Mattel has formed a strategic partnership with OpenAI to create AI-powered toys and experiences, aiming to enhance its product offerings beyond traditional toys.

The collaboration will focus on age-appropriate play experiences, emphasizing innovation, privacy, and safety.

The first product utilizing OpenAI's technology is set to be unveiled around the holiday season in late 2025, with plans for third-party safety audits to ensure child safety.

This partnership comes at a time when Mattel is facing declining sales in its traditional toy market, influenced by economic pressures and U.S. trade policies.

The collaboration reflects Mattel's shift from being solely a toy manufacturer to becoming a broader entertainment brand, inspired by the success of the 2023 'Barbie' movie.

As part of its strategy, Mattel is evolving into a digital-first entertainment company to adapt to changing media consumption trends among children.

The initiative aims to provide more engaging and adaptive experiences, addressing criticisms of previous AI toys that lacked true intelligence.

Experts have raised ethical concerns regarding data collection and compliance with child privacy laws, highlighting the need for careful navigation in this partnership.

Under the agreement, Mattel retains full control over its intellectual property while utilizing OpenAI's advanced AI technology.

OpenAI is also pursuing a strategy to enter the physical product market, indicating a broader trend of tech companies integrating AI into consumer products.

While specific applications of AI in Mattel's products remain uncertain, potential uses could include games, apps, or toys with internet connectivity linked to ChatGPT.

This partnership signifies a response to the declining toy sales and the need for innovative solutions to maintain momentum in a challenging economic environment.