LeapFrog’s Game

The local toymaker wowed Wall Street, but the educational frenzy it spawned may not be in children's best interests.

Toy stories used to be simple. Just ask anyone at Pixar Animation Studios: Seven years ago, the Emeryville digital-filmmaking powerhouse pitted a toy cowboy named Woody against a toy spaceman named Buzz Lightyear in a children’s flick that reaped more than $350 million at the box office. Crucial to its plot was a competitive market environment that made Woody obsolete and Buzz the latest gadget, but the rival toys eventually found common ground in the affections of Andy, their ten-year-old owner.

These days, it’s hard to imagine Andy would have time for either toy. Neither, after all, would help him develop phonemic awareness, expand his vocabulary, or engage him in higher-order thinking. Nor could they drill him on multiplication tables or state capitals. Buzz’ only nod to interactivity was a blinking light that he claimed shot a laser beam, and Woody went mute when Andy or another human entered the room.

The same year the movie came out, in fact, the real toy story was just getting started in a glass-and-steel nouveau warehouse a few blocks from Pixar’s headquarters. It’s the story of how newcomer LeapFrog Enterprises revolutionized a stagnating toy industry with an interactive reading aid called LeapPad, an electronic tutor that plays perfectly to the anxieties of busy parents. It’s also the story of how these parents — spurred on by the industry’s trend-following marketing machine — have increasingly turned what was once playtime into school time, stuffing kids’ rooms with overtly educational toys in a perhaps-quixotic quest to give their offspring a jump on classmates. And of how that’s not necessarily a good thing.

LeapFrog was born of a parent’s frustration. It was 1990, and the three-year-old son of Orinda technology attorney Mike Wood was struggling to associate letters on a wooden alphabet puzzle with their phonetic sounds. Sitting on the floor and practicing them by straight memorization tried the patience of both father and son. What Mat needed, thought LeapFrog’s future CEO, was a toy that would make phonics fun.

“At the time, I represented a talking greeting-card company. I thought it would be great to take their technology and use it to make each alphabet letter talk. When you squeezed the letter, it would make its sound,” says Wood in a rare free moment between his executive duties and his three kids — now teenagers — at home. “The idea was that simple. But I went shopping and there was nothing like it. And I couldn’t shake the idea.”

Five years later, the lawyer teamed up with his former legal secretary and another business associate named Robert Lally to found LeapFrog. (Lally is now president of LeapFrog Schoolhouse, the company’s preschool and K-12 division.) Their first product, the Phonics Desk, was just what Wood had imagined for Mat, although his son was too old by that time to benefit from it.

Given the market, LeapFrog has been staggeringly successful. It has managed to dominate the only toy demographic with sales growth — the so-called preschool/electronic segment, which ballooned 77 percent last year in an otherwise flat industry. As a result, the manufacturer has become a powerhouse in retail circles, commanding its own section in stores like K-Mart and Target. And its LeapPad — a computerized plastic housing for interactive books that drill preschool kids on reading, math, geography, and other subjects — catapulted past longstanding toy heavyweights like Hot Wheels, Barbie, and Pokémon to become the nation’s best-selling toy in 2000 and 2001.

Fueled by a cash injection in 1997 from Knowledge Universe, an educational venture fund started by former junk-bond king Michael Milken and Oracle chairman Larry Ellison, LeapFrog’s rise has been nothing short of phenomenal. Its sales more than quadrupled from $71 million in 1999 to more than $313 million last year. Its now fifty-plus products, ranging from infant to high-school learning devices, continue to fly off the shelves of Wal-Mart and Toys R Us, and have firmly established the company as a rare prince on a Wall Street of peasants. Last year, it boasted five of the ten best-selling items in the industry’s overall preschool segment, and eight of the top ten in the preschool/electronic niche. Growth has been so rapid that many new hires find themselves working in the halls of LeapFrog’s ultramodern headquarters because the building can’t accommodate the company’s expansion rate.

Its greatest moment to date, however, came at the end of July, during a week where an abysmal stock market prompted cancellation of four of six scheduled initial public offerings. LeapFrog braved the jump, and was rewarded: The value of its shares soared 22 percent on the first day of trading, triple the year’s average first-day gain for an IPO. And that day, with the closing bell of the New York Stock Exchange, Wood sat at the helm of a publicly traded company that, as of last Friday, was worth $790 million.

How did LeapFrog spring to the top of its industry so quickly? In part, the company simply played it smart. Unlike many bravado-over-substance start-ups, it successfully sought access to deep pockets and sound expertise; along with Knowledge Universe’s controlling investment came the toymaking wisdom of KU’s president Tom Kalinske, a former top executive at both Mattel and Sega who knows what works — and what doesn’t.

Those toy giants occasionally tried to create educational products, and inevitably failed, Kalinske notes during a recent visit to LeapFrog HQ. “For an entertainment company, education is simply too hard,” he says. “You don’t understand how to do it correctly, and have to invest too much to learn to do so. A Barbie shopping toy may teach numbers, but it is not geared to show what a seven-year-old needs to understand math. It’s much easier to do the next version of say, Sonic the Hedgehog, which you know will sell thirty million, than it is to learn to build in curriculum.”

But LeapFrog did its homework: From the start, it took pains to bring potential critics into the fold. The company has relied on hundreds of academics, teachers, and parents to shape its products, so much so that it’s become a challenge to find a prominent child-development expert who hasn’t at some point been solicited by the company to provide feedback, review products, or serve on LeapFrog’s advisory board. Wood, furthermore, has instructed his designers to make every product play on educational concerns. And perhaps most importantly for shareholders, LeapFrog has managed to condition parents torn between the Tickle Me Elmo, the GameBoy, and LeapFrog’s Learn to Read Phonics Desk System, that they should, as Wood puts it, “choose the toy that also teaches.”

The company also came along at the right time, technologically speaking. The electronic innovations that make LeapFrog’s products possible hadn’t been invented a decade ago, says Kim Ryokai, a researcher on children and interactive media at the Massachusetts Institute of Technology. The first attempt at something similar, Texas Instruments’ Speak & Spell, came out in 1978, but confused some kids with its blurry alien voice and choppy speech patterns. It may have been the perfect prop for ET to learn to talk to Elliot, but it didn’t last very long on this planet.

Since then, of course, plummeting chip prices and leaps in memory and audio quality have opened the door to LeapFrog and a plethora of imitators. Ryokai gives the new technology mixed reviews. “Now, toys guide play much more than before. The toys speak on their own and they have something to say,” she says. “That’s both good and bad.” While it makes the toys very engaging, she notes, the kids can only play with a certain toy in a certain way, because that’s how it’s programmed. “Kids don’t have to work on their own to make the toy come alive,” she says.

At the same time, some parents applaud the LeapPad for inspiring independence in their children. “It made my son feel like a big boy,” says Vicki Greenfield of Discovery Bay. Greenfield says her son, Nick, a second-grader, learned to read using the LeapPad and now reads at a fourth-grade level. “He always loved books, but he just really enjoyed that with the LeapPad,” she says. “He didn’t need me to sit there and help him.”

That’s apparently a strong selling point with school administrators. At the August graduation ceremonies for the Oakland Police Activities League’s eleventh annual reading program, representatives from the sixteen participating schools praised their donated LeapPads as much as they hailed their 300-plus young graduates. “Kids use the LeapPad in a separate language area to learn new vocabulary. They get excited on their own. I have only seen that happen when they use the LeapPad,” gushed Deborah Figs, a fifteen-year-teaching veteran from Harriet Tubman Early Childhood Development Center. LeapFrog products have also been a staple in Oakland’s HeadStart programs since 2000.

Not all parents have been so enamored, of course. “I’m more interested in play-based toys,” says Berkeley resident Nannette Smith, a recent Virginia transplant with a six-year-old daughter and three-year-old son. Smith says she bought the LeapPad a few years ago, but her kids only play with it once in a while. “Brandon is more passionate about puzzles,” she says, “and Julianne would rather read with me than do it by herself.”

To date, there have been no specific studies demonstrating that LeapPad or the company’s other products actually accelerate learning or improve early academic performance. Still, the general concept has been proven, says Robert Calfee, dean of UC Riverside’s School of Education and a prominent researcher and author in the area of reading development who serves on the company’s advisory board.

“If you look at cognitive and motivational outcomes with the best control group that can be created, on how kids do on things directly related to schooling,” he says, “there seems to be a fairly clear advantage for those who have been exposed to the materials.”

Soliciting feedback from top child-development experts during the design process has turned out to be a smart move for the company. Perhaps as a result of these collaborations, many experts now describe LeapFrog’s products as nothing short of revolutionary. “When I first saw the LeapPad technology, I thought it had the potential for the miraculous — to take the book and make it dynamic,” says Calfee, who has spent years searching for ways to motivate kids to practice reading. He also likes that the LeapPad doesn’t replace the book with a computer screen. Young readers still get the feeling of using a book, something both portable and palpable.

“Before LeapFrog, most other forms of educational toys were repetitive, relying on rote exposure,” says Calfee. For a learning aid to be effective, he notes, kids must be motivated to play with it, and there has to be a sense of “thrill” underlying that motivation.

Calfee and other experts agree that the company’s star product, the LeapPad, is entertaining at its heart. The brightly colored storybook-size plastic platform is essentially a portable computer that lets a book “talk back” to children. Kids insert a series of paper books — also among the company’s top sellers — that drill them on phonics, vocabulary and spelling, math, geography, and music. When they touch designated places on the paper page with the unit’s “magic” pen, the gadget responds by sounding out words, asking additional questions, and giving other feedback.

In thirty years of academic study, the professor says he has yet to see the same direct outcomes with what he calls “nonsequenced” materials — open-ended playthings like ABC books, blocks, and coloring books — that he sees with curriculum-based materials. “There is an advantage to something systematic,” he says.

While LeapFrog’s products may help teach children certain concepts, the company has been at the forefront of an educational-toy binge that’s about as pleasing to some child advocates as fingernails on a chalkboard.

Rival companies have responded to LeapFrog’s success at the register by filling shelves with new learning toys directed at the same young audience. This fall, for instance, Fisher-Price launches a “get-ready-for-school friend” called Kasey the Kinderbot, a toy it spent two years developing. The large doll-sized robot sings ABCs, does simple math, and imitates animal noises while showing pictures of the animals on a screen in its chest. It accepts cartridges for different skill levels, and gives high fives for correct answers.

VTech Electronics, meanwhile, has jumped the LeapFrog bandwagon with its “Smart Start” line for babies and toddlers. Oregon Scientific has scored with “learning laptops,” which helped the company double the size of its toy division over the past four years. The company’s Barbie B-Book laptop is now second to LeapPad in sales within the electronic learning niche, and it also makes a Hot Wheels version for boys. “The proof is at the register,” says Brian Rubenstein, Oregon Scientific’s national sales manager. “Parents are looking for laptop-style products to jump-start kids, to help them learn pre-computer skills.”

Driven by the LeapPad boom, 22 percent of preschool toys are now peddled as “educational,” and that proportion is rising, says Reyne Rice of NPDFunworld, which tracks the toy industry. “Parents as a whole are having kids later and have more money to spend,” says Rice, “and they are responding to the public notion that the window for early learning must be seized at younger and younger ages.”

Indeed, one of the biggest ingredients in LeapFrog’s success was that it hit the right market with the right product at the right moment. Parents these days have less time to spend with their young children than they did in the past. According to data from the Bureau of Labor Statistics, the proportion of US families with kids under six in which both parents are working has hovered around sixty percent in recent years.

In addition, the toddler demographic is growing. Rebounding from a seven percent decline between 1990 and 1997, birth rates have since reached their highest point in three decades, according to the federal Centers for Disease Control. And birth rates for women over thirty — who have more cash to spend on their kids than their younger counterparts — have soared. For LeapFrog, it all adds up to a great ride. “There is a push for kids not to get left behind,” says Diane Cardinale, spokeswoman for the Toy Industry Association, “and toys are the best way introduce things rather than to say flatly, ‘This is school.'”

Unlike the companies behind toy crazes that pried every lemonade-stand nickel from the palms of young consumers — Beanie Babies come to mind — LeapFrog has focused its marketing efforts on busy moms and dads. The strategy has paid off — a playroom strewn with educational toys now has the same sort of social cachet as a Harvard sticker on a Volvo station wagon. “There is a certain fashion to toys,” says Sandy Springer, director of merchandising for Imaginarium, an educational toy retailer operated by Toys R Us. “Parents today are more savvy about what’s out there for their children. If you give too many generic toys and not enough educational [toys], you are not seen to be an intelligent, in-the-know parent.”

It’s not just the parents. The learning frenzy is also fueled by pervasive marketing that tries to cast just about every plaything as educational. Manufacturers and retailers of children’s products from mobiles to Matchbox cars are hyping the learning angle, and even the simplest toys have fallen victim: Rattles now “inspire confidence” in infants, and the red rubber playground balls we all know from elementary school are now said to foster an understanding of rules in toddlers. One Amazon.com teacher review of Baby’s First Blocks from Fisher-Price claims, “The toy naturally introduces your child to important mathematical concepts,” in addition to allowing the kid to “to practice visual discrimination.” A wooden puppy-shaped xylophone from Babystyle isn’t billed just for early music development, but also as “great for developing baby’s hand/eye coordination.” And at KBtoys.com, Crayola Sidewalk Chalk is peddled, not to draw hopscotch games or simply have fun, but to inspire your budding “little outdoor artist.”

Imaginarium rates its products through a system of “learning values.” What a parent might understandably mistake for a basic toy — the Bruder 24-inch Mercedes-Benz Green Garbage Truck, for instance — the company says will instill learning values like mathematical, visual, and motor skills in addition to introducing “environmental consciousness” (due to the recycling symbol on the truck’s flank).

This is precisely the sort of over-the-top nonsense that worries Dr. Toy, an East Bay child-development expert and author who in the adult world goes by the less-colorful name of Stevanne Auerbach.

Auerbach is a fan of LeapFrog, but not of the hype it has helped spawn. Of course parents should care about what their child gets from a toy, but not every plaything has to instigate a specific skill, she says. Imagination, creative thinking, and emotional development can be fostered simply by experiencing the world, and targeted “skill-building” has become far too prominent on toy-store shelves.

Auerbach is far from alone in this opinion. More than a few child-development experts fret that all the focus on education has encouraged parents to allow less and less time to let their kids just be kids. While most of the academics have good things to say about LeapFrog, they also warn parents that no electronic device can replace interaction with adults and open-ended imaginative play.

“There is an increasing feeling among parents that there is this tremendous educational race on that starts as soon as their children are born,” Alison Gopnik, a professor of psychology at UC Berkeley and author of The Scientist in the Crib: Minds, Brains, and How Children Learn, told Education Week in January. “So it’s a waste of time to them if their children are playing dress-up when they could be learning their vocabulary. That is pernicious, and some people are really exploiting that to make money.” (Gopnik, too, has served as an advisor to LeapFrog.)

Simple play is far from being a waste of time, says Brian Gulassa, who teaches toy design at Oakland’s California College of Arts and Crafts. On the contrary, he says, today’s kids have so little time to actually play that parents need to protect true playtime even more vigorously. The designer, who has worked on several LeapFrog products, adds that his second-grader son Max already has three hours of homework. Unfortunately, he says, many parents don’t really recognize their children’s time constraints. “They would rather believe their kids are getting smart than have them engaged in imaginative play,” he says.

A recent cartoon in the New Yorker mockingly portrayed this dilemma: “So many toys — so little unstructured time,” sighs one baseball-cap-wearing, backpack-toting youngster to his pal.

LeapFroggers counter that they never intended to replace parental interaction. The company’s stated aim, as opposed to selling toys that teach, is to saturate explicit learning products with fun — to wit, you won’t even find the word “toy” in the company’s press releases, and this sort of corporate modesty may help shield it from criticism.

In any case, Wood argues, worrying whether learning toys confuse play and work is the wrong paradigm. “It’s completely possible to allow kids to have a blast and, as they are doing it, learning important concepts,” says the CEO. “Is Monopoly work because it teaches the concepts of tens? No, you’re having fun while you’re learning a lot.”

Other industry types concur. “Since today’s toys are a better blend of education and fun, and parents have less time, playtime had to become value-added,” says Imaginarium’s Springer.

Now that LeapFrog has conquered the preschool market, it has expanded rapidly in both directions with such offerings as the LeapStart Learning table, a musical and tactile gadget for infants, and the Quantum Leap line, which includes an advanced LeapPad and a handheld computer called iQuest for grade-school and secondary-school students.

As the users of its products grow older, the company need to market to the kids as well as the parents. And if education sounds like a tough sell with the youth, there’s also reason to believe the company could succeed. A study released in June by nonprofit think tank Just Kid, Inc. concludes that kids have a powerful need to learn. In the study, children reported daydreaming about “being smart” more often than they dreamed about meeting a famous person, being popular, looking good, being rich, or falling in love. The most important thing in their lives, said 96 percent of the study’s young subjects, was “to do well in school.” In a similar study by Nickelodeon/Yankelovich Youth Monitor, 75 percent of kids aged six to eleven wished “there was a quicker and easier way to making myself smart.”

But the kids will ultimately follow their parents’ lead, says Dr. Toy, and parents need to heed a different prescription, which Auerbach calls “smart play.” From her research, play provides the building blocks for learning. Play experiences help the child to gain an understanding of the world, act productively with other children and adults, enhance concentration, and expand natural curiosity — all essential components of mastering the learning process.

For kids, and even for adults, she adds, the value of play cannot be separated from learning. Recess isn’t just for blowing off steam, Auerbach admonishes, her head tipped forward for emphasis in a manner that only a former elementary school teacher can effectively pull off.

“Kids need lot of downtime,” agrees Jim Steyer, a Stanford education professor and founder of both family-focused media company JP Kids and national advocacy group Children Now. Steyer, who has spent his career studying children’s issues, warns that kids getting constant pressure to do educational things or organized activities is not good. “They need a healthy, balanced play diet,” he says.

Not all Bay Area toymaking success stories rely on the educational parent trap. “The anxiety level is crazy,” laments Judy Folkmanis. “Childhood is not all about education. Learning takes many different forms.”

Folkmanis is founder of Folkmanis Puppets, a company housed in a historic brick warehouse a few blocks down the way from LeapFrog. Limited in physical movement by multiple sclerosis but not dampened in spirit, the toymaker has spent more than three decades in the toy business. In 1973, she started making and selling her puppets on Berkeley’s Telegraph Avenue to supplement the family income while her husband, Atis, awaited the start of his biochemistry fellowship at UC Berkeley. But when her clever design of a turtle that could retreat into its shell began selling like hotcakes, he gave up science and the couple went full-force into the toy world. Folkmanis Puppets now makes more than two hundred lifelike animals and other creatures.

While her attitude perhaps reflects her business interests, Folkmanis, for one, isn’t big on the computerized educational toys now flooding the marketplace.

“Kids learn to establish a relationship with something lifelike, which I think supersedes knowing the ABCs,” she says, speaking above the constant noise of an obsolete dot-matrix printer that is busy cranking out orders for her creations. “Parents need to equally value emotional development,” she says. “You can’t hug a computer board or take a learning tool to bed. These kinds of toys can’t be listening companions.”

Yet in the current overhyped atmosphere, where ambitious parents play Mozart to their fetuses and rush to put newborns on nursery-school waiting lists, how are other folks supposed to relax and heed the Folkmanises of the world? With considerable difficulty. The toy-industry marketing machine has added to the growing sense that life is on fast-forward, and that kids are getting older, faster. They shop for grown-up music, drink lattes, and gobble sushi years before they can dream of driver’s licenses and dates. And the parents, anxious to keep them ahead of the curve, have accelerated their own expectations, assuming that drilling their kids on school skills earlier and earlier will keep them competitive with their peers.

“I don’t want to take the LeapFrog toys away from kids,” says Auerbach. “Technology has come a long way, and can be used to help children who need those aids to learn.” But perhaps, she suggests, parents can make it a priority to set aside some time on a regular basis, shut off the television and all the gadgets, and rather than seeking a leap, simply offer their kids a lap.


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