As inflation and cautionary economic data took hold in Q3, Spin Master experienced a revenue decline across all categories, according to its latest quarterly report that was released today.

Overall revenue for the Toronto-based company clocked in at US$624 million, a 12.7% decrease compared to the same period last year (US$714.5 million). The drop pervaded all major segments, including toys and entertainment. 

Entertainment was down 30.1% this year from an exceptional Q3 2021 that was largely driven by Paw Patrol (pictured). This quarter’s biggest dip was posted by the digital games division, which experienced a 35.7% decline, thanks to a drop in in-app purchases on Toca Life World; in the same quarter last year, the app helped drive a 93.5% increase in revenue for the category.

Rangel attributed declining in-app purchases to kids returning to in-person classes, sports and playdates this summer and fall, and remains bullish on the category. He said Spin Master’s long-term goal is for digital games to represent 20% of its total revenue, and has a bundling strategy in the works for 2023. This approach would combine several apps into one cost-effective subscription, and also make oversight easier for parents by amalgamating permissions and settings into one service.

The more recession-resilient toy category saw a much smaller decline of just 9.1%, but CEO and global president Max Rangel noted during the company’s investor call today that there are dark clouds gathering at retail. 

“We are operating in a very uncertain macroeconomic environment,” he said. “Retailers have begun to reduce orders due to higher inventory levels industry-wide, putting a greater focus on profitability over growth.”

But Spin Master’s Q3 revenue shrinkage wasn’t entirely driven by external factors, especially for entertainment. Year-over-year comparisons in that category were affected by the strong performance of last year’s PAW Patrol: The Movie, which contributed to a 158% increase in entertainment and licensing, said Rangel. The company will continue to build on the now-evergreen popularity of the IP in 2023, with a sequel to the film and a spinoff series called Rubble and Crew in the pipeline.