Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Toy Industry Part 3
Transcript
- Lucas: So we've done two episodes now on how falling birth rates reshape the toy industry, and I thought we'd covered the big themes — the shift toward educational toys, the rise of subscription models, the pressure on mass-market players. But then I came across a number that stopped me. Luna: I'm listening. What's the number? Lucas: The global toy market is roughly ninety billion dollars today. By 2030, depending on which forecast you use, it's projected to be between one hundred and five and one hundred and ten billion. That's a compound annual growth rate of about two and a half percent. But here's the thing — the number of children under fourteen globally is basically flat, and in many developed markets, it's declining. Luna: So the growth is coming from price per child, not more children. Lucas: Exactly. And that's a fundamentally different business than the toy industry of the 1990s or early 2000s, when you could just sell more units to more kids. Now the game is about capturing a larger share of a smaller wallet. But that wallet is fatter per child. Luna: Right. Parents with fewer kids tend to spend more on each one. The whole 'quality over quantity' thing. Lucas: And that's the angle I want to drill into today. Because it's not just about toy companies making more expensive toys. It's about a structural shift in what kind of toys sell, how they're marketed, and even how they're distributed. Let's start with the most obvious example: Lego. Luna: Lego is almost the perfect case study. They've been around for decades, but their strategy in the last ten years has been very deliberate. Lucas: Lego's revenue in 2025 was about nine point seven billion dollars. That's up from about six billion in 2015. So they've grown more than fifty percent in a decade, during a period when the number of children in their core markets — Europe and North America — has been flat to down. Luna: And they did it by raising prices and targeting adults. Lucas: Exactly. The adult fan of Lego — the AFOL, as they call it internally — is now a massive demographic. Lego's Botanical Collection, the flower sets, those are aimed squarely at adults. The Titanic set, the Eiffel Tower, the Star Wars Ultimate Collector Series. These are three hundred, four hundred, seven hundred dollar sets. And they sell out. Luna: So they're not competing for children's attention against screens. They're competing for adults' disposable income against things like whiskey or concert tickets. Lucas: Right. And that's a different competitive set. It's also a different margin profile. Lego's operating margin has been in the high twenties to low thirties for years. Compare that to a traditional mass-market toy company like Hasbro, which has struggled to hit fifteen percent in recent years. Hasbro's revenue has been basically flat since 2015, around five to six billion dollars. Luna: And Hasbro has been shedding brands, cutting costs. They sold eOne, their entertainment division. They're trying to focus on fewer, bigger properties. Lucas: Which is exactly the strategy you'd expect in a shrinking child population. You can't just flood the market with new SKUs and hope some stick. You have to pick your bets. Hasbro is betting everything on Dungeons & Dragons, Magic: The Gathering, and a few core franchises like Monopoly and Nerf. Those are brands with high loyalty and high per-customer spend. Luna: And they're also leaning into the adult market. Magic: The Gathering is overwhelmingly played by adults. The average age of a Magic player is thirty-something. Lucas: Exactly. So both Lego and Hasbro are chasing the same demographic shift: fewer kids, but adults who still want to play. And the data backs this up. A 2025 survey by the Toy Association found that forty percent of toy purchases in the U.S. are now made by adults for themselves. That's up from about twenty-five percent a decade ago. Luna: That's a huge swing. And it changes everything about packaging, about where toys are shelved in stores, about advertising. Lucas: If today was actually useful to you, the way these stay ad-free is listener support — buy me a coffee dot com slash fexingo. Luna: Yeah, it really does help keep us going. And we appreciate everyone who's chipped in. Lucas: So let's talk about one company that's been particularly smart about this adult pivot: Ravensburger. They're the German puzzle company. Puzzles have become a huge adult category, especially during and after the pandemic. Ravensburger's revenue has grown from about five hundred million euros in 2019 to over seven hundred million in 2025. Luna: And puzzles are almost perfectly aligned with the demographic trend. They're quiet, they're screen-free, they're a solo or small-group activity. And adults with disposable income are willing to pay thirty, forty, fifty dollars for a high-quality puzzle. Lucas: Plus, the margins on puzzles are pretty good once you have the manufacturing scale. Ravensburger has also moved into games for adults, like their 'Exit: The Game' escape room puzzles. That's another niche that didn't really exist twenty years ago. Luna: So the common thread here is that companies are finding ways to sell to the same person multiple times, at higher price points, rather than selling once to a child who outgrows the product. Lucas: Exactly. And that brings us to the subscription model. We talked about this a bit in our first toy episode, but I want to highlight one specific company: KiwiCo. They do monthly STEM and art crates for kids. They started in 2011 and now have over two million subscribers. They're privately held, but reports suggest revenue north of five hundred million dollars. Luna: And their model is perfect for smaller families. Parents with one or two kids are more likely to invest in a subscription that delivers curated, educational activities. It's a recurring revenue stream, high retention, and the per-crate price is reasonable — twenty to thirty dollars. Lucas: Compare that to the old model where a parent would walk into a Toys R Us and buy a random plastic toy for fifteen bucks. The subscription model builds a relationship. And it also solves the problem of toy clutter — you get a new crate, you do the project, and it's either consumable or you pass it on. Luna: It's almost like the toy industry is becoming more like the software industry. Recurring revenue, high lifetime value, low churn. Lucas: And that's a structural change. The old toy industry was driven by hit-driven, seasonal spikes — the holiday quarter could account for forty percent of annual sales. Subscriptions smooth that out. They also give companies direct data on what kids actually play with. Luna: Which is incredibly valuable. If you know that a five-year-old in Austin loves space-themed crates, you can target them with related products. Lucas: Now, there's a darker side to this demographic shift, and that's the pressure on traditional toy retailers. We saw Toys R Us collapse in 2018. But the survivors — Target, Walmart, Amazon — they're all adjusting. Target, for example, has been expanding its toy section and adding more exclusive partnerships. They recently launched a line with Melissa & Doug. Luna: Melissa & Doug is another great example. They've always been about wooden, open-ended toys. That's exactly the kind of toy that appeals to millennial parents who want less plastic, more quality. And they've been growing steadily. Lucas: Melissa & Doug was acquired by private equity in 2021, and since then they've expanded into puzzles, arts and crafts, even furniture. Their revenue is estimated around eight hundred million. Not huge compared to Lego, but healthy and growing. And they've managed to do it without a massive TV ad budget. They rely on social media and parent influencers. Luna: Which makes sense. Millennial and Gen Z parents are online, they're researching products, they trust recommendations from other parents more than traditional advertising. Lucas: So the marketing shift is as important as the product shift. Ten years ago, a toy company would spend heavily on a thirty-second spot during Saturday morning cartoons. Now, Saturday morning cartoons barely exist. Instead, you need a presence on Instagram, TikTok, and YouTube. Luna: And you need to target parents, not kids. Because with fewer kids, the parent is the gatekeeper more than ever. Lucas: Exactly. And that changes the messaging. It's less about 'this toy is fun' and more about 'this toy is educational,' 'this toy develops fine motor skills,' 'this toy is made from sustainable materials.' The parent's values become the selling point. Luna: And those parents are also more willing to pay a premium for those values. A wooden puzzle from Melissa & Doug might cost twenty-five dollars, while a similar plastic puzzle from a generic brand might be ten. But the parent chooses the wooden one. Lucas: So the industry is bifurcating. On one end, you have premium, high-margin, niche products aimed at discerning parents and adult collectors. On the other end, you have cheap, mass-produced toys sold through dollar stores and Amazon. The middle — the mid-priced, unremarkable plastic toy — is getting squeezed. Luna: And that's tough for companies like Mattel, which has a huge portfolio of mid-priced brands. Barbie is iconic, but it's also mass-market. Mattel's revenue has been flat for years, around five billion. They've tried to pivot into entertainment — the Barbie movie was a huge success — but that's a different business. Lucas: The Barbie movie grossed over a billion dollars, but how much of that flowed back to toy sales? It helped, but it was a spike, not a sustained trend. Mattel's core problem is that they're dependent on children who are shrinking in number. They need to find a way to sell to adults, or to parents who are buying fewer but higher-quality items. Luna: They've been trying with adult-focused lines like Barbie Signature, which are collector dolls at higher price points. But that's a small slice of their overall business. Lucas: And that's the challenge for the whole industry. The demographic tide is going out. Some companies will build boats, others will try to swim. The ones that adapt to the adult collector and the quality-conscious parent will survive. The ones that keep chasing the shrinking child market will struggle. Luna: So what's the one number or trend you'd want listeners to take away? Lucas: I'd say it's that forty percent figure — the share of toy purchases made by adults for themselves. That number is only going to grow. If you're looking at the toy industry as an investor or as a business owner, follow that thread. The companies that are winning are the ones that treat adults as their primary customer, even if the product is nominally for children. Luna: It's a different industry than it was twenty years ago. And it's going to keep changing. Lucas: Absolutely. And on that note, next time we'll look at how falling birth rates are affecting the video game industry — which is another huge category that's already further along in the adult pivot. Thanks for listening.