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From Skylanders to Amiibo: Video games embrace the toy

Nintendo's hot to cash in on the appeal of action figurines that come to life in a game, and Marvel Comics won't be far behind. But does the fad have staying power?

Activision's Skylanders games have an increasing list of competitors. Activision

LOS ANGELES -- When Noah Tan saw these toys on the shelf, he had to have them.

The 4-year-old from a Toronto suburb is collecting a new genre of figurines built by companies like Activision Blizzard and Walt Disney. Like most toys, they're painted with vibrant colors and posed in dramatic positions.

But these aren't normal figurines: when placed on a special surface connected to a console and TV, they appear on the screen and can star in a video game.

To Tan, it's part of their magic. "They have superpowers," he said. He's since collected at least 30 of these toys, often sold for about $15 apiece.

Tan, and many eager young players like him, are helping to change the video game industry.

Historically, game makers were confounded by children. Aside from a handful of successes, such as Nintendo's Super Mario Bros. and Pokemon franchises, efforts to make games for kids haven't had great success despite the opportunity that comes with targeting that demographic.

That changed with the arrival of Skylanders: Spyro's Adventure, released in 2011 from Activision Blizzard. The game introduced customers to new figurine accessories and a "portal of power" with which to send the toys into the game. Sales have been steadily jumping, and other companies have rushed to offer their own takes on what has become a multibillion-dollar genre.

"From the first time a kid picked up a stick and pretended it was a sword, we've all brought toys to life in our minds,," said Eric Hirshberg, head of Activision's publishing arm. "This brings that fantasy closer to reality."

Activision's Skylanders franchise of games has so far topped $2 billion in revenue, selling more than 175 million toys through the end of last year. Skylanders is now one of the top 20 best selling video game franchises of all time, according to Activision's internal data. The company also says it is now the world's largest manufacturer of action figure toys.

The rapidly rising sales for this new genre come in contrast to overall sales of console video games, which have contracted seven percent in the past three years to about $25.1 billion.

The genre is poised to grow even larger.

At the Electronic Entertainment Expo here, Nintendo showed off its own take, called Amiibo, which will allow figurines of individual characters from Nintendo's franchises to interact with various video games through wireless radio signals. The devices will communicate with the GamePad tablet controller, which is sold alongside each Wii U video game console.

Ready for action: Nintendo's Amiibo figurines. Nintendo

Scott Moffitt, a marketing and sales executive for Nintendo of America, said some of the products' appeal will come from the items having been fashioned from the company's popular video game characters.

"The obvious fact is that the characters are widely known and have great appeal," he said. Nintendo plans to offer about 10 figurines at the outset. The figurines will interact with at least five games, eventually including the recently released Mario Kart 8 racing game as well.

Making products for this genre of games was a natural decision for Nintendo. Citing market research, the company said 58 percent of customers play these types of games on its devices.

Down this road before

Analysts disagree about whether the market will continue to prosper, noting that fads have swept through the video game industry in the past.

One of the most notable examples was Activision's Guitar Hero, a franchise of games first released in 2005. The game relied on real-world controllers shaped as guitars for players to use as musical prompts filled the screen. Four years later, and after several entrants attempted to offer different takes on the genre, sales sharply dropped.

Some analysts and industry insiders say this new toy genre could meet a similar fate, arguing that many toys are popular for only a few years. Companies say they continue to add twists on game play in an effort to keep the games fresh and encourage customers to buy new toys by offering different functionality.

Some game makers have decided to wait it out all together. Yves Guillemot, chief executive of game maker Ubisoft, said his company was at one point developing its own line of toys, but decided the upfront investment was too much. "When you have to buy the toys plus the system, plus create the game, plus create the marketing, you have to choose at one point where you put your efforts," he said. He chose to invest instead in making elaborate high-end games, such as Ubisoft's latest historical fiction title, Assassin's Creed.

Walt Disney chose to compete against Activision, becoming the second major player in the market when it released its Infinity line of toys last year. John Vignocchi, an executive producer at Disney, said many of the mistakes companies have made were that they don't focus on making the games compelling over time; He intends to avoid that particular pitfall.

Part of his plan comes from a twist in the way the games are played. Like Activision's Skylanders, Infinity players place figurines on a specialized base that recognizes the toy and activates it in the video game.

Once activated, gamers can use these characters to play a traditional action adventure game using characters like the Parr family from Pixar's animated superhero film "The Incredibles."

But there's another way to play, too. Customers can can create their own worlds using a feature called "toy box," in which to play with the characters in any way they wish. Gamers have downloaded toy boxes shared over the Internet about 10 million times, Disney said.

"Players want to create their own worlds and share them," Vignocchi said. He added that the Infinity team is working with other groups at Disney to create more toys using well-known characters.

The next iteration of the franchise will offer more capabilities for existing characters, as well as a cast of new ones from Disney-owned Marvel Comics. It will launch in the fall.

In the meantime, companies are racing to cash in on the craze. One company, Hanakai Studio, is producing a more intricate take on the genre with its strategy game Prodigy.

Retailer GameStop has also responded, holding specialized education "clinics" to teach parents and children about the toys, and it is working on additional sales efforts it hopes to have ready for the holidays.

Tony Bartel, GameStop's president, said the company will also expand shelf space it dedicates to these toys in its stores by 50 percent, in part to accommodate Nintendo's entrance into the market.

"We obviously wouldn't be doing it if there wasn't strong consumer demand," he said.