By Christina MacDonald
One never knows where the next good idea is going to come from. Isaac Larian was running a company that imported and distributed electronic gizmos six years ago when a buyer from Wal-Mart told him the retail chain was eager to find a fashion doll that could compete with Mattel's Barbie. Ever the entrepreneur, Larian immediately set to work, and the first Bratz doll hit store shelves in 2001.

In the ensuing years, Bratz has become a toy phenomenon, with MGA now "the largest independently owned toy company in the world," according to Larian. Sales, he says, topped $1 billion in 2004 at retail, including revenue from 30,000 Wal-Mart outlets. (Because the company is privately held, there is no public accounting.)

Larian's 10-inch knockouts with bee-stung lips, thigh-length hair and removable feet have continued to be a top seller among their core demographic: girls ages 7-11.

Along the way, the toy mogul has caught the attention of Hollywood.

"Isaac Larian is a visionary entrepreneur," says Jim Gianopulos, co-chairman of Fox Filmed Entertainment, which has entered into an agreement to make movies and TV shows with MGA. "He understands consumers, the retail infrastructure and creative properties, which is a great combination. We're delighted to be in business with them."

In addition, the product line has turned into a major licensing success story. MGA won best character brand license and overall license of the year honors last year from the International Licensing Industry Merchandisers Assn., which nominated the company again in those categories (and three more) for its Licensing International 2005 show, running June 21-23 at New York's Jacob K. Javits Convention Center.

With more than 350 licensees worldwide, MGA enjoys a healthy flow of third-party income. While the flagship doll line generates substantial revenue, Larian estimates that licensing accounts for about half of his company's revenue and possibly a greater share of its profits.

"You can't really compare (licensing revenue with product revenue) because with licensing we get royalties, and there is very little cost -- only that of doing the approvals and things like that," he notes, underscoring why licensing should be an important part of the long-term growth plan of any company with original content or an appropriate brand.

"Our licensing strategy has evolved. You need the right property to be able to do it, and, of course, we always wanted to -- we had big hopes, big dreams."

His dreams came true. "Today, it is huge for us," Larian concedes, noting that MGA's licensing revenue increased 30%-40% during the first four months of this year, compared with January-April 2004, largely because of increased sales of licensed goods (as opposed to more licensees). For the same period, he cites NPD figures that show sales of Bratz dolls up 17%.

"A lot of people initially thought Bratz was going to be a fad, here and gone, but we're doing better than ever. The brand is bigger than ever before," Larian says with no small satisfaction.

Adds Cindy Elfenbein, MGA's vp retail business development: "Kids have changed, and there's a whole new consumer out there. They've been waiting for a new line. No one took a chance on this more than MGA. Barbie hasn't changed over the years; she's still sleek and big-breasted. Kids want something they can relate to with a sense of style, fashion and character. Bratz have attitude."

The core product line is flourishing. MGA lead designer Paula Garcia and her team churn out roughly 12 Bratz lines a year -- from the Asian-inspired Tokyo a Go-Go to the Rock Angelz line, set to debut in August.

Now, the sassy little upstarts are on their way to becoming multimedia stars, segueing into direct-to-video DVDs, a TV series and a feature in the works through Fox, as well as CDs through Universal Music Enterprises and video games debuting in the fall via THQ Interactive. Those initiatives will dovetail with the Rock Angelz rollout and will be backed by the company's biggest marketing campaign to date, estimated at $50 million.

In September, a Bratz fashion magazine will hit U.S. newsstands. A U.K. version swept that country during its 11-month run, with circulation topping out at 100,000.

Led by a 15-member licensing team at MGA headquarters in Van Nuys, Calif., the Bratz brand is expanding at record pace. The company signed its first licensing apparel deal at Licensing International 2001, before the dolls had even hit the market.

Two-thirds of MGA's deals are international, and the company employs agents to seek out foreign licensees. Once a licensee signs on, MGA works closely with them to ensure that designs on the various products stay true to the specs of the brand. "Computers and digital files have made all of that a whole lot easier," MGA executive vp worldwide licensing Sid Kaufman says.

During the first submission stage, MGA looks at the overall product and gives licensees ideas via an approval form. Once approved, the product is categorized as hard goods (publishing, party goods, electronics, etc.) or soft goods (wearable items).

Next comes the strike-off stage, in which the printing quality is examined. Once approved, the soft goods go into preproduction, and the hard goods get final art. Then, during the final production stage, the licensing department closely examines 10-12 samples before final distribution.

"This is not a character where you take a piece of art and throw it on your garment because we're talking to a tween girl that's going through that self-expression period, and it's an identity," Kaufman says. "What we try to do is every time we come out with a new style guide, we meet in mass with our licensees and present them our rationale and our product boards. We always ask ourselves: How do I make this product appeal to this untapped, underdeveloped market? Because it's so particular."

MGA also puts its employees on the ground so that they can understand the sensibilities of foreign markets and design localized programs with main branding themes. The dolls might have different price points or names depending on the region.

When searching out domestic licensees, MGA's team is out on the floor -- asking buyers who they like to work with, looking at the quality and innovation of the products and evaluating whether a certain company will be able to satisfy the terms and conditions MGA demands.

"A big aspect is whether they understand fashion and (whether they're) going to push themselves and think outside of the box," MGA domestic licensing director Marcy George says. "We try to find the partners that interpret our brand best."

When asked about the company's future licensing plans, Kaufman says the trend is toward private labels at retail and less space for licensed goods. His goal is to sustain MGA's core program and supplement it with the right products.

"We try to provide leadership for the brand, and it's a precarious thing because any kink in the armor has potential vulnerabilities," Kaufman says. "We are a serious competitor, and because we are new, we have to be ahead of the curve -- and not just in performance."

Much of this commitment involves protecting the Bratz brand, including the dolls and licensed products, from infringement. MGA scours major trade shows for infringement violations, and it has agents in foreign territories on the lookout for copycats.

The company's in-house legal department handles not only its infringement cases but also its licensing deals.

While a crystal ball has yet to be added to the list of upcoming toys on MGA's slate, it's safe to predict that the Bratz brand will be around for a while. Does the brand have the potential to become a successful "retro" property? George is confident that the Bratz might never have to make a comeback because they might never leave the scene.

"Bratz is never generic, basic or doing the same theme season after season," she says. "The possibilities are endless with this hugely successful brand. We believe the Bratz brand will endure for decades, continuously, as long as we keep it fresh."

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