If You Can't Beat Mobile Devices, Join Them

They’re cheap, they’re convenient and they’re making waves.

Consumers of all ages are spending more time playing games on smartphones and social networks, and it’s having a far-reaching impact on videogame developers, toymakers and even retailers.

Source: AppGear

That point was underscored by the latest read on videogame sales from data tracker NPD Group. Sales of new videogames, consoles, and accessories at U.S. stores dropped 21 percent in December.

Some of the decline was expected. There was an aging lineup of gaming consoles and last year’s accessory sales were given a boost from Microsoft’sKinect and Nintendo’s Move, but there also was an unexpected slowdown in software sales.

That might be where you argue that games on smartphones and tablets are having an impact.

NPD’s monthly report excludes used games, mobile apps, and online-game subscriptions, but a separate report on estimated consumer spending shows that sales of all gaming content — including the mobile piece — fell about 2 percent in 2011. Declines in traditional videogame software were moderate by gains in these newer segments.

All these products are competing for a share of consumer's time and wallet.

Toy makers are certainly grappling with the issue.

Source: AppGear

“There is no bigger threat to the toy industry,” said Sean McGowan, an analyst at Needham & Co. who covers the toy industry.

According to McGowan, even young children are spending increasing amounts of times playing games on smartphones and tablets. “It’s a profound shift,” he said.

The shift also leaves retailers largely out of the mix as most of this content is distributed digitally to the device.

But these industries aren’t giving up without a fight. This year, we can expect to see more accessories that can be used with mobile devices in order to give toymakers and retailers an entry into the category.

Spin Master has already entered the category with Cars 2 Appmates, a game that features toy cars based on Disney/Pixar’s Cars 2 movie. The toys interact with the iPad as they roll across the screen. Spin Master also has AppBlaster, a gun that can be loaded with your iPhone or iPod Touch.

At this week’s Consumer Electronics Show, toymaker WowWee was one company offering a glimpse of what may be ahead. The company, which is known for its robotic toys andPaper Jamz instruments, unveiled App Gear, a new brand with several titles. Each of the games in the App Gear line-up pair tangible game pieces, all priced under $20, with games designed for smartphones and tablets running on both Apple and Android devices.

How successful these products will be remains to be seen. But over the last holiday season, we saw a slightly different take on a similiar subject.

Source: AppGear

Activision Blizzard brought "Skylanders: Spyro's Adventure" to market. Skylanders pairs a videogame with collectible toy playing pieces. Each of the playing pieces can store a player’s skill level and they can move from gaming platform to gaming platform, which means children can bring their playing pieces to a friend’s house to play even if they have an Xbox and their friends have a Playstation. The characters also unlock unique elements within the game.

“If you combine the sales of software bundles with the character packs, which are tracked in the accessories category, the title would rank fourth in December, and tenth for annual 2011 on dollar sales,” said Anita Frazier, an analyst at NPD.

"I think the industry will take notice of the success of Skylanders," Frazier said.

This means there could be a market for this kind of model where physical experiences are combined with digital ones.

Some of App Gear’s titles also are based on a similar model, but use mobile devices rather than traditional gaming consoles. For example, “Zombie Burbs” is a game for tablets that interacts with 16 collectible zombie figures. Each figure unlocks mission, abilities and new levels of game play.

For these products to be successful there needs to be a reason to buy them, McGowan said, noting that others have tried similar concepts in the past but were unsuccessful.

Source: AppGear

More than a decade ago, Zowie Intertainment developed Redbeard’s Pirate Quest, a toy pirate ship that could interact with a computer screen.

“I thought it was cool and innovative, but there was no interest,” McGowan said. “It was glued to the shelves.”

One hurdle was explaining a more complex message about what the product can do in a short TV commercial, McGowan said. But, today there are more ways to market a product.

Another hurdle these companies face is where to place these products in the store so that consumers can find them. Do they belong with the toys? Or do they go with the videogames?

But that's another hurdle that can be cleared if there is a demand from consumers, and it's not just a gimmick.

“If it doesn’t make the material play experience better, it won’t succeed,” McGowan said.

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