Toy company going to the dogs--and cats--to build bigger market share.

In a world where school kids play games on their cell phones and PlayStation contests captivate for hours, what's a toy company to do?

Ask Fido for help.

Malibu-based Jakks Pacific Inc. now has in its arsenal SpongeBob SquarePants, Shrek and Barbie branded pet products--all courtesy of the Pet Pal line of products it acquired over the summer.

The company has big expansion plans for the new subsidiary, including its own line of pet gear. It also struck a licensing deal with MGA Entertainment Inc., the Van Nuys maker of the popular Bratz dolls.

"Consumer spending for premium pet food and supplies is growing everywhere, at better than 5 percent," said Sean McGowan, an analyst with Harris Nesbitt Corp. in New York. "What Jakks is doing is taking that to its logical extreme."

Americans spent $20 billion on toys last year, but growth was flat. By contrast, sales of pet products will near $36 billion this year, with 5 percent growth expected in 2006, according to the American Pet Products Association.

Lots of companies have gotten the message.

Since 2003, shelves at Target have carried Winnie the Pooh brand squeaky balls, and Mickey Mouse and Goofy leash and collar sets licensed by Walt Disney Co. Twentieth Century Fox has a line of licensed products based on "The Simpsons" cartoon characters that include tug and chew toys and leashes.

Pet products remain a small portion of Jakks' business--just $1.1 million of the $233.5 million in third-quarter sales. The bigger action remains on the toy side, with its pull-cord driven Fly Wheels cars and Doodle Bear plush toys helping boost third quarter net income to $32.8 million, up 41 percent from a year ago.

But there are expectations of much more through the Pet Pal deal, which came through a deal with Nancy Sales Co. Inc. for $10.6 million in cash and a $25 million earn-out. That includes inheriting several licensing deals with Viacom Inc., DreamWorks Animation SKG Inc., and Mattel Inc.

The license with El Segundo-based Mattel involves a line of Barbie pet collars and pet clothes with lots of rhinestones and faux fur. But it also expects big sales from its deal with MGA, whose hugely popular line of Bratz dolls has severely cut into Barbie sales.

Meanwhile, Jakks plans to manufacture several pet products based on its own popular toys, including a version of its Fly Wheels cars modified to trail a tennis ball behind it to encourage kids to mix up their play with pets.

"Jakks said, 'Wow, kids and pets makes sense,'" said Merritt Schoch, co-founder of the Pet Pals product line and now co-president of Jakks' JPI Corp. division in Carlsbad.