Tag Archives: Mattel

Up—or Down?—InvestorPlace Believes That Tough “Structural Challenges” Facing Hasbro Explain Why Investors Should “Fade” (i.e. SELL) Despite the Company’s Recent Stock Market Rally

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What the heck is going on?— A wary stock market continues to keep a cautious eye on economic and societal events currently plaguing both Hasbro and Mattel. (Photo: phillipcfd)

It’s a Secret No Longer—There’s a Terrible Truth Facing Today’s Toymakers

Here at The Joe Report, we like to keep an eye on the the economic health of the major players in the toy industry. While reading an article about stock market investment re Hasbro, the term “fade” was used. That left us a tad confused. Fade? Beyond the obvious definitions, what did they mean? We looked up “fade” over on the investopedia website and discovered the following:

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“Fade refers to a contrarian investment strategy used to trade against the prevailing trend. A trader who ‘fades’ would sell when a price is rising and buy when it’s falling.” 

Ah. Okay. So the article is encouraging investors to be somewhat “contrarian” when considering investment in the “big H.” That’s understandable in today’s “contrarian” world. In fact, the July 24, 2018 article written by Luke Lango and published recently on the InvestorPlace website proved to be rife with additional quotes of interest for both GIjOE fans and Hasbro followers in general. Here are just a few that stood out to us (edited for length):

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Luke Lango, L&F Capital Management, LLC and InvestorPlace contributor (Photo: Luke Lango)

“Surprise, surprise! Toy maker Hasbro (NASDAQ:HAS), one of the companies that was supposed to be crippled by the recent Toys R’ Us liquidation, reported much better than expected second quarter numbers. Revenues weren’t down all that much. Margin compression wasn’t that bad. And profit erosion wasn’t as awful as everyone feared for Hasbro stock. In response to those better than expected numbers, Hasbro stock is up more than 10% to above $105. But I think this is a rally investors would be wise to fade. At $105, the valuation simply doesn’t make sense for Hasbro. Revenues are in retreat. Margins are falling back. There are secular headwinds facing the toy industry outside of Toys R Us. As such, I think Hasbro is way overvalued here, and will inevitably fall as investor enthusiasm fades.”

So… it appears Hasbro is doing just fine–for now. That’s great news. But after the “investor enthusiasm fades,” Lango states he believes the big H’s stock value will FALL. Why should that be the case? Well, apparently, it’s due to something we’ve long discussed here on The Joe Report—the dwindling interest today’s children have in toys—DUE to the growing infiltration of electronic devices such as cell phones, home computers and video gaming systems. Lango clearly concurs:

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“The Toys R Us bankruptcy and liquidation was supposed to kill this company. Indeed, it did kill Hasbro in the first quarter of 2018. Revenues dropped 16% year-over-year, led by a 19% decline in the U.S. and Canada business and a 17% decline in the international business. But, the numbers got a lot better in the second quarter. Overall, that is a positive development in the Hasbro growth narrative. The problem is that Hasbro stock is already priced for this positive development, and a whole bunch more. 

At the core, Hasbro’s issue isn’t the Toys R Us liquidation. It is a boom in internet and smart device usage among children. The average age for a child getting their first smartphone is now 10.3 years, so that means that all those 10-year-olds that were playing with Hasbro action figures are now playing on their smartphones.”

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Too young? This toddler is clearly engrossed in this—or is it HIS(?)—new cellphone. Will toys ever again appeal to future generations? Or has that appeal already been LOST—forever? (Photo: mercury news)

The very real dangers posed by cell phone addiction, unrestricted access to the internet and excessive video gaming are all well known. For children, those influences can also mean an abrupt end to what HAD been considered a traditional (or “normal”) childhood development. Surrounded by electronic distractions, their lost or waning interest in traditional, imagination-based play—and toys—is practically a given. Lango confirms this bad news with some more startling statistics:

“Plus, tablet usage among children has soared from 26% to 55% over the past several years, while internet usage has soared from 42% to 64%. In other words, children aren’t playing with Hasbro toys as much as they used to. Instead, they are playing on smart tablets and smartphones.

<Sigh.> The troubles facing the toy industry appear to be just as we feared. So how does Lango see these sad developments affecting Hasbro in the future? He closes with:

This trend won’t slow any time soon. Indeed, things may only get WORSE for Hasbro as technology continues to grow in popularity. Hasbro’s second quarter numbers were much better than expected…But, that doesn’t mean it is time to buy Hasbro stock. The company has structural challenges due to waning toy demand as a result of growing smart device adoption. So long as these structural challenges remain, Hasbro will have trouble holding onto gains.” —Luke Lango, InvestorPlace Contributor

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Q: Who needs toys? A: Fewer and fewer children, apparently. Whenever an iPad or other such high-tech device is placed into the hands of a young child, oftentimes that moment marks the END of what was previously regarded to as a “normal,” or pre-digital childhood development. The resulting “ripple effects” are still being studied and understood, but stock markets are clearly paying attention. (Photo: herald.ie)

Bottom Line: It’s a tough toy-world out there nowadays. Human society—and our children—are changing. Is this a good thing? A bad thing? Or just par for the course of life? Strongly affected by such unpredictable developments, toymakers are clearly heading into some serious economic—as Lango calls them—”headwinds.” Keep your fingers crossed that they’re able to adapt and thrive in such an uncertain business climate. Let’s hope too, that innocence and childhood isn’t eroded or shortened any further. When I was growing up in the 1960s-’70s, I remained blissfully ignorant of the “trials and tribulations of adulthood” until about age 16. Now it’s 10? Where are we headed?

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It’s Getting REAL—Mattel Lays Off Nearly One-Fourth of Its Total Workforce (2,200 Employees) As Toy Sales Continue Plummeting Worldwide—Mattel Factories Too, Will Soon Be Up for Sale

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Will Matty Mattel ask for a government handout? Maybe. It looks like the giant toy company’s mascot is extending his hand, pleading for financial assistance in a “time of need.” If sales of its products continue to drop, will Mattel’s leadership seek bankruptcy protection in court—ala Toys R Us? Toy fans around the world are wringing their hands!

We’ve been talking about the “slump” toymakers Mattel (and Hasbro) have been going through for a couple of years, but the downward economic effects of that trend are now about to be be felt on a truly PERSONAL level—by over TWO THOUSAND of Mattel’s employees. Mass layoffs loom. Factories too, are slated for imminent sales and closure. According to VOA News

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“Mattel, home of Barbie dolls and Hot Wheels, is cutting 2,200 jobs in order to save money after the closing of U.S. toy retail giant Toys R Us. The toymaker said the cuts amount to 22 percent of its nonmanufacturing employees worldwide. Mattel has about 28,000 employees. It also plans to sell factories in Mexico as part of a $650 million cost-saving plan.

Mattel reported a loss of $240.9 million in the second quarter, bigger than the $56.1 million loss in the same period a year ago. Revenues fell nearly 14 percent to $840.7 million, below the $863.1 million analysts had predicted. The toymaker has lagged behind its competitors in digital media, analysts say, and is trying to catch up with other brands that have spawned apps, movies and TV shows. 

Mattel CEO, Ynon Kreiz, said the company is working closely with other retailers and looking for more ways to sell its toys online.

Bottom Line: Mattel better get its act together. Sales are down. Factories are closing. People are losing their jobs. What else can go wrong over at the “Big M?” Stay tuned to The Joe Report!

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A Real Pain in the Wallet—Hasbro and Mattel’s Stock Values Take Immediate Hit After News of Toys ‘R Us’ Imminent Liquidation Announced

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Stop the Madness— It’s like dominos—If Toys ‘R Us fails or “falls down,” then toy manufacturers too, may begin to fall—like dominos. And if that actually happens, we’ll all have to start buying those wooden “educational toys” peddled at local farmer’s markets. Oh, nooooo!!! (Graphic: dreamtime)

And so it begins— Yesterday’s news of Toys ‘R Us “facing its finality” sent immediate shockwaves throughout the toy industry, reflected most clearly by a corresponding drop in both Hasbro and Mattel’s share values. Hasbro survived yesterday’s economic “ripple effects” better than Mattel, dropping -2.06%, while Mattel fell a whopping -7.11%—in just 1 day! According to MarketWatch: 

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“Mattel’s stock has tumbled 36.6% over the past 12 months and Hasbro shares have lost 4.1%, while the S&P has gained 15.8%.”

Bottom Line: Ouch. Anyway we look at it, while the economy and stock markets continue to perform strongly, the toy industry is now officially headed in the other direction. Fortunately for both Hasbro and Mattel, the stock market closes today at 1PM, hopefully shielding them from any further losses—at least until Monday. Stay tuned. We may need to revisit this topic frequently.

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Hasbro Bluntly Urges its Loyalest Customers to “Ditch the Digital Distractions” (and Return to Toys) in Mass E-mail Promotion Released Today

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How to Help Hasbro Stem the Flow—In this screenshot (taken today) of our email “inbox,” the subject heading of Hasbro’s most recent mass emailing urges consumers to “Ditch the digital distractions.” Digital devices such as cell phones and video games are a growing threat to an already beleaguered toy industry. This latest plea from Hasbro appears to confirm that fact. Click to enlarge.

An Open Admission of a Major Threat to a Struggling Toy Industry

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“Ditch the digital distractions.”

Those four powerful words are actually quite revelatory coming from a company like Hasbro. Giant corporations that generate billions of dollars in sales—per year—typically want nothing more than to paint the rosiest of pictures (regarding their businesses) for their customers and of course, their stockholders. But for a few years now, toy industry analysts (including those here at The Joe Report) have been openly ruing and discussing how two specific inventions—the cell phone and the video game console—have largely been responsible for precipitating an industry-wide slump in toy sales; not to mention the bankruptcies and closings of major toy retailers (i.e. Toys ‘R Us, Hobbico, etc.) and the scariest thing of all—the growing LOSS of the toy industry’s  historically primary customer base—CHILDREN. Yes indeed, those are four POWERFUL words.

One BIG Question Remains—Will Children “Tune Out” of Toy Fandom FOREVER?

Remember the days when toy companies simply had to urge us to “Collect ’em All!” and we’d frantically beat a path to our local toy store to comply? Sure ’nuff! And growing up, we’d watch all of those Hasbro and Mattel commercials on TV, see their products displayed in store windows, and peruse their ads in endless pages of comic books. By the time we’d finally convinced our parents to take us to the toy store, our desires had become almost Pavlovian. See the toy—want the toy. Remember the mad scrambles over Cabbage Patch Dolls back in the 1980s? The idea of that sort of consumer “scrum” over ANY toy today seems almost quaint. It’s just not likely to happen.

Forgotten how to PLAY? (Photo: The Finder)

Bottom Line: This latest email from Hasbro may be nothing—or it may be something. How’s that for a wishy-washy conclusion? Regardless, we’re sure that the “big boys” over at both Hasbro and Mattel would be THRILLED to see some of that ol’ “rabid” consumer interest in their products once again. But thanks to today’s dreaded digital distractions, that sort of mania doesn’t seem likely to happen ever again. In fact, the current, ongoing, DECREASING demand for nearly all categories and brands of toys continues to paint a gloomy (rather than rosy) picture for the industry. It clearly has MANY manufacturers worried (see our previous story HERE). Fingers crossed for better news!

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Mattel and Hasbro Considering a Merger—Again

matty-kid-1A recipe for disaster corporate success: Take 1 part struggling Mattel Toys, combine it with 1 part more of longtime rival, Hasbro Toys, then sprinkle with a dash of shrinking consumer interest and a smattering of unpalatable market effects (such as crumbling Toys ‘R Us (TRU) infrastructure), and what do you have? We don’t know, but the world’s two biggest toy companies appear to be contemplating a merger that (they hope) would cook up profitable “hot” products (to display on those vanishing TRU store shelves?), raise “Has/Mat” stock prices, and boost their newly combined mega-company’s bottom line. But WILL it?

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Will all of this corporate merger/restructuring simply result in a bland melange of bombast trumpeting, “Hey, look at us, we’re doing something BIG about our troubled toy industry.” Or is this all going to boil over into an even bigger, blander pot of  “kids-just-don’t-care-about-toys-anymore” reality stew? It will be interesting to toy fans and collectors to find out. Here’s the latest article we’ve found on this possible merger and its hoped-for final effects. Read it, watch the Mattel CEO video, and decide for yourself whether this merger is a good idea

Bottom Line: This move seems like too MUCH, and too LATE, to us. If the two companies combine, wouldn’t there be less urgency, less rivalry, less competitive spirit and less innovation? Monopoly the game, may be fun to play, but monopolies in real life rarely work out well for consumers. Company execs and stockholders may benefit in the short term, but toy fans in general will probably be quickly bored by all the new “tech toys” Mattel’s CEO seems to be so enamored of. (And all this hoopla looks like it’ll be one more nail in GIjOE’s “low tech” coffin box.)

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Ripple Effects of Chapter 11 Filing By Toys ‘R Us Begin to Spread to Manufacturers— Declining Profits Now Reported By Hasbro and Mattel

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Where are all of our customers? As the number of independent toy retailers and their “brick-n-mortar” stores continues to decline, toy manufacturer claims that their own lost profits could be made up with rising internet or “online” sales has now proven to be questionable—even unlikely. Should toy manufacturers such as Hasbro consider opening their own retail store outlets to compensate?

To most toy fans and collectors, this latest news will not come as much of a surprise. In fact, current developments regarding the world’s ongoing toy retailing saga may seem all too predictable, but here we go nonetheless: It turns out, having fewer retail stores for customers to visit and browse for products (like toys) can actually be bad for business. <Wow. Who’d a thunk it?> In fact, following closely on the heels of the recent story of Toys R Us’ (TRU) filing for Chapter 11 bankruptcy protection, we now also learn that Hasbro and Mattel (both) are beginning to feel their own negative economic ripple effects—and that they believe their troubles can be laid squarely at the doorstep of TRU’s earlier woes. According to the AP:

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“Mattel, the maker of Barbie dolls and Hot Wheels cars, reported disappointing third-quarter results late Thursday and said it was hurt by Toys R Us’ Chapter 11 bankruptcy filing last month. Earlier this week, Hasbro, the maker of My Little Pony and Monopoly, also blamed weak results on the Toys R Us bankruptcy filing.

Mattel, whose revenue in North America fell 22 percent in the three months ending Sept. 30, said that about half of that decline was due to the Toys R Us bankruptcy. Globally, most of its brands saw sales declines. Barbie sales fell 7 percent and Hot Wheels fell 6 percent. Sales of its American Girl brand, whose 18-inch dolls typically cost more than $100, fell 30 percent.” —AP

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Will Matty need a handout? Looks like this company mascot is extending his hand for…what? Will his business soon seek court protection, ala Toys R Us?

Whoa. 30 percent?  That’s quite a financial nosedive. And if ever a particular toy brand needed a store’s support (i.e. an actual, physical PLACE to go to) so as to be able to SEE and HANDLE their extensive and upscale line), it’s pricey American Girl. Anyway…

Bottom Line: If TRU’s Chapter 11 reorganization and debt payoff difficulties continue, it seems likely that additional store closings and employee layoffs industry-wide could also continue. That would result in even fewer “brick-n-mortar” toy stores, less actual shelf space for toys, and then ultimately, fewer toys overall for fans and collectors to buy and enjoy. Ouch! That’s where WE feel “the pinch.” We’re not too worried about the financial stability of either Hasbro or Mattel (they’re doing just fine, thank you), but this situation is fluid and developing. Stay tuned for further intel. Read the AP story HERE.

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Barbie Suffering Same Fate as 12-inch G.I. Joes: Will Future Children No Longer Play w/ Toys?

Are we looking at a future without Barbie? A world where children no longer have the interest, desire or attention span required to keep the iconic toy line afloat? Plummeting sales at Mattel appear to bear an ill harbinger of things to come. (Photo: clayzmama)

A future without Barbie? In a world where children appear to be losing the interest and attention spans required to creatively play with dolls, how will Mattel keep its iconic toy line “alive?” (Photo: clayzmama)

The memories of playing with his GIjOE and his

The 1970s were a busy time for children fortunate enough to have grown up playing and creating adventures with GIjOEs and other imagination-dependant toys. Above, Scott McCullar (now an adult) plays with his GijOE’s “Troubleshooter” play set. (Photo: Scott McCullar)

The Future of Some Toy Lines Certainly Growing—UNcertain

If you’re an adult over say, 45, you may be a member of a dying breed. We’re not talking about your health or lifespan, we’re talking about the fact that you’re a human (man or woman) who can still remember when “childhood playtime” meant interacting with dolls, action figures and other toys. You may not realize it, but you could be a member of one of the last generations who’ll remember those youthful pursuits as the carefree activities they were and how they required one of life’s most precious gifts—imagination.

This conclusion is easily understood by simply observing the children of today’s societies and how their evolving behavior patterns have begun to affect the “bottom line” of an already struggling toy industry. Yes, it’s a different world (today) than the one you grew up in, and that reality is forcing toy giants (i.e. Hasbro and Mattel) to push for changes that will usher in a new era, one that may be largely devoid of the past’s traditional or “imagination-dependent” toys.

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We’re sorry kids, but today’s largely politically correct, non gender-specific, “discovery” type toys are, in our opinion, a poor substitute for the more creative toys of the past; specifically those from the 1950s, ’60s, ’70s and ’80s. Today’s bland, generic toy fodder, such as this “MentalBlox” game will do little to instill the sort of life-long toy memories once so common among children and adults. Today’s children are moving on to hand-held electronic devices at earlier and earlier ages which quickly stunt their desire to play with traditional, imagination-dependent toys. (Photo: discovery toys)

Robert's sons Gus (l) and Ben (r) hold up their 1st-place winning custom figure of

An exception to the rule— It’s becoming a rare sight to see children who are actively interested in 12″ GIjOEs. In this case, longtime collector Robert Browning and his two sons Gus (l) and Ben (r) keep their love of toys alive by attending conventions (such as Joelanta) together as a family. Here, the boys hold up their 1st-place winning custom figure of “The Shadow” and their prize, a Sideshow “Cobra Ninja” action figure. Such activity encourages camaraderie and the creation of life-long toy-related memories. (Photo: Mark Otnes)

Children are ChangingBuying Behavior is Changing—The Toy Industry is Changing

In the past, toy manufacturers used to be able to count on keeping a child’s interest and faithful patronage until about the age of 13 or so. Once the teenaged years kicked in, it was understood that kids began to switch over to more “grown up” interests such as sports, dating and music. While it was a shame to lose them as customers, toy companies knew there would always be more children coming along and more profits could be made from them. But now…that predictable mode of forever selling toys appears to be changing. Dramatically.

At earlier and earlier ages, children are visibly turning away from traditional toys. Once their first computer, video game system or <shudder> “smart” phone enters their lives, there’s really no looking back. In fact, the very idea of playing with traditional, non-electronic toys is becoming positively quaint to children of today (of both sexes). Even casual observations at toy shows and toy stores have confirmed they already perceive GIjOEs and Barbies as stiff, almost unrelatable artifacts of bygone age; something that their Mommy or Daddy “used to play with” very long ago, but is now—boring.

So what does all this mean? It means that now, in 2015, toy companies can no longer afford to do business as usual. New solutions to newly emerging problems must be found, before sales and stock values plummet any further. It means that once impervious toy lines of the past are now at risk of being ignored (read Derryl DePriest’s commentary on the fate of GIjOE HERE) or canceled altogether. As children continue to grow up faster and switch to non-toy pursuits at younger ages, they’re truncating a once lengthy consumer-provider relationship. Profits from toys therefore, are now harder to predict, forcing changes in marketing strategies that, while helping boost the bottom line, may actually increase the growing gap between children and traditional toys—even further.

Is there anything sadder or less interesting to young girls nowadays than a pile of pulled-apart Barbie bodies? Probably not. (Photo: buzzfeed)

Playing with Barbies— Is there anything sadder than a pile of pulled-apart Barbies or GIjOEs? Unfortunately, young boys and girls (nowadays) could probably care less. (Photo: buzzfeed)

Logo-MattelIn a stunning admission, Mattel recently disclosed that Barbie’s sales figures have fallen for the last SEVEN CONSECUTIVE QUARTERS. It’s hard to imagine how much longer the toy giant will want to support such a steadily declining “loser,” but it’s harder still to imagine a world where Barbie no longer exists—at ALL. In a recent article in the The Wall Street Journal, business analyst Cassandra Jaramillo reported:

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“Mattel Inc.’s sales of the doll fell 19% in the second quarter, as the toy maker swung to a quarterly loss and posted a 7% drop in overall net sales. The stronger U.S. dollar drove a large chunk of the decline, but Barbie’s sales would still have fallen 11% when stripping out currency swings.”

Bad news Barbie fans, but hardly a surprise to the bean counters at Mattel. The article continues:

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“Sales of the doll have dropped by DOUBLE DIGITS for seven straight quarters—underscoring the deep challenges facing new Mattel Chief Executive Christopher Sinclair as he looks to right the world’s largest toy maker by sales. Barbie is Mattel’s largest brand and a big driver of profits, but its long slump has cost it shelf space at retailers that Mattel will have to work hard to earn back.”

How long has it been since you've seen BOTH sides of the aisle in a toy store devoted solely to Barbies? The famed

Valuable Shelf Space LOST— How long has it been since you’ve seen BOTH sides of a toy store aisle devoted solely to Barbie? Those famed “Pink Aisles” are unlikely to return, and in the future, may only reside in your memory. (Photo: artisancomplete)

Currently, the profit pendulum is clearly swinging backwards in a negative arc for Mattel. Its stock value went down by 3 points and the WSJ article ended with THIS sobering total:

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“The company posted a LOSS of $11.4 million in the most recent quarter, compared with a profit of $28.3 million a year earlier.”

Toy Companies—Media Companies—Will There Be a Difference in the Future?

hasbrologonewMattel’s not the only toy giant to see one of its oldest toy lines struggle to remain relevant and profitable in this modern age. Hasbro too, now considers its once industry-leading brand, 12″ GIjOEs, to be practically null and void. Without the “little Joes” (3.75″ sized), the world’s most famous toy brand would have vanished from stores by now.

But Hasbro has demonstrated amazing vision. Anticipating the evolving market realities and changing interests of children, they’ve diligently built-up their business from its basic toy origins into a full-blown media and entertainment powerhouse; producing blockbuster brand-offshoot motion pictures such as The Legos Movie, Transformers, etc., while simultaneously working alongside other film industry giants (see HERE) to coordinate massive merchandising efforts. Despite all the vitriol many fans continue to spew in its direction, Hasbro has clearly shown them (and Mattel) that there IS a future for toy production. And while that future may not include GIjOEs or Barbies, it will certainly include profits made from toy sales—LOTS of them.

Playing with toys in the near future may look something like this. With virtual reality, the need for (and use of) real objects that you actually touch and hold would be lost, but the interaction with similar “virtual” objects would remain the same. The question is…Would you WANT to play this way? (Photo: TIME)

Move Over Traditional Toys—Virtual Reality is Here NOW

On top of everything else we’ve discussed, we’d be remiss not to mention the impending arrival of virtual reality (VR) systems. Recent breakthroughs have solved the majority of nagging technological and biological hurdles (4K resolution refresh rates, dizziness, headaches, etc.), and promises of very near future “life-like” immersion will make playing with traditional toys seem as obsolete as newsprint is to the internet. The latest TIME magazine goes into this subject in great detail (see cover above) and VR’s impact on the future of entertainment and toys promises to be profound.

You think today’s video games are addictive? With the arrival of virtual reality systems, it’s hard to imagine a future wherein children would be satisfied playing with traditional, “imagination-dependent” toys. Question: Is a “virtual” GIjOE still a GIjOE? (Photo: YOSHIKAZU TSUNO/AFP/Getty Images)

Bottom Line: We’ve discussed the topics of shifting consumer buying habits and evolving toy preferences many times over the years. The days of children playing with imagination-dependent toys may largely be behind us as a society; or at the very least, are becoming seriously endangered. The future of 12-inch Hasbro GIjOEs is already known. The future of Mattel’s 12-inch Barbies now falls into question. Fans have to wonder, what exactly will children of the future be playing with? And what effects will those toys (both traditional and virtual) have on their shrinking attention spans, imaginations and overall cognitive abilities? Will kids be jumping for joy like the dude in the TIME cover photo? Or will they be drooling over in a corner without an original thought inside their impressionable little heads? Let us know what YOU think. Please leave a comment today. Thanks!

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