August 9th, 2007

Computers for 3-Year-Olds

By Olga Kharif
Business Week

Toy and PC makers are rolling out computers and digital tools for the youngest audience yet

When Chiara Jannotta Rothenberg was just 18 months old, her parents started sitting her on their laps to watch photo slide shows on the home computer. By the time she was 2, Chiara was slowly punching keyboard buttons with her little fingers in Microsoft (MSFT) Word. “She wanted to learn what mommy was doing,” explains her mother, Jacqueline. Now 4, Chiara plays interactive games on kids’ Web sites, including Viacom’s (VIA) She is among a growing number of children using computers and other digital devices practically from the cradle—creating what toy and computer makers see as a new market opportunity.

While kid-friendly electronics—keyboards, software, and even laptops—are nothing new, most have been geared toward children ages 7 to 12, and many haven’t done very well. In 2004, Disney (DIS) released a computer with Mickey Mouse ears for the under-12 crowd. But like many other early gadgets, it has come and gone. Perhaps, since many parents just let their school-age children use the “adult” computer, there wasn’t much demand for a dedicated, specialized machine for children.

Mess-Proof Computing

Now, electronics makers are realizing that the real, untapped opportunity for hardware may lie in catering to an even younger crowd: 3- to 6-year-olds, whose undeveloped motor skills and messy habits (think grape-juice spills and cookie crumbs) prompt most parents to keep their offspring away from their computers, or only allow supervised use. Seeing their parents tinker daily at personal computers, many kids want PCs of their own for game-playing and exploring the Web.

And parents don’t appear to be becoming any less uptight about handing over the keyboard to the family PC. According to surveys by consultancy NPD Group, an average child in the U.S. now starts using a computer at the age of 5½, only a slight decline from two years ago, when that average age hovered at 5.7 years old.

The question, then, is whether those parents might be more apt to buy a separate computer or device designed specifically for their little spillers. An array of companies, from toymakers LeapFrog Enterprises (LF), VTech, and Mattel (MAT), to computer maker Hewlett-Packard (HPQ), appear to think the answer is yes, and recent market research suggests they may be right.

Last year, 46% of consumers purchased a high-tech gadget for a child 3 to 5 years of age, the highest spending level on behalf of any children’s age group, according to the survey by In-Stat. That’s a huge shift from a few years ago, when the highest percentage of such spending went toward purchases for kids ages 5 to 10. In-Stat also estimates that the market for edutainment toys will more than triple from $2.1 billion last year to $7.3 billion in 2011. Toymakers are discovering that “if a toy has purported educational value, parents are more likely to buy it,” says Stephanie Ethier, an analyst with In-Stat.

PC Kids

This fall, HP plans to sell its first desktop PCs designed for families with younger children. The devices will be bundled with JumpStart learning software and a special kid-friendly operating system that sits on top of Windows and filters inappropriate Web content. “We are taking our current product line and providing software that will help kids learn,” explains Sean Patterson, senior product manager for consumer desktops at HP.

LeapFrog’s new $60 ClickStart is a wireless keyboard for 3- to 6-year-olds that’s designed to withstand liquid and drops from as high as two feet. The full QWERTY keyboard is shaped like a green dog with a full-featured computer mouse in its paw. The wireless signal connects with a console that you plug into a television, turning your TV set into a computer monitor for games that familiarize kids with using a keyboard and mouse. “It’s the first product that we’ve ever done that’s reflective of the trend that the age of kids using computers continues to decline,” says Jeff Katz, chief executive of LeapFrog.

VTech, which says its sales of educational gadgets have been growing at a 25% annual clip, recently introduced the Whiz Kid Learning System. A tablet-like computer equipped with a touch keyboard and stylus, the device features more than 120 activities designed to promote reading skills. The Whiz Pad can also be connected to a regular computer to print out activity pages, play additional games, and let parents track a child’s progress. Older kids can transform the Whiz Pad into a piano keyboard.

Gadget-Toting Tots

Meanwhile, demand for kid-friendly laptops has been on the rise. VTech, which introduced its Tote ‘N Go laptop for 3- to 5-year-olds in 2004, is about to ramp up marketing for a new one: the $130 Color Blast Notebook for 6-year-olds. Designed to resemble an adult laptop, the color-screen device is programmed to teach topics ranging from Spanish to space exploration.

Among other toymakers, Disney’s consumer product division is set to launch a digital video camera that’s designed to teach 6-year-olds to edit movies. And Mattel, which last October acquired electronic-game maker Radica, recently introduced Girl Tech Video Journal, a digital camera that lets girls 6 years and older snap pictures and video. The camera comes with a dock that uploads the images to a computer; the child can then use the accompanying software to create collages and journal entries.

For slightly older kids, Mattel plans to release IM-Me, a $65 wireless device that sends text messages to other IM-Me users. The BlackBerry-like handheld transmits messages to a home PC, which forwards them to recipients over the Internet.

With these new gadgets, “you don’t have to worry about kids gumming up your mouse. You don’t have to be constantly scolding them,” says Joanne Oppenheim, an editor of Oppenheim Toy Portfolio, an influential toy review newsletter. “Do preschoolers need computers? No—and they are not going to get your child into Harvard sooner. Do they want to play with computers? Absolutely.”


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