The Skylanders brand has been so groundbreaking for Activision that, ahead of this year's annual Toy Fair in New York City, the publisher on Tuesday staged an announcement of a sequel called Skylanders: Giants, due this fall. Last year, says Activision Publishing CEO Eric Hirshberg, many wondered what a video game company might be doing at a toy fair. "We knew we were launching a product that defied categorization," he concedes of Skylanders' aim to bring the worlds of toys and video games together in a new way. It was the publisher's first time competing in the toy business, and with a new IP to boot. "Launching new intellectual property is probably the most difficult task there is in this business," he says. Yet Hirshberg cites NPD data, to note Skylanders was the only non-sequel to break the firm's top 10 lists for the year 2011 and for December. Even still, he says Activision has been asked often by analysts and investors about making an investment in the toy business when most video game publishers are beginning to exit it. "I think as an industry we spend too much time looking for patterns in genres or categories of the business, when actually the most active ingredient to success isn't just the momentum of the category, but the magic of the idea," he says. Activision has also been questioned about why the company doesn't apply the Skylanders strategy to established or licensed characters, which primarily drive the kids' business in general. "I think that question underestimates the power of video games as a storytelling medium." Hirshberg says. Not only in his own household of two children, but across playtesting as well, Activision has noticed that kids have been playing as much with the Skylanders figures away from the video game as they do with it. That may have helped inform the company's latest strategy, which involves not only a new game, but also bringing larger figurines into the universe to enable kids to engage even more with the fantasy of magical powers. The new game introduces eight new legendary Giants characters that are twice the size of previous characters, both physically and in the game, with powers to match. Eight regular-sized new characters will be introduced as well. The Giants characters also implement interesting new battery-free light technology that causes the figures to light up whenever they are on or near the "Portal of Power" that brings their image into the game world. Skylanders: Giants, like its predecessor, is developed by Novato, California-based Activision studio Toys for Bob. Activision said the game will have "integration across console, handheld, mobile and online." The company emphasizes that all the Skylanders are fully forward-compatible with the new game, enabling players to bring all of their experiences and characters thus far into the storyline evolution. "We knew that if the franchise was successful enough to warrant a sequel, that we couldn't just deliver new content... we had to go even bigger," said Hirshberg of Skylanders Giants. Toys R Us CEO Jerry Storch also took the stage to offer the retailer's endorsement of the Skylanders brand, noting that Activision and Toys R Us spent some two years working together on the product offering and how it'd be managed within stores. The store will offer some exclusive figurines and first-to-market adventure packs. Skylanders even defies patterns of usual holiday hot-item peaks followed by troughs. "Even as we sit here today... it's unbelievable how hot this thing remains," he notes. "It simply doesn't stop, and I don't really think it's going to stop. ... The combination of the physical world and virtual world is so powerful that it's almost unexplainable."