Cliff Annicelli, Editor-in-Chief

Well, The NPD Group said last month that the US video game market had an even better year in 2008. It tallied another double-digit growth spurt—22 percent—on its way to a record $21.33 billion in sales. The market was propelled by stellar performances like that of video game retailer GameStop, which saw its holiday season receipts grow 22 percent on a 10 percent gain in same-store sales during the worst selling season for most other retailers in decades.

For the toy business, that $21.33 billion video game industry sales total should sound familiar; it’s just about the size of the US toy market, which was worth $22 billion in 2007.

As this issue went to press, NPD had yet to announce the official tally of the traditional toy business’ 2008 sales, but if history is any judge, it would be reasonable to expect they’ll slip below 2007’s numbers. Were that to be the case, the video game business in 2008 may have surpassed the toy industry in sales for the first time. That would be one of the toy industry’s most noteworthy milestones, ranking up there with Wal-Mart’s dethroning of Toys “R” Us as the industry’s overall market share leader more than a decade ago.

The video game business’ good news (and Playthings.com blogger Richard Gottlieb’s post about it, “Who Mugged the Toy Industry?” Jan. 16, 2009), got me pondering what lessons toycos could learn from the video game industry’s success.

One thing is certain, the& video game industry’s apparent imperviousness to economic recessions certainly shows it’s doing a better job communicating to potential customers the inherent long-term play value of a game system, despite their comparatively high price upon initial purchase. Frankly, as much as I appreciate the work that goes into the average piece of interactive plush, as a consumer I’d rather spend $50 for 50 hours of game play than $39.99 for three minutes of watching a stuffed animal toy talk at me. If you’re in the interactive plush biz, or make high-tech toys of other types, you’ll need to work at changing my mind on that.

One of the biggest differences between the toy and video game markets at retail is pricing. Toys are increasingly treated as a commodity category whose primary role at major retailers is to be a holiday traffic-driving loss leader. Video games aren’t. You rarely see video games on sale, unless a newer unit comes along to make the existing games for the “old” system look technologically obsolete. And when a new (and usually more expensive) system does come along, retailers don’t launch into a price war; instead, they bundle a console together with additional games in order to get consumers to pay even more than they intended to when they walked into the store. Can you do something similar?

If you read the marketing story in this month’s issue by 360Kid CEO Scott Traylor, you’ll see he found several differences between the way toys were advertised on television this past holiday season compared to video games. The main distinction isn’t “how”; it’s when. Video games are advertised all the time, including post-Christmas. Games are expensive to create, and much like movies, are just as expensively marketed in order to help ensure that outlay is recouped. Similarly, video game companies, like movie studios, do a much better job hyping their upcoming releases. It’s why video game execs say they’re in the “entertainment business,” not the toy business. They’re not selling “items”; they’re selling experiences. It’s an attitude adjustment some in the toy business might just benefit from, particularly now, when the last thing on consumers’ minds is purchasing another “item.”