Those of you who are about to stroll through the corridors at Javits during Toy Fair might want to prepare yourselves for something you haven’t experienced in a while. This could be the year that the KAGOY (Kids Are Getting Older Younger) shift is cause for celebration rather than mourning. While toycos tried to beat the US$150-billion consumer electronics industry at its own game with toytronics in 2006, this year many have adopted an ‘if you can’t beat ’em, join ’em’ stance that relies more on their chief strength as creators of engrossing play patterns than on their experience as makers of electronic devices. Several have created a new category of product that meshes physical toys with online gameplay, and with the rate at which tweens are flocking to the internet for casual gaming, they just may be on to something.

Kids are online and spending for games

According to research firm eMarketer’s October 2006 study Teens & Tweens Online, roughly 10.5 million kids ages eight to 11 are regularly online, with web gaming ranking as the number-one activity for nine-year-olds (56%). Similarly, Kids & Digital Content, a new report from Port Washington, New York’s The NPD Group, indicates that downloading games is the biggest activity for kids two to 14, and a full 44% get their games on Yahoo!Games. Furthermore, though it’s believed that lack of credit card access is impeding the development of paid sites for kids, the report found that 55% of kid computer users pay for content. This bodes well for these new toys that will be purchased at retail and accompanied by complimentary immersive websites.

‘It makes so much sense to take what’s engaging about the internet and incorporate it with a physical toy,’ says Anita Frazier, industry analyst for toys & games at NPD. The key to success, she says, is that toycos entering the space will have to strike a balance between high-tech bells and whistles and the developmental stage of the target demo. Preschoolers, for example, are limited by their dexterity and inability to read. Make no mistake: Kids as young as two are online, but Frazier notes that if the item is too complicated, it will occupy more of the parents’ time than the child’s. ‘Parents won’t want to do it,’ she says. ‘They want to set the child up on the computer once, and then leave them be.’ And with older kids, until they reach age 11 or so, they’re only really interested in gaming. Spending too much time developing social-networking components, à la MySpace, Habbo Hotel and Club Penguin, may be lost on the core crowd.

The other plus about these toys that primarily tap into the web via standard USB ports and cables is the retailer remains a vital part of the equation, and consequently, the product might garner more shelf space. Whether it’s Wal-Mart or Best Buy, mass retailers aren’t currently a part of the online casual game market that, according to research gathered by Hasbro’s Tiger Electronics, is growing year-on-year by 18% and should hit US$990 million by 2009. As these relatively low-priced playthings – ranging from US$5 to US$49 at the highest end – will only be available through retailers, it’s a way for them to get in on some of the action.

Toycos line up to get wired

So what do North American toycos have up their sleeves? L.A.’s MGA Entertainment was early to market with Miuchiz, which launched late last July. The toy has both a portable handheld and online component, and is centered on virtual pet gameplay; it’s also separately targeted to boys and girls as it offers individual worlds based on Bratz, Monsters and Paws (cats and dogs). So kids can travel with Bratz on their handheld, keeping their customizable characters healthy and happy, and then plug the device into a PC to open up an extensive virtual environment online that includes casual games, a place to ‘buy’ virtual accessories for their character and limited social-networking capabilities.

Gary Kanazawa, MGA’s GM of interactive and electronic games, says the number of online registrations for the device has doubled every month since Miuchiz launched, and children who don’t even own the handheld are trying to become part of the web world. The plan now, he says, is to let those kids have limited access to the site so that they can experience the toy and hopefully convert into handheld users. And a second version of Miuchiz that may prove more enticing is in the works. The number of games will increase tenfold, and some will be rendered as 3-D multiplayer titles; the online mall will add more services, such as a hair salon where characters can get new hairstyles and hair colors; and finally, the social functions will expand beyond simple chat to let kids send each other e-cards and cooperate in online treasure hunts organized by MGA.

Over at Playmates Toys in Costa Mesa, California, the master toy licensee for Microsoft and 4Kids Entertainment’s Viva Piñata is one-upping the model by adding a collectible figure to the mix – did we mention it’s a figure embedded with an intuitive microchip?

The lead toy is more like a network of components. Proprietary J-Sync technology weaves together the figures, the handheld Party Port, Viva Piñata website and same-titled Xbox game – they will all interact with each other when the toys launch this fall. The line will go out with 24 figures based on Piñata characters (US$7.99 to US$9.99 apiece, depending on rarity), and they’ll house a J-Sync chip that turns them into digital trading cards, each with distinct characteristics and Party Points value. Players can then wave their figures over the screen on the Party Port (SRP US$49.99) and transfer the digital info. Once entered into the device, characters can become part of battling games, and then via a USB hookup, the info can be transferred to the Piñata microsite. Once there, kids will be able to collect more points by playing casual games, as well as adorning their avatars with accessories.

What guilds the lily with the Piñata line is that the Party Port has the ability to synch up with the Xbox game itself. Not only will users be able to open up cheats in the console game, but when they wave a character over the port, it will appear in the console game sporting the accessories that the physical figure has on, closing the loop between toy and interactive gameplay. And upping its marketing potential, the Party Port will function like a retail scanner that reads special Piñata-coded labels. Kids can earn bonus points by scanning, and packaged goods partners and retailers will get more exposure.

Radica, which is now part of the Mattel family, has taken the original IP route and created Funkeys, a line of urban-inspired vinyl figures (US$4.99) that plug into a larger starter kit (US$19.99) and connect to a proprietary website and rich virtual world. Chris Wilson, VP of marketing, says the time has finally come for these types of toys. Back in 1998, he notes, a crop of internet-based toys debuted at Toy Fair. ‘Those toys failed so miserably that if you showed up with one the next year, you were a fool…,’ he says. ‘But kids’ use of the internet has caught up with the plans from eight years ago.’

And since the social-networking aspect of the internet is a big pull for chatty, chatty girls, you can expect that Bandai’s Girlz Connect Destiny device won’t be alone for long. The toyco is putting to work the lessons learned with its successful relaunch of Tamagotchi in 2004. Headed onto version 4.5, the virtual pet and its tamagotchitown.com continue to add more play value. According to director of marketing Colleen Sherfy, the website averaged 75,000 visitors per day in December, and the new edition will add more games, interaction and opportunities to earn sought-after Gotchi points that kids can use to further customize their pets and habitats.

Targeting girls eight and up, Destiny bypasses the pets and gets straight to the socializing. Girls can use the device to take quizzes and then go to its website and create new quizzes to download back onto Destiny or share with their friends. Essentially, the quizzes try and get to the root of their personalities, similar to those found in YA magazines like Seventeen.

Finally, there’s Net Jet, Tiger Electronics’ casual gaming console. The idea was to make bite-sized online gaming a better experience, while (as noted) letting the retailer in on the equation, says Steve Flege, the company’s VP of marketing. So the Net Jet Controller (US$29.99), launching this spring, acts like a plug-and-play device by connecting to a PC and taking the user directly to the Net Jet site. Kids then plug in a game key (US$14.99) that enables them to access one feature game and three additional titles. It’s a closed system that doesn’t permit users to venture outside of the site, therefore internet safety shouldn’t be an issue. Also, the site will not be supported by ads, so Flege expects some parents might be more comfortable with it than other commercial sites. Net Jet will roll out with 10 game keys, including licensed titles like SpongeBob SquarePants: Pizza Toss and Foster’s Home for Imaginary Friends: Buggin’ Out.

Racing to market? Beware the retail traffic jam

With so many offerings hitting the market at the same time, there is a danger that consumers will be overwhelmed by too many options. ‘It’s not all going to work,’ admits NPD’s Frazier. ‘If there are too many on the market at once, it will quickly get confusing,’ she says, adding that this same situation played out in the electronic learning aid category about two years ago.

That said, Frazier believes the category shouldn’t feel too much heat from interactive competitors in the console game aisle. The web is a different space, and these new toys revolve around a different game model. Al Kahn, CEO of 4Kids Entertainment, agrees.

‘Many different online activities co-exist right now with console games,’ he says. Of course, the one thing that might stop the market from becoming flooded is the cost of the websites being supported by the sales of physical toys. ‘Depending on how deep these sites are,’ says Kahn, ‘they can take millions of dollars to develop.’ The more members and gameplay it can handle, the more it will cost. ‘That’s what will end up filtering out what’s good and what’s not.’