Games are afoot at Mattel. In recent weeks the company behind Barbie dolls and Hot Wheels cars, which has seen its market value plunge by 20% this year, has replaced its chief executive and much of its leadership team. Big shareholders are calling for a sale. Interested buyers are said to include Zuru, a maker of water pistols, and Authentic Brands, custodian of trademarks from Care Bears to Juicy Couture. Anyone betting on the business has one hope: that Mattel
Games are afoot at Mattel. In recent weeks the company behind Barbie dolls and Hot Wheels cars, which has seen its market value plunge by 20% this year, has replaced its chief executive and much of its leadership team. Big shareholders are calling for a sale. Interested buyers are said to include Zuru, a maker of water pistols, and Authentic Brands, custodian of trademarks from Care Bears to Juicy Couture. Anyone betting on the business has one hope: that Mattel can remake itself from a traditional toymaker into a buzzy entertainment firm.
It is a bad time for producers of playthings. The Iran war has sent commodity prices soaring. Toys of the sort Mattel makes require plastic, and plastic requires crude oil. Parents, feeling the pinch from inflation, are turning stingy. In a recent survey by Mintel, a research firm, 65% of toy buyers said price is now their top consideration. Many are turning to retailers’ cheaper own-brand alternatives.
The challenges go deeper still. Anthony Bonadio of Wells Fargo, a bank, reckons the industry is in structural decline. Birth rates are falling and children are abandoning toys at ever-younger ages. The American Academy of Child and Adolescent Psychiatry reckons that, on average, American children aged between eight and 18 spend 7.5 hours per day on screens, leaving little time for physical toys.
Worldwide sales have grown at a meagre compound annual rate of 3% over the past decade, mostly through higher prices, according to UBS, another bank. Even that overstates things. Circana, a data provider, points out that much of the growth is coming from categories where nostalgic adults are propping up sales. That includes trading-card games (think Hasbro’s “Magic: The Gathering”) and building sets (the domain of Lego).
The pattern is reflected in Mattel’s business. On November 5th it reported that sales of Hot Wheels (another product favoured by kidults) were up by 6% in the third quarter, year on year. But those for Barbie were down by 10%, and Fisher-Price, a brand for infants, plunged by 15%. The company slashed its annual forecast for sales and profits.
It will fall to Mattel’s new leadership to bring back the joy. Roger Lynch, who took over as chief executive last month, previously ran Condé Nast, publisher of Vogue. Before that, he was in charge of Pandora, a music-streaming service. On the earnings call he told investors that what drew him to Mattel was what had drawn him to Condé Nast: its intellectual property (IP).
Mattel benefits from a stable of names people know and love. UBS reckons that the firm’s IP is worth around $8.7bn, nearly double its current market value. That could form the basis of lucrative films, video games and live experiences.
To date, however, the company has struggled to make use of this treasure trove. “Barbie”, the highest-grossing film of 2023, boosted the company’s operating profit by around $100m (or 15%) the year of its release. But the boost to doll sales was short-lived. As Jaime Katz of Morningstar, a research firm, notes: “It was more about ladies dressing up in pink and showing up at the movies.” Mattel’s latest films, “Masters of the Universe” and “Matchbox: The Movie”, have been flops.
Its efforts in video games have also been a disappointment. In 2018 Mattel set up a mobile-gaming studio in collaboration with NetEase, a Chinese gaming giant; this year it acquired its partner’s 50% stake in the venture. But releases such as UNO! Mobile, based on the card game, have been better at attracting eyeballs than generating money. Because mobile games are cheap to make—more so now with the rise of artificial intelligence—competition is fierce.
Even so, rivals have had better luck cashing in on their IP. Hasbro worked with a video-game studio to produce Monopoly Go!, an adaptation of its infamous board game; the app, released in 2023, generated $41m in royalties for the toymaker in its most recent quarter alone. Mr Lynch will be hoping for similar feats from Mattel’s IP. Barbie may soon be put to work once again.
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