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Skylanders: 'Spryo’s Adventure' Has Just Begun

With another month of solid sales under its belt, it looks as though Activision is proving that its budding Skylanders franchise has staying power, and that’s hopeful news for videogame developers and retailers alike.

Skylander
Source: Skylander.com
Skylander

Skylanders has sold just under $200 million at retail in the U.S. since being introduced in October 2011, according to market researcher NPD Group. That figure counts both sales of videogame software and the collectible character packs that interact with the videogame.

“To put that in context, it puts Skylanders in the top 10 properties during that timeframe in terms of revenue generated at retail,” said Anita Frazier, an industry analyst at NPD.

While others have tried to pair videogames with physical toys, few have been successful.

“This property has really caught me by surprise,” said Sean McGowan, an analyst at Neeham & Co., who covers the toy industry. “Not because I thought it wasn’t a good idea or that the game wouldn’t be popular, but almost every other attempt to combine a physical toy with a virtual game had failed, and there had been attempts over many years.”

It also comes at a time when videogame sales have been struggling. Last month, sales of videogame hardware, software and accessories fell 25 percent from a year earlier, according to NPD. That marked the fourth month of decline for the industry.

Although there is no way to predict how successful Sklyanders will be in maintaining its current sales growth, the brand “has already broken the typical decay curve realized with new items launched at retail,” Frazier said.

Skylanders
Source: Skylanders.com
Skylanders

“With careful management of the brand, there is no reason to believe that it can’t be an entertainment property with true staying power,” she said.

Activision appears to be nurturing the franchise by keeping it fresh and interesting. Skylanders recently made its debut on Apple’s iOS mobile platform, and CNET said the new game has rocketed to the top of the most popular paid apps list on iTunes. The 99-cent app is called "Skylanders Cloud Patrol" and is an arcade shooter-style game for the iPad, iPhone and iPod Touch.

The company also releases new character packs throughout the year, including ones that are exclusive to retailer partners such as Toys ‘R Us.

Then, in the fall, Activision will release a new videogame, “Skylander: Giants.” Like its debut game, “Skylanders: Spyro’s Adventure,” the next version will interact with the collectible toy figures though a game portal. Figures from the earlier game will work with the new title. Like “Spyro’s Adventure,” “Giants” also will be compatible across video console platforms.

Toys ‘R Us has been a big supporter of the brand, with its CEO Jerry Storch speaking at the launch events for both editions of the game. At the end of last year, Toy ‘R Us identified toys that combine videogame play with physical toys as an emerging trend. At the moment, none of the products in this category work quite like Skylanders. However, there is a raft of toys that combine apps for smartphones and tablets with physical toys.

Accessories clearly will continue to be an important part of the videogame business. In the latest month, NPD said accessory sales were higher as measured by units sold but down in dollars because of the decline in the average retail selling price. But Frazier notes that among the top ten accessory SKUs for the month, only three were “traditional” accessories, while the remainder were either point or subscription cards, or Skylanders character packs.

Frazier expects other games will be introduced to the market with a similar concept.

“Since new physical retail sales have been on the decline, I think innovation and creativity and thinking outside the typical software ‘box’ will be more and more evident,” she said.

McGowan said Skylanders’ success is a “very important development” for several reasons.

“First, it shows, once again, that ‘you never can tell.’ Second, it shows the marriage between physical and virtual can work. Third, it gives retailers something real to sell,” he said. “The biggest threat to retailers is that consumers will get all their gaming fun without ever having to go into a store.”

Questions? Comments? Email us at consumernation@cnbc.com. Follow Christina Cheddar Berk on Twitter @ccheddarberk.

Retail