My research on video games and their impact on toy industry revenues from 1980 through 2018 demonstrates that the sales of the former have a definite impact on the latter. Which raises the question: What can we expect in 2019 and 2020?
I think most toy industry analysts failed to consider the impact that video games had on toy sales in 2018. With Fortnite, Overwatch and the Nintendo Switch leading the way, the video game industry was up a whopping 18% last year. When you put that together with the Toys R Us bankruptcy, it is amazing that the toy industry was only down 1.9% (NPD).
Which raises the question, what can we expect in 2019? According to excellent articles in gamesindustry.biz and NPD.com featuring NPD's Mat Piscatella, 2019 will see a cooling off in video game sales.
Here is how Mat sees 2019:
This year will be more challenging, and I do not expect to see the growth rate of a year ago repeated. We should see cyclical declines in both PlayStation 4 and Xbox One that Switch gains will not be able to offset. The market will also have a tough time to replicate the growth that Fortnite helped drive, particularly in the year’s first half. Finally, it will be very difficult for the market games slate in 2019 to show significant growth against what may have been the strongest software slate in a decade a year ago.
He goes on to say that "…the 2019 market will be relatively flat, or a few percentage points thereabouts."
That's really good news for the toy industry. Though most analysts are anticipating a relatively flat year for the industry in 2019 (-1% to +1%), I think that, because video game sales will be down, we could see growth of +2% or +3%. Also helping things for the industry will be those companies like Jazwares, Wicked Cool Toys and Hasbro that have licensed Overwatch and / or Fortnite for their toys.
2020, however, could be trouble for the toy industry. Microsoft and Sony are planning to release new versions of their gaming consoles. If they do, and it is not a sure thing, it will spell trouble for the toy industry. Historically, each time a new console has been released, toy industry sales have been negatively impacted.
As it appears now, 2019 should be a pretty good year for the toy industry. Let's just be happy about that.
by Mat Piscatella, the video game expert for The NPD Group.