Bratz Dolls’ Maker Plays to Win in Battle With Barbie

Bratz maker Isaac Larian couldn’t help but gloat after archrival Mattel Inc. released its second-quarter earnings last month.

For the first time since Larian launched the dolls with their funky, streetwise look four years ago, he said, Mattel Chief Executive Robert Eckert mentioned Bratz by name, acknowledging on a call with analysts that they had put pressure on his company’s iconic Barbie.

“They are no longer calling us their ‘nearest competitor,’ � said Larian, chief executive and owner of MGA Entertainment Inc. of Van Nuys. “That was a first,� he said with a laugh.

If Larian has his way, Barbie will be playing second fiddle in years ahead to his girls with their “passion for fashion.�

Indeed, Barbie, the world’s most popular doll, has already yielded her crown to Bratz in Britain. And Barbie’s grip in the United States is weakening, with sales sliding for a seventh straight quarter, down 6% for the three months ended June 30. Bratz’s year-over-year sales rose 19% during the same period, research firm NPD Funworld reported.

For Larian, 51, the numbers are sweet vindication, given the skepticism of some in the industry who wonder whether he can continue to thrive as a largely one-brand man.

“I’m very competitive,� he said. “I want to be No. 1 -- I don’t want to be No. 2.�

For now, he’ll have to settle for being a strong No. 2, with privately held MGA estimating that Bratz racked up $2.5 billion in 2004 retail sales, between its dolls and products sold by licensees. Barbie dolls and licensed products recorded an estimated $3 billion in worldwide sales. (Larian declines to give wholesale sales figures or profit, and Mattel does not break out sales for Barbie separately.)

Starting this month, the battle in the dollhouse may get even more heated, with MGA set to release a direct-to-video movie, video game and music CD and produce an animated TV series tied to its new line of Bratz Rock Angelz dolls.

The Bratz product blitz will go up against Mattel’s launch this month of “Barbie My Scene Goes Hollywood,� a direct-to-video movie featuring an animated Lindsay Lohan character.

The debut of Rock Angelz, with an accompanying 300 licensed products, represents MGA’s biggest launch ever. The “Bratz� animated series, which is set to debut in September on the Fox network, cost him $10 million to produce, Larian said.

It’s a big bet, analysts say -- and one that could easily backfire if little girls used to hip-hop and pop don’t relate to the rock theme. But analysts say Larian can afford to suffer a dud now and then, as when his Pretty in Punk dolls flopped last year.

“Even if they fail they’re not going to put him under,� said Jim Silver, publisher of industry publication Toy Wishes, of the Rock Angelz line.

With no shareholders to report to, said analyst Sean McGowan of Harris Nesbitt in New York, Larian can move more quickly and take chances that Mattel can’t despite its much deeper pockets, such as rolling out more themes and accessories during the year.

“Bratz has done a better job of keeping things fresh,� McGowan said.

Mattel has fared best in recent years with girls ages 4 to 6, who favor the fairies, rainbows and unicorns in its Fairytopia line, while Bratz has won much of the business with girls 7 to 11, who are beginning to outgrow dolls.

Its doe-eyed characters Yasmin, Cloe, Sasha and Jade wear what these girls’ older sisters are wearing, and they have a wider range of skin tones and exotic names that make them appealing to girls around the world.

“The [older] kids don’t want to play with Barbie anymore,� Larian said. “They think Barbie is for babies.�

Mattel executives dispute Larian’s claims. The Barbie line is regaining its footing, they say, citing the relatively brighter second quarter after a first quarter in which worldwide sales were down 15% year over year.

“I think we have made headway in terms of making [the brand] cooler and more relevant to older girls,� said Dianne Douglas, a senior vice president at El Segundo-based Mattel. But, she said, “we still have work to do.�

Analyst McGowan agrees that Mattel is making progress.

“The Barbie product I see in stores is better,� he said. “Retailers tell me there has been an improvement -- not an increase in sales but less of a decrease.�

McGowan expects to see Barbie sales break their losing streak this fall, with the arrival of “My Scene Goes Hollywood� and a bigger advertising push by Mattel.

The Bratz-versus-Barbie battle has been just as intense outside the toy aisles and in Los Angeles courthouses.

Larian filed suit against Mattel in April in U.S. District Court, accusing his rival of copying the Bratz dolls’ heavily made-up, almond-shaped eyes and pouty, lip-glossed mouths, as well as packaging and themes, for its My Scene dolls.

“They are blatantly knocking us off,� Larian said. “Short of calling them Bratz, I don’t know what else they can do.�

Mattel says it’s the other way around. Last year, it sued Carter Bryant, a designer for MGA, claiming that he brought doll designs to the company after leaving Mattel.

Mattel’s Los Angeles-based attorney, John B. Quinn, said he believed that Larian’s suit -- filed a day before Mattel’s first-quarter earnings report -- was in part a “publicity ploy� designed to draw attention to the blond icon’s woes.

Larian might be said to have a passion for bashin’ -- he rarely passes up a chance to provoke Mattel. MGA’s showroom at the American International Toy Fair in New York in February featured a prominently displayed photograph of Fashion Fever Barbie’s teen pitchwoman, actress Hilary Duff, holding a Bratz doll.

Larian has sued McDonald’s Corp. and Nordstrom Inc. in disputes over Bratz-themed merchandise. He even took on George Lucas and Lucasfilm Ltd., successfully defending MGA’s rights to “Star Wars� hand-held games -- electronic toys were once the company’s principal business, back when it called itself Micro Games of America.

Even as he keeps his attorneys busy -- a recent Bratz-themed licensing supplement to the Hollywood Reporter included five ads from law firms congratulating Larian -- others believe that Larian crossed the line when he took on his own industry’s trade group, the Toy Industry Assn., withdrawing from the organization and accusing it of favoring Mattel in its annual product awards.

“I am not just going to get pushed around by these big bullies,� he said, “whether it’s Lucasfilm, McDonald’s or Mattel.�

Like it or not, observers say, it’s this pit-bull determination that enabled Larian to rise from teenage immigrant from Iran to toy industry mogul.

Larian, who trained as a civil engineer, started out importing brass decor and knickknacks before moving into the more lucrative electronics business in the late 1980s, eventually securing the U.S. distribution rights for Nintendo hand-held games.

It was the introduction of Bratz in June 2001 that secured Larian’s fortune. Yet ultimately, some observers say, his single-minded determination to make Bratz the bestselling fashion doll could be his downfall.

Aside from Alien Racers, a line of action figures and vehicles, MGA depends almost entirely on Bratz for its income -- 70% to 80% of total sales by analysts’ estimates.

“You never want to be that reliant on one product,� McGowan of Harris Nesbitt said.

After all, tastes can change quickly -- Larian’s own success illustrates that point.

“In a matter of one or two years, you can have a relatively unknown small toy company become one of the largest brands in the entire business,� said Brian Dubinsky, president of manufacturer Toy Quest in West Los Angeles and a former employee of Larian’s. “How many other industries can you say that for?�

Whatever happens with this season’s new products, MGA and Mattel will continue to see their fortunes intertwined, especially as long as Larian can influence the conversation. In a news release issued July 19, a day after Mattel’s earnings report, MGA quoted new figures showing its share of the British fashion doll market at 49.3%, nearly 9 percentage points ahead of that of a company it would only call “its nearest competitor.�