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How child's play got a little cheaper

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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. (Nasdaq: JAKK) 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 percent 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. (NYSE: WMT) 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, McGowan said.

For smaller companies, courting consumers with low-price, high-tech toys is a key part of competing with industry titans like Mattel Inc. (NYSE: MAT) and Hasbro Inc. (NYSE: HAS). 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. (NYSE: LF) 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.

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 percent of toys sold in the United States 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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