Walt Disney (DIS -0.04%) is the world's largest entertainment operator. It has 12 theme parks, several billion-dollar franchises, and an unmatched content library. However, it's been struggling recently with streaming profitability and disappointing results at the box office.
At the same time, Mattel (MAT -0.60%) is making its way back up from its own long-term struggles. It's primarily a toy company, and in the past didn't compete with Disney; in fact, it has partnerships with Disney to make licensed products based on Disney franchises and characters.
But it's been developing a media strategy that has culminated in the release of the Barbie movie this summer, the top-grossing hit of 2023, and continuing with a pipeline of new media. Most recently, Mattel made an announcement that it's heading in a completely different direction and opening a theme park.
This is moving into major Disney territory. Should Disney feel threatened?
Isn't Mattel a toy company?
Mattel makes many of your favorite childhood toys and games. Its three main brands -- what it calls its power brands -- are Barbie, Hot Wheels, and Fisher-Price. It also owns many other names, like the American Girl Doll, Uno, Pictionary, and Polly Pocket. It has deals with Disney, Warner Bros. Discovery, and other entertainment companies to make character and theme-based products.
Mattel was once the largest toy company in the world, but through various missteps, it's lost the top spot and has seen declining revenue. It was on an upswing after hiring current CEO Ynon Kreiz in 2018, but current macroeconomic problems are impeding its progress.
Part of Kreiz's vision is to reinvent the company as a media and entertainment company, which is a move into Disney's terrain. It has released content such as several animated series on Netflix based on its brands, and the Barbie movie, its first live-action feature film, has propelled its media segment into the spotlight.
But the building of a theme park is completely novel for Mattel, and it's another way that it's following the Disney playbook. The Disney model leverages its much-loved brands to create products and experiences that forge an emotional connection with customers. Creating a new world is how it makes its magic. Mattel is trying to make some of that magic as well.
It's partnering with VAI Resort, which is opening in 2024 in Arizona and aiming to be the premier U.S. resort, offering every kind of amenity. As part of that ideal, it's building the Mattel Adventure Park on its grounds. It's meant to appeal to families looking for an all-in-one getaway similar to a Disney resort. Some of the planned rides include two Hot Wheels roller coasters, a Masters of the Universe laser tag arena, and a life-size Barbie Beach House.
Epic Destinations, which is working on the park attractions, is calling them "innovative" and "pioneering," and President Mark Cornell is promising that "You've never seen a park quite like this one."
How does this impact Disney?
I don't think that anyone is worried about Mattel bumping Disney from its perch on top of the entertainment industry, but Disney is in a vulnerable place right now, while Mattel is roaring, and it's seizing the opportunity to leverage its film success and create new growth opportunities.
Disney's parks segment is actually its most reliable right now. Visitors have returned to Disney's theme parks, and with the exception of a disruptive pandemic, this segment has always been reliable for growth.
So long as Disney continues to churn out new content and create more franchises, it has a large moat that protects its business. It has full-time top creatives working on new material, while Mattel is only working with the brands it already has -- at least for now.
But no company is impervious to the effects of new competition, and Disney is feverishly working to stay on top of its game. Investors should consider that the long-term outlook for Disney remains strong, but it's dealing with many near-term headaches. You may want to stay on the sidelines until it's in a better position.
