Strategy

Look out, Barbie, Bratz are back

Having wrested its dolls back from Mattel, MGA looks to rebuild the brand.

Isaac Larian wept when he heard the news. In July, after a tortuous six-year legal battle with Mattel, Larian wrested back control over Bratz, a line of dolls produced by his California-based company, MGA Entertainment. “I was ecstatic,” he says. “This has been a big ordeal for me and my family.” But Larian could still face legal hurdles, and now has to revive a wounded brand.

Larian began producing Bratz in 2001. The Bratz characters were provocatively dressed and aspired to do little more than shop. Children loved them, even as many parents complained the dolls were poor role models. Part of the success lies in the fact that unlike the queen of the doll market, Mattel’s Barbie, Bratz were designed for an ethnically diverse society. They came in a variety of skin tones, and yet still seemed racially ambiguous.

Larian’s success put him squarely in Mattel’s sights, as Bratz were a direct assault on Barbie’s territory. The toy giant sued in 2004, alleging the dolls’ designer, Carter Bryant, was a Mattel employee when he conceived of the idea. After a jury trial in 2008, MGA was ordered to pay Mattel US$100 million and turn over the entire Bratz trademark portfolio to its competitor. But an appeals court reversed the decision in July, arguing that while Bryant was a Mattel employee, MGA nevertheless turned Bratz into a billion-dollar brand. “Mattel acquired the fruit of MGA’s hard work,” the judge wrote in his decision.

Mattel has indicated it may try to pursue a retrial. But the company has already spent well over US$100 million in legal fees, and according to Needham & Co. analyst Sean McGowan in New York, even the best-case scenario is that the company “takes ownership of a much-depleted brand and gets to take a victory lap in the press.”

Indeed, when Mattel won the rights to Bratz, the dolls virtually disappeared from stores. “The brand value has diminished by hundreds of millions of dollars,” Larian concedes. Naturally, MGA is suing Mattel for damages. The company is also wasting no time trying to restore the Bratz name. MGA is rolling out two new lines for release in North America and Europe this year. The dolls will be more modestly dressed and wear less makeup than their predecessors, a change the company hopes will placate overly concerned parents.

Some are skeptical about how Bratz will fare. “It’s hard for second acts in toys,” says Richard Gottlieb, an industry consultant in New York. “Successful products happen because the time is right, and society keeps moving.” Competitors have since grabbed share, and retailers will also be reluctant to stock the doll until the legal uncertainty is resolved. “We believe it would be wrong to assume that the reintroduction of Bratz, a nearly 10-year old brand that had already begun to experience reduced sales, will retake its lost market share,” wrote McGowan in a recent note.

But Larian is confident he will prevail, both in court and in stores. Even the name of one new Bratz line is a way to commemorate his victory. “We named that line Party Celebration,” he says.