01:03 AM EST on Sunday, February 27, 2005

BY PAUL GRIMALDI
Journal Staff Writer

NEW YORK -- It was the invention convention.

Once upon a time, the annual American International Toy Fair was the land of Tinker Toys.

More and more, it's gadgets galore in the showrooms along Fifth Avenue and at the display booths inside the Jacob K. Javits Convention Center.

"Tech toys continue to be the hot trend to watch in 2005," said Reyne Rice, a toy trends specialist for the Toy Industry Association. "Technology can add that edge, providing new interactive components to expand long-term play value."

Toymakers hope technology will help them get a grip on the psyches of tech-savvy children and the pocketbooks of their cost-conscious parents. Keeping prices at or below what retailers charge for grownup gadgets such as cell phones and iPods is crucial for toymakers.

AFP Getty Images photo / Timothy A. Clary

Chicken socks are modeled at the Klutz toy display during the American International Toy Fair in New York on Monday.

Last week's Toy Fair came at a tough time for the toy industry, which saw sales fall 3 percent last year, from $20.7 billion to $20.1 billion, according to Port Washington, N.Y.-based NPD Group, a marketing-research company.

During the same period, worldwide video-game revenues topped $24.5 billion and could reach $55 billion by 2008, according to PriceWaterhouseCoopers.

So, toy companies have turned to electronics and computer-based activities to lure children who want to mimic their parents and older siblings.

Prices on some of these new toys can be as high as the most popular gadgets aimed at adults. But plenty of toymakers price their gizmos well within the range of the typical child's weekly allowance.

Hong Kong-based Wow Wee Ltd. turned out one of last year's big sellers -- Robosapien. The company sold 1.5 million of the pint-sized, remote-control robots -- at $100 a pop.

This year, Bratz dollmaker MGA Entertainment Inc., of North Hills, Calif., is selling $150 DVD players shaped like lips and a $100 camcorder shaped like a purse.

Leapfrog, the struggling educational-device maker, is marketing Fly, a computer that allows children to use pen and paper in conjunction with a portable computer and interactive technology. Fly retails for $100.

Rhode Island-based Hasbro Inc. has ChatNow, a $75 pair of two-way radios that lets children communicate within in a two-mile radius.

Mattel Inc., the world's largest toymaker, is selling a Barbie-brand cell phone for preteen girls. The phones cost about $50.

Neil Friedman, president of Fisher-Price Brands Inc., a Mattel division, is enthusiastic about the division's 2005 lineup, including Star Station, a $60 system that plugs into a television set and lets children star in their own TV shows.

There's also the Read With Me DVD!, which will bring classic Scholastic Books titles such as Where the Wild things Are to life to aid reading comprehension.

"We have some invention in there, but we also have some discovery in there," Friedman said.

Friedman, who once worked for Hasbro, expects another Fisher-Price toy, a break-dancing Tumble Time Tigger, to do well. In its latest incarnation, Tigger can cartwheel -- for about $40.

In contrast to some of these pricey entries, Techno Source USA Inc., the U.S. arm of a Hong Kong-based toy company, last year sold hundreds of thousands of its handheld game devices for under $20 each. The company, which has offices in Needham, Mass., and New York, has licensing deals with Warner Bros., Cartoon Network, NASCAR and others to produce games based on their brands.

"This is the stuff that kids want," said Eric Levin, an executive vice president at Techno Source. "[But] a lot of the cool stuff is expensive.

"We give people the ability to buy something."

At those prices, parents are willing to indulge young children who want to be like their older siblings, Levin said.

Pointing to rows of poker game players, Levin said, "We're so price inelastic, at $19.99 I would sell zero units, at $7.99, I'll sell seven figures."

Price is a key for Sakar International Inc., of Edison, N.J.

"That's definitely the main focus. You want to have the right functional product . . . at the right price," said Elizabeth Ashear, a Sakar spokeswoman.

Sakar markets a variety of low-priced electronic gadgets for children who want to feel grown up. Among Sakar's simplified electronics are $20 "Berry" phone/organizers that mimic the functionality of a BlackBerry and KidzCam, a $22 digital camera that allows children to shoot and edit photographs.

Sakar is developing a microscope with a built-in digital camera that children can hook up to a computer for viewing minute objects.

Even simple dolls have high-tech add-ons these days.

For instance, companies as large as Mattel and as small as Manhattan Toy use activity-laden Web sites to promote Barbie and Groovy Girls, respectively.

Manhattan has sold about 8 million of the soft Groovy Girls dolls since 1998. The company launched its Groovy Girls Web site last fall and has about 145,000 registered users.

"We wanted to see what the viral effect would be," said Nancy Severson, the company's marketing director. "We really built it [the Web site] to extend the play of the brand."

Manhattan execs hope the site will spur sales, she said, not replace them.

The Web site is just another way that technology is expanding the universe of toys, said toy industry members.

"It's not that the growth of technology has rendered toys obsolete," said Chris Byrne, a New York-based analyst. "It's just made the toy box bigger."

Wire service material was used in this report.