Bratz vs. Barbie, Round 2.0

This should be a big week for Bratz. MGA's toy line of doe-eyed dolls will star on the big screen and in cyberspace. If you have a young daughter, niece, or granddaughter who loves to play with the ethnic dolls, you probably know all about Friday's theatrical opening of Bratz.

Distributed by Lions Gate (NYSE: LGF  ) , the personification of the playthings is a gamble. Sure, it may be just the multiplex ticket to expand the characters and grow the brand. However, I can't be the only one who is often left scratching my head as to why a company would want to get in the way of the creative interpretation process of children.

Young girls who have taken to Bratz may have carved their own personalities into the dolls. Watching them as flesh-and-blood high school kids bumping up against the student body president may be not gel with their own custom-tailored role-playing creations.

Yes, Mattel (NYSE: MAT  ) has put out nine different direct-to-video films starring Barbie, but those flicks have been unassuming -- cough, cough, bland -- animated releases. Besides, Barbie sales have been sluggish in recent years. Mattel has scored four straight quarters of year-over-year Barbie product growth globally, but that is coming off of depressed levels. And perhaps even more troublesome to Mattel, domestic Barbie sales dipped by 5% this past quarter.

However, despite all of the attention in the Bratz community pointing to Friday's movie-house debut, I think the bigger event will ultimately be Wednesday's launch of Be-Bratz.com.

Social playthings become social networks
Instead of the promotional nature of Bratz.com, Be-Bratz will be an online community. Taking a page out of the Webkinz model, where consumers who pony up for a plush animal purchase can bring the critter to life online, buying a $30 doll will unlock the website. "Out of the box" is the Bratz movie tag line, but thinking inside the box -- the computer box -- is what the website is all about.

It's a gutsy call. Mattel launched the similar BarbieGirls.com two months ago, but decided to make it free. With little advertising, Mattel's graphical community has grown to roughly 3 million registered users. Even most virtual accessories -- something that many popular online social games charge for -- can be purchased by acquiring virtual currency for playing free casual mini-games.

Mattel isn't treating Barbie Girls as an ambassadorial beachhead, though. It began selling a $60 Barbie MP3 player this month -- in the shape and image of a doll -- that opens up exclusive areas and unlocks accessories to enhance the website experience.

One can argue that Mattel has to do it this way. Barbie is a brand that needs to work harder at winning style points. It needs to reestablish itself with young kids who may have flocked to Bratz as the edgier alternative to the plaything that their mothers -- and possibly even grandmothers -- grew up with.

Don't get me wrong here. Even with the $30 cover charge, Be-Bratz will be a hotbed of activity in a few weeks. This is the kind of battle that can bleed perfectly into the holidays with Be-Bratz dolls and Barbie MP3 players topping seasonal wish lists.

The catch here is that while Bratz and Barbie don't have a whole lot of competition in the toy space, they are jumping into a very crowded cyberspace.

Virtually a click away
Mattel and MGA aren't toiling away on virgin soil here. Graphical communities that cater to young kids have been around for years. If you've never heard of Viacom's (NYSE: VIA  ) Neopets, Club Penguin, or Disney's (NYSE: DIS  ) Toontown Online, ask a young kid. Sites like Habbo Hotel and Gaia Online are there for slightly older kids, before they graduate into Second Life. Ganz's Webkinz may have lit a fire under rival toymakers, but the natives aren't going to bow out without a fight.

The allure of creating an avatar and mingling in a virtual community is all too real. There are too many competitors, going after a finite number of kids. Barbie and Bratz hope the brands will give them an advantage, but if that's so, it will only be a matter of time before companies like DreamWorks Animation (NYSE: DWA  ) and Build-A-Bear Workshop (NYSE: BBW  ) jump in.

What's that? Build-A-Bearville exists? With an online population of more than 662,000 virtual residents? Just imagine what will happen if the community is marketed and expanded aggressively.

Different players are approaching the potential differently, but it won't be that hard to ape the leader if one perfects the craft. There is too much to gain here. The ability to monetize a sticky, brand-widening community? Who wouldn't want that?

Disney and DreamWorks Animation are recommendations for Motley Fool Stock Advisor subscribers. You don't need to purchase a $30 doll to get a free 30-day pass to the newsletter.

Longtime Fool contributor Rick Munarriz wonders who will have the hot toys for the 2007 holiday season. He does own shares in Disney and DreamWorks Animation. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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