>Edit: It seems like "kids" here might be referring to smaller children acting like teenagers. Even in that case, I think little kids playing with toys and games all day is fairly new. Most were doing chores or actual work throughout history.

The KGOY phenomenon tends to refer more to the sexualization (from skimpy wear for girls to glitz magazines for tweens to common widespread use of porn from age 10 and upwards) of children in media, and the effects that may have (if any) on the behaviour of children with regard to how they dress, talk, think, and act. That's what I gather from it, anyway. You can read more about it by searching up the phrase on Google Scholar.