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Will Launch of Movie Unit Boost Mattel’s Sales?

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Mattel Films

On September 6, toymaker Mattel (MAT) announced that it is creating a movie division, Mattel Films, to develop content based on its extensive intellectual property (or IP). Mattel is one of the leading names in the toy manufacturing space. Some of its iconic brands include Barbie, Hot Wheels, Thomas & Friends, and Fisher-Price. The stock rose 3.7% in aftermarket trading.

The movie division will be helmed by the well-known movie producer, Robbie Brenner. Brenner’s work includes movies like Oscar-nominated Dallas Buyers Club, Mirror Mirror, Safe Haven, and Dear John. Previously, she worked with Miramax and Twentieth Century Fox studios as senior vice president. She was also the president of production at Relativity Media.

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Movie unit likely to boost top line

Mattel’s top line has been hard hit due to the liquidation of Toys “R” Us. Moreover, the weakness has negatively impacted the sales of its American Girl, Fisher-Price, Thomas & Friends, and Toy Box owned and partner brands.

Mattel is focusing on innovation and expansion of its digital channel to grow its sales. The company is stepping up its marketing efforts for its Fisher-Price, Barbie, American Girl, and Hot Wheels brands.

Mattel is well-positioned to gain from the creation of its movie studio given the strength in its IP. Rival Hasbro (HAS) had forayed into the movie business long ago. Hasbro Studios was formed in 2009 and is churning out TV shows and movies.

The company has also partnered with other movie studios to make full-length feature films based on its content. To put this into perspective, the first Transformers movie, released in 2007, netted over $700 million at the box office, almost five times its production budget. It was produced by Hasbro and distributed by Paramount and DreamWorks Pictures.

There are four more Transformers movies and two G.I. Joe movies in the pipeline under the Paramount deal. The company recently partnered with Paramount Pictures to produce and distribute more Hasbro content.

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