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From Skylanders to Infinity, Amiibo and beyond: The coming battle over the toy

Some of the biggest companies in the video game industry are vying to become the leaders in the next big thing: toys that interact with video games.

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Nintendo has added two new toys to its Amiibo line that will work with its own games as well as with Activision Blizzard's Skylander series. Screenshot by Nick Statt/CNET

When you picture the toys of the future, do they come to life when you interact with them? Are they connected to a video game?

That future is already here, and there's a mighty battle brewing in the video game industry over the toys you'll buy.

Activision Blizzard, Nintendo, Warner Bros. and Walt Disney are all producing toys that incorporate wireless technology. Place that toy on a pad or controller connected to a video game console and a TV and, hey presto, the toy appears on screen, ready to save the day.

"The days of going to the movies and playing the game are over," said John Vignocchi, Disney Interactive's vice president of production. "Now it's see the film and continue that experience in an interactive format."

So, whose toys do you buy?

That's the question at the center of an industry that's now worth $4 billion but that didn't even exist four years ago. Game makers believe they've created game-changing technology that will forever alter both the toy and video game industries. That shift may already have happened. The world's largest manufacturer of action figures isn't Mattel, Fisher-Price or McFarlane Toys. It's Activision, which has sold 250 million figurines since launching its Skylanders franchise of games in 2011.

"There is way more value in each one of these toys than toys that don't come to life," said Eric Hirshberg, head of Activision's publishing arm that makes Skylanders.

Rising competition

For two years, Skylanders were the only toys of their kind on the market. Not that others hadn't tried. Hasbro offered a line of products called zAPPed that attempted to connect board game pieces with a tablet. One app, for example, let players place a game piece from the board game Battleship on an Apple iPad screen. But that was before 2011, when Activision showed its first toy.

It wasn't obvious at the time that Activision could trigger a new market. The company was still reeling from the dramatic drop-off in sales in 2009 of its Guitar Hero series of music games, which had been a five-year sensation. Activision desperately needed a new hit.

Luckily, it was among the few companies with experience making and selling plastic accessories, having produced the guitar and drum controllers that players used in its music titles.

"We had a real advantage," said Josh Taub, a senior vice president of product management on Skylanders at Activision. The company grabbed children's attention with new characters each year -- helped by a storyline that made the game player the hero, or "portal master," with his or her toys.

"I have a 9-year-old. When he puts the toy on the portal, he's excited to see what happens," Taub said. "There are kids who are submitting drawings of Skylanders every day all across the world."

Activision didn't have the market to itself for long. Disney in 2013 began offering a line of figurines called Infinity, bringing characters from its TV shows and movies into a video game. Placing a figurine of Elsa from the movie "Frozen" on a pad produces a flash of light on the TV screen, followed by Elsa's likeness. Now gamers can play through levels inspired by the movie or create a castle and use her powers to freeze bad guys.

More toys have followed, modeled after characters from Disney's other brands, including Marvel comics, Pixar films and, this fall, Star Wars. Nintendo, whose Super Mario Bros. and Legend of Zelda characters are among the most popular in the industry, joined the race last year with its own toy line, called Amiibo. Demand is so high that Nintendo is struggling to keep up.

"We're at a point where we have to take our volume estimates and double them or triple them based on the levels of demand we're seeing," Reggie Fils-Aime, the president of Nintendo of America, said during an interview this week at the Electronic Entertainment Expo, or E3, the video game industry's biggest trade show. "We're working very hard to meet that demand."

Last month, Lego announced it would also enter the toys-to-life market with Lego Dimensions, in partnership with Warner Bros. The game, due in September, will feature the wizard Gandalf from the fantasy classic "The Lord of Rings" and Marty McFly from the time-bending '80s trilogy "Back to the Future."

With Lego and Disney's Star Wars on their way to store shelves, Nintendo and Activision have teamed up to bring Amiibo toys to the Skylanders game. Activision hopes the partnership, along with the addition this year of toy vehicles for the Skylanders SuperChargers game, will help it stay ahead.

Many consumers can't seem to to get enough.

Sam Dixon, 24, a radio production assistant living in Pennsylvania, said he and his brother collect Amiibo and Skylander figures. "When I first started I wasn't aiming to get a whole bunch of them," Dixon said. But soon, his girlfriend was buying them too. "We ended up with a bigger collection that way."

Dixon even keeps a few rare characters in their box -- the collector's value, he said, is too high.

Follow all the latest news from E3 2015 on CNET and GameSpot.