The name Mattel, Inc is synonymous with some of the most successful toy brands in the world – and the company itself is the world’s largest toy firm. But it hasn’t been all plain sailing for the company that established itself with designer picture frames.
Mattel Creations was formed in 1945 with a partnership between Ruth and Elliott Handler, and Harold ‘Matt’ Matson. Ruth had been a secretary for Paramount Pictures in Los Angeles; her husband Elliott was an industrial engineer, and Matson was an old friend of Ruth’s. Picture frames were the first item to be sold by the fledgling firm, designed by Elliott and created using scrap plastic and wood. He used the leftover materials to make dollhouse furniture, but by the time this new line had been added to the stock list Matson had already been forced to sell his share of the company because of ill health.
It didn’t take too long for the Handlers to come up with a popular toy – the Uke-A-Doodle was introduced in 1947 and immediately became a hit. A miniature plastic ukelele, it was followed the next year by an all-plastic piano that was also very popular. But the company was still relatively new and struggling, and when the Handlers went to the banks in 1948 to seek a loan for development of a music box that had a unique mechanism, they were universally turned down. Instead, Ruth’s brother-in-law loaned the capital of $20,000 for a product that turned out to be hugely successful.
In 1955, the Handlers took an enormous punt on their business. They signed an agreement to sponsor a 15-minute segment of Walt Disney’s Mickey Mouse Club on the ABC TV network. The contract was for 52 weeks and cost $500,000 – the entire net worth of the firm at that time. Never before had a toy company spent money on year-round advertising, and the decision of the Handlers to do so began a marketing revolution in the toy industry. It also reaped huge financial rewards for Mattel, whose sales reached $9 million in 1957 and had swelled to $14 million by 1958. But the best was yet to come.
Ruth Handler had noticed that her daughter Barbara preferred to play with her adult-looking paper dolls, rather than the baby dolls. She thought a teenage fashion model doll might fit this niche, and in 1959 the first Barbie was introduced at that year’s New York Toy Fair. In her first year of manufacture, 351,000 Barbie dolls were sold at a price of $3 each. Her success led to the introduction in 1960 of the world’s first talking doll – Chatty Cathy – and Barbie’s boyfriend Ken in 1961 (named after the Handlers’ son). Mattel’s sales, which were $26 million in 1963, had reached more than $100 million just two years later. By the end of the decade, the company was the world’s number one toy maker. But disaster was just around the corner.
A fire in 1970 and a shipyard strike the following year led to a massive loss of $32 million in 1973. The chief financial officer was fired in 1974, and the Handlers were pressured by the banks to resign. In the end, Ruth and Elliott were each fined $57,000 and ordered to complete 500 hours of charitable work every year for 5 years. When they did eventually cash in their stock in 1980, it had a value of around $18.5 million.
It turned out to be a good time to sell. By 1983 the firm was on the edge of bankruptcy, after suffering a loss of $394 million due in part to bad investments in the world of video games. It was rescued by two venture capital firms, but in 1987 was hit with a further $113 million loss when the market for its toy line Masters of the Universe dried up. The radical cost-cutting exercises and concentration on the core brands of new chairman John W. Amerman saved the company and paved the way for more success for established lines such as Barbie and Hot Wheels; in 1991, it was estimated that 95 percent of all girls in the United States aged 3 to 11 owned several Barbie dolls. By 1992, the company’s sales had reached $1.85 billion.
In the 1990s Mattel went on a buying spree, purchasing Fisher-Price Inc., Tyco Toys, Pleasant Company and The Learning Co. But it was this last acquisition that caused the latest downfall – a net loss of $430.9 million was recorded in 2000. Incoming chairman Robert Eckert had his work cut out for him, but his conservative approach brought the firm back into the black and re-established it as the largest toy company in the world.
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