LeapFrog 2015 Annual Report Download - page 11

addition, during fiscal 2015, we launched LeapBand, a wearable activity tracker, which encourages active play
and healthy habits through nurturing a child’s very own personalized virtual pets.
Online Services:
•LeapFrog App Center: The App Center is a web-based store, through which customers can
purchase and download digital content for their LeapTV, LeapPad, Leapster and LeapReader
products. The App Center sells a wide variety of learning games, videos, music, flashcards,
interactive storybooks and other educational content. The App Center includes content developed by
us, and content from third parties that we curate and distribute.
•LeapFrog Learning Path: The Learning Path is a service that we first introduced in 2008. The
Learning Path is a unique tool for parents, designed specifically to help support and guide their
child’s learning with personalized ideas and feedback, fun activities and expert advice, which is
accessed through LeapFrog Connect.
The Learning Path combines our proprietary curriculum and technology with the power of the web
to bring new levels of engagement, customization and personalization to LeapFrog products. The
Learning Path builds direct one-to-one customer relationships with parents by empowering them
with personalized feedback about their children’s learning progress and by suggesting specific
LeapFrog products that will further develop their children’s skills.
During 2013, we launched a new component of the Learning Path that provides a weekly newsletter
with resources and activities for children in order to drive engagement with the LeapFrog brand and
our products. The Learning Path is a component of our strategy to build direct relationships with
parents, keeping them engaged with us as their children grow through different learning stages.
For information on sales of product lines that constituted 10% or more of total net sales by segment, see
Note 21 — ‘‘Segment Reporting’’ in our Consolidated Financial Statements included in this Annual Report on
Form 10-K.
For more information about the risks associated with our new products, see Part I, Item 1A. — Risk
Factors — ‘‘Our business depends on our ability to correctly predict highly changeable consumer preferences
and product trends’’ in this Annual Report on Form 10-K.
Competition
While our products compete mainly in the learning toy and electronic learning-aids markets, our multimedia
learning platforms increasingly compete in a broader arena with a variety of consumer electronics products
including tablet computers, eBook readers, mobile devices and gaming platforms. We also face increased
competition from creators of digital applications, software and content for children. Competition is significant
in all of these markets.
We believe the principal areas of competition in our industry are the quality of learning content, brand
recognition, price, performance and features. We believe the LeapFrog brand is recognized for comparably
higher quality educational products, enabling us to compare favorably with many of our current competitors
despite premium pricing. In addition, we believe our learning toy product category is an important competitive
differentiator because it introduces parents to the LeapFrog brand, provides an entry point to the Learning
Path and supports our associated strategy to build direct relationships with customers.
We face the challenge of competitors introducing similar products or functionality soon after we introduce our
new products or product lines, and these competitors may be able to offer their products at lower prices using
cheaper manufacturing processes or materials, more limited functionality, more limited educational content, or
reduced safety features. In addition, we focus on the educational aspect of our content, ensuring that each
piece of content is based on age-appropriate educational curricula. In contrast, many of our competitors seek
to compete primarily through aggressive pricing and low cost content that lack significant educational value.
Many of our direct, indirect and potential competitors have significantly longer operating histories, greater
brand recognition and substantially greater financial, technical and marketing resources than we do. Our
principal competitors in the learning toy category have included VTech Holdings Ltd., Mattel, Inc., primarily
4