The toy business: It’s now a girl’s world

October 30, 2013, 5:50 PM UTC

FORTUNE — If trends in the toy industry were illustrated with its own merchandise, My Little Pony just mule-kicked G.I. Joe into oblivion.

Sales of girls’ toys are outpacing boys’ sales — by a long shot. In the third quarter of this year, girls’ toys carried sales at the country’s two main toymakers, Hasbro and Mattel, while boys’ sales slumped.

Earlier this month, Hasbro (HAS) reported net income of $172.5 million, an increase of 5% from the same period a year ago. Hoisted by the popularity of the Furby toys and My Little Pony, with its cult-like following among college-age men — “Bronies” if you will — revenue from girls’ toys shot up 29%. Meanwhile, boys’ products revenue slipped 17%.

Mattel (MAT) has had a similar experience. Sales of the Barbie brand were up 3%. The rest of the company’s girls’ portfolio saw a 28% sales uptick in the third quarter, buoyed by the Monster High line of ghoulish fashion dolls. Sales of its pricier American Girl products were up 20%. But its male-oriented toys faltered. Worldwide gross sales for the Wheels category, which includes the Hot Wheels, Matchbox, and Tyco brands, were down 9%. Overall, the company’s net income rose 16% to $422 million.

“The girls segment has been leading sales for a while, but very recently it’s starting to really ramp up,” says Matthew Hudak, a research analyst at Euromonitor International.

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The trend has become all the more exaggerated as toy companies emphasize the business areas that are growing, Hudak says. For instance, Mattel’s American Girl brand announced on Tuesday that it was expanding its stores beyond the U.S. for the first time. It plans to open two stores in Canada in 2014. And earlier this week, Mattel launched Ever After High, a line of dolls based on the teenage children of fairytale characters.

Hasbro, meanwhile, introduced My Little Pony Equestria Girls — a set of dolls — to its line of pony products earlier this year. It also added the girl-oriented Nerf Rebelle — reminiscent of a Hunger Games crossbow — to what’s traditionally been a boys shooting game.

Apart from being outshined by girls’ sales, slacking boys’ sales can be attributed to their close ties to action and comic book movies. That’s a good thing in years like 2012, when the Avengers movie franchise grossed more than $1 billion at the box office, boosting the sales of toys connected to the film. But in a year that lacks a blockbuster kids action movie, like 2013, boys’ toy sales lag.

The upside of this correlation is that sales bounce back when a big movie hits theaters. A Barclays analyst report on Hasbro from October 21 said that it estimates 28% revenue growth in the boys segment, with the expected releases of Transformers 4, Captain America, and Spider-Man. During an analyst call on Wednesday, Mattel CEO Bryan Stockton touted the growth opportunities related to the company’s upcoming licensing agreements with Marvel and Spider-Man and the Hulk characters, as well as the company’s plans to sell Star Wars-themed Hot Wheels products in 2015.

Traditional male toys are also feeling the heat from a longtime rival: video games. Competition from video games is felt more acutely on the boys’ side of sales, says Hudak, since males are more prone to jump to electronic playing platforms. According to a Euromonitor survey, in 2012, 45% of boys up to age six had played a video game in the past year, compared to 38% of girls. Video games will be an especially fierce menace to traditional toy sales this holiday season as Sony (SNE) and Microsoft (MSFT) release their new consoles, the PS4 and Xbox One, respectively.

And then there’s the biggest threat of all: mobile gaming. The tablet­– and smartphone­­–based industry has grown from $901 million in 2010 to a projected $3 billion this year, according to Superdata, a market research firm. And children are some of the industry’s best customers. Roughly 62% of children ages 8 to 14 years old regularly play games on their own smartphone or tablet in the U.S., according to Superdata. “We expect this number to grow, as content providers continue to release games suitable for this audience,” says Joost van Dreunen, Superdata’s CEO.

The popularity of digital gaming among kids is driven mainly by the free-to-play category of games, which kids can download for free, says Hudak. Game developers make money off of these games once kids are hooked and pay for add-ons, power-ups, and extra levels with — and sometimes without — their parents’ permission.

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“[Mobile games] are sapping sales from traditional toys. Kids are so tablet–oriented at such a young age because they’re playing with their parents’ iPad or a device of their own,” Hudak says. Stockton of Mattel countered that point during Wednesday’s call, arguing that digital and toy sales were growing together and that toy play complements digital use.

Nevertheless, toy companies are trying to catch up to and capitalize on their popular digital counterparts. In July, Hasbro purchased a 70% stake in mobile gaming company Backflip Studios for $112 million. It also brokered a partnership with Ubisoft, a video game developer, as part of a strategy to bring board games to the screen. Mattel has added digital components to many of its toys. Its new Ever After High doll line, for instance, is supported by a website, global Facebook page, and a YouTube channel. And Stockton announced on Wednesday that the company had signed a deal with Minecraft, whose mobile app has been downloaded 30 million times, to develop a range of games in fall 2014.

If they can pull it off, striking a balance between traditional toys, video games, and mobile games might be a toy company’s savior. Just ask video game publisher Activision (ATVI). In October 2011, it launched its Skylander franchise, which brings action figures to life through video and mobile games. As of July, sales had reached a staggering $1.5 billion.