Toys transcending
Digital play strategies among toymakers gets serious as tariffs loom
The SuperJoost Playlist is a weekly take on gaming, tech, and entertainment by business professor and author, Joost van Dreunen.
The wealthiest 10% of Americans now account for nearly half of all consumer spending.
According to The Wall Street Journal, the economy depends on the continued purchasing power of this elite segment while everyone else's spending barely keeps pace with inflation. In the US, the top 10 percent of earners—households making $250,000+—now contribute 49.7 percent of all consumer spending, up from 36 percent three decades ago, representing nearly one-third of GDP.
This concentration of spending power is evident in gaming, too.
First, despite initial backlash over Sony's $700 PlayStation 5 Pro, the company reported its best quarterly sales. Next, premium pricing has become normalized, with Electronic Arts successfully charging $100 for pre-orders of College Football 25—proving die-hard fans willingly pay more for their favorite releases. Finally, the discussions around Take-Two Interactive potentially pricing Grand Theft Auto 6 at $100 signals a clear market bifurcation.
With development costs rising and digital markets rife with uncertainty, the luxury pivot emerges as a strategic response. This trend focuses on premium-priced offerings for devoted players rather than expanding the overall market, raising the stakes and exacerbating the risk profile of game publishing.
Historically, entertainment companies respond by investing in their brand identity to signal quality to audiences. Beyond increasing marketing budgets, luxury now extends beyond price. It is about creating brand identity and relationship models that signal quality to overwhelmed consumers.
Sounds expensive.
On to this week’s update.
🎙 EVENTS — March
In case you’re in town for the New York Toy Fair next week, give me a shout. It’s one of the most fascinating growth areas in gaming right now (see below).
A fortnight from now I’ll be in Austin for SXSW 2025. I’m doing two talks: one featured talk on the state of play, and a panel on the next big generation of gamers.
Finally, GDC 2025 goes live in three weeks. I’m scheduled to do no fewer than three talks that week (one, two, and three). It’ll be busy, but paid subscribers to the SuperJoost Newsletter are automagically invited to my annual happy hour.
Come say hi!
BIG READ: Toys transcending
The short: As the line between physical toys and digital play blurs, major toymakers are strategically embracing video games to capture their evolving audience.
With Toy Fair here in New York less than a week away, now is an opportune moment to take a closer look at how major toy makers are future-proofing their respective business models. The recently reported full-year 2024 performances of Bandai Namco, Hasbro, Mattel, Spin Master, and Games Workshop provide a comprehensive snapshot of the industry's digital transformation trajectory.
Let’s start with earnings.
Bandai Namco represents perhaps the most advanced case of digital integration among major toymakers, reflecting its historical positioning at the intersection of physical collectibles and interactive entertainment. The company reported $6.4 billion in revenue for fiscal year 2024, with its Network Entertainment segment—comprising video games and related digital content—accounting for approximately 27% of total revenue. Its strategic balance between physical products and digital entertainment underscores Bandai Namco's early recognition of cross-medium synergies, particularly evident in its successful deployment of intellectual property across toys, arcade machines, console games, and mobile experiences.
Next, Hasbro generated $4.1 billion in total revenue for 2024, with its Wizards of the Coast and Digital Games segment contributing $1.1 billion—a 4% year-over-year growth that delivered an exceptional 41.8% operating margin despite challenging market conditions. This digital segment has become Hasbro’s primary growth engine, propelled by strong performances from Magic: The Gathering and particularly Monopoly Go!, which alone contributed $38 million in revenue in Q4.
Mattel reported $5.4 billion in 2024 revenue, with its digital gaming initiatives through Mattel163 exceeding $200 million in gross billings and experiencing “double-digit” growth. This represents a strategic pivot for the company, which historically has centered its business model around physical toys and collectibles.
Spin Master's financial performance presents a more complex picture, with $2.3 billion in total revenue for 2024 but challenges in its Digital Games segment, which declined by $9.4 million to $164.5 million for the full year despite a 13.5% increase in Q4. This mixed performance reflects the ongoing adjustment period as traditional toymakers navigate the digital transition.
And, finally, Games Workshop demonstrates yet another approach to digital integration, generating $379.4 million in revenue for the 26 weeks ended December 2024, with its licensing segment surging 149% to $38.1 million. This dramatic growth was largely driven by successful video game partnerships, including Warhammer 40,000: Space Marine 2, with the licensing model delivering an impressive 93% operating margin.
Video games first emerged in retail toy aisles and were long considered a derivative category, even as they eventually outpaced traditional toys in global consumer spending. The evolutionary context is crucial for understanding the strategic imperatives now facing traditional toymakers.
Navigating demographic shifts and global trade tensions
The toy industry faces two significant challenges that are accelerating its digital transformation.
First, consumer habits have dramatically shifted toward online play, especially among core demographic segments. Second, looming tariffs and global supply chain vulnerabilities threaten to compress margins on physical products.
The migration of younger consumers toward digital entertainment creates an existential challenge. Their core audience increasingly expects interactive, connected experiences that traditional physical toys alone cannot provide. This demographic reality has forced companies to develop multifaceted strategies that bridge physical and digital play experiences or risk obsolescence.
Simultaneously, the specter of global trade tensions—particularly between the US and China—presents immediate financial pressures. As noted in a Financial Times interview, Mattel has warned that US prices could rise to offset tariff impacts. This external economic pressure compounds the urgency of digital diversification strategies.
Both Hasbro and Mattel appear prepared with specific manufacturing diversification targets, aiming to reduce dependency on Chinese manufacturing from approximately 50% to under 40% over the coming years. Bandai Namco’s diversified manufacturing footprint, with significant production capacity in Japan and Southeast Asia, provides it with structural advantages in navigating potential tariff disruptions compared to its North American counterparts. By contrast, Spin Master and Games Workshop have adopted more cautious wait-and-see approaches, indicating they will assess the situation as policy details emerge.
Beyond these immediate challenges lies the question of long-term sustainability. Blockbuster hits like Monopoly Go!, Baldur's Gate 3, and Warhammer 40,000: Space Marine 2 have generated record revenues, but maintaining this performance requires sophisticated audience engagement strategies and content pipelines that traditional toy manufacturers have not historically needed to develop.
Strategic differentiation in digital entertainment
Each major toymaker is leveraging its strengths, intellectual property, and risk appetite to navigate this transformation with distinct strategies.
