Augmented Reality: What are the Prospects for Licensed Toys, Books, Games and Other Products?

Reprint of article from  The Licensing Letter (May 3, 2010). Reprinted with permission of EPM Communications, Inc.

With the number of 3-D movies seeming to increase exponentially with each new release, and with the consumer electronics industry trying to push 3-D into the home, what are the prospects for licensed 3-D toys, books, card games and other products incorporating the technology known as Augmented Reality (AR)?

There is definitely buzz about Augmented Reality in the toy, publishing, and entertainment industries. Back at this year’s Toy Fair, one attendee went so far as to say he has “seen the future of toys and it is Augmented Reality.”

But whether AR is the “flavor of the month” or has the potential to become a mainstay of toy aisles, publishing, and games remains to be seen.

Broadly, AR involves a product such as a card or toy connected to a webcam that allows an image to be viewed in 3-D form on a monitor. At this stage, AR offers more promise than actual product, but some speculate that it will transform the toy industry in particular — perhaps with 3-D tie-ins to heavily licensed 3-D movies.

“There are traditionally two phases of technology. The first, shock and awe, happens when everyone jumps on what is cool and different. The second, general acceptance is when a technology becomes mainstream and a part of everyday life. It’s too early too tell what AR will do, but I wouldn’t bet against it becoming mainstream,” says toy consultant Richard Gottlieb.

“[Augmented Reality] seems to have the potential to become mass market in the not-so distant future,” says Greg Davis of Total Immersion, a company focused on integrating AR technology into new platforms. “As [AR] continues to develop, new methods of tracking this paradigm will change dramatically, providing a playground that seamlessly combines the virtual with the physical world.”

Certainly AR is novel and exciting, but others question whether it will have a run beyond the novelty factor. As one licensor says, “I just don’t see what’s fun about it right now.”

Many experienced toy licensors are taking a wait and see approach. “When you first see AR, it’s absolutely super cool, but I’m not quite sure how kids will really play with it,” says Carlin West, 4Kids Entertainment. “I have seen what Topps has done with its cards, and how images come up on screen and move around and do things, but I’m not sure it’s really a play pattern; I don’t know if it gives the kid that much extra value.” Topps has had success with its Disney Club Penguin cards, which are interactive with the children’s virtual world.

As West points out, one of the hottest toys on the market of late is “a wind-up hamster.” Items like $1 Hot Wheels have also been driving volume.  Toy giant Hasbro has so far been holding back, despite Mattel making a buzz about its AR Avatar toy lineup. According to Hasbro, there are no plans on the horizon for AR in its licensed product range, despite 3-D entertainment hits such as its Transformers movies, that would seem to lend themselves to the genre.

“Kids are the ultimate early adaptors and they expect technology to be a part of their daily lives,” says Elie Dekel, Saban. “Today’s examples of augmented reality — i.e. Mattel’s Avatar toys — are a glimpse of what kids will demand in the future.”

Time will tell how Mattel’s AR offering performs. Mattel has the deep pockets to give it a go, but price is the most obvious downside for companies interested in AR. An action figure from Mattel’s Avatar iTag AR line, for instance, costs about $10 more than the basic action figure. Since an AR toy has both physical and digital components, the tangible product is the most expensive component, though the development of the digital element, AR or otherwise, also involves substantial fixed initial costs. Here is how AR has been making its way into the marketplace in products and promotions:

Improved Action Figures. Mattel and Total Immersion introduced a line of action figures based on 20th Century Fox’s Avatar in fall 2009. These are considered the first retail toys to incorporate AR technology. The collection, called iTag Set, started with an initial 25 SKUs and was followed with an additional 15 SKUs for spring 2010. Similarly, SpinMaster’s Tron Legacy Impulse Projection Figure has a 3D face that enables the action figure to display lifelike features.

Point-of-Sale. Lego and its AR partner, Metaio, are using AR on toy packaging. Kids hold a package to a screen to see what the completed project looks like in 3-D. This Lego Digital Box is currently available in all Lego retail stores.

Worldwide Play. The MIT Media Lab is developing an interactive physical game that makes it possible for one child to stand in front of a screen to kick a physical ball to someone standing in front of another screen who is able to return it.

Beyond The Printed Word. Kids’ books are able to “come alive” with animations, sound, and video clips when placed in front of the webcam, says Metaio’s Lisa Murphy. “[It] really teaches the kids the topics.” Metaio and ArsEdition recently introduced an interactive 3-D book, “Aliens & UFOs,” which transforms 2-D pictures into 3-D. Animated films Nine and Coraline both issued AR-enhanced trading cards allowing users to interact virtually with film characters. Topps and Total Immersion offer 3-D Live trading cards for Major League Baseball and the NFL.

Virtual Theme Parks. Total Immersion has worked with Six Flags Theme Parks on several interactive games, including Professor Keaney’s Xploratorium. Metaio teamed with Universal Orlando for an AR promotion providing a 3-Denhanced tour at the new Harry Potter world.

Food Tie-Ins. The general consensus among those in the restaurant industry is that in addition to a toy, premiums need a digital element to appeal to families. McDonald’s has been the first to offer AR premiums with McD Vision, a global promotion tied to Avatar that ran in 40 countries.