SM: Does this include the kids chatting with each other?
JK: At launch we will not do that, and we are targeting that age range where today it is delicate. We have another product that is an expansion of our gaming line, where we are getting old enough kids that we will be able to facilitate communication.
SM: That is becoming a major trend as well.
JK: It is, but at 5 it is a little young, although we can allow parents to connect with parents and kids to earn rewards. Ultimately if the society makes that less problematic we will technically be able to get there. We will not launch that way due to the age level.
SM: Is this still a retail channel product to leverage your channel relationships?
JK: Yes, it certainly does. Really to get with consumer goods, it is pretty hard for most companies to sell consumer goods at volume if you do not use retail.
SM: Absolutely, although even for that very young age group, companies like NeoPets are creating more immersive experiences. That is what I was trying to get at with my question earlier, to determine if you are planning on doing anything which can get to that same level of immersive learning.
JK: We clearly have to begin in a way that leverages our channels. You will see that these products all either invent or in some cases force the parent or the child to connect. Once they connect, we can get them involved in the experience online and we can grow their experience. Once they get a little bit older, 7-8, we think we can have a lot more fun with them. The whole online gaming thing can be rich.
SM: You said 60% of the business was LeapPad. Does that mean 60% of the business is going to be that age group of 3.5 – 6 going forward again?
JK: I think it is fair to say that 60% when we are done is still going to be 4-6. Not wholly reading because we launched Leapster in 2003. Leapster has become a big franchise, and we will expand the Leapster franchise next year with 2 new products. Gaming as we call it, educational gaming, will continue to grow. Between reading and gaming, there are two pretty big products hitting those demographics. Gaming will take the age group a little bit older, just far enough so we will still have a shot at extra users. In 2002 we did have a $110M business with 6-8 year olds.
SM: What product was that?
JK: We had a product called QuantumLeapPad, which had some writing and a microphone. A little more advanced skill set. There was an IQuest which was a calculator type device which helped with standardized test taking preparation. We had turbo test taking which was a lot of fun. It was test prep quizzing, oriented towards second and third graders’ quiz prep. We had quite a large product in that range. We will have products again in that range which are more in line with this connected strategy and a little less toy like.