Oct. 10 (Bloomberg) -- In early 2011, Hasbro Inc. Chief Executive Officer Brian Goldner convened a team of designers, engineers and marketers to figure out the Next Big Toy.
They asked themselves a simple question: “What’s the most alive thing a toy can do?” After eight months of prototyping and kid focus groups, they had their answer: Reboot Furby, the cuddly robot that seems to develop a personality as you play and was one of Hasbro’s biggest-ever hits.
In resurrecting a plaything that had its heyday when Bill Clinton was president, Hasbro is betting the toy will appeal to adults who played with Furby as kids as well as tech-obsessed children this holiday season.
Still, a retro toy from the 1990s will be hard to market as a true innovation, said 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,” said McGowan, who is based in New York. “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 the Pawtucket, Rhode Island-based company’s history. The largest U.S. toy sellers have also invested in its success. Wal-Mart Stores Inc., Target Corp. and Toys “R” Us Inc. all put Furby on their lists of hot toys, a sign they’re dedicating plenty of shelf space to it.
Hasbro could use a hit after revenue declined 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. The toymaker traded at a premium on a price-to-sales basis to the 80 companies in the Standard & Poor’s 500 Consumer Discretionary Index from early 2003 through late 2011. It peaked at a premium of more than 100 percent in 2008. At $37.57 through yesterday, it now trades at a discount of 1.6 percent.
In part, the company’s sagging sales reflect an industry that’s being transformed by the surging popularity of mobile devices. As more kids of all ages turn to tablets such as Apple Inc.’s iPad for play, the more Hasbro and competitors such as Mattel Inc. need to invest in innovation, McGowan said.
Hasbro’s innovation is “pointed in the right direction, and they are certainly taking it seriously,” McGowan said. “There just needs to be a lot more, and that’s true for the entire industry.”
The new Furby is the first of more than 20 products the company plans to bring to life with technology, said Kenny Davis, the marketing director of new brand franchises, including Furby.
After years of contemplating a return of the puffball that sold more than 40 million units in the late 1990s, Hasbro indulged 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,” said Davis, who was part of the innovation group. “I wonder if we could have done it a year earlier.”
Bringing back Furby was also a chance to leverage a built-in audience, a trend seen across toys as well as entertainment. Hasbro estimated that in 2000, when it stopped making Furby, half of girls and a third of boys ages 6 to 12 in the U.S. had one.
While the new Furby resembles its predecessor with a face that looks like Gizmo, the good character in 1984’s “Gremlins,” its innards feature an upgraded system of sensors and computer circuits. That and eyes made from liquid-crystal displays will bring Furby to life in new ways, according to Hasbro, and convince parents, teenagers and even shoppers in their 20s to shell out $60.
The original Furby had regimented programming that created the illusion of a customized experience. Play with it enough and it unveiled the same sounds and movements as it eventually migrated from speaking Furbish, its native tongue, to English. At the peak of its popularity, the toy generated more than $500 million in annual sales and was every bit as big a hit as Sesame Street’s Tickle Me Elmo, according to McGowan.
“It was a hold-your-breath, hope-you-get-it toy,” said McGowan. “Nothing had been done like that before.”
The new version has a computerized brain that will alter its behavior depending on how it’s treated, according to Hasbro. For example, if you pet it nicely and play music for it, it may act more fun-loving. Shake it upside down, and it could become ornery. Furbies can also interact when in the same room by sending out and reading inaudible tones from each other.
“With the older one, everyone basically had the same Furby,” said 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, the fastest-growing part of the computer market. A free application for Apple’s iOS operating software and one for Google Inc.’s Android later this year allows users to translate what Furby is saying and feed him everything from coffee to a dirty sock. Depending on what is chosen, responses could be a burp or other rude noises.
Hasbro’s biggest challenge besides price may be conveying in marketing Furby’s technological bona fides, McGowan said. 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.
“‘We envisioned Furby as not a toy, and this packaging really reinforces that,’’ Paulson said
A national television campaign will focus on today’s kids. Hasbro will try to sell Furby as a retro toy via Facebook and Twitter to shoppers in their 20s, who were kids when the toy debuted in 1998. The Furby Facebook page already has 200,000 likes. Hasbro also is planning to extend the brand by licensing Furby to apparel and stationery makers.
While it’s unlikely Furby will be the phenomenon it was more than a decade ago, it doesn’t have to replicate that to be considered a success, McGowan said. The re-imagined Furby needs to sell well enough to demonstrate that Hasbro’s move into technology is working, he said.
‘‘If it sells well, even if it doesn’t have a second year, it just underscores that the company was able to do it,” McGowan says. “If it doesn’t, then it leaves a hole, and leaves you wondering what will happen with the next such item.”
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