With the rumors flying of these two being in merger talks, we thought it would be interesting to look back on the early history of both companies
In the toy industry, there are a lot of big names but few compare to Hasbro and Mattel, both in terms of brand recognition, depth of product, and ultimately market share. These are the #1 and #2 toy companies in the world and this past week there has been a lot of discussion (see Fortune, Reuters and Bloomberg as three examples) that they may be talking about a merger. As of the end of last week (per Bloomberg), Mattel was valued at roughly $11 billion and Hasbro at $9.5 billion with Hasbro expecting a significant bump with today’s February 8th full-year earnings report (thanks primarily to Star Wars sales, of course.) Chasing after these two is LEGO which is closing in on them each quarter by outperforming both companies as it claws up the ladder, brick by brick, toward those top spots.
As a result of this news, I thought it might be a good time to take a look at both Hasbro and Mattel in terms of their early history. Up front, it’s important to know that they have been direct competitors for many years (in some ways generations) and, according to sources like the Toy Industry Journal, there is clearly no love lost between these two. Even before the recent rumors, a lot of internet ink was dedicated to the fact that Hasbro brokered a new deal that, beginning this year, pulls away some of the Disney Princess lines from Mattel as the two battle for lucrative licenses. Now, there’s a lot that could stand in the way of a deal. Given obvious antitrust concerns, the possible influence of Disney (see Global Toy News), an emotional corporate cultural divide between longtime competitors, and an east coast (Hasbro in Pawtucket, Rhode Island) vs west coast (Mattel in El Segundo, California) base of operations, there are many considerations if the rumors are true. Most who already know the industry question if these talks could actually produce a merger. That, however, is a verdict only time will tell, and we’re much more interested in how these two got to where they are today. For that we look to their roots.
The early Hasbro Story
Hasbro, originally know as the Hassenfeld Brothers, began in 1923 (over 93 years ago) selling textile remnants, which quickly expanded into pencils and pencil cases. The three brothers (named Herman, Hillel, and Henry Hassenfeld) began this toy company as so many do; family owned. In time, the production of pencils was shifted in house to cut costs, and these savings lead to a revenue base. That new base made possible an expansion into other lines in the 40s. It was during that period that they first shifted direction toward toys, making doctor and nurse kits plus a modest line of modeling clay.
What was once a sideline venture began to be a focus for the company in 1952 when they found their first hit toy with Mr. Potato Head (which they actually acquired from the toy’s original creator George Lerner.) In 1964, after the company was approached to produce dolls for a military themed television show, the Hassenfeld Brothers declined and went on to make their own army themed figure with the now famous G.I. Joe. Hasbro (still Hassenfeld Brothers at the time) is credited with coining the term action figure as they sought to market the new toys to boys. They wanted to produce dolls for boys, but change the designation so they would be easier for boys to accept. Thus, the action figure was born and G.I. Joe accounted for two-third of Hassenfeld’s total sales between 1964 and 1965. This changed everything.
In 1968 the company shortened its name to Hasbro Industries and went public with a portion of its ownership for the first time. Over the years that followed, brands like Transformers and My Little Pony would have significant impact, along with key acquisitions like Tonka, which brought them Parker Brothers, and Wizards of the Coast which brought them Dungeons & Dragons (but that is a story for another time and a deeper article.) Suffice it to say that their modern rise has been built on solid products, primarily geared toward boys, and their recent success story with Star Wars have only bolstered their hold on the market.
The early Mattel Story
On the other hand, Mattel (then known as Mattel Creations) was founded in 1945 (just over 71 years ago.) The name Mattel comes from its founders, Harold “Matt” Matson and Elliot Handler, however Matson would leave the company very early in its history due to health issues and be replaced by Elliot’s wife Ruth. Mattel initially sold only picture frames, but slowly grew to include dollhouse furniture in their product line, marking their first step into the toy market.
Of course, they needed a first big hit and Mattel’s, oddly enough, was a ukulele called “Uke-A-Doodle.” They played upon the success by launching the first ever year-round sponsorship of the Mickey Mouse Club in 1955 and slowly evolved into a household name. This company began its rise to dominance with the Barbie doll, which was first introduced in 1959. While Barbie would later become the company’s best selling toy ever, in 1960 they benefited more from the success of Chatty Cathy, the first pull string speaking doll which spawned many imitations in the years that followed. Interestingly enough, this doll spoke via a small phonograph record inside the doll’s abdomen which was driven by a metal coil that was wound by pulling the string.
In 1960 the company went public for the first time (eight years before Hasbro.) By 1968, they began introducing the world to Hot Wheels, just as Hasbro began selling ownership in their company to continue growth. Elliot Handler, however, would not remain with the company past the mid-70s as “false and misleading financial reports” relating to, of all things, Mattel’s ownership and losses associated with the Ringling Bros. and Barnum & Bailey Circus would cause him to step away. Ruth Handler would later sell her stock in the company, marking the end of all ties to the original owners in 1980.
The coming of Masters of the Universe would bring another wave of success for Mattel starting in 1982, but acquisitions have also been a part of both company’s histories. For Mattel, they grew through purchasing the Ice Follies, Western Publishing, Fisher-Price, Tyco, and many others.
As with Hasbro, there is so much more to the Mattel story and their rise. Always loving a tease, I can promise that we are going to explore both companies (and the history of the toys they produced) in more detail in upcoming CompleteSet Stories articles.
Hasbro vs Mattel
In closing, what I think is most impressive as a takeaway is just how historic any deal between these two could be for the world of toys. More than once I’ve heard the very idea that these two might merge described as an “earthquake” in the toy industry, and when you look at their long history and the number of iconic products they’ve produced (and are still producing today), that word may even be an understatement.
Today, Mattel is clearly reeling a bit from the loss of Frozen and the Disney Princess lines, and this comes at the same time that their Barbie and Fischer Price lines have been in a slow, consistent financial decline. Hasbro conversely has seen growth in their Transformers, My Little Pony, and Nerf lines. Despite re-imagining the look of Barbie, Mattel has to be nervous as it watches the success of Hasbro coming off its monumental Star Wars sales in 2015 and increasingly close working relationship with Disney (not even counting their successful Marvel history together.) Taking the broader look, you begin to see why combining the portfolios of both companies to stave off the ever growing LEGO (which, according to Business Insider, is consistently more profitable than both companies combined) could be very attractive.
Could these two battling giants form one company and not light a bigger fire along the way? Would it be good or bad for the toy industry? Time will tell.