Now one of the most profitable franchises in the game industry and with more than 30 million toys sold, Skylanders' success has been remarkable. In October 2011, Skylanders: Spyro's Adventure launched in stores but with a unique twist - the player can introduce characters into the game by putting toys onto a portal.
An initial 15 million toys were produced, which were all sold out not long after Christmas. Because the toys are hand-painted, it took six weeks before they could re-stock. Even though Skylanders: Spyro's Adventure can be played with just the three toys that come with the bundle, people went out in their droves to add to their collection.
Toys for Bob studio head Paul Reiche told Digital Spy that he was taken aback by the popularity of Skylanders. "It was tremendously surprising and exciting," he said. "We had hoped that people would buy a few extra, and we were delighted to see most kids buying four or five more."
Skylanders was a highly ambitious project. Activision had merged with Vivendi when they approached Reiche and asked if he wanted to do the next Spyro game. The twist was, they didn't want a conventional Spyro; they wanted a new kind of game that would be an explosive hit. Reiche was told to aim high, to make it not only the top kids' game but also to rival the likes of Call of Duty.
Toys for Bob initially struggled to come up with an innovative idea that they believed could sell. "I had this idea about clothing you wore that was almost a costume and that could track body motion. We were trying to get kids to play physically - it was a disaster."
In the end, what they decided on actually came from something they had started to patent years earlier - the concept of toys communicating with a game. Toys for Bob spent three months building the software side and manufactured prototypes of the toys. However, even in the early days of production, there were indications that the figures would end up being the success they are today.
"We would design these toys, and one of the ways we knew things were working was - every time we made them, they would vanish," continued Reiche. "We would do demos in Santa Monica but we never went home with the toys, because someone would always take them. We said, 'Okay, this is a good sign'."
Activision was impressed, and soon the game and the toys were ready to be shipped, although interestingly in an unfamiliar state. At this point, the toys didn't remember progress. They functioned, but didn't store data inside to keep track of things like their level and stats. It was Activision head Bobby Kotick who intervened.
Reiche explained: "Kotick said, 'You know, this game is good. I think it can be great. I need you to spend another year making this great. What can you do to make this not only innovative but so far ahead of what other people are doing?' And that's when we added the memory inside the toys. Back then, it was a complicated save-game mechanism that didn't feel magical.
"I will always credit Bobby. He was the guy who helped us make Skylanders really great and giving us the time and money to do it. That was a good decision."
Skylanders figures use RFID chips, contributing to cross-compatibility between different platforms, and that was always the plan. Toys for Bob wanted the toys to be seen as characters rather than peripherals. That also posed an interesting challenge, as they had to ensure that toy data for someone playing on the Wii can be interpreted on the Xbox 360 and PlayStation 3 too.
Nintendo's Wii U console includes NFC (near-field communication) functionality, and when asked if Toys for Bob would be utilising it, Reiche replied that at least for now, they would continue using the portal. On a practical level, the NFC doesn't fit with Skylanders.
"The problem is, if you look at the NFC, it's in the GamePad, which is really convenient if you want to do the traditional 'swipe your card', but trying to set a toy on there, it slides off," he said before describing the portal as a "fundamental" part of the Skylanders experience.
"At first, we looked at the NFC feature before we got the hardware specs and we were, like, 'Uh-oh, now everybody can do this'. Then we saw the Raving Rabbids and the video that showed them putting the toy on the GamePad.
"Unfortunately, they dropped that feature, and I think for potentially the same reasons, which is - for an ongoing game mechanic, it didn't seem well-suited, as you are holding the GamePad."
As the Skylanders franchise continues to grow, Toys for Bob are also looking to expand for mobile devices, too. The iOS game Cloud Patrol was released earlier in the year, but while Reiche said he had a lot of fun with it, he's keen to make a "relevant" mobile Skylanders game.
"Cloud Patrol doesn't integrate the toy play directly because it doesn't use the portal," Reiche explained. "As we go forward, to be a Skylanders game, the toys have to be constantly relevant. I want you to be switching the toys, and to do that requires the portal.
"We haven't announced anything yet, but I think what you can imagine is that in our future mobile games, the portal will be relevant. There will be reasons to be switching characters - the work that you do powering your characters up in one game should transfer onward to the other games."
Reiche described Skylanders as one of the most rewarding projects he has ever worked on, alongside the early '90s game Star Control. He suggested that in the future, he would like to see the toys provide a unique experience even outside of people's homes. What if you're visiting your local toy store or seeing a movie while carrying your favourite figures?
"If you added every game I've ever made, Skylanders is more successful than all of them put together in terms of the number of kids who have made happy and the number of adults who have been made happy by playing," Reiche concluded. "That's really the only way worth measuring - we're here to make people happy.
"Everyone in the office was into the idea. Some of the people thought it was a little crazy and that we all might lose our jobs, but we all thought it was worth trying and investing themselves in. Fortunately, it paid off."
Skylanders Giants will be released on October 19 in Europe and October 21 in North America for Xbox 360, PlayStation 3, Wii, PC, Mac and 3DS. A Wii U version will launch later this year.