Toys-to-Life: A Bubble About to Burst?

Disney announced yesterday that it will no longer be publishing console games, bringing its popular Disney Infinity series to an abrupt end. As part of the news, Disney also announced that Avalanche Software in Utah will be closed permanently.

Avalanche Software has been working exclusively on the Disney Infinity IP for the last five years or so. With the studio shuttered and the IP shelved, it begs the question…if a successful franchise like Disney Infinity can’t stay viable in the current market, are we about to see the bubble burst for all Toys-to-Life games?

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In terms of dollars spent, last year’s Disney Infinity 3.0 overtook all other Toys-to-Life games. With $200 million in sales from its September launch through the end of the year, the franchise seemed to be taking a extremely positive turn. A large part of that revenue is likely tied to the toys themselves, which I wouldn’t say is actually a bad thing. While the toys have much lower margins than a game disc, their costs aren’t as tied to game development costs, likely giving them a much higher ROI than the game itself. If that’s true though, the fact that Disney has chosen to not move forward with the frahcnise probably speaks volumes about their ROI on development costs.

So if last year’s market leader can’t survive in this market, what can we expect to happen with its two largest competitors, LEGO Dimensions and Skylanders?

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LEGO Dimensions got off to a hot start last year, beating out Disney Infinity 3.0 and Skylanders Supercharged in first week sales. Developer Tt Games also showed a long content roadmap for the base game including character and level packs. While that’s a great sign on the surface, it basically amounts to a long term DLC plan with no sequels in the works, at least not ones that are public knowledge at this time.

Skylanders SuperCharged on the other hand is the fifth entry in the annualized Skylanders series. With a sixth entry planned for Fall 2016, it would seem that the series isn’t showing any signs of slowing down. However, Activision recently had a small round of layoffs tied to disappointing sales from Guitar Hero and Skylanders in 2015.

With Disney Infinity out of production, Skylanders proceeding cautiously, and LEGO Dimensions hesitant to annualize like it’s competitors right out of the gate, I’d say there’s more than enough to be concerned about with the Toys-to-Life genre. Though the more interesting question to me is if LEGO Dimensions‘ more spread out business mode or Skylanders‘ annualized model will emerge as definitively more successful. After years of taking the industry by storm, the next few years will certainly be interesting for the genre.

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