The hottest toy of the year is signed by a startup you haven’t heard of

Almost a decade ago, engineers at a Silicon Valley company called Nex began working on an iPhone app that would use AI to track basketball shots. After a few years they made a sharp turn: they jumped from software to hardware, convinced investors they weren’t crazy, got dangerously close to the bottom of the cash pile and then, managed to build a product that became a hit.

This toy is an elegant cube in pastel colors, like a Hungarian cube placed under the TV. Technically, it’s a games console, but it can also pass as a design item. Every part of the Nex Playground gaming system is exceptional. At $249, it’s cheaper than traditional consoles, even with an $89 annual subscription fee. And it is marketed to people who don’t usually buy game consoles: families with young children.

It attracts even parents who would not usually allow their children to go near the screens. Using a camera that tracks their movement, users control the Playground not with a remote, but with their hands and body. Instead of sprawling on the couch, they jump up and run around the living room. Thus, parents actually like the game console that also gives their children physical training.

The prediction algorithm was surprised

The most unlikely thing about Playground is the way it was born. The tech world has a rich history of companies taking components from a failed product to create a successful product. Every young entrepreneur knows the origin stories of Slack, which started as an internal messaging tool, and Instagram, which grew out of a check-in app known for its ability to share photos. The ability to abandon one idea and adopt another has become the hallmark of Silicon Valley.

But for consumers it wasn’t just a change of direction, but a 360 degree turn followed by a few more somersaults in the air. And it worked. Two years ago the company sold about 5,000 units of Playground, last year about 150,000, and this year it is on its way to 600,000. Before the recalculation of the route, Nex brought in about $3 million a year and was not profitable. This year it expects sales of more than 150 million dollars and is finally on the way to breaking even.

On Black Friday, Playground seemed to come out of nowhere: it was snatched from the shelves at Walmart, Target and Best Buy, exploded in the TikTok store, and jumped to the number one spot in the games category on Amazon. It was also temporarily out of stock because even the most sophisticated prediction algorithm didn’t expect it.

That week, the unnamed system ranked third in hardware unit sales in the U.S., ahead of the Xbox and below the PlayStation 5 and Nintendo Switch 2, according to research firm Circana. People in the industry saw those numbers and wondered what it was. Circana analyst Matt Piscatella admitted: “Until a month ago, I didn’t know it existed.”

And by the way, I know him from the very beginning. In 2018, I met the founders of Nex when they released the company’s first NBA-backed product. And in 2019 I wrote about using their slick shot tracking app, HomeCourt, to log 100k shots in one year. Her name was Laney Grant, and she was in sixth grade. By the time she got to high school she was already the best actress in Virginia. Then she became the youngest player in college basketball. Today she is an actress at the University of North Carolina. But there weren’t many Laney Grants in the world.

The team at Nex in San Jose, California realized there was a glass ceiling to the basketball shot tracking market. Therefore, at the beginning of 2020, when families were stuck at home due to Corona, the company took its core technologies – iPhone camera, computer vision and artificial intelligence – and launched a series of gamification activities and training within HomeCourt. Immediately there was a jump in downloads.

The response was so overwhelming that the company made its first change of direction, launching a new app dedicated exclusively to augmented reality games. In two months it had more downloads than HomeCourt in almost 4 years.

The startup noticed that users were more engaged on iPads than iPhones, and that engagement peaked when the devices were connected to televisions. There was a clear fit: the bigger the screen, the better customer retention.

The market dictated the product

The market told them what their product should be, and that they should make another change of direction. “We built something great,” said David Lee, co-founder and CEO of Nex, “but for the wrong platform.”

Lee, 44, founded an online spreadsheet company that he sold in 2008 to Apple. A father of two daughters, he fully understood the appeal of the Playground. He also understood that switching to the right platform was a daunting move.

Even for companies that know what they are doing, there is nothing simple about consumer hardware. The idea for a motion-based gaming system was reminiscent of consoles like the Nintendo Wii and Microsoft’s Xbox Kinect – both discontinued. To make things even more difficult, Nex had almost no experience with chips, locating manufacturers, or controlling the supply chain.

They started work in late 2022 and delivered a well-designed product in time for the 2023 holiday season. But it was a very niche product. In a year when Sony was aiming for 25 million PlayStation 5 sales, the Playground sold just 5,000 units.

Now that the product is selling, it seems that company executives are not bothered that the industry has not heard of their product. “It means my marketing is working,” says Alex Wu, vice president of strategy and partnerships, whose target audience is not the stereotypical gamer. “Single with no kids? I’m not trying to sell you that.”

But he did try to sell the Playground to retailers. After the first holiday rush, the company presented the product to the major networks in early 2024 at the CES electronics show in Las Vegas – the same city where they previously presented their basketball app. When giant retailers expressed interest in the product, they raised $30 million—just in time to fund holiday orders. While waiting for the funds, they were so close to running out of cash that CEO Lee temporarily backed the company with his personal assets.

The mother of all changes

As one of Nex’s first investors, Chip Austin of HBSE Ventures has always believed in the startup’s technology. But his bet on the company was as much about the people as the initial idea. If the original product didn’t work, he trusted them to find one that did. And he was right. What he could not have predicted was that it would require a change as he calls “the mother of all changes”.

Last year the Playground was marketed by word of mouth, through social networks and parent groups. For the holidays, the company was scrambling to get inventory out of warehouses and onto shelves to offer as holiday gifts. Since then they have been preparing for this year’s shopping blitz.

The platform already had dozens of games. In the fall, Nex unveiled “Bluey: Bust-a-Move” after licensing the children’s series that became the most-watched show on streaming. They also increased supply in hopes of meeting the forecasted demand. When planning the orders, remind the Nex managers that they do not produce eggs, and their products do not spoil. They were advised to order more than they might need – just to be safe.

“So,” CEO Lee said, “we ordered what we could afford to order without putting the company at risk.” It wasn’t enough.

During the shopping celebration that includes Black Friday and Cyber ​​Monday, when the Playground was discounted to $199, Nex dreamed of selling 200,000 units. She sold more than 300 thousand.

After running out of stock almost everywhere, they increased the stock – but in limited supply. The company expects shortages to continue well into the new year.

Meanwhile, so much has changed that many of the company’s new hires don’t even know that Nex made apps before it started making one of the world’s hottest toys. As it turns out, Wu’s friends also often ask him a question that is the greatest compliment to someone who has made a successful change of direction: “Wait, are you working for another company now?”.