June 3, 2010 - The Wall Street Journal

Mattel's New Playbook: Toy First, Franchise Next

Mattel executive Tim Kilpin inside the Monster High room at Mattel headquarters in El Segundo, Calif.

Mattel Inc. is embarking on an expensive strategy to create a new toy craze from scratch, with the movies and TV shows coming on its heels—an abrupt departure from usual procedure.

In fact, the Monster High toys are the least of it. The company is aiming for an entertainment juggernaut, with books, movies, clothing, and anything else it can think of, in addition to the dolls.

Mattel, the world's largest toy company, is feeling Disney envy, experts say.

Mattel's usual approach is to roll out a new line of dolls based on other companies' entertainment successes, such as the "High School Musical" movies or the parade of Disney princesses.

The company now is playing catch-up, and doing it the hardest way possible by not using an existing book or movies character, as Disney usually does.

The Monster High characters are the offspring of movie stalwarts like Dracula and Werewolf who attend Monster High. (Frankie Stein is the sweet, klutzy new monster on the block, for example, and Draculaura is a parental disappointment because she is blood-shunning vegan).

Becoming an entertainment company is now every toymaker's dream, in the wake of the apotheosis of Mr. Potato Head by "Toy Story" and the tremendous success of the "Transformers" movies. The latter two are properties of Hasbro Inc., which is attempting to morph into a full-fledged entertainment company by starting its own cable-TV kids network this fall.

The Monster High dolls, clad in goth-lite outfits, will land in July. This summer, the tween apparel store Justice will begin selling a line of Monster High clothes. Then, this fall, Little, Brown & Co. is publishing the first of six Monster High books written by Lisi Harrison, author of the popular teen "Clique" book series. Party City will be stocking Monster High Halloween costumes.

A live-action movie musical with Universal is in the works, produced by Craig Zadan and Neil Meron, the duo behind the films "Chicago" and "Hairspray."

"We see the tone as 'Beetlejuice' meets 'Grease' meets 'The Addams Family' meets 'Edward Scissorhands,' " Mr. Meron said.

Mattel thinks people of all ages will be attracted by the Monster High premise. "Who doesn't feel like a freak in high school?" said Tim Kilpin, Mattel general manager who oversaw a team of 20 employees who worked on the concept for three years.

Asked if Mattel has ever devoted so much time and manpower to one project, Mr. Kilpin replied, "Not on purpose."

Whether the public will bite is an open question. The movie won't be out for about two years, leading toy industry observers to wonder what will drive toy and merchandise sales.

"If girls don't get it right away, it could flounder and die a premature death," said Gerrick Johnson, toy analyst at BMO Capital Markets. "The one thing that is missing that I think would really help at the outset is TV content."

Mattel couldn't find the right partner for a TV series when it was ready to launch the line, Mr. Kilpin said. He admitted the approach is risky, although he declined to detail the amount of money the company has committed. Analysts put the figure at tens of millions of dollars.

After being battered in the recession, Mattel's situation has improved considerably. In April, Mattel reported a profit of $24.8 million for its most recent quarter, compared with a year-earlier loss of $51 million. Revenue increased 12% to $880.1 million, helped by a weaker dollar and strong sales of toys tied to entertainment.

View Full Image

Michal Czerwonka for The Wall Street Journal Mattel's Monster High dolls and apparel will be aimed at tweens.

Mattel is launching Monster High through TV commercials and a website that will offer weekly 90-second animated stories; one chronicles the travails of a Jaundiced Brothers concert.

A slow, steady build in popularity isn't necessarily bad and, in some ways, can be preferable to a craze that is a flash in the pan. But the problem, said Chris Byrne, a toy-industry market analyst, is that "retailers only give products a limited time to prove themselves."

Consumers are willing to pay 50% more for toys based on entertainment properties, according to a recent report by Citibank. And sales of such toys have grown 40% over the last four years, while sales of other kinds of toys have dropped.

Mattel said its new "franchise" approach to developing toys and entertainment properties is a model for the future. But franchises usually evolve over time, said Sean McGowan, a retail analyst at Needham & Co.

"I don't know if these things can be engineered," Mr. McGowan added. "But then again, things can catch wild fire faster than you think."

Source