How Child's Play

This fall, a new set of powerful night-vision goggles will hit the
market that use infrared waves to pierce the dark, while sophisticated
sensors show the view on a clear, monochrome display. But these goggles
aren't made for hunters, private investigators or the police. Rather,
they're a child's toy, called EyeClops Night Vision. The price is about
$80 -- far less than the $250 or so manufacturer Jakks Pacific Inc. said they might have cost just a few years ago.

The reason for the lower price may sound surprising:
the growing popularity of camera cellphones. A key imaging processor
used in camera-equipped phones has fallen in price in recent years as
the phone industry has grown. And that processor is also a key
component in the Jakks goggles. When the company was able to strike a
deal for the part at a price 75% less than in previous years, engineers
rushed to design a mass-market night-vision toy.

For years, expensive optical technology rarely made it
into the toy box, namely because costs were a put-off to parents in
retail aisles. But demand for personal electronics -- digital cameras,
cellphones and flat-screen television sets -- has driven down the price
of raw materials, giving toy manufacturers some unexpected bargains.

Companies like Jakks say they're leveraging this development to get the souped-up toys into big outlets like Wal-Mart Stores
Inc. and Toys "R" Us and passing the savings on to moms and dads. The
result this year will be a host of new gadgets that are mostly under
$100.

With a slow economy, mass-market toys will be touted
more than ever, experts say. "Last year a lot of companies found they
could get away with selling products for $150 and $200," said Sean
McGowan, a toy-industry analyst at New York-based Needham & Co.
This year "nobody's going to be shying away" from touting
affordability, Mr. McGowan said.

Hopes for 'Lucky'

For smaller companies, courting consumers with low-price, high-tech toys is a key part of competing with industry titans like Mattel Inc. and Hasbro
Inc. This fall, Bannockburn, Ill.-based Zizzle LLC, will release a
mechanical plush dog named Lucky that responds to 16 verbal commands
using a microprocessor similar to voice-activation technology used in
cellphones. After saying the dog's name, kids can tell Lucky to do
things such as lie down, sit or shake.

Zizzle tried to sell the dog in 2005, but cut back
production after it became clear that the retail price would near $50.
(Zizzle usually markets toys between $10 and $35.) This year, lower
costs on the voice chip, alongside other savings related to the toy's
development, meant Lucky could sell for $30.

"There's been a pretty big change in the weather,"
says Marc Rosenberg, Zizzle's chief marketing officer. In order to be
competitive, "you have to make chips do more for less money."

Riding on what engineers call the "trailing edge" for
components, toy companies have been able to use second- and
third-generation parts from other industries to vamp up their lines or
create new ones without upping prices. Emeryville, Calif.-based LeapFrog Enterprises
Inc. is releasing a $90 videogame toy called Didj that uses a color LCD
display similar to what's used on flat-screen television sets. Five
years ago, the part cost nearly three times what it does today, says
Jim Cordova, a senior LeapFrog engineer, but as the flat-screen market
grew, the component dropped in price, suddenly making the technology
accessible to the kids market.

The technology has been repurposed for some surprising
creations. Westlake Village, Calif.-based Uncle Milton Industries Inc.
is releasing a $50 "Pet's Eye View" that attaches to an animal's collar
and takes pictures with an 8-times zoom lens. Wild Planet Entertainment
Inc., of San Francisco, has developed a $100 spinning remote-control
car that transmits audio and video wirelessly and lets kids spy on
others in their household.

And Hong Kong-based VTech Ltd is offering its $50
Nitro Notebook computer this year and a $70 educational videogame set
called V-Smile Motion that uses a wireless remote-control pad to let
kids play games on a TV screen without the tangle of cords. VTech,
which specializes in toys for preschoolers, is attentive to drops in
the raw-materials market since "a mom doesn't want to spend $300 on a
toy for a preschooler," says Julia Fitzgerald, the company's vice
president of marketing.

Parents Watch Spending

That's certainly true for Kenya Young, a 35-year-old
radio producer from Los Angeles. Her two children, ages 2 and 4, "just
don't stay interested in stuff," she says, leaving the mother wary of
big investments in toys. "One-hundred dollars would be my max for that
age," she says, given her children's fickle tastes. "Probably once
every other month I go through their room and collect a bag for the
Goodwill."

But other cost pressures mean the prices might not
last for consumers through the next year, say those in the industry.
Toys employing plastic, a byproduct of petroleum, are likely to face
stiff increases as the price of oil continues to rise.

China -- where about 80% of toys sold in the U.S. are
produced -- presents its own issues for toy makers. Labor costs have
risen by a third in recent years, according to the Toy Industry
Association. And increased valuation of Chinese currency against the
U.S. dollar may mean higher prices tags. "Some prices may have come
down, but eventually the savings are going to be countered by other
manufacturing costs," says Reyne Rice, a toy trends specialist at the
industry association.

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