
• HASBRO
• LEGO
• SONY CORPORATION
• VTECH
• UBTECH
• DJI
• IROBOT
• IROBOT: PRODUCT LAUNCHES
• SPHERO
• DIGITAL DREAM LABS
• PILLAR
• WONDER WORKSHOP
• TOSY ROBOTICS
• WORKINMAN INTERACTIVE
• WOWWEE
• KEYI TECH
• MIKO
• MAKEBLOCK
• SMART TEDDY
• INTELINO
• FISCHERTECHNIK
• POTENSIC
• MAINBOT
• ROYBI
• PLAYSHIFU
• BANDAI NAMCO Entertainment
• Basic Fun Inc.
• Konami Holdings Corporation
• PLAYMOBIL

Recent Developments in Connected Toys Market

• Hasbro and eOne: In December 2019, Hasbro, a leading global toy and game company, completed its acquisition of Entertainment One (eOne), a multinational entertainment company. This strategic move aimed to expand Hasbro's capabilities in content development and entertainment-driven storytelling. eOne's expertise in film and television production, including popular franchises like Peppa Pig and PJ Masks, complemented Hasbro's portfolio of brands, including Transformers, My Little Pony, and Monopoly. The merger allowed Hasbro to further leverage its connected toy offerings by integrating them with eOne's engaging content.
• Mattel and NetEase: In September 2020, Mattel, a renowned toy manufacturer, announced a partnership with NetEase, a leading internet technology company in China. The collaboration aimed to develop and publish new digital gaming experiences and innovative learning solutions for children in China. By combining Mattel's extensive brand portfolio, including Barbie, Hot Wheels, and Fisher-Price, with NetEase's technological expertise and online gaming platforms, the partnership sought to create immersive and interactive digital experiences that integrate with connected toys.
• LEGO and Tencent: In January 2020, LEGO, the iconic Danish toy company, partnered with Tencent, a multinational conglomerate known for its digital services and social media platforms. This collaboration aimed to create a safe and child-friendly digital environment for Chinese children through Tencent's digital platforms, including QQ and WeChat. The partnership aimed to develop online games, digital content, and educational experiences that combine LEGO's physical play with Tencent's digital capabilities, enhancing the overall play experience for children.
• Sphero and LittleBits: In August 2019, Sphero, a robotics and educational toy company, acquired LittleBits, a company specializing in modular electronics and STEAM (Science, Technology, Engineering, Arts, and Mathematics) learning. The acquisition brought together two leading companies in the educational toy space, leveraging their expertise in robotics, coding, and electronics. The combined entity aimed to offer a broader range of innovative products and resources to inspire and engage children in hands-on, creative learning experiences using connected toys.
• Spin Master and Toca Boca: In May 2021, Spin Master, a global toy and entertainment company, announced its acquisition of Toca Boca, a leading digital play studio focused on creating digital toys and games for children. Toca Boca's expertise in digital play and Spin Master's extensive portfolio of physical toys and entertainment properties, such as PAW Patrol and Hatchimals, aimed to enhance the integration of physical and digital play experiences. The partnership sought to deliver immersive and interactive play experiences through connected toys and digital platforms.
• Spin Master and Rubik's Brand Ltd: In October 2020, Spin Master announced its acquisition of Rubik's Brand Ltd, the iconic puzzle toy company known for the Rubik's Cube. The acquisition aimed to combine Spin Master's global marketing and distribution network with Rubik's Brand's innovative product portfolio. This partnership enabled Spin Master to expand its presence in the puzzle and games category and leverage the enduring popularity of Rubik's Cube to create new connected toy experiences.
• Hasbro and Entertainment One (eOne) Acquisition by Mattel: In December 2021, Mattel completed its acquisition of eOne, the same company that Hasbro acquired in 2019. This acquisition by Mattel aimed to strengthen its content creation and entertainment capabilities, as eOne owns valuable franchises such as Peppa Pig and PJ Masks. The integration of eOne's content and Mattel's portfolio of brands like Barbie and Hot Wheels could lead to the development of innovative connected toy experiences and engaging storytelling for children.
• VTech and LeapFrog Enterprises: In August 2021, VTech, a global supplier of electronic learning products, completed its acquisition of LeapFrog Enterprises, a leading educational toy company. The merger aimed to combine the strengths of both companies in the development of interactive and educational toys for children. By leveraging LeapFrog's expertise in early childhood development and VTech's technological capabilities, the partnership aimed to offer enhanced connected toy experiences that foster learning and skill development.
• Sony Interactive Entertainment and BANDAI NAMCO Entertainment: In May 2022, Sony Interactive Entertainment (SIE) and BANDAI NAMCO Entertainment announced a partnership to jointly develop and publish new IP (Intellectual Property) for the PlayStation platform. While this collaboration is not specific to connected toys, it highlights the ongoing efforts to create engaging gaming experiences that could extend to connected toy integration in the future. By combining the strengths of both companies, the partnership aimed to deliver innovative gaming content to a global audience.
• Anki assets acquisition by Digital Dream Labs: In 2019, Anki, the robotics and artificial intelligence toy company, went bankrupt and ceased operations. However, in 2020, Digital Dream Labs acquired the assets of Anki, including its popular product lines like Cozmo and Vector. Digital Dream Labs aimed to revive and support the existing Anki products while also exploring new possibilities for connected toy development. This acquisition provided a new lease of life for Anki's innovative robotics toys and offered opportunities for further advancements in the field.

Connected toys have emerged as a powerful and transformative force in the world of play. By providing enhanced interactivity, educational value, personalized experiences, and opportunities for collaboration, these toys have the potential to enrich children's playtime and foster their overall development. However, the adoption of connected toys depends on factors such as safety, educational value, user-friendliness, and affordability. Governments also play a vital role in ensuring the privacy, security, and well-being of children through policies and regulations. As technology continues to advance, it is crucial for stakeholders, including manufacturers, parents, and policymakers, to collaborate in creating an environment where connected toys can bring joy and learning to children while safeguarding their interests.