Eric Clark - The real toy story: inside the ruthless battle for americas youngest consumers

T oys are wonderful. They inspire love, comfort the lonely, enrich experience, embody the best childhood memories. A bedraggled toy dog in bed can hold back the night. A red plastic fire engine can put out a tantrum. A tiny doll stems tears. They encourage learning, nurture imagination and creativity, and turn people into lifelong collectors.

Toys are special. They give a glow, years after theyve been discarded. Remember the excitement of opening presents: the belled clatter of a xylophone, the slither of a Slinky, the waxy smell of Crayola crayons. The feel of Play-Doh in your hands. That Fisher-Price airplane peopled with pop-in passengers. Toys are fun. More, they are a vital part of our lives, our culture, and our childrens development. They are crucial for physical, emotional, intellectual, and social interaction.

Good toys enhance play. Play is the work of childhood, and toys are the tools of that work. They stimulate imagination, creativity, coordination. They let children experiment, discover themselves, solve problems, feel in control. They provide a two-way connection with adults. They help them make sense of the world and find their role in it.

The industry that produces these toys should also be special. It has to hold a singular place in our society: Few others affect such a critical and sensitive area of family life.

The American toy industry dominates not just the United States but also the whole of the globe. It is now a $21 billion business, and although fewer than 4 percent of the worlds children are American, American children consume more than 40 percent of the worlds toys.

It is massive and exciting. Every year it puts almost 3.6 billion toys into the home market alone, including 76 million dolls, 349 million plush toys, 125 million action figures, 279 million Hot Wheels and Matchbox cars

The toy industry has never been a static one: Part of its genius has been a capacity to adapt with speed and flair. Today, though, the changes that buffet it are huge, the greatest for at least 50 years.

Kids are leaving behind their toys earlier and earlier. Partly it is that they are growing up fasterthe famous KGOY (kids getting older younger), a trend ironically encouraged by the toy industrys own marketing methods of using sex and violence to attract kid sales. Partly it is the competition from all the other rivals for childhood time and attention, especially from todays new toys, such as iPods and cell phoneselectronics are eating the toy industry, laments one insider.

The industry that once drew vigor and innovation from the sheer number and challenging creativity of its range of companies is now corporation dominated. Just two toy companies and three retailers control a huge proportion of the worlds toys, determining which will be produced and which die. And their overriding concern is not the wonderful, special nature of toysbut the bottom line.

The fact is, the toy business is no longer fun and games. Its a harsh, corporate world, driven by social and demographic changes, concerns about stock prices, and fierce battles between global brands.

The rewards for success are enormous: A top toy can earn billions. H. Ty Warner shot into Forbes Worlds Richest People list with his Beanie Babies. Likewise, the cost of failure can be catastrophicthe battlefield is littered with the corpses of once-successful toy companies whose multimillion-dollar gambles did not pay off.

As a result, the toy business has become increasingly ruthless, willing to use gloves off methods and exploit its young customers. In the industrys struggle to adapt and to survive, our kids are regarded as walking wallets. Ever younger age groups are constantly being targeted. Research companies work with children as young as 2; by 4, most are already making requests by brand name. One-year-olds attract increasing attention.

Marketers put into play the whole range of sophisticated research and selling techniques developed for adultsplus some extra (and sometimes dubious) techniques such as covert data collecting at child-oriented Web sites.

The impact of the U.S. toy industry on children can hardly be exaggerated. It reflects, influences, stimulates, and sometimes anticipates their wants and whims. Half the 40,000 commercials the average child views every year are for toys. Industry-promoted toy fashion fads condition toddlers for the wider marketing onslaught that will engulf them as they grow older.

Play has become too easy. A child loves his play, wrote Dr. Benjamin Spock, not because it is easy, but because its hard. Kids have a short attention span. A good toy is versatile: a cardboard box can be house, boat, fortress, tent, sledgeyoull never improve on a box. But the toys produced today too often do everything at the touch of a button. Vast numbers have computer chips and many come with pre-scripted story lines. Far from encouraging creative play, they stifle it: The action comes from the toy, not from the child. The play patterns that result are structured by the movies or television programs that spawn them, or from the built-in electronics. No one says, Lets pretend.

Todays big toy companies like to see themselves as being in the lifestyle entertainment business. They are no longer selling playthings but promoting properties. The only way to change the play with these toys is to discard, move on to a new onewhich, for the industry, is the perfect commercial solution. Even better, these toys are springboards to the sales of other toys and accessories in the line, promoting constant repeat buying. The industrys continued existence depends on selling instant gratification over and over again.

Todays toy people are not manufacturers. Most of the worlds toys are made thousands of miles away in China by migrants toiling for a few cents an hour. The monstrous gap between the cost of manufacture and the selling price fuels the process to which toy companies devote themselvesthe marketing. Throughout Americaand throughout the worldthe way kids play is increasingly determined by a tiny number of executives who could just as effectively be selling soap or breakfast cereals (and probably have, or someday will).

There are still toy people who care: lone, maverick inventors conjuring up captivating playthings with passion and ingenuity; entrepreneurs with persistence and daring.

It is a business in which losers far outnumber winners. The losses are monumental, the wins colossal. And it can happen in the space of a season: one longtime commentator on the industry memorably says, Every big toy company is just a stones throw away from disaster.

It is a high-wire act without a safety net. Thats why the thrills remain.

O ne is a New York City landmark. The other is the contender. Two of the worlds greatest toy shops stand just 16 blocks apart in midtown Manhattan. FAO Schwarz, the Fifth Avenue flagship of Americas oldest toy retailer, calls itself the ultimate toy store. The competitor, Toys R Us, an upstart newcomer, is self-styled as the worlds biggest. Rivalry between them is given added edge by the fact that the Times Square challenger was the brainchild of FAOs ex-chief John Eyler when he moved across to the big-box toy retailer.