NFT brands are stepping into the toy category

The NFT market has had a tumultuous year. Data from DappRadar suggests that the sales of NFTs from January to July 2023 declined 49%. Layoffs also plagued the industry with NFT fantasy sports startup Sorare letting go of 13% of its staff last week and NFT marketplace OpenSea slashing 50% of employees in November. Now, many NFT brands are trying their hand in the toy category where they could both grow the popularity of their characters outside of the digital space and gain a new revenue source.

At the height of the NFT craze in 2021, many of these NFT companies had big ambitions to enter the entertainment industry. But coinciding with the declines in NFT sales, some of these efforts stalled or fizzled out. Actor Seth Green infamously teased a show featuring his NFT from the Bored Ape Yacht Club, only to have his Bored Ape stolen from him. Green later recovered the NFT, but the show — Whit Horse Tavern — has yet to be released. Stoner Cats, which is backed by actress Mila Kunis, is a collectible that’s funding an animated series. The series of the same name launched the first season in 2021 and can only be viewed by people who have a Stoner Cat NFT. Stoner Cats was banned from NFT marketplaces like OpenSea and Blur late last year after the SEC charged the company for selling unregistered securities.

While NFTs remains a nascent space, many of the companies behind them are looking for more ways to introduce the technology to more people. Melissa Minkow, director of retail strategy at digital consultancy firm CI&T, said that offering toys can be a low-barrier way for people to access characters found in the NFT realm.

“This is kind of the shift that we anticipated quite a few NFT brands needing to make with the crypto economy becoming pretty questionable in terms of its resilience,” Minkow said. “It makes a lot more sense for them to have a physical product that is shoppable in a big box retailer or in a toy store than it does to have them solely accessible in the metaverse.”

NFT-inspired toys can be a big hit. Pudgy Penguins launched Pudgy Toys in May and then rolled them out in 2,000 Walmart stores in September. So far, the company sold over 750,000 units and made $10 million in retail sales in less than a year. Apart from Walmart, Pudgy Toys are also sold in the company website, Hot Topic, Amazon and GameStop. 

“Usually it’s the other way around, people make physical items and bring them into the digital world,” said Luca Netz, CEO of Pudgy Penguins. “I think it’s just a great way for the crypto native to enjoy physical products.”

Pudgy Toys currently offers 60 different products. Netz, who had been CMO of toy company Gel Blasters, said his experience in the toy industry had been one of the main catalysts for the expansion. The company’s penguin figurines cost about $20 and its plushies cost around $25. 

At the moment, Pudgy Penguins’ toy business still pales in comparison to its NFT revenue. To date, Pudgy Penguins said it has made $600 million in digital NFT sales. However, Netz said that its toy business can be a key initiative to bring more interest into the NFT side of the company.   

“I think it spreads the Pudgy Penguin IP,” he said. “I’m a firm believer that the more people see the IP, the more people that love the IP and the more people will eventually want the NFT.”

Much like Pudgy Penguins, World of Women also sees the opportunity to spread brand awareness by unveiling its own edition of Monopoly. In an interview with NFT Now, WoW COO Shannon Snow said that the board game is a way for people to learn about the lore and story telling behind the NFT brand.   

“I think everything that we do is to expand our brand and expand our community,” Snow said in the interview published in October. “Our hope is that we continue to find new and unique ways to introduce World of Women to new audiences.”

Claynosaurz, meanwhile, wants to bridge the gap for younger audiences that might not find online platforms accessible or engaging. The company told NFT Now that it plans to make “digital twins” for every plush collectible. 

CI&T’s Minkow said expanding into toys can be an effective way for NFT companies to appeal to people while they are young. She added that the toy category does particularly well during the holiday season. However, she said that it is a competitive market.

“The toy category is a pretty saturated market. There are definitely some dominant brands with strong market share,” Minkow said. “It is a big leap of faith if you didn’t cultivate the following and customer base that you had hoped in the NFT space.”