Activision’s Skylanders burst onto the toy scene in 2011 using near-field communication that lets kids import physical characters into a console game, effectively bridging the gap between virtual and real-world play. Given the unprecedented success of this property, whose revenue has surpassed US$3 billion at retail, scores of toycos scrambled to follow suit and quickly cranked out their own interactive hybrid toys. None met with Activision’s success and the trend faded. Enter New York Toy Fair 2015.

The show floor at Javits was flooded with virtual-cum-real-world playthings that combine digital games and physical toys that interact with smartphone and tablet apps. Many big industry players like Spin Master, Mattel and Crayola, in fact, are now vying for market share in this space, but they’re up against some steep competition.

To name a few, there’s category vet Activision, which is releasing a fifth version of Skylanders this fall, and newcomer Anki, whose game/toy hybrid Drive was the second-bestselling item on Amazon.com’s toy list in December. Anki is now gearing up to release an updated version of the game this fall, Overdrive, and if the standing-room only crowds around its Javits demos are any indication, it may be a can’t-miss proposition.

Pole position
Combining innovative toys with cutting-edge robotics, Overdrive takes the battle racing experience to a new level, where players can take on friends or enemy AI commanders. “We really believed that we could use robotics to make toys intersecting with video games better than anything else,” says Hanns Tappeiner, president and co-founder of the San Francisco, California-based company. “You have to make sure the technology isn’t just there for technology’s sake, but to actually make a better product.”

Using a robotics technique called positioning to monitor cars and make sure they don’t go off the track, each car’s camera takes 500 pictures per second of the track and transfers the information to a player’s smartphone. Players control their cars by tilting their phones and can access features like turbo bursts and 180-degree turns through the game’s free app. An Overdrive starter kit will retail for US$150 and expansion packs will cost between US$10 and US$30 apiece.

While Anki is busy perfecting Overdrive for the game’s September release in the US, UK and Germany, it has also been fielding calls from several companies interested in licensing. “It’s not just car models. There are certain types of video games, or even movies, where you could do very beautiful licensing models so they’re like a completely different universe,” he says.

From the ground up
Spin Master’s Sick Bricks lets kids optically beam characters into a gaming app to protect its central city from attack by an evil overlord and his goons. For this game, the toyco uses refined 3D facial recognition to capture and bring to life the smallest of details. “It can recognize something that is the size of a two-by-two building brick as being a distinct head and body of a character,” says Johnny O’Neal, marketing director for Sick Bricks.

Low price-points (collectible characters cost less than US$2 each when you buy a pack of five) and the game’s ground-up design for today’s kids who expect their toys to live digitally and physically, could help it stand out, he adds. “An earlier generation of toy companies, including ourselves, tried to create toy and app experiences where the toy simply wasn’t adding enough value for what it cost,” says O’Neal. “Consumers made it clear they don’t want a US$15 toy unlocking a US$99-cent app.”

O’Neal says the Sick Bricks concept could be applied to any kind of toy, not just small collectibles, and the business model has the company’s top executives excited because it delivers twice the value to the toys. Spin Master has also had preliminary discussions about bringing optical beaming to top licenses. Sick Bricks launched at retail in March with packs of figures ranging from US$2.49 to US $6.99, as well as a three-in-one playset for US$17.99.

Lights, camera, animation
An extension of its Color Alive app, which allows kids to bring their drawings to life with movement and sound, Crayola’s upcoming Easy Animation Studio (US$24.99) takes things one step further by letting kids create their own animated movies.

Users can design their own characters with colored pencils and crayons and then import them into the app. Then they put a mannequin on a stand in front of the camera and place it in different poses, confirming each one in the app. The app captures the movements through glyphs on the mannequin and fuses them together through smooth-action technology, which kids can play back when they’re done.

“Kids love creating and sharing their own videos, but animation creation has typically been difficult and time-consuming,” says Jordan Howell, Crayola’s virtual product manager. “Color Alive allows them to take their physical creativity to the virtual world.”

Crayola already has many licenses in its Color Alive franchise and will continue to add  favorite characters to the product portfolio, he adds. “We’re excited about launching Easy Animation Studio and changing coloring forever.”

Brave new 3D world
Mattel and Google, meanwhile, have joined forces to give a popular 76-year-old stereoscopic toy a modern facelift. The reimagined View-Master works with Google’s Cardboard technology and lets kids experience and learn about famous places, landmarks, nature and planets via virtual reality. It works by combining an app, an experience reel, and an Android smartphone, which slides neatly into the device.

“By infusing technology and innovation with this classic toy, we are giving kids an enhanced experience allowing for play opportunities not yet imagined through new, digitally curated content,” says Aslan Appleman, Mattel’s senior director of advanced concepts. “The challenge to bridging the gap is to ensure you are not forcing an unnatural play experience.”

Mattel is looking for ways to leverage the technology to deliver unique experiences from both a content and physical product perspective, and the company will announce licensing and developer partners closer to the product’s fall launch. “The most important thing is for us to deliver a quality, family-friendly experience, so we will take the time to ensure whatever we bring to market can deliver that for our consumers,” Appleman says.

The View-Master and a sample experience reel will cost US$29.99. Additional packs with four themed reels will sell separately for US$14.99.

The viability of v2.0
With all these companies lining up to once again take on the interactive hybrid/toys-to-life toy market, one thing’s for certain—not everyone will be a winner. However, there are certain attributes that point to a likely success.

Richard Gottlieb, toy industry insider and publisher of The Global Toy Report, says growth in this category is being driven by the realization that 21st-century children and their millennial parents live in a much bigger universe than 20th century parents.”They don’t really see a bright line between what’s virtual and what’s real,” he says. “And you can really see that with young children, who when given a magazine, will press on the pictures like it’s a tablet.”

Toy industry analyst at market research firm The NPD Group, Alex Teper, says more kids are using tablets and connected devices than ever before, and this trend is only going to grow in the near future. “The internet is infiltrating just about everything a child plays with, which promises to make physical toys much more fun and emotionally resonant,” he says.  According to The NPD Group, the US toys-to-life market swelled 22% from 2013 to 2014 and is now worth upwards of US$425 million.

While the toy industry sees some innovation in classic play patterns and categories each year, tech is where the needle can really be moved, notes Adrienne Appell, Toy Industry Association trend specialist. And this category is unique in that it makes traditional toys relevant for today’s kids. “With some of these toys, you’re able to play with or without a device, so it’s a great way to get kids engaged and excited about something, but not have them in front of a screen 24/7,” she says.

The integration of old- and new-world toys works best when kids can get the most out of the tangible toy space and the interactivity of the digital world, explains tech guru Marc Saltzman. “It can’t be gimmicky,” he says, which was a big problem early on in the category. “The consumer didn’t see really any value in buying the physical product. It just didn’t feel right. It wasn’t intuitive. It was very limited and very linear. And as a result, you can buy it for a dollar now.” He cites Mattel’s Apptivity and WowWee’s AppGear as two prime examples.

Gottlieb agrees. Previous versions of the technology were mostly add-ons and didn’t bring anything useful to the table. “It was two separate experiences,” he says, adding category leaders like Activision’s  Skylanders and challengers Disney Infinity are succeeding because the game-play experience is seamless. “The separation between the digital and physical is being erased. It’s a really important development in play,” he says.

What’s different about this iteration of toys-to-life, according to Appell, is toymakers have figured out how to use the technology in a smart way to make the toys more fun and engaging. “Kids aren’t going to care whether or not the toy has technology. The technology needs to make sense,” she says.

That’s especially true for today’s kids, who are digital natives, not digital immigrants, says Saltzman. “This whole Minecraft generation, these kids love building digital worlds and then bringing them into the real world through augmented reality,” he says.

Teper adds one of the biggest advantages of toys that connect to apps is toymakers can create physical toys with their own personalities that aren’t necessarily borrowed from other media. “Connected toys often make for a far more powerful experience than a game rendered only in pixels on a two-dimensional tablet,” he contends.

This article originally appeared in the April 2015 issue of Kidscreen