While tablet computers sell at record-setting rates this holiday season, behemoth traditional toy makers like Mattel and Hasbro are shaking in their boots as many parents put high-tech toys like Kindle Fires and iPads under the tree for their interactive kids, according to one expert.
It wasn’t a merry Christmas this year for Barbie or Ken, as many parents put high-tech toys like Kindle Fires and iPads under the tree for their interactive kids.
"The top two guys, Mattel and Hasbro, they are terrified," Sean McGowan, managing director of equity research at Needham & Company, an investment banking firm, told The Financial Times
. "They should be terrified, but the official party line is they're not terrified."
reports that toy sales were down about 5 to 6 percent through the end of the third quarter, according to BMO Capital Markets toy industry analyst Gerrick Johnson. "To be 5 to 6 percent down at this time of year is pretty dramatic," he said.
As a result, industry analysts are revising their fourth-quarter predictions, claiming they will be much lower than previously anticipated.
NBC News reports that if sales decline between 2 to 3 percent in the fourth quarter, when the industry rings up about 55 percent of its sales, sales will shake out at a decline of about 3.5 percent for the year, which would be the worst year for which Johnson has data. His records go back to 1980.
Mattel's number-one selling product this year was a plastic cell phone case, FT reports, another telling sign that times are changing.
On "Cyber Monday," the Monday after Thanksgiving when there are many online deals, "iPad" was searched the most, 1.7 million times, while "Lego" was searched 1.5 million times, and "Barbie" got 300,000 searches.
Mattel, which makes Barbie, is in a slightly better position than Hasbro because girls' toys are more popular than games right now, toy analyst Margaret Whitfield told USA Today.
Toy makers simply can’t compete with the engaging and realistic games a child can play on a tablet, McGowan told FT.
In an attempt to keep with the times, Hasbro came out with "Monopoly Zapped," which allows players to keep track of money and property on their iPads.
Aside from Apple and Amazon tablets, a few of the high-tech toys that Johnson says should do well are LeapFrog's LeapPad 2 and VTech's Innotab 2, which are targeted primarily to younger children, as well as tablets such as TechnoSource's Kurio and Toys 'R Us' Tabeo, he said.
Even if children do receive a board game or an action figure for Christmas, the sheer amount of time they spend playing games online or streaming movies leaves far less time to play with traditional toys.
"Everyone I know who has a kid under 10 has a tablet in the house. And that tablet is the babysitter," Dylan Collins, an investor in Fight My Monster, an online gaming company, told FT.
Johnson chalks it up to a bad economy. It takes 18 months to two years to develop a toy, and the poor economy limited the amount of investment and risk toymakers were willing to make on new toy ideas.
"In the toy business, safe usually means boring," Johnson told NBC News.
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