Toys x games are bigger than ever

Why toy-to-game collaborations are huge, and how web3 will make them bigger

It’s not really that new of a concept, but toys are having a big moment in games right now. Fortnite’s recent collaboration with Lego (which was a game inside the Fortnite universe as opposed to just a vanilla game cosmetic item collection) gained a ton of attention and player love as people revisited their favorite painful bricks in safer digital form. 

Toys and digital games are a match made in heaven. Toys are tangible, they can be collectible, and their primary purpose is for play. With aging audiences who find it harder to either store giant boxes of Lego and action figures in small city apartments, or who struggle with the mental gymnastics required for imaginary play with the same immersion as we did as kids, toy-based games are a powerful way to harness nostalgia and bring new creativity and joy to familiar toys. Digital games are also more easily accessible than physical items that have to be ordered or bought at retail, sometimes with huge prices (the Lego Millenium Falcon is $850, but Lego Star Wars: the Skywalker Saga is $80). For toy makers, digital games are a great way to tap into increasingly digitally native audiences who are more comfortable on their phones or consoles than with physical play. 

Toy games have similar benefits to other IP-based games, particularly through amped up reach thanks to recognizable content and existing fandom and core audiences. In the user acquisition battle, this can help lower costs for developers. And as with any licensed IP, there’s the potential for comarketing with the IP holder, bringing additional attention to the game. 

But toys also have attributes that other IP areas don’t always. Because toys are inherently purchased as opposed to other forms of IP, consumers are primed to be in a spending mood. A Barbie doll is always bought (or, I suppose, gifted) while a TV show IP can be freely consumed. This is great for games, because users are already comfortable spending money. Further, toys sometimes come with existing product tiers and merchandising structures that are well adapted to gaming monetization. Characters, accessories, themed expansion sets, dwellings, etc. For free to play games, this is huge: developers can tap into tons of possible in-game assets as well as ingrained purchasing behavior.

In many instances toys aren’t burdened by limitations of lore or physics that film or sports content could be subject to. This gives developers more freedom to test the limits of that content. That’s also a win for toy makers who can now offer new outlets for their fans to do things with the toys that they haven’t been able to do before. Part of the fun of Lego is creating structurally sound buildings, but sometimes you just want something that plastic and gravity won’t allow but Fortnite does. 

Finally, toys are normally 3D, and existing 3D files from the toymaker can help developers speed creation of in-game assets where media content can’t. This certainly helped me when I was able to leverage Weta Workshop’s incredible 3D sculpts for Jim Henson’s first entrance into web3 through a collectible “card” game.   

But the real power in toys x digital games is a cross-product collaboration that gives game developers and toy makers mutual wins and offers fans the option to migrate between physical and digital products, increasing the surface area for engagement. However, there’s even more potential for benefits when physical and digital intersect and interact in a 1:1 way. So-called phygital products and platforms became a fad over the past few years as the concept of digital twins or tokenized physical products came to the forefront through the rise of web3 and metaverses. But there’s nothing new about physical and digital games colliding. 

As Guinness points out, while Skylanders popularized toys x gaming beginning in 2011, it was actually Mattel that pioneered toy and game interactions with its 2007 title, U.B. Funkeys. There’s obviously no requirement that physical items and digital games interact in the way that these games did it—and toymakers and developers can both win through more standard licensed content deals—but by having this connective tissue both parties can be more united and incentivized while offering a new level of engagement for consumers who aren’t accustomed to these worlds coming together. (And I think this is a mechanic that we’ll see much more of as AR and MR increase in adoption, allowing physical items to not just be “keys” for unlocking game content but actual game pieces in an interactive, augmented space.) 

The old style of phygital games were typically created in-house by toymakers, perhaps with the help of external development teams; but, in short, they weren’t licensed content games. By building the games themselves the toy company was able to have more oversight of the process and ensure that the entire system worked together: inserting RFID tags into the toys, distributing the dock that would read them and connect them to the PC and then the game. Other games like Webkinz had cards with codes attached to the toys that consumers would use to redeem their digital pets. In general, the process required a tremendous amount of coordination with manufacturers and development team to ensure that the tags, codes, etc. were properly distributed and linked to the game. This is likely one reason that toy makers kept the process internal. 

This setup also let the companies have greater ownership of their flywheel: user buys toys, goes home to unlock those items in the game, the game prompts the user to buy more toys. In turn, the digital games could be iterated on more quickly with new play modes and mechanics, buying the toy company time to go through the manufacturing and distribution of new physical items. 

At the same time, because of these manufacturing needs, the flow of toy-to-game collections was not only driven by in-house arrangements but was also almost always unidirectional—the physical toy unlocked the digital item. This setup—of both walled gardens and unidirectional consumer journeys—limited what toy makers could do. It was much harder, for example, to have a digital item unlock a physical toy because it required a backward flow of game data to manufacturer to retailer. It also didn’t allow for other integrations with third party retailers such as a digital item being an offer redeemable for a discount on a physical toy.(Of course, some of this is now easier with drop shipping and other changes to distribution.)

The model has certainly worked well, though it does require toy companies to create new business units around community management and game development that not all of them are equipped to handle as well as dedicated game developers and publishers. 

With blockchain technology, however, toy companies are revisiting their relationship to phygital experiences. Thanks to the more accessible and universal database of the blockchain, toymakers are able to explore strategies that not only increase their ability to collaborate with game licensing but also new kinds of retail and digital experiences in scalable ways. Web3 lets companies continue to maintain control over their content and ecosystem but open up the ability for third party developers and other partners to help with game creation and go to market strategies. This concept is new and unique in the web3 world. 

Take, for example, the current closed ecosystems of licensed web2 games, like the Lego x Fortnite collaboration. The challenges posed by separate private servers, as well as data sharing regulations like GDPR, mean that Lego is limited in how it can benefit from this collaboration (i.e. royalties and exposure only). The company can’t, for example, access the users of the Fortnite experience, despite the fact that they are indicating their fandom by playing the Lego game. No user data, no direct communication. This means they also can’t offer unique toy set discounts to those players or otherwise rally them back into the physical lego universe. Nor can they use a player’s in-game performance and achievements as part of a Lego loyalty program. It would be great, for example, to reward top players who have spent tons of money on in-game Lego cosmetics with discounts or access to special physical editions of those items. 

In short, Lego can’t take Fortnite players and easily make them Lego consumers outside of passive marketing or manual collaboration with Epic. They can’t tailor an experience to an incoming ecommerce or retail user based on—for example—knowing that they were mainly buyers of jungle-themed in-game Lego items. No wonder these companies tended to keep their phygital strategies as first party plays rather than collaborations. The inverse is also true. Epic can’t easily tap into the existing Lego CRM, retail experiences, or broader ecosystem, thereby limiting its ability to bring more gamers into the experience, something that benefits Epic and Lego. 

The blockchain, as I’ve written about before, is a tool that lets different entities tap into information in a more scalable way which, in this instance, could mean that Epic, Lego, manufacturer, retailer, ecommerce platform, and other entities all interact with and make use of the same audience and same items in a way that reinforces and re-engages consumers. 

The promise of web3 is not to make these kinds of collaborations a requirement or something that has to happen on day one of a toy x game endeavor. Instead, it’s about optionality for developer, toy company, and consumer. The potentially infinite utility of a single item—when theoretically anyone can access that information and its owner—lets these collaborations happen more easily while also reducing burdens on marketing or development teams of the more manual connectivity or data sharing that web2 requires. The blockchain abstracts away the closed loops. 

Some toy companies, like Mattel, are already starting to leverage web3 for digital collectible ecosystems. Again, since many toys are already seen as collectible (Barbie, Hot Wheels), this is a wise play. And they’ve wisely recognized early on that utility and the ability to tie digital to physical items and experiences—like VIP physical event passes—is not only a requirement for a healthy collectible community but also a powerful way to use on-chain items to power their phygital flywheel. 

We’ve just seen the tip of the iceberg for strategies like Mattel’s. Licensed game pieces that third party developers can use, digital twin items, and gamified mechanics that leverage a digital loyalty-like experience will put the company at the forefront of the current frenzy for toy x game collaborations across as many partners as it wants.

And the potential mechanics are infinite. Imagine, for example, digital twin game items that degrade over time after the primary purchase the same way the toy company knows the physical item does. Scuffed edges on a the Hot Wheels chrome, some extra frizzy Barbie hair. It’s something that gives users evolving experiences, new tiers of collectibility, and the ability to posture OG status: owning the most beat up action hero is a badge of honor the the potential bonus of making it a more valuable item.

The second they’ve got digital Lego pieces with toothmarks that show the wear from when I had to unstick particularly tenacious blocks, that I can bring into a game, use to access a unique retail experience, and redeem a special offer, you can bet I’ll be there.