Hasbro announced the VuGo, a portable video player for kids in September.

Today the VuGo online download service opens it's doors today. The WSJ (Thanks Larry R.) reports that cable TV channels Nickelodeon and Cartoon Network are amongst the broadcasters offering TV shows on the VuGo platform. A half-hour episode of Sponge Bob sells for instance for $2.99.
An interesting aspect is that the VuGo has direct recording (DVR). So kids can record TV shows themselves without spending their cash online. The VuGo Kids PMP and DVR unit contains 128MB of memory, enough to hold up to 60 minutes of video, 6 hours of music or over 1,200 digital photos. The VuGo can be expanded with SD Memory Cards. The VuGo runs on AAA batteries and has a built-in speaker.
The VuGo starts shipping from Amazon.com tomorrow (update: currently shipping date is December 9th) for $119.99. Also available from Wal-mart online for $117.44 and it is in stock there right now.