Battle of the Fun Factories

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Another chatterbox, A.G. Bear ($35), made by California's Axlon, contains a microprocessor that monitors the voice of the child with whom it is speaking. The bear replies with vaguely similar murmurings, though it does not move its mouth. A.G. Bear is the latest creation from Inventor Nolan Bushnell, who devised the first video game, Pong, and then went on to found Atari. He now plans a whole line of electronic pets.

Yet the real sophistication in the toy business is often found in the marketing rather than the design. While companies have long promoted toys with blizzards of Saturday-morning TV commercials, they have now taken over much of the programming as well. Manufacturers typically turn their toys into cartoon- show characters, and one hypes the other. Virtually all of the current top toys have regular programs or specials. This stands tradition on its head. In the past, cartoon characters like Mickey Mouse or Bullwinkle often inspired toy products, but not the other way around. Everything changed in 1980, when the American Greetings card company of Cleveland and Kenner Products of Cincinnati teamed up to invent a character who was the star of a line of toys and two TV specials. The strategy succeeded handsomely. Strawberry Shortcake products have rung up total sales of $1 billion.

Cartoons work effectively for the companies because they hook children on a character or a mythology rather than just one toy. Thus the G.I. Joe cartoon program helps sell dozens of licensed products, ranging from pajamas to G.I. Joe Cereal. Explains Brian Sutton-Smith, author of Toys as Culture, a book to be published next month: "Children's minds live more in a story world than in a toy-category world." Concurs Bernard Loomis, president of GLAD, a toy design and licensing firm: "Manufacturers create a fantasy world, and this has led to a very sophisticated relationship between them and the child. We are now in the business of multiple sales to the same children in the same fantasy."

The toy programs spark bitter debate, though, because some parents oppose such promotions. Peggy Charren, founder of Action for Children's Television, claims that 46 toy-based shows have flooded the airwaves since 1983. Says Donna Lambert of Charlottesville, Va., mother of Matthew, 5, and Kate, 4: "It's difficult for me to tell them not to watch the shows because I don't necessarily object to the content, but the kids aren't aware of the advertising." Even so, toy sellers point out that parents or grandparents ultimately control the purchases. Agrees Atlanta Attorney Stephen Kane, father of three: "When it comes down to it, we're going to get them what we think they should have anyway--clothes and one or two things they really want."

While marketing is the most obvious battleground, perhaps the most treasured commodity in the toy business is ideas. Creative staffs feel heavy pressure to dream up the next toy that will break Santa's back. Says Gerald Cleary, vice president of sales for Tonka: "It's nightmarish. You have to plan and plan, see lots of inventors and review lots of concepts." Some of the best ideas spring from the general public, rather than the toymakers' market-research labs. Huggy Bean, a big-selling black doll, was created by a black mother and father in New York City who saw the need for a make-believe character with whom black children could identify.