On lists of holiday wishes, kids talk tech

Toy makers are facing stiff competition from technology giants over playtime as demand for electronic gadgets this winter is expected to increase.

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By Althea Chang, CNNMoney.com contributing writer

NEW YORK (CNNMoney.com) -- More laptops for toddlers and MP3 players for infants are stocked on store shelves this holiday shopping season as Fisher Price and Playskool battle it out with Sony and Nintendo for dominance in the toy box.

"From the age of 3, kids have the capacity for role playing," and want to emulate their parents, said Reyne Rice, analyst at the Toy Industry Association, a trade organization.

"These kids were already on the computer at age 3," Rice said. "They see their parents using digital cameras and laptops and want them too."

About 25 million kids ranging from newborns to 5-year-olds received electronic toys as gifts in the 12 months ending July, according to the Consumer Electronics Association, often at their own request.

Even more gadgets are expected to appear on kids' wish lists this year, and toy makers and electronics manufacturers alike have been scrambling to deliver.

Under pressure, toy makers grow up

As kids lose interest in more traditional toys at younger ages, kid-focused companies have been looking to the growing market for children's electronics, said Rice.

For kids 3 and up, just in time for this holiday season, Oregon Scientific has launched a line of "learning laptops" for kids, with Star Wars, Hot Wheels and Barbie themes. The teaching toys are reminiscent of the old Texas Instruments (Charts, Fortune 500) Speak & Spell and Speak & Math devices from the 1970s and '80s, adding sound effects, pictures and a full laptop-like keyboard.

Among the Star Wars-themed offerings, a laser-pointing light saber, "Wookie" sounds and the Star Wars theme song keep kids entertained while they play educational games.

For infants, Hasbro (Charts) offers a digital music player called the Playskool Made For Me MP3 which attaches easily to a crib.

"Last year, Fisher Price hit a home run with the Kid-Tough Digital Camera," notes Gerrick Johnson, an analyst at BMO Capital Markets who covers major toy makers. The camera is aimed at kids 3 and up and features a two-eye view finder, wrist strap, sturdy handgrips and big buttons.

While sales of that Mattel (Charts, Fortune 500) division's device could take a hit after lead paint and other safety concerns prompted recalls of several of the company's toys in recent months, the overall cost of developing and manufacturing electronics has come down in the past several years while spending on electronics for kids is up, according to the CEA.

Online spending on electronic toys in the 12 months ended in July was up 27 percent among adults giving entertainment and educational gifts to kids aged birth to 15, according to the electronics trade group.

"Game on" for electronics companies

"Toy companies are definitely trying to keep kids in toys for longer, and tech companies are definitely looking at toys as an opportunity," said Rice, "but the consumer electronics industry hasn't mastered building ergonomically for kids. As tech companies get better at it, they will become a continuing force in the marketplace."

The Fisher-Price Smart Cycle, as an example of ergonomic toy design for 3- to 6-year-olds, incorporates exercise with video game skills by using a tyke-sized stationary bike to pedal and steer through racing and learning games played on television.

This type of design could prove difficult for electronics companies, which have less experience designing products that are safe for kids, fit their tiny hands and are shock and spill resistant, among other kid-friendly features.

But electronics companies are winning over pre-teens and teens, as the urge to upgrade from toys to full-fledged gadgets seems to come at a younger age every year.

About 76 percent of teens surveyed by the Consumer Electronics Association had some type of consumer electronics item on their wish lists, up from 66 percent last year, notes Tim Herbert, the CEA's senior director of market research.

Besides the Nintendo Wii, Microsoft's (Charts, Fortune 500) Xbox 360 and Sony's (Charts) Playstation 3 and recently launched games such as "Halo 3," "Guitar Hero 3" and "Rock Band," the Apple (Charts, Fortune 500) iPod and other music players as well as cell phones and laptops are high on pre-teens' and teens' holiday wish lists.

"Teens are aware of the great products out there," Herbert said.

"I don't know if they toy makers have come up with the right product to capture that market," said Johnson of BMO.

To further expand the market for kids' gadgets, toy companies are also looking to develop more to electronic products that encourage the social aspects of play, as opposed to a "crash and bash play pattern," Rice said.

And with the Smart Cycle and other toys, gadget makers are also addressing parents' worries about rising obesity rates by working exercise into playtime.

"A few years ago [the market] was all about educational toys," said Johnson. "Now it's 'my kid's fatter than the other's kids.'"

Whatever method toy and electronics companies use in the battle over the kids' gadget market, the competition alone means a bigger toy selection for kids, and possibly longer holiday wish lists for parents. To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.