In early 2011, Hasbro (HAS) Chief Executive Officer Brian Goldner convened a team of designers, engineers, and marketers to figure out the Next Big Toy. They asked themselves: “What’s the most alive thing a toy can do?” After eight months of prototyping and kid focus groups, they had their answer: reboot the cuddly robot Furby, one of Hasbro’s biggest-ever hits, which seems to develop a personality as you play with it. In resurrecting a plaything that had its heyday when Bill Clinton was president, Hasbro is betting that the electronics-laden Furby’s ability to interact with its owner will appeal to tech-obsessed children. Still, a retro toy will be hard to market as a true innovation, says Sean McGowan, an analyst for Needham & Co. And at $60—double the original’s price—it may be a tough sell for shoppers recovering from the recession. “I don’t want to denigrate the technical innovation,” says McGowan. “In terms of the basic toy, yes it’s probably better, but it’s the same.”
The Furby reboot is one of the most expensive and complex product development projects in Hasbro’s history, and the largest U.S. toy sellers are also invested in its success. Wal-Mart Stores (WMT), Target (TGT), and Toys “R” Us put Furby on their annual lists of hot toys, a sign they’re dedicating plenty of shelf space to it.
Hasbro could use a hit. Revenue fell 7.6 percent, to $1.46 billion, during the first half of this year and is projected by analysts to be little changed in the quarter ended Sept. 30. In part, the company’s sagging sales reflect an industry hit by the popularity of mobile devices. The more kids of all ages turn to tablets for play, the more Hasbro and rivals such as Mattel (MAT) need to invest in research and development, McGowan says. Hasbro’s innovation is “pointed in the right direction, and they are certainly taking it seriously,” he says. “There just needs to be a lot more, and that’s true for the entire industry.”
Piggybacking on the popularity of smartphones and tablets, toymakers have launched a new product category dubbed “app toys.” One of the best-selling gadgets at electronics chain Brookstone is the Rover Spy Tank, which is remotely controlled by an app on an iPhone or iPad. Mattel has a line that it calls “apptivity” toys that includes Hot Wheels cars a child can move along the screen of a tablet as a digital racetrack scrolls underneath. Mattel’s Fisher-Price brand is even incorporating smart devices into toys for preschoolers.
The new Furby is the first of more than 20 products Hasbro plans to bring to life with technology, says Kenny Davis, marketing director of new brand franchises. After years of contemplating a return of the puffball that sold more than 40 million units in the late 1990s, Hasbro finally jumped because advancements in computing power and robotics had become cheap enough for a substantial improvement to be affordable. “It’s certainly something we couldn’t have done in years past,” says Davis. “I wonder if we could have done it a year earlier.”
Resurrecting Furby lets Hasbro capitalize on a built-in audience, a trend seen across toys. Hasbro estimates that in 2000, when it stopped making Furby, half of girls and a third of boys ages 6 to 12 in the U.S. owned one. At the peak of its popularity, the toy generated more than $500 million in annual sales, making it as big a hit as Sesame Street’s 1996 Tickle Me Elmo. “It was a hold-your-breath, hope-you-get-it toy,” McGowan says. “Nothing had been done like that before.”
The original Furby had regimented programming that created the illusion of a customized experience. But extended play revealed the same sounds and movements as it migrated from speaking Furbish, its native tongue, to English.
The new version has upgraded sensors and a computerized brain that will alter its behavior depending on how it’s treated, according to Hasbro. Pet it nicely and play music for it, and the creature may act more fun-loving. Shake it upside down, and it could become ornery. New Furbies can interact with other Furbies in the same room by sending out and reading inaudible tones. “With the older one, everyone basically had the same Furby,” says Kris Paulson, design manager of integrated play, who worked on Furby. “This one really adapts to who is playing with it.”
Furby also works with mobile devices. A free app for Apple’s iOS operating software and one for Google’s (GOOG) Android later this year will allow users to translate what Furby is saying and feed him everything from coffee to a dirty sock, potentially eliciting a burp or other adorably rude noises.
Although a national television campaign will focus on kids, Hasbro will try to sell Furby as a retro toy via Facebook (FB) and Twitter to shoppers in their 20s, who were kids when the toy debuted in 1998. The Furby Facebook page already has 300,000 likes. Licenses for Furby apparel and stationery are also in the works.
Hasbro’s biggest challenge—in addition to price—may be clearly marketing all of the Furby’s new technological bona fides, McGowan says. Hasbro put Furby in the kind of packaging typically used to sell consumer electronics—a small trapezoidal box with no plastic window or hole to give shoppers a sneak peek. Explains Paulson: “We envisioned Furby as not a toy, and this packaging really reinforces that.”