The Week Ahead: Mattel gambles on racy magazine cover

February 15, 2014 

Manufacturing a marketing controversy is a high-risk game for shareholders. The annual Sports Illustrated Swimsuit Edition from Time Inc. sees single copy sales jump 15 times over the average weekly SI. Total circulation of the yearly magazine, including print and digital editions, is 26 percent larger than the usual fare SI offers. Advertisers pay top dollar to appear in its pages. Since the first swimsuit edition appeared in 1964 the franchise has raised an estimated $1 billion for parent company Time Warner.

When the 2014 edition goes on sale Tuesday, another $1 billion franchise will be featured. Mattel's Barbie is tied into the annual media barrage of branding and bodies (featuring swimwear). In a tacit acknowledgement of the pending criticism, the effort is part of a campaign Mattel calls "unapologetic."

The partnership makes sense for Time Warner and its business model. It needs to collect eyeballs for advertisers, especially as it prepares to split off its publishing business, including SI into a separate company this spring. The publishing operations represent only about 10 percent of Time Warner's total revenues and the business has been shrinking.

What's in it for Mattel and its shareholders? The doll, all her friends, and accessories bring in more than $400 million per quarter for Mattel. Most of those customers don't buy SI and probably won't even be aware of Barbie's moonlighting with the swimsuit edition. Still, with Barbie's global sales falling 13 percent in the last quarter (including Christmas) and the stock collapsing to a 13-month low, Mattel will have more than a misguided marketing strategy for which to apologize.

Tom Hudson, financial journalis, hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter HudsonsView.

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