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Tech toy box looking empty

A lagging economy is pushing key technology players out of the market for fancy electronic toys, analysts say. Aibo, we hardly knew ye.

NEW YORK--During tough economic times, it seems no one is in the mood for high-tech fun.

The "Techno Play" pavilion at the 99th annual American International Toy Fair last week was a small, sparse room in the basement of the Jacob K. Javits Convention Center here. The pavilion hosted only 20 of the conference's 1,600 exhibitors. Of those 20, three made karaoke machines.

Where have all the high-tech toys gone? A lagging economy has pushed key technology players out of the market for fancy electronic toys, analysts say. Statistics also show that sales of consumer electronics have declined overall, and all toy sales had meager growth last year. But it's the anecdotal evidence from this year's toy fair that gives the strongest evidence: The heyday for high-tech toys may be over.

"Last year, Intel was here. Sony had that whole stage," said Matthew Wu, senior sales manager of 3i Techs Development, a Taiwan-based maker of embedded speech technology. "Aibo was running around up there," said Wu, motioning to the long black stage at the back of the Techno Play pavilion, where Sony's robotic canine once romped, and that now sits empty.

Sony said it's far from retreating from the toy market. "The timing just didn't work out for us this year," said Sony spokesman John Piazza, who said Sony will show off its products when Aibo's three-year anniversary comes up this spring.

Nevertheless, Sony has had to cut the price of Aibo. Sony first sold the robotic dog for $2,500, but now the company offers comparable models for $1,500 and $1,300. A new Aibo, aimed at a younger audience, retails for $850. Piazza declined to say whether Aibo sales have fallen, but he did note that the company has shipped 100,000 units over the last two years.

For its part, Intel said it chose to retreat last October from the niche it helped create--the market for PC-connected toys. "We just couldn't see long-term profitability," Intel spokesman Bill Calder said.

The company's Intel Play division had been responsible for some of the most innovative high-tech toys, including the Digital Movie Creator, which recorded, edited and even animated video, and the QX3 computer microscope, which would magnify objects up to 200 times for viewing on a PC.

Keeping the cutting edge out of reach
Perhaps the biggest deterrent to the high-tech toy market has been parents, who have become more price conscious.

"You can't believe how cost sensitive this industry is. No one's even buying $50 toys in this environment," said Erik Soule, director of marketing for Sensory, a Santa Clara, Calif.-based company, which says it has around 85 percent of the market for speech technology in toys.

While video games have increased in popularity, with strong sales of $9.4 billion in 2001, up from $6.6 billion in 2000, other forms of electronic play for children appear to be on the decline.

Consumers' reluctance to buy toys is evident in figures from the toy industry overall: Traditional toy sales (excluding video games) were only up 1.6 percent last year, rising $25 billion in 2001 from $24.6 billion in 2000. In comparison, the industry grew 7 percent from 1999 to 2000, and 8.5 percent the previous year, according to NPD Funworld, a division of research firm The NPD Group.

Like The NPD Group, the Consumer Electronics Association (CEA) doesn't track high-tech toys, but CEA analyst Sean Wargo said the toy industry may be suffering from the same problems as the consumer-electronics market overall.

"The economic times are placing a strain on cutting-edge technology," Wargo said. The CEA predicts consumer-electronics sales will fall to $93.2 billion for 2001, down from $95.2 billion in 2000. The same trend may apply to toys, since it follows what's known as the "bleeding edge" of technology--always staying one step behind the newest technology in order to catch lower prices.

The dearth of original tech toys at the Techno Play pavilion was evidence that even staying on the "bleeding edge" has become a challenge. Under the din of bad karaoke and clashing plastic from battling radio-controlled "Insectzoids," the only innovative products to be found included a few speech-recognition toys, mini versions of PDAs (personal digital assistants) and a smattering of "edutainment" games.

Can you say "speech recognition?"
Aibo once frolicked freely across the Techno Play stage, but this year, another toy dog, i-Cybie, was penned in the booths of companies that used it to demonstrate their technologies.

Soule of Sensory used i-Cybie, from Hasbro's Tiger Electronics, to show off his company's embedded speech-recognition technology. The electronic dog, which retails for around $100, can do almost everything Aibo can do. It uses a combination of motion and proximity sensors, and Sensory's RSC-300 technology, which allows the toy to recognize its owner's voice.

Like i-Cybie, Sensory's speech-recognition technology is nothing new. It's just a scaled-down version of what adults use with their PCs. The only thing different about Sensory's technology, said Soule, is that it integrates speech capabilities into chips that control a toy's motion and blinking lights. Sensory last year increased its chip capacity for voice output, so toys can talk back to their owners, Soule said.

Honey, somebody shrunk the PDA
The other "new" toy at Techno Play was the PDA, slimmed down and simplified for the junior market.

Techno-Toys, a Pomono-Calif.-based company that also makes minibikes and pogo sticks, displayed prototypes for PDAs slated to hit the market in March. The devices range from $20 all the way to $70 for a PDA that includes a digital camera.

Toronto-based Interactive Toy Concepts also makes a PDA watch for kids. "The technology is just at a price point where this becomes possible (for manufacturers)," said Frank Otta, the company's marketing manager, as he showed off the watch's ability to take low-resolution photos and link to other watches and a PC.

Though most big research firms don't cover the toy market, Gartner analyst P.J. McNealy had a strong opinion on Web-connected devices for children. "Yuck," McNealy said, what parent "wants something with service charges? It's such a costly base price."

Smart play, dumbed down
Even the market for "edutainment" has been stagnating, as CD-ROM technology hasn't progressed and parents have started to suffer from tech fatigue.

A spokesperson for Surplusoft distribution, a San Francisco-based distributor of CD-ROMS, said top-selling titles in 2001 were the "Living Books" and "Carmen Sandiego" series, which have both been around for years.

The only thing that has changed in edutainment is the marketing slant. "Edutainment has become a bad word," said Eve Seber, director of North American sales and operations for Tivola, a CD-ROM publisher. Now its "smart play," and the games are becoming more fun, as the industry realizes children have to like them more than their education-oriented parents.

But even parents that want their children to become tech-savvy are getting tired of fiddling with computers and gadgetry. "Can you really convince someone to hook a toy up to a computer? That question hasn't been answered yet, and it's a huge issue," Soule said.

VTech cuts the tech toy's cord to the computer, with "smart play," offering a range of products for preschoolers to early teens that use a combination of motion sensors, proximity sensors, and LCDs (liquid-crystal displays) on "animatronic," or mobile, plastic statuettes of cartoon-like characters. The devices help teach children to read, count, and to learn basic arithmetic and to spell.

VTech faces stiff competition from LeapFrog, which was a success last year with its "Leap Pad" interactive books.

But the devices that power "Leap Pad," like most of the other technology in the show, isn't terribly original. "Sensor technology isn't unique," said Jeffrey Rogers, vice president of marketing at VTech. "It's what's used in your garage door."