The devices, which play popular TV programs, cartoons, music videos, or even movies, are a move by companies to nab "tweens," the fickle preteen demographic with waning interest in traditional toys.
Hasbro, the No. 2 toy maker, is selling a color player called VideoNow, a handheld device that costs about $75 and plays video discs of selected television shows.
Rival toy maker Mattel is expected to launch a competing product called Juice Box this fall in time for the holiday shopping season.
"It's definitely a trend we've been seeing, the marriage of adult consumer electronics with toylike products?Seventy-five dollars is a lot of money, but it's a lot more expensive to get a car with a video system," said Chris Byrne, a toy analyst known as the Toy Guy.
Hasbro, which posted lower-than-expected second-quarter earnings on Friday, said a black-and-white version of VideoNow was one of its most popular items last year, selling more than 1.2 million units.
At a color VideoNow launch event on Thursday at the Toys R Us flagship toy store in New York's Times Square, hundreds of children and their parents lined up around the block waiting to meet with actress Hilary Duff and skateboarding icon Tony Hawk.
The company gave away 600 tickets entitling holders to autographs as a way to create a buzz around the product.
Mattel's Juice Box, which will cost about $70, will appeal to a slightly older child and will play music videos, television shows, animation and full-length movies, a representative said.
Juice Box will also have a digital photo album capability and MP3 music player. The company would not comment on what particular licenses it will have on the cartridges.
Hasbro's system plays discs and the company has signed licenses for hot properties like Nickelodeon's SpongeBob Squarepants, Fairly Odd Parents and Jimmy Neutron; and episodes of ABC's America's Funniest Home Videos, NBC's Fear Factor and Fox's American Idol.
Others competitors will include LeapFrog Enterprises' Leapster, which can be used to play educational games and videos. Kids who already own a Nintendo portable video game playercan use cartridges by Majesco Holdings to watch cartoons and television shows.
"There's a huge opportunity out there for Game Boy Advance because there's millions out there and it has the virtue of being a game player," said Harris Nesbitt Gerard analyst Sean McGowan. "I wonder what the long-term market position for VideoNow will be when there are so many other alternatives out there."
And with the intense price cutting among consumer electronics retailers during the winter holidays, portable DVD players could go below $100, adding more competition to the mix.
McGowan expects the newto be popular.
"It's cheap babysitting," he said. "Someone once said religion is the opiate of the masses. I say entertainment is the opiate of the mass consumer."