Battle rages over doll's 'parentage'

Mattel Inc, the world's biggest toymaker, may add as much as $500 million a year to its revenue by winning a copyright suit against MGA Entertainment Inc over the Barbie doll's hip urban rival, Bratz (pictured).

The maker of Matchbox cars, T.M.X. Elmo and Barbie is arguing before a California court this month that the pouty-lipped Bratz doll was conceived while designer Carter Bryant was a Mattel employee.

If the jury agrees, the toy company will potentially pocket damages estimated at $360 million and, based on Mattel calculations, as much as $500 million in annual direct MGA sales and licensing fees.

"Mattel either gets the status quo or something better," said Sean McGowan, an analyst at Needham & Co in New York. A win and damage award would send shares of the El Segundo, California-based company up "a few dollars at least", he said. The analyst rates Mattel a "strong buy" and doesn't own the shares.

Barbie, originally all-blonde and all-suburban, has had a place on toy shop shelves since 1959. Since the advent of Bratz in 2001, sales have slipped. Mattel reported on April 21 that US Barbie sales fell in the first quarter by 12 percent.

By contrast, the Bratz doll, with big eyes, prominent lips, hip-hop clothing and "a passion for fashion", has grown in seven years into a $2 billion franchise, according to MGA Chief Executive Officer Isaac Larian.

Needham's McGowan estimates that MGA has made about $360 million in after-tax profit since the beginning and probably earns licensing fees "in the vicinity of 15 percent" on non-MGA sales of Bratz products.

"Bratz is a key competitor of Barbie, which is Mattel's biggest brand," said Ira Carnahan, an equity analyst for consumer product companies at T. Rowe Price Group Inc in Baltimore. "So if Mattel prevailed, that would be positive for the company." T. Rowe Price manages $450 billion, including 14.4 million, or 4 percent, of Mattel shares.

Bryant and MGA maintain he worked on Bratz between stints at Mattel, inspired by children he saw while living in Missouri with his parents.

If it proves infringement, the company probably will ask for MGA's past profits from Bratz, said Terence P. Ross, a lawyer with Gibson, Dunn & Crutcher in Washington who isn't involved in the case.

Agencies

(China Daily 05/14/2008 page17)