Market Insight

Mattel launches film division in bid for new growth

September 18, 2018  | Subscribers Only

David Hancock David Hancock Director – Research and Analysis, Cinema & Home Entertainment, IHS Markit
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Mattel Toys has launched a film arm to develop and produce films based on its toy-related brands. Drawing on the success of not only Marvel and DC Comics, but also rival toymakers Hasbro and Lego. Mattel believes that it has a range of valuable IP that can be better exploited in cinema and other media.  Mattel’s intellectual property includes Barbie, He-Man: Masters of the Universe, Hot Wheels, Thomas & Friends, Monster High and Fisher-Price.

Mattel has already been active in the movie business, albeit in a piecemeal way and via other studios, such as a film on Barbie’s life which is now scheduled for release in 2020, delayed from this year, and developed and distributed by Sony. However, the deal with Sony for both Barbie and He: Man has now expired, which probably explains the timing on the launch of Mattel Films. The new announcement highlights a more strategic approach to exploiting its key IP in the film arena, not to mention retaining control of the production and timing of projects.  Another recent film project was Max Steel, which had a very underwhelming impact on the box office and audiences alike.

Mattel has responded to a difficult trading environment for toys (this includes a slowdown in sales of movie merchandising too) with a job and cost--cutting plan, amid weak sales for brands such as Fisher-Price and American Girl Doll. Amid the demise of Toys ‘R’Us, Mattel’s revenue from partner brands (including movie merchandising) fell 23 % in the second quarter of this year. The company announced a job loss plan of 2,200 jobs (22% of its global non-manufacturing workforce) in a bid to save costs of $650m.


Our analysis:

Both Mattel and its rival Hasbro are active in creating web series, DVDs and other forms of content but film-making is a more expensive and altogether riskier proposition. Mattel has hired a very experienced movie executive to oversee this division (Robbie Brenner produced the Dallas Buyers Club and has a long track record in film production) and the current CEO of Mattel was also a TV executive (Chairman and CEO of Endemol) as well as selling his previous company Maker Studios to Walt Disney in 2014.

Traditional toymakers and retailers are struggling at present, as is evidenced by the demise of Toys ‘R’ US. In the movie arena, a potential source of growth for toymakers, Hasbro has had some success with the Transformers franchise, which the toy company produced and Paramount took distribution rights to. The franchise has grossed $4.4bn globally in cinemas. The two companies also worked on G.I. Joe, also controlled by Hasbro. This was less successful than Transformers but by no means disaster, bringing in $678m globally in the two films. In late 2017, Hasbro created Allspark Pictures and Allspark Animation to extend its collaboration with Paramount, for both live-action and animated projects, under a co-financing exclusive deal that has a five-year lifespan.

In terms of the Mattel brands, at first sight it could be argued that they are not likely to be as popular as the comic-book inspired universes created by Marvel and DC, and are therefore less likely to drive the box office over the next few years in the same way, but that may not be the point. The experiment with Max Steel may put Mattel off from going the lower-budget route: the budget on that film was around $10m and the total box office worldwide was less than that. While the market for children’s films is strong, the standard has been set high by makers like Pixar but the universes created by the comic books Marvel and Dc Comics have a proven ability to bring in older audiences too. The brands owned by Mattel could struggle to do that.

A possible route to consider could be that of Lego, which has used its toy brand (although not character-based) in conjunction with more recognisable characters from DC Comics, resulting in The Lego Batman Movie. A wider deal with Warner Animation began with The Lego Movie, and is still going. Lego has character deals for its building blocks with both DC Comics and Marvel.

Mattel is the licensee of the DC Comics toy line as well as other film-based merchandising strands: Jurassic Park (it won off Hasbro), Disney-Pixar Cars, the 8th instalment of Fast and Furious, Ghostbusters. This experience with developing movie-based merchandising should be a useful asset in their negotiations and strategy development.

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