Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Toy Industry
Transcript
- Lucas: So the toy industry is in a strange spot right now. Fewer kids being born means a smaller pool of traditional customers, but the industry is actually bigger than it was a decade ago — just for different reasons. Luna: Wait — bigger despite fewer kids? How does that work? Lucas: It's because the toy companies figured out that adults buy toys too. And I don't mean just for their kids. I mean adults buying for themselves — the so-called 'kidult' market. It's now roughly a quarter of all toy sales in the US. Luna: Right, I've seen LEGO sets marketed to adults with like 5,000 pieces and no age recommendation. But is that enough to offset the demographic decline? Lucas: For some companies, yes. But the shift is real. Let's take Hasbro as the clearest example. In 2025, their total toy revenue fell about 12 percent year-over-year. But their digital gaming revenue grew 9 percent. And that's the pattern — physical toys for young kids are shrinking, but licensed entertainment and games for all ages are growing. Luna: So Hasbro is becoming less of a toy company and more of an entertainment company? Lucas: Exactly. They've been leaning hard into their brands — Dungeons & Dragons, Magic: The Gathering, Monopoly — and licensing them out for movies, TV, and mobile games. Their big hit last year was Monopoly Go, a mobile game that made over a billion dollars. That's not a toy sale, but it's Hasbro revenue. Luna: And the flip side — companies that just make rattles and baby toys? Those must be hurting. Lucas: They are. The overall US toy market contracted about 8 percent between 2022 and 2025. The birth rate in the US hit a record low in 2024 — about 1.62 births per woman. That's well below replacement level. So the toddler toy aisle is just a smaller pie. Luna: So what happens to a company that's tied to the infant and preschool segment? Are they just doomed? Lucas: Some are diversifying. Fisher-Price, which is owned by Mattel, has been expanding into digital content — think apps and YouTube channels — to keep the brand in front of parents. But the core physical product is under pressure. Mattel overall saw flat revenue in 2025, but their action figure line — especially Masters of the Universe and WWE — grew because those have adult collector bases. Luna: So it's almost like the toy industry is aging up. The average age of a toy buyer is now older than it was 20 years ago. Lucas: Right. The National Toy Hall of Fame even noted that the 'kidult' phenomenon is the biggest shift in play patterns since video games. And it's not just action figures. LEGO's adult-targeted sets — the botanical collection, the architecture series — now account for something like 15 percent of their total sales. Those sets are priced at $50 to $300, and they're sold to people with disposable income. Luna: That's a pretty different business model from selling $20 plastic cars to five-year-olds. Higher margin, but smaller volume. Lucas: Exactly. And it changes the whole supply chain. Fewer units, but each one has a higher price point and more complexity. Companies are also producing fewer SKUs — they're cutting back on the number of individual toys and focusing on the ones that have licensing power. Luna: So if you're a small toy maker without a big movie franchise, you're in trouble. Lucas: That's the fear. The mid-tier toy makers — the ones that made generic board games or craft kits — they're getting squeezed by both ends. Big entertainment IPs dominate the shelf space, and the overall demand is shrinking. A lot of them have been acquired or gone under. Luna: Before we go further — I want to circle back to something you said about the adult collector market. Because that feels like a lifeline for the industry, but it also raises a question: can you build a sustainable business on nostalgia alone? Lucas: It's a good question. Nostalgia has a shelf life. A kid who grew up with Power Rangers in the 90s might buy a retro figure today, but what about the kid born in 2010? They don't have the same nostalgia. So companies have to keep creating new IP that can become the nostalgia of tomorrow. That's hard. Luna: And that's where the birth rate problem bites again. Fewer kids means fewer people forming those childhood attachments to new brands. Lucas: Exactly. That's why companies like Hasbro and Mattel are doubling down on evergreen brands — things like Monopoly, Barbie, Hot Wheels — that have been around for decades and have cross-generational recognition. They're not betting on creating the next hot toy; they're betting on the classics. Luna: But isn't that a bit of a gamble too? Relying on the same few brands? Lucas: It's a calculated one. Barbie alone generated about $1.5 billion in retail sales last year for Mattel, boosted by the movie. Hot Wheels is similar. These brands have longevity because they adapt. Barbie now has a career doll for every profession, Hot Wheels has digital integration. But yes — if those brands fade, there's not much underneath. Luna: So what about the international picture? The birth rate decline is a global phenomenon, but some countries are further along — like Japan and South Korea. Lucas: Japan is a case study. The toy market there has been shrinking for over a decade. Birth rate is 1.3. The big Japanese toy maker Bandai Namco has shifted heavily into digital and arcade games, but their physical toy line — especially Gundam models — has a huge adult fan base. In fact, Gundam model kits are sold more to adults than kids now. Luna: So the pattern holds globally. But does that mean the industry is just going to become a smaller, more premium, more adult-oriented market? Lucas: I think that's the most likely scenario. The mass-market toy aisle — the one with cheap plastic toys for young kids — is going to keep shrinking. The growth will be in collectibles, high-end construction sets, and licensed merchandise tied to movies and games. And those are all higher margin, but they also require more marketing and IP investment. Luna: There's something about this topic that makes me think about the broader economy. If the toy industry is a canary in the coal mine for demographic decline, what does it tell us? Lucas: That industries tied to children are going to have to reinvent themselves. And that early childhood — education, healthcare, housing — all face similar pressures. But the toy industry is interesting because it's showing that reinvention is possible, even if it means becoming something different. Luna: Speaking of reinvention — this episode is exactly the kind of thing that makes our show what it is. We dig into a specific industry and show how demographics are reshaping it in real time. If you found that useful, the way we keep this ad-free and independent is through listener support. You can buy me a coffee at buy me a coffee dot com slash fexingo. It's a simple way to keep these episodes coming. Lucas: Yeah, it really helps. And we appreciate everyone who has chipped in. Now, back to toys — I want to talk about what happens to the secondary market. Because collectibles have a whole economy around them. Luna: Good point. With fewer kids, are we going to see a glut of old toys on the resale market? Lucas: It's possible. The '90s and 2000s had peak birth rates in many countries, so those cohorts are now in their 30s and 40s with money to spend on nostalgia. That's driving the current collectibles boom. But as those cohorts age out, and with smaller cohorts behind them, demand for vintage toys could soften. Luna: So the bubble might burst? Lucas: Some categories, maybe. But rare items will always have value. The bigger risk is for mass-produced common toys from the 2010s — there's just fewer collectors to buy them. We're already seeing that in the graded action figure market, where prices for common figures have stagnated. Luna: What about the role of streaming and video games? Kids today spend more time on screens than with physical toys. Lucas: That's probably the biggest competitor to traditional toys. Screen time has been rising for a decade, and it's not just about birth rates — it's about play patterns. The toy industry's response has been to make toys that connect to screens — like app-enabled robots or AR playsets. But those are expensive and haven't been huge hits. Luna: So the toy of the future might be something that blends physical and digital, like a collectible that unlocks content in a game. Lucas: Exactly. The Skylanders and Amiibo models from a decade ago were ahead of their time. Now with blockchain and NFTs — though that's cooled off — the idea of a digital-physical hybrid is still alive. LEGO's recent partnership with Epic Games for a metaverse platform is a play on that. Luna: It sounds like the industry is in a period of experimentation. Trying to figure out what works when the traditional customer base is shrinking. Lucas: That's right. And the winners will be the ones that successfully pivot to older audiences or create hybrid experiences. The losers will be the ones that just keep making toddler toys and hoping for more babies. Luna: So to wrap up — what's the one number our listeners should remember? Lucas: The US birth rate at 1.62. That's the number that's driving all of this. If it stays that low, the toy industry will continue to shrink and reshape. But if it ever recovers — well, then the toy companies that survived the lean years will be in a great position. Luna: Let's hope for a baby boom, then? Or at least a small bump. Lucas: Ha, I wouldn't count on it. But the toy companies aren't waiting around — they're adapting. And that's the story.