Here’s what passes for good news these days at Mattel, the iconic toymaker that has taken more knocks than one of its Rock ’Em Sock ’Em Robots: a quarter of not losing money. In late October, Mattel posted positive quarterly cash flow for the first time in three years. It grew revenues for its second consecutive quarter, a feat it hadn’t achieved since 2013. Even its long-troubled Fisher-Price tots division would have reported single-digit year-over-year sales increases but for a $34 million recall of nearly 5 million Rock ’n Play Sleepers feared to have caused more than 30 infant deaths.
Some of Mattel’s news was good by any measure. Unlike archrival Hasbro, it isn’t being hit by tariffs imposed in the U.S.-China trade dispute, thanks to savvy shipping arrangements with its buyers. Recent cost cuts enabled it to raise its financial forecasts, sending its stock soaring (a rare occurrence of late). Its two most important brands, Barbie and Hot Wheels, are selling well. What’s more, both are on track to become feature films, a key pillar in CEO Ynon Kreiz’s plan to remake Mattel from a not-terribly-efficient toymaker to a media company that leverages its time-tested and beloved characters and gadgets.
It’s enough for Kreiz, who is 18 months into his tenure running the company, to suggest that Mattel has a future, even if its problems are far from solved. “The turnaround is working,” Kreiz told investors. In an interview a few days later, he exudes guarded optimism. “We are starting to think about growth,” he says. “You can see how we’re focusing the company.”
Longtime followers of Mattel will be forgiven for thinking they’ve heard it all before. Kreiz is its fourth CEO since 2012, the latest in a string of well-credentialed executives who thought they knew what it would take to fix the toymaker. The most recent was Margo Georgiadis, a former top Google executive who quit to take another job after just over a year at Mattel.
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Mattel’s list of woes is long. It has a habit of squandering advantages, like the long-term decline in its once-dominant American Girl doll business or the loss to Hasbro, in 2016, of a lucrative license to manufacture Disney princess dolls. The company’s balance sheet is weak, the result of high debt and declining sales. The 2017 bankruptcy and subsequent liquidation of Toys “R” Us dealt a blow to Mattel’s entire industry. “The toy business has not been very good,” says Stephanie Wissink, a Jefferies analyst who has followed the industry for nearly 20 years. “And the cash flow of the company is dependent on the toy business being good.”
Kreiz doesn’t disagree. But by pivoting Mattel to become less of a toy company and more of a higher-margined media enterprise built on a stable of valuable brands, he thinks he can take a page from Hasbro, which has brought Transformers, G.I. Joe, and others to the silver screen and recently announced plans to buy kids’ media firm Entertainment One. Hasbro’s gross margins are 51%; Mattel’s are 39%. Kreiz also has his eye on a bigger colossus: Disney. It’s an organization he knows well, having sold it two companies over the years. It’s not even out of the question that if Kreiz is truly successful, Mattel could be the third.
No one thing went wrong at Mattel. But in the recent past, there has always been something going wrong, some part of the company sputtering even as other parts chugged along. Earlier in this decade, when American Girl was doing great, dolls associated with Disney’s Frozen franchise—manufactured at the time by Mattel—cannibalized Barbie sales. Monster High merchandise collected annual sales in the hundreds of millions of dollars—and then collapsed. Hot Wheels flatlined at the worst possible moment, just as American Girl became oversaturated. It all contributed to a steady erosion in Mattel’s sales, from $6 billion in 2014 to $4.5 billion in 2018. (Analysts are expecting flat revenue growth in 2019.)
Kreiz, pronounced “cries,” has a theory about the decline. “The company was too successful for too long for its own good,” he says. It didn’t move fast enough in updating its manufacturing and supply-chain operations. It didn’t freshen its retail approach. And it lagged in innovation. Years after Hasbro ditched its factories in favor of outsourced manufacturing, Mattel continued to operate its own facilities. “Except for Lego, no one makes their own toys,” says Kreiz. Mattel’s employment peaks at 40,000 at times of maximum factory output. Hasbro, whose sales are comparable to Mattel’s but is worth three times as much, has fewer than 6,000 employees. (Among Kreiz’s first moves as CEO: cutting the workforce by 22%.)
Then there was the inescapable fact that Mattel’s most important brands—Barbie, Hot Wheels, Fisher-Price, and Thomas the Tank Engine—were, to put it politely, long in the tooth. The company hadn’t come up with a genuine hit in years, even though it deftly sold what it had. A former Kraft Foods executive, Robert Eckert, ran Mattel for 12 years beginning in 2000, and the ethos of consumer packaged-goods “brand management” dominated the company. “We were comparing ourselves more with P&G and Kraft while competing against Hasbro and Disney,” says Richard Dickson, Mattel’s president, who worked at the company in that era, left in 2010, and returned four years later. “The creative conversation wasn’t necessarily the paramount one.”
Mattel also had a unique approach to its smaller brands: It tossed them all in a segment called “toy box,” an everything-else category that Kreiz calls “a black box that lost money.” The unit, whose brands included Polly Pocket dolls, card game Uno, and toys affiliated with the video game Minecraft, recorded $1.6 billion in revenue last year. Previous management saw so much value in the concept that it created a short-lived reality-TV show on ABC called The Toy Box, a competition in which contestants pitched ideas, and the winner would see their toy made by Mattel and sold by Toys “R” Us. The show died when the retailer did.
The executive suite had a revolving door, with each successive CEO lasting a shorter time than his or her predecessor. Weeks after Georgiadis joined Mattel, it was forced to disclose a massive shortfall in earnings. That prompted her to cut the dividend, sending shares plummeting. Georgiadis staked her tenure on tech-enabled toys, few of which excited kids enough to change Mattel’s trajectory. Having signed up to grow a company, not to orchestrate a turnaround, she jumped at the opportunity to run Ancestry.com. In April 2018, the board turned to Kreiz, who had joined its ranks the previous year, to succeed her.
Kreiz decided early on to ditch the toy box and shift Mattel’s portfolio focus, grouping its brands into two buckets: toy-industry leaders (dolls, vehicles, infant/preschool) and challengers (games, construction, action figures). “This is almost obvious,” he says. “Why wouldn’t you do it that way? It’s how the toy industry is organized.” Turning Mattel toward what has worked for others would become a recurring theme for the newcomer.
There’s a robotic quality to Ynon Kreiz’s voice. He speaks deliberately, at a metronomic pace, and in a register that lacks highs and lows. The voice matches the person, whom associates describe as sure and steady, disciplined, and unflappable. Kreiz, who is 54, was born in Israel and went to UCLA for business school. He landed a job with Haim Saban, another transplanted Israeli, who ran a company that specialized in children’s TV programming.
Kreiz served as a right-hand man to Saban, who says he likes to have a U.S.-educated Israeli beside him, someone who understands the American business context but with whom he can switch to Hebrew when the need arises to speak confidentially in front of others. Saban calls Kreiz a “relentless perfectionist” and credits the younger executive with the idea that grew into Fox Kids Europe, a TV programming block that Kreiz ran from London and later sold to Disney. Kreiz still considers Saban a mentor. “I got my MBA at UCLA,” he says, “and I got my Ph.D. with Haim.” (His friendship with Kreiz didn’t stop Saban from selling his Power Rangers franchise last year to Hasbro, for $522 million.)
After selling Fox Kids Europe, Kreiz stayed with Disney for a while, then ran Endemol, a Dutch producer of reality-TV shows burdened with debt from a private equity buyout. Kreiz spent his time trying to cut costs and reduce debt in a worsening economy. He calls it a formative experience—and a less-than-successful one. “Endemol had similar challenges to Mattel but less opportunity,” he says. After a stint in venture capital, Kreiz landed in Los Angeles as CEO of Maker Studios, a struggling producer of user-generated videos. Maker was nearly out of cash when Kreiz arrived in 2012. Four years later, he sold it to Disney for $500 million.
Another short Disney stay preceded Kreiz’s next gig. In 2016, media executive Edgar Bronfman Jr. and Russian billionaire Leonard Blavatnik recruited him to their investor group that was bidding for magazine maker Time Inc., then the owner of Fortune. The plan was for Kreiz to run the company. The two sides never reached a deal, and Time later sold to a rival publisher, Meredith, whose finances have suffered from digesting the Time titles. Bronfman says Kreiz made sure the group didn’t overpay. “What was clear from day one to both of us was that there was a price at which this made sense and a price at which it didn’t,” says Bronfman. “He never lost sight of that.”
With time on his hands, Kreiz joined the board of Mattel in the middle of Georgiadis’s tenure. In short order he became executive chairman and CEO. His first goal was to simplify what had become an overly complicated company. “Before I joined, there was a three-inch-thick strategy document,” says Kreiz, sitting in what he dryly calls his “ocean view” office, across the street from a runway at Los Angeles International Airport. “I brought it down to one page.” That page divided Mattel’s to-do list into three categories, ranked in order of urgency: cut costs, fix broken brands, and capture value from Mattel’s intellectual property.
The cost-cutting is well underway. (Kreiz isn’t saying exactly how many of the company’s 13 factories he intends to sell; Mattel has sold only one so far.) The last goal, what Kreiz calls “IP monetization,” is shorthand for Mattel becoming a media company. It’s a through line that maps Kreiz’s career. “All these companies were about managing talent,” he says of his previous jobs. “In a lot of these properties, there is a narrative even if there is not a script.” Getting those scripts written, literally, is Mattel’s most important bet on the future.
Mattel has been trying to make movies for years. An earlier Hot Wheels project, for example, had been kicked around Hollywood to no avail. In 2010, movie-business trades buzzed that director Wolfgang Petersen had teamed up with Mattel to make a movie based on Rock ’Em Sock ’Em Robot. It never happened. In 2014, Sony began developing a live-action version of Barbie, originally cast as a comedy. In 2016, the studio chose comic Amy Schumer for the role. She dropped out a year later.
The appeal of making movies is straightforward: It can drive toy sales and make even dormant brands relevant. Hasbro has cashed in on its Transformers line, for example, with a series of live-action films directed by Michael Bay. DreamWorks Animation, now owned by NBCUniversal, bought rights to a beloved European doll with almost no revenues attached to it and turned the Trollz into box-office successes and consistent toy moneymakers (again, for Hasbro). Toymakers take a small percentage of a movie’s revenue, the lion’s share going to the studio and distributors. But a buzzy movie moves merchandise.
Kreiz describes Mattel’s moviemaking potential as if he were talking about Disney. “Our brands are holistic, not violent,” he says. “They are wholesome.” To jump-start the business, he hired Robbie Brenner, a veteran producer who cut her teeth at Miramax and achieved indie success with the 2013 hit Dallas Buyers Club. Brenner considered hundreds of potential directions Mattel could go in. “I distilled it down to 40,” she says. She landed on some obvious choices—Barbie, Hot Wheels, and American Girl, all of which are now in early stages of development—and some less obvious, including Magic 8 Ball, a venerable “toy box” denizen buried so deeply in the company’s bowels that it didn’t merit a mention in Mattel’s annual report.
All told, Mattel has announced eight film projects with at least four different studios. Barbie and Hot Wheels, for example, are at Warner Bros. MGM plans to make an American Girl movie. A live-action adventure about Major Matt Mason, starring Tom Hanks, is being shepherded by Paramount. (Mason, a nearly dormant astronaut action figure, was created at Mattel in 1966; Hanks has been connected to the movie project since 2011.) The spreading of the wealth allows Mattel to move quickly, its executives say. “We don’t want to park at one studio,” says Brenner, referring to what Hollywood calls a slate deal—the kind of exclusive studio pairing that Hasbro has with Paramount. “We can progress concurrently on a number of projects at scale,” says Kreiz. With a slate deal, “it would have taken years to do eight projects.”
No brand is more important symbolically than Barbie. At 60 years of age, Barbie still represents a fifth of Mattel’s sales. She also has been a long-evolving mirror of global culture. Says Mattel’s Dickson, Barbie’s creative guardian: “Fifty percent of our doll business is ‘non-original body’ or non-Caucasian.” A surprise hit has been Barbie dolls in the image of K-pop band BTS. Like Barbie’s longtime companion, Ken, the members of BTS are boys. (Mattel also recently launched its first gender-neutral dolls, a new line called Creatable World.)
Earlier this year, Mattel announced the lead for its Barbie movie: Margot Robbie, an Oscar nominee whom W magazine noted “kind of does look like an actual live-action Barbie doll” (in female, Caucasian form). To write the script, Warner signed the prestigious team of Greta Gerwig and Noah Baumbach, each of whom has a major film being released for this year’s holidays—Little Women and Marriage Story, respectively. But the payoff for Barbie is anything but certain. The project lacks a director or a production schedule. Kreiz says the film strategy is tracking ahead of schedule and will begin paying off “not in the distant future.”
On Mattel’s October, not-bad-news-is-good-news earnings call, a Wall Street analyst who long had been bearish asked Kreiz to discuss his vision for the company’s next steps beyond its current plans. Kreiz sidestepped the question, keeping to his script as any good CEO, or actor, would.
Asked days later to take another stab at the vision question, Kreiz stays on message: “What we say is that we’re focused on executing the strategy. There’s tremendous value simply in running this company well.” It’s an adequate answer, especially if he can drive up Mattel’s margins closer to Hasbro’s. Kreiz bristles at the suggestion that he’s merely copying Hasbro, which tried buying Mattel several times before Kreiz joined the company. “Yes, they run an efficient toy company,” he says. “Yes, we’re making movies.” But he thinks Mattel’s untapped potential—all those under-loved brands—is different. “I believe our franchise catalog is unique. There’s nothing like it, next to Disney.”
When Kreiz talks about Mattel’s potential, Disney is a constant point of reference. Their strategies are the inverse of each other. While Mattel is about leveraging its brand “outside the toy aisles,” in Kreiz’s words, Disney is about exploiting its characters with multimedia stories that morph into high-value merchandise. But Kreiz, emphasizing that “journeys start in different places,” insists Mattel has powerful characters too, characters Disney doesn’t have. So would he sell the company to Disney, as he’s done twice before? The disciplined CEO answers in predictable fashion: “At this time, I’m focused on running Mattel the best I can,” he says. If he has his eye on a fairy-tale happy ending, in other words, he’s not saying.
Old Favorites: Mattel’s Aging Big Four
Mattel has stayed near the top of the toy industry despite not having had a big new hit in recent years. Among the uncertainties it now faces: how much more mileage it can get out of what it calls its “power brands.”
Barbie (born 1959)
The cultural mainstay accounts for 20% of overall sales. Barbie has changed with the culture, taking on different shapes and colors. A live-action film, starring Margot Robbie in the title role, could be the next big brand extension.
Hot Wheels (b. 1968)
Mattel makes 520 million a year; a few include ID chips that let them compete in virtual races online. North American sales grew 17% in the most recent quarter. A Hot Wheels plant in Malaysia is the only one of its 13 factories that Mattel has explicitly committed to keeping.
American Girl (b. 1986)
Dolls, clothing, books, jam-packed stores. American Girl grew to epic scale after Mattel acquired it in 1998. But knockoffs, particularly in apparel and accessories, chipped away at sales, and some critics say the retail experience has grown stale.
Fisher-Price (b. 1930)
The brand aimed at tiny tots has been a big headache for Mattel, owing to sales declines and costly recalls. In Mattel’s infant and preschool division, Thomas the Tank Engine (b. 1984), shown here, is now among the biggest stars.
EDITOR’S NOTE: The print version of this article misstated the status of Mattel’s cost-cutting program, which is well underway. It also said the company plans to sells 12 of its 13 factories; Mattel has not said how many factories it intends to sell. This version of the article has been updated for accuracy.
A version of this article appears in the November 2019 issue of Fortune with the headline “Making a Toy Story.”
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