(Bloomberg) – About five years ago, MGA Entertainment was a mediocre toy maker struggling for its relevance. And then, one night, founder Isaac Larian stumbled across a growing YouTube fad generating millions of views: iPhone unboxing videos.
“I was frankly shocked and stunned,” Larian said in the latest episode of System Shock, a Bloomberg Quicktake series. “Why would someone buy an iPhone, take it home and show it to the camera?” “
There were also toy unboxing videos, thousands of them. MGA quickly pivoted and launched a line of toys with unboxing at its heart: LOL Surprise. The first items were miniature dolls (and their accessories) enclosed in plastic orbs that look like Christmas decorations. The company then distributed LOL Surprise to the children (and adults) making the unboxing videos.
Adopting the creators of YouTube turned out to be a neat move, as the toy and its many layers of packaging were a hit with the unboxing generation. The videos generated millions of views and inspired kids to unbox their own, only reinforcing the play model. By the end of 2018, the LOL brand had eight of America’s top 10 best-selling toys, according to the group. NPD, giving MGA another line of success to rival the earlier phenomenon of its Bratz dolls. And last year, LOL content on YouTube generated 5.1 billion views, Tubular Labs said.
Behind LOL’s success lies a confluence of events that have turned the toy industry upside down. It all started about ten years ago, when children turned away from television for entertainment. It threatened an industry that relied on television to fuel its growth since Mattel pioneered marketing to children in the 1950s with commercials during the Mickey Mouse Club.
With tablets replacing televisions in the early days, ratings plummeted on children’s networks such as Nickelodeon, while YouTube exploded. The first unboxing videos gained traction around this time, and in 2013, videos of kids opening Legos and Furby dolls were blooming on the platform. While the videos may have seemed boring to adults, they uncovered a basic play pattern, according to Nancy Zwiers, former marketing director for toy maker Spin Master.
“It just seemed a little weird,” Zwiers said in the episode. “But then when I started to think of exploration and discovery as a basic game model, it started to make sense.”
Eager to connect with kids, toy makers inundated YouTube creators with cash to promote the products in their videos. It brought in more creators and eyeballs, which led to bigger paychecks. Now, young YouTube stars are media titans in their own right. Take Ryan Kaji, the star of the Ryan’s World YouTube channel, which has nearly 30 million subscribers. He had a toy line at Walmart, a Nickelodeon TV show, and was a balloon in Macy’s Thanksgiving parade.
“YouTube has created a revolution, not an evolution, in the way children and families consume video content,” said Chris Williams, CEO of Pocketwatch, a media company that works with young YouTube stars, in the ‘article. “And that extends to the way they see toys and play.”
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