This was supposed to be the year that Barbie finally regained her tiara as the queen of the toy aisles.
After many false starts, Mattel (MAT, news, msgs) thought it had found a way to make the iconic fashion doll once more a must-have for girls of all ages -- and to boost the company's flagging revenues as well. It is spending millions of dollars to promote its new "Fashionista" Barbies, even hiring a choreographer-to-the-stars to create a dance called "The Barbie" for a video that had its premiere on the "Today Show" and was posted on YouTube.
But the latest Barbie was beaten to the stores by two new dolls that could threaten her resurgence, industry insiders say. One comes from perhaps the hottest toy makers in North America, Spin Master. The other was created by designers with a grudge against Mattel, which wrested away their company's rights to the hit Bratz dolls.
And so a firefight is breaking out in the doll business that would put G.I. Joe to shame.
Inside the high-security Mattel design center near its headquarters in El Segundo, Calif., guards check visitors' laptops and briefcases on entrance and exit. Humans who bear an uncanny resemblance to Barbie -- high heels, ponytails, sparkly jewelry -- gathered there late last month in the Pink Room. That's where they're devising battle plans for their new Barbie, who wears runway-inspired outfits and has 12 movable joints that are supposed to allow girls to pose her like a supermodel.
A few miles away, in the Los Angeles studio of Toronto company Spin Master, designers were struggling to figure out a way to lash their Liv dolls -- which trump Barbie by having 14 movable joints -- into retail display boxes more quickly. "If one of the dolls' heads is turned, or her hair is covering her face, the presentation is destroyed," explains a company spokesman.
Meanwhile, in the Van Nuys, Calif., headquarters of MGA Entertainment, former Bratz designers were devising accessories that girls can color for the company's new line of dolls, Moxie Girlz.
Already the sniping has begun. "The Fashionista Barbies don't even come with a hairbrush," says MGA's founder and chief executive, Issac Larian.
The battle for the hearts and minds of American girls comes at a crucial time for Mattel. The company's sales, one-fifth of which come from the $1.3 billion Barbie brand, have stagnated for several years, and in 2008 profits fell 37%, to $379.6 million. Last week, Mattel said third-quarter revenues slid 8% and net profit fell 3.5%. Sales of Barbies worldwide declined 8%.
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"Our core Barbie business was something we counted on heavily this year with the absence of entertainment-related properties," Robert Eckert, Mattel's chairman and chief executive, told analysts in a mid-July conference call.
But some analysts are dubious, contending in published reports that Mattel has had difficulty executing its strategies even without added competition.
Video: Mattel battles for doll domination
Mattel pulled out all the marketing stops earlier this year to celebrate Barbie's 50th anniversary, even turning a house in Malibu, Calif., into a life-size version of Barbie's Dream House. It also reoffered five Barbie dolls from past decades.
Such efforts helped rejuvenate sales in the first quarter, but Barbie lost momentum again, with sales sliding 15% worldwide in the second quarter.
"Barbie had the doll aisle to herself in the first half while riding a 50th-anniversary wave, yet could not produce overall sales growth," says Gerrick Johnson, a retail analyst at BMO Markets.
Continued: 'How do you know when a doll is pretty?'
