How YouTube Changed the Billion-Dollar Toy Industry - VoiceTube: Learn English through videos!

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If you're like the estimated 74%
of adults in the US who use YouTube,
this might be what your home screen looks like.
An algorithmically curated look into what you like to watch.
Maybe some tips on how to prepare a new meal
or your favorite vlogger's latest video.
But if you're a parent
who shares your phone with your children,
it probably looks a little more like this.
Kid's content on YouTube is huge.
Views for videos can reach into the billions.
Five of the top 10 videos in all of YouTube's history
are either music videos or kids' videos,
with Baby Shark having more views than people on the planet.
♪ Daddy shark doo doo doo doo doo doo ♪
♪ Daddy shark ♪
♪ Grandma shark doo doo ♪
YouTube has created a revolution, not an evolution,
in the way kids and families consume video content.
And that extends then into how they view toys and play
and all of the associated things that go with that.
Kids YouTube, for the unaware, can be adorable.
It can be boring.
It can also just be flat out strange.
♪ Here I am, here I am, how do you do ♪
But often, it involves toys.
And for toy makers who embraced the platform,
it led to record success.
I think L.O.L. Surprise
unquestionably is the biggest phenomenon
that has ever happened in the toy industry.
This is the story of how YouTube
changed kids' toys.
Play patterns, the way children play, is timeless
but how we deliver on those play patterns through product
and how we market that to children
has changed quite a bit over the years.
And I would say that the last five to 10 years
really ranks right up there with the 1950s,
when TV commercials directed to children
was first launched by Mattel.
This is Nancy Zwiers.
She lead the Barbie brand during the '90s
and spent four years as the Chief Marketing Officer
for Spin Master.
It used to be that there would be a few play things
that parents would bring into the home
or that children would create themselves
like a stick and a ball becomes a play thing.
And the industry was at a certain level of volume
at that point.
Mattel was very innovative
and actually put the first product on TV
and advertised it to children.
Let's play house.
This created a huge explosion in the toy industry
that unfolded across decades.
♪ The hit of the day when you're ready to play ♪
♪ Everyone knows the Slinky ♪
♪ Here he comes, here he comes ♪
♪ Greatest toy you've ever seen ♪
♪ And his name is Mr. Machine ♪
♪ G.I. Joe, G.I. Joe ♪
♪ Fighting man from head to toe ♪
♪ On the land, on the sea ♪
♪ In the air ♪
When you go back to the 1980s,
what do you think of in terms of hit shows?
You think of things like Masters of the Universe,
you think of the original Transformers and Care Bears.
The joke was they were 22 minute commercials.
Just close your eyes and care.
Let's make a TV show which is really promotion
for our property or IP to help sell toys.
There were a lot of those famous characters
in which kids absolutely loved it.
They were totally entertained
but there were huge toy lines behind them.
This is Jim Silver,
a 37 year veteran of the toys industry.
In 1999, he started a consumer toy review magazine
called Toy Wishes.
And now, he's the CEO
of an influencer talent management group, TTPM.
Regulations changed through the years
and also parents became aware
that they were purely commercials.
And you saw a lot of the new channels,
the Disney Channel and Nickelodeon,
they realized that wouldn't work anymore.
And to them, entertainment came before licensing.
What happened over time was that
toys started to become designed for a 30-second commercial.
Closed, it's a mild-mannered tool box.
Open, it's a Micro Machines USA.
Cruise your mini Micro Machines vehicles, planes and boats
to the police station, the marina,
the mini motorcycle repair shop, the gas station,
the construction office.
Work the real working draw bridge,
highway, passenger wrap and garage doors.
So if you couldn't explain it in a 30-second commercial,
cost reduce it out of the product
and just stick with what you could say.
And features of toys, magical features using electronics,
lights and sounds, and mechanical movements,
that magic, like they don't know how it happens,
that became more and more important.
The sound of power is heard.
It's firebolt Batman.
See ya, Batman.
Batman's turbo-powered Batmobile
flies into high gear.
Since 2000 with the cable channels dedicated to kids,
Disney Channel, Nickelodeon, Cartoon Network,
there became the opportunity to reach kids
in mass numbers every day of the week.
And so the toy industries continued to grow.
The toy industry for the most part
was a pretty solid business,
just, you know, growing a couple percent a year
here and there.
There'd be big, big years here and there
when there was maybe a hit movie
like a Star Wars movie come out,
you know, drive a lot of toy sales.
From 2014 to 2019,
the global toy industry would grow by 15%.
At about the same time, those major cable networks
of Nickelodeon, Disney Channel and Cartoon Network
would lose half their total audience.
2017 also saw the bankruptcy of Toys R US,
as both parents and kids
discovered and bought more toys online.
If you think about kids, they're usually
the first adopters of a new medium.
Kids weren't watching things like Nickelodeon
as much as they used to.
They were watching things on YouTube.
YouTube started in early 2005.
And this was like the very early
web 2.0, this beginning of sort of like
what at the time was known as user-generated content.
Like web-blogging was really big,
MySpace was the biggest thing on the internet back then.
There was an early video of a Brazilian soccer legend
doing the stunt tricks that just exploded on the site,
one of the first viral videos.
Lazy Sunday, if you remember that SNL short.
♪ Pass that chronic-what-cles of Narnia ♪
Ouch, Charlie!
Oh, Charlie bit me.
If you remember those earliest viral hits.
YouTube in the early days was definitely comedy and music.
It was a place of experimentation.
I was the Chief Audience Officer at Maker Studios.
I oversaw essentially the creator partnerships
all over the world.
Maker Studios was one of the largest
multi-channel networks on YouTube
and had partnered with some of the biggest YouTube channels
of the time, before being sold to Disney in 2014.
Chris is now the CEO of Pocketwatch
which represents some of the largest kids' stars on YouTube
including Ryan's World and Love, Diana
who can amass over a couple billion views every month.
The truth is one of the very biggest
and earliest videos on all of YouTube
was by a creator and star named iJustine
where she unboxed her first mobile phone bill
for her brand new iPhone, and it came in a box.
And this ultimately morphed into many different formats
associated with unboxing
and tech was actually really big.
And those became fairly successful pretty early on
on the platform.
And you saw them expand from tech products
to beauty products, and then around 2012 and 2013,
we saw this explosion into toys.
So here's the Furby inside right here.
We used to call them hands channels, okay?
And a hands channel was literally a top-down view
of someone's hands unboxing typically a toy,
and they'd unbox it, they'd show each component.
We just got Uncle Scrooge.
I would speak to many of those creators.
We signed many of those creators at Maker Studios
to be our partners.
And it was fascinating in that it was this whole new genre
and this whole new format and that corresponded
with a rise of kids and family viewership on YouTube
that was stark, that was hard to miss.
And you would see it in the data.
And we had access to a lot of data
at Maker Studios, around YouTube.
Let's see what's inside.
First up, we have the Stormtrooper Pig.
You saw the launch of EvanTube
who I consider the first child, so to speak, unboxing star.
And they would open toys
and kids were just mesmerized by it.
They loved watching it.
And next thing you know, you had literally 50 unboxings.
They were unboxing just about every toy, you know?
And people were just really excited.
You'd open the toy and you'd see a toy pop out
and kids just got excited seeing it piece by piece.
Yeah, he's in a bathrobe, he's eating a lobster.
You know, the early days of these unboxing videos,
the videos were, you know, from adults' perspective,
just terrible, I mean, they were 10 minutes long.
They were boring, there was a shaky camera.
There was absolutely no production value.
And if you think about these executives, you know,
they're trying to figure out how to reach this new audience.
And they're brought these videos
and say, "Well, look at this video,
it has 200,000 views on it, and it's terrible.
When I first heard of it,
I thought it was the weirdest thing.
It just seemed kind of bizarre.
Who would want to watch someone opening a toy,
taking it out of the box?
But then when I started thinking about
this idea of exploration and discovery
as a core play pattern,
the most fundamental play pattern there is,
it started to make sense.
And I think that I have to say that the company
that really jumped on that in the most concerted way was MGA
with their launch of L.O.L.
♪ L.O.L. Surprise. ♪
L.O.L. Surprise had three key elements.
Doll play, which is basically
the most popular play pattern there is.
Collectible, so within each L.O.L. Surprise,
you'd get a little sheet that showed you
all the other dolls you could collect.
And then the surprise factor.
You didn't know which doll you were getting.
It was a blind pack as they call it.
An L.O.L. was made by this company called MGA.
Back then, you know, 2016, they were a small player
in the toy industry, founded by this guy named Isaac Larian.
He's the CEO and founder.
I have three adult kids and they were making fun of me
that, "Oh, you're old, you don't know anything about
what's happening in today's scene."
And I said, "Like what?"
And they said, "For example, there is,
do you know about these iPhone unboxing videos
that get millions and millions of views?"
So I thought they were pulling my leg.
As children do, to make fun of their parents.
And then I did go and look one night
and I was frankly shocked and flabbergasted
that why would anybody buy an iPhone
take it home and open the box and show it on the camera
and everybody can go watch it?
So I typed toy unboxing, and my God,
I saw so many different videos
and people, kids and adults, buying toys like an Apple,
and unboxing it on video and posting it.
So that gave me an idea
that why not come up with the ultimate?
And that's the first L.O.L. Surprise.
All right, oh yes, we've got a gold ball.
L.O.L. changed the way you opened with toys,
and everybody saw that.
And the packaging became part of the play
which became part of the entertainment.
So normally, if you get a package
that you just open a package, and you take the toy out,
that's not exciting.
You open up L.O.L., you peel it away, you open up inside,
you have seven surprises.
And it took off like wildfire
and quickly became the top toy in the country.
By December of 2018,
eight of the top 10 toys sold
were all L.O.L. Surprise brand.
And according to MGA, from 2016 to 2020,
L.O.L. would generate over $10 billion
in retail sales worldwide.
L.O.L. was bigger than Star Wars,
it's bigger than Marvel, it's bigger than Barbie.
These brands with huge advertising budgets
are known basically by everyone.
You don't have to, you know,
figure out what Marvel or Star Wars is.
And L.O.L. eclipsed them all.
In the toy world,
blind bag or blind box toys have been growing in popularity.
The most famous example in recent years is Pokemon cards,
where you open packs in hopes of getting a Charizard,
but more often wind up with something common
like Gligar here.
Two years before the launch of L.O.L. in 2014,
the Australian toy company, Moose Toys,
launched a blind bag collectible called Shopkins.
And in 2016, Spin Master would launch
a more expensive blind box toy it called Hatchimals.
But the thing that sets L.O.L. Surprise apart
is that it mainly focused on YouTube
and not putting ads on YouTube,
but working with creators and influencers
to get their products in the hands of these kids
doing the unboxing videos.
For MGA, actually, the move towards YouTube
was kind of a bit lucky and almost out of necessity.
In late 2015,
Nickelodeon parent company, Viacom,
would sue MGA for breach of contract
after it failed to pay $3.5 million
for the production of a TV series
based on their Lalaloopsy dolls.
They tried to flex their muscle,
and they said, "Well, if you don't agree
to our way of seeing things in the conflict that we had,
a separate conflict,
we are going to stop your advertisement of toys.
At the time, Nickelodeon was the number one ranked
children's network,
and not to be able to advertise on Nickelodeon
could have been a death knell,
but MGA, necessity is the mother of invention,
that caused them to lean into digital advertising
far more than any big brand had ever done before
because they had to.
They had to find a new way to reach kids.
The court would ultimately rule
in favor of Viacom, both in LA federal court,
and on appeal in the Ninth Circuit.
Larian blamed the court defeat
on what he contends was judicial bias.
Nickelodeon parent company, Viacom,
didn't respond to a request for comment.
So that by itself forced us to go and say,
"Okay, the hell with Nickelodeon.
Let's find another way to reach to children.
And that's how we went
and doubled up on YouTube, especially,
and the rest, as they say, is history.
So early on, MGA partnered with YouTube creators
with huge audiences like Cookie Swirl C.
Good morning, Chocolatey Chippy Cookies,
we are gonna be spending the morning
with this L.O.L. Surprise baby, Fancy.
They took it another step further.
They actually helped kids
learn how to do their own unboxing videos.
They gave them support and learning and tools,
and so all these kids got to be
kind of a little, mini influencer themselves
as they were unboxing their L.O.L. products.
So just to give you a flavor
of how popular these videos are,
go onto YouTube and search L.O.L. Surprise,
and you'll see videos with a million views,
10 million, 25 million, 50 million, and even 100 million.
There's lots of them, and kids are watching these videos,
and they're probably watching them over and over again.
The old way toy manufacturers would do things
is they'd buy TV, which was about 90% of their ad spend.
And then traditional PR, get on the big morning shows.
It's an entirely different formula.
It's much harder for toy companies right now
because the formula is so complicated.
You have to really take a deep dive into each platform.
Am I promoting on Twitter?
Am I promoting on Instagram?
Am I promoting on TikTok?
What am I doing on YouTube?
You have to look at every possible social channel.
By 2017, big toy brands like Mattel
had shifted nearly 50% of their marketing budget
to social platform advertising.
Brands would help seed videos of their toys
and if they were lucky, that could kick off
a wave of creators making their own content
around the product.
In 2020 alone, Tubular Labs estimated
that L.O.L. related content had amassed 5.1 billion views.
This idea of imitation.
So when you see kids playing with product,
it kind of excites the same neurons in your brain
that happen when you do it yourself.
The more we could show children having this experience,
the more kids felt what it would be like to have it,
and then wanted to experience it themselves.
You know, one of the criticisms
of this whole influencer movement among kids
is that kids are young, they don't understand
what's necessarily an advertisement versus real content.
And that's a big criticism of this industry,
is that a lot of kids are getting on YouTube at young ages,
not being supervised by their parents
and just watching these videos.
And they don't realize that maybe that influencer
is getting paid by the brand to do that video,
or there's some other compensation.
And that, you know, blurs the lines for kids
as they're sort of developing
and figuring out how to consume media.
Questionable advertising concerns aside,
kids YouTube creators would take off.
Channels like Ryan's World would grow
to almost 30 million subscribers,
and a whole industry formed around them.
When we first started working with influencers,
they were very happy to work for free product.
You give them the product, and they'd do something for you.
And gradually, influencers got smarter
and started, you know, charging for their services
as they started building a following.
Now because it is such a big business,
the dollars can be significant
investing in big influencers.
When Spin Master launched one of its new TV series
and associated product,
we made it a point to buy an advertising package
with Ryan's World to ensure
that we could get really quick, big reach right away.
This is an advertisement for Spin Master.
So from these unboxing videos,
the content's gotten a lot more sophisticated.
They're creating narratives around the toys
with voices and meta-universes, if you will.
And it's really engaging content even more so
than the original unboxing videos for these kids.
And the content is coming out maybe
once a week or even daily.
So if you think about it, what they've done
is they've created basically like a TV show around a toy.
It's not unlike what we saw back in the '80s
which was criticized back then, by the way,
when you had toys like G.I. Joe
turn into an animated series,
or Masters of the Universe, or Transformers.
So we've kind of seen this full circle now, right?
So back to where we were content
and basically, mini television shows
created around toys on YouTube.
Kid's content on YouTube
is likely to face increased regulation in the coming years.
In 2019, the company would agree
on a $170 million settlement with the FTC
for serving ads based on personal data to kids on YouTube.
YouTube would put more emphasis
behind its made for kids platform, YouTube Kids,
and each video uploaded to YouTube
must be flagged as either made for kids or not.
In a statement outlining changes to the site,
YouTube would say that
"responsibility is our number one priority at YouTube,
and this includes protecting kids and their privacy."
Still the site is far less regulated
than traditional television.
I do think parents have a better understanding
of YouTube now, and the new genres and formats there
that they didn't prior.
And they now notice things like
their kid isn't watching a toy unboxing,
that's a commercial for a toy.
Their kid is watching other kids play with toys
in an imaginative way,
which inspires them to go play with things in the real world
in an imaginative way.
In just a few short years,
YouTube had caused a transfer of power
from toy and network executives
to nine-year-olds and their families.
The Kaji family may have started out as toy reviewers,
but now Ryan has launched his own line of toys,
a cartoon series,
he was even a blimp in the 2020 Macy's Thanksgiving parade.
You or I might think about Spider-Man or Snoopy
but today's kids see that blimp of Ryan
and they relate to him.
He's the character they want to grow up with.
He's the character they want to engage with.
And as we go forward, these influencers are becoming
more and more like big, giant global brands.
And that has profound effects
for entertainment going forward.