LeapFrog brings new meaning to FLY-paper

By Brent Felgner and Tom Sosnowski -- Playthings, 1/13/2005 6:56:00 AM

NEW YORK—LeapFrog president Jerry Perez walked onto a darkened stage and picked up a spotlighted piece of paper from the floor. In doing so, he took what the company hopes will be its next massive step into the future, creating a new industry segment that will extend LeapFrog’s appeal into new markets, new technologies and new customer bases: Pen- and paper-based computing.

LeapFrog unveiled a prototype pen and paper computing platform offering real-time audio feedback and enabling users to write on a piece of paper then interact with it directly. The FLY pentop computer is based on a variety of technologies including optical scanning, finely dotted paper media, ASIC (application-specific integrated circuit), character recognition software and a phoneme-to-speech engine.

“If I asked you to name the simplest piece of technology you use everyday, you might say your iPod and cell phone, which would be wrong,” Perez said to an assembled group of media and financial analysts here. “The simplest technology that you use everyday is this and this—pen and paper … imagine bringing the power of computing and interactive technology to pen and paper.”

Scheduled to ship this fall with a $99 price point, the product is being directed initially at tweens, although line extensions are already envisioned for teens and adults, according to LeapFrog president Jerry Perez. He says the product will be directed at a variety of retail outlets, notably mass merchants, toy chains and electronics specialty stores, such as Best Buy or Circuit City. It should deliver an initial retail gross margin in the 20s, Perez says, adding additional applications are expected to retail for $7.99 to $34.99.

The timing of the announcement was intentionally tied to the period immediately following the Consumer Electronics Show and immediately before next month’s American International Toy Fair, Perez said—an indication perhaps of LeapFrog’s broadening view of its marketplace. “We thought it was the perfect timing to be in between the CES and Toy Fair,” Perez tells playthings.com.

Among other functions, the FLY enables users to draw a picture of a calculator, tap in a calculation and hear the answer from the pen—in a human-sounding voice. It offers the ability to write a word, have it translated into Spanish or defined from a 70,000 word dictionary. In addition, users may draw a piano keyboard and then play it. The pen also offers a variety of games, journaling, clock and calendar functions.

In appearance, the device itself is somewhat similar looking to optical pen scanners that have been on the market for some time. But where those scanning pens require data to be dumped into a PC to be useful, the FLY is a self-contained processor.

“It’s a computer bundled into a pen. And in conjunction with special FLY paper, it makes the simple act of writing and drawing computer enabled,” Perez explained.

Moreover, LeapFrog for the first time has formed a developers’ network permitting third party applications, including HP, Disney, NBC Universal, MeadWestvaco and Upper Deck.

“We’ve created an intuitive user interface that provides instant navigation, from a blank piece of paper to a user’s desired application,” said Jim Marggraf, executive vice president of worldwide content and the FLY “visionary.”

“Our initial set of tween learning tools and games are designed to alleviate critical educational pain points for tweens, and to provide easy access to information and entertainment in sync with a tween’s lifestyle,” he said.

Marggraff was also the developer of the LeapPad learning system.

LeapFrog used a group of 50 tweens—dubbed the Quantum Xers—to aid in the design, development and testing of the product, in an effort to be sure it was hitting its mark and market. Development has been in the works since 2000, according to the company. To perfect its handwriting recognition consistency, Perez says the company “literally tested handwriting samples from 3,000 kids. We had a high success of recognition.”

“Ten years ago, we launched LeapFrog with a mission,” notes chairman and CEO Tom Kalinske. “Begin with real educational content; enable it with innovative technology; be certain that you make it fun, interesting and cool. And when you do that, something really magical happens: You end up with a product [with which] kids really learn.”

That philosophy has helped the company win an installed base of 20 million platforms, more than 60 million pieces of software and, with its SchoolHouse division, win placement in more than 45,000 schools, according to Kalinske. That said, LeapFrog has also been racing to fend off new competition in its traditional markets, in part, by finding extended businesses to enter, such as adult learning and its global business. The FLY technology represents its latest effort—one it expects will enhance its retail presence.