The trouble with Bratz

Valley-based doll-maker MGA Entertainment has more on its hands than the nasty copyright infringement case with Mattel. The WSJ reports that Target and Wal-Mart have both reduced stocks and shelf space for Bratz (Target by about 50 percent). The reason, quite simply, is that sales have slipped. This year, analysts expect the Bratz line will generate $300 million, down from around $400 million in 2007 (MGA is privately held and doesn't disclose financials).

Some attribute the dolls' recent dip to the inevitable come-down that has hit even the most sought-after toys of years past, from Tickle-Me Elmo to the Cabbage Patch Kids. "Nothing stays hot forever," says Gerrick Johnson, a toy industry analyst at BMO Capital Markets. But there's another reason for Bratz's decline. MGA was distracted this year as it battled a lawsuit from Mattel Inc., which claimed MGA stole the idea for the dolls from the toy giant. In July, a federal jury sided with Mattel and later awarded the company as much as $100 million in damages. Mattel is now asking a federal judge to evaluate MGA's continued ownership of the brand. MGA has agreed to consider settlement talks with Mattel before the judge approves the award, though it hasn't ruled out an appeal.

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MGA Chief Executive Isaac Larian concedes that Bratz lost their edgy looks as his company fought the allegations by Mattel, maker of rival Barbie. The change struck him as he and other employees were reviewing the current fall line earlier this year. "We said, 'Oh my God, we lost focus on what our brand was,'" Mr. Larian said. The company had standardized some of the dolls' accessories and features, reducing the individuality that had long been their appeal. "They had become the same doll with different names," he said.

It's worth noting that El Segundo-based Mattel has been having its own problems with Barbie. Sales fell again in the second quarter, though the company overall beat analysts expectations, thanks to tie-ins with Hollywood hits like "The Dark Knight" and "Kung Fu Panda." Also helping out were international sales.