The companies involved in the toys & games industry fall into three general categories: traditional toys, video games, and casino games and accessories. In 2007, there were 6,296 manufacturers of traditional toys (which consist of action figures, dolls, playsets, stuffed animals, models, and other related products) in the United States. The traditional toy industry is essentially stagnant, as its 2007 revenue was $21.2 billion, compared to $22.3 billion in 2006. In contrast, the video game industry is one of the quickest growing industries in the United States. Its 2007 revenue of $18.9 billion was 51.2% higher than its 2006 revenue. Meanwhile, in 2007 the casino game industry began to see a shift in consumer preferences towards electronic casino games such as slot machines. As a result, manufacturers of electronic video games have benefited, while manufacturers of more traditional casino games suffered.
From 2006 to 2007, revenue from the traditional toy manufacturing industry fell from $22.3 billion to $21.2 billion, a 4.9% decrease. The video game industry, on the other hand, increased from $12.5 billion to $18.9 billion over the same period of time, a 51.2% increase. As a result of this shift in customer preferences, many companies in the toy industry have begun to place more emphasis on video game products. For example, Mattel, the world's largest toy manufacturer and the company behind names such as Barbie and Hot Wheels, entered the video game industry in 2006 to keep up with the changing face of the toy industry.
The majority of traditional toys are made from plastic resin. One of the key components of plastic resin is petroleum, which reached all-time high price levels in 2008. In fact, in May of 2008, the price for crude oil reached $117.40 a barrel, a staggering 76.8% increase from 2007, when it was at $66.40. With most experts believing the price of crude oil is unlikely to decrease anytime soon, these rising petroleum prices figure to continue to negatively impact manufacturing costs. And although most primary traditional toy manufacturers, such as Mattel, Hasbro, and JAKKS Pacific, have hedging strategies to keep its raw material costs under control, further increases in the price of petroleum are a potential disaster for the traditional toy industry.
As of fiscal 2007, customer preferences have begun to shift away from traditional table games and towards electronic casino games. In 2008, casinos, racinos, and bingo halls nationwide continued to follow this trend, implementing high-tech game systems, wireless customer-service features, and other technologically advanced services. This trend helps electronic video game manufacturers like International Game Technology, FortuNet, and GameTech International, all of whom obtained higher revenue figures in 2007 than in 2006. However, this trend is detrimental to manufacturers of traditional casino game equipment, like Gaming Partners International, whose 2007 revenue was 20.5% lower than its 2006 revenue.
Consumers tend to gamble or buy toys and games only when they feel they have enough disposable income to afford such luxury goods. Rising oil prices, a struggling U.S. housing market, and other similar factors limited Americans' disposable income in 2007 and the first half of 2008. Shaky consumer confidence sent the Applied Analysis Gaming Index, which includes casino operators and gaming machine manufacturers, down by 15.7% in January 2008. The toy industry also felt the effects of this trend, as its overall revenue decreased by $1.1 billion from 2006 to 2007.