The rise of non-fungible tokens (NFTs) and their impact on toys and gaming
South Africa’s toy and game manufacturing landscape points to the seismic shift happening in the global market – the rise of non-fungible tokens (NFTs) originally associated with digital art, are now making waves in the world of toys and games. The ability to tokenise ownership is offering new possibilities for creators and consumers. How will this technological revolution impact South Africa’s toy and game industry? The mainstream view of NFTs has been that of avatar pictures and generated image collections and the astronomical values that people have been placing on these images.
In August 2021, the Toybook website published an article stating that: “from movie studios and comic book artists to food brands and, yes, toy companies —non-fungible tokens (NFTs) were offered for consumers to purchase or bid on. Whilst this is a new phenomenon and might not replace traditional toys, it is worth keeping an eye on.
Trends in the toys and gaming industry
The latest WOW report on the manufacturing and retail of toys and games in South Africa reveals two compelling truths. The first is that globalisation and the disruptions to supply chains compelled industries to find innovative ways to navigate turbulent waters to remain competitive. The second is the pervasive cultural dominance, particularly emanating from the entertainment giant, the United States (US), and how it casts its shadows on the diverse fabric of global preferences.
Opportunities for the South African toys and gaming industry
Despite the various barriers in the global market, the size of a reachable market makes it worthwhile for the industry to keep innovating.
The WOW report highlights how the relatively small size of the South African economy prevents the local manufacturing of toys and games from developing to its full potential. The size of the market in South Africa also hampers growth compared to a country like the US, where making one successful item would set one up for life. This is not the case in South Africa and other small countries.
The international entertainment industry is dominated by the US, given its size and track record with well-established trusted brands and characters that are popular and therefore drive storylines that are imbibed by, and influence, other cultures. As explained in an article in the Journal of Applied Behavioral Science, “beliefs compose a general category that includes at least the following: Stories that describe what has happened, expectations that describe what will happen, causal perceptions and, theories that describe how and why things happen, concepts and labels that divide perceptions into categories, and values that state preferences. Ideologies are logically integrated clusters of beliefs. Share beliefs create culture”.
South Africa’s competitive advantage in the toys and gaming industry
Economic constraints, a rich cultural heritage and the South African spirit of innovation and resilience make the journey unique and promising. The WOW report has unveiled the intricate factors shaping local manufacturing of toys, which makes us reflect on the industry’s future trajectory. From a relatively small country’s perspective, it’s just a bit harder and might take longer to pierce the culturally-dominant barriers to get product appeal across cultures and geographies. Lego started its business in 1932.
Headwinds in the toy world include the rise in video games and one of the biggest US toy companies, Toys R Us going bankrupt in 2005 due to loss of sales and high debt incurred for growth that did not materialise.
The WOW report refers to Statista forecasts that the South African toy market would grow at a CAGR of 1.77% between 2023 and 2028 compared to 9% globally. No wonder Microsoft made an offer to buy Activision Blizzard.
The interesting aspect about video games and the borderless internet is that it requires way less investment in physical and production assets. It is an attractive market for bright minds, which South Africa has, to develop video games.
The future of NFT’s
As globalisation faces disruptions and supply chains navigate turbulent waters, the trending topic of NFTs reflects on a technological wave, challenging traditional norms in the toy and game industry. South Africa, with its bright minds and unique perspectives, is well placed to play a significant role in this digital revolution.
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