July 11, 2021- 11:35 p.m.
Smart toys made with artificial intelligence, such as machine-learning capabilities, can collect different forms of data from kids. Whether an AI-enabled toy is personalizing lessons based on how fast your kid learns shapes, or a doll is learning your kid’s favorite ice cream flavor, toy experts expect more of these toys to be introduced in the years ahead, even though early missteps and high sales prices have limited consumer interest to date.
The thought of a child’s toy listening in on a family 24/7 is unsettling. While smart toys can be useful, educational tools for kids, they also pose privacy risks which toy makers and privacy experts are still learning how to balance.
“Parents tend to like it simple. If it’s something that doesn’t really enhance the play value of the toy and it adds cost, then it’s not going to be successful,” said Gerrick Johnson, an BMO Capital Markets equity research analyst following toy companies like Mattel, Hasbro, which sold a smart R2-D2 droid and later discontinued it, and Funko, which does not currently sell any smart toys.
But the success of AI toys, like other technological advancements, may be inevitable in coming years.
“I don’t think any of us have any doubt that the world these children are going to live in is going to be a world that’s enhanced by artificial intelligence,” said Richard Gottlieb, CEO of Global Toy Experts, a toy industry consultancy firm.
Gottlieb said the introduction of AI toys is similar to when kids were first introduced to books. Books are now vital forms of literacy and education, but parents were initially concerned about access to uncensored information.
“Artificial intelligence is extremely important to society, whether we like it or not,” Gottlieb said. “It’s going to be progressively more important to play.”
Pricing may prove to be a bigger impediment to the uptake of smart toys by consumers than privacy issues, for the time being.
The majority of toys sold to consumers are at a price point as low as $10 to $15, according to Wissink, and the integration of artificial intelligence can raise toy cost to as high as $60 to $75, which is too expensive for many parents. Until smart toys become more affordable, the prevalence of these toys is going to stay relatively low, she said.
Market demand for smart toys has been low.
Between May 2020 and May 2021, the market for programmable smart toys, specifically, made up 0.1% of the whole toy industry, according to Juli Lennett, the U.S. toys industry advisor at NPD Group, and sales were roughly half of the previous year period.
There have been sales spikes when a specific toy hits, such as in 2018, when Anki, a robotics and artificial intelligence start-up, was selling a popular toy named Cozmo, similar to ROYBI Robot, designed to use programmable features to enhance learning.
According to NPD, Anki had $24 million in annual sales from Cozmo, but Lennett said the company went bankrupt in 2019, potentially due to high manufacturing costs.
Cozmo was acquired by Digital Dream Labs, where it is in the process of being rereleased in the coming months, as an AI-powered smart companion, according to Matthew Eversole, chief marketing officer of Digital Dream Labs.
“Customer demand for these devices are still high today,” Eversole said.
Lennett is more cautious about demand.
“Every now and then, you’ll see something hit the market and cause some crazy trends, and a toy might last on the market for two or three years on average, and then fade away,” she said.
