MGA Entertainment: Isaac Larian

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Onto the show. I went to a a guy named Ron Stover who was a buyer at Walmart. Very tough to sell products to, I can't be the next dog. He said no, one day he took me to Walmart. and showed me this 98 feet of Barbie.

Products. He says, I think you see these They own 90% market share. They sell And I make my bonuses every year.

Hm. I said, Ron, what if I came up with something? Better than Barbie and you didn't buy it, you're gonna feel left out. So you came back and told My design teeth. Give me something

That competes with Barbie. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. They built. Guy Roz and on the show today, how Isaac Larian took on Barbie with a new line of dolls called Bratz. built NGA Entertainment into one of the biggest toy companies in the world.

There's a reason why most of us love Rags to Riches stories. They speak to the idea of possibility that Even in the most miserable of circumstances, there might be a way out. It's why people like Oprah or Jay-Z or JK Rowling inspire us, because they all remember what it was like to worry about how they were gonna make the rent. We've told a few of these kinds of stories. You might remember our episode with Howard Schultz, who grew up in a housing project in Brooklyn, or media mogul Haim Saban, who sold pencils on the streets to help out his family. Well, today We bring you a story that begins in the slums of Tehran, the capital of Iran, in the nineteen fifties.

This is where Isaac Larion was born and grew up. And at age seventeen, with just a few hundred dollars in his pocket, he arrived to Los Angeles with almost no English. and only one contact. Isaac would go on to build the largest privately owned toy company in the United States. It's called MGA Entertainment, and the company is probably best known for two products.

LOL surprise, which is one of the hottest toys in the world. And bratz, the punky streetwise dolls that at one point knocked Barbie off her market-dominating pedestal. MGA turned Isaac Larian into a billionaire, which, on the face of it, isn't that interesting to me or to this show, but to go from zero to a billion? Well, that's a really hard thing to do. And so this story is, of course, about how he did it, and how a nearly decade long legal battle with Mattel. Almost killed him.

Yeah. But most importantly, Isaac Larian's journey is also about why ego is truly your biggest enemy when building a business. And why the word no is actually the beginning of a conversation. Rather than the end.

Today, at age seventy, Isaac still runs MGA Entertainment. But as a kid He was an outsider. Growing up as a minority, in his case Jewish, In Iran in the nineteen fifties.

We lived in actually in the readed Islam. No running water, no light. And uh we live there with my aunt And uh my two, three other cousins all in a two bedroom house. And you had a very big family in Iran. Huge, yes. Uh everybody's was working so hard. I was working since I was nine years old.

And my mom It started buying clothes out textile. And making she was a good uh Seamstress. Right. And made dresses for the neighbors. And she, my mother, supported us.

And the whole family, you know, my mom had me when she was fifteen years old. Wow. I I read that when you were a little boy, you actually witnessed your dad um Your dad actually getting beaten. Yeah. My father was a textile merchant.

And he was a good entrepreneur, but he loaned money left and right to These so called friends and family, they didn't give him back the money and he went bankrupt. Hm. So one of the creditors One day walked in to our house.

With another big guy, I remember. I opened the door, they burst in. And the guy demanded Money. And uh

course my father didn't have money to give him. So they started beating him with this big stick until he was bloodied. And on the floor I was crying. My mother was crying, my little sister was crying, and then they left. They said, Pay me Or we come back and they left. So it was like a it was like a mafia shake down. It was. And that was a defining moment in my life. Uh

I told myself One day I'm gonna have so much money. that nobody in my family is gonna suffer from poverty. You were eight years old. Yes.

I mean certain things as a kid when you put in your head It doesn't go away. Yeah. When we lived in the slums there were a lot of uneducated People that basically they were kind of fundamentalist.

And I remember being beaten up by the Bullies in the neighborhood. Because I was Jewish. I was getting beaten up so bad.

One day that when I came home, I think b I was about seven years old. From school. That I was all bloodied and all um and my mother told me that if you ever come home again bloodied I'm gonna also eat you. Go uh fight back. By nine, ten, eleven I had made Two dumbbells from two

And uh I remembered that and I was exercising to get stronger. And you know, one day w when the neighbors gathered around me with the biggest bully In the neighborhood his name was Mortiza. He started beating me.

And I started hitting him back so hard and Until he was on the ground. And since then he became my friend. Okay. So they didn't bully me after that.

Huh. So I guess in nineteen seventy one. when you were a teenager, like well, like seventeen years old, you decided you wanted to come to the United States and you ended up in Los Angeles'cause I guess you had like a a friend who had moved there and and I think you were studying your or planning to go to college and and study engineering. Right. But this I mean, this was obviously a a big step for you, right? I mean you were pretty young at the time.

Yeah, so to be honest with you, guy, I was scared shitless when I got here. When I came here my mom borrowed seven hundred and fifty three dollars from her brothers and also gave me a yellow blanket which I still have and actually is hung at MGA's headquarters. And frankly also coming out of Viran, this was my first time on a plane, actually. It was first time for me to get out of Tehran. Ever. So I mean I cried all the way from Tehran to America on the plane. And these students is felt sorry for me and they keep giving me food.

By the way Did you speak much English? No, no, no very How were you going to get through university? Yeah, when you're seventeen And you have grown up With hardship through the slums

You have a feeling of invincibility and you have a feeling that okay, I learned it. It's not difficult. Yeah, I was trying to teach myself English. I bought an English Persian dictionary and that's what I was reading every day. And getting LA time trying to read that and learn from it, trying to watch TV and learn from that. But I had no idea. But you have to get a job.

So what did you do? Yeah, so uh within a month I was down to twenty five quarters. in my pocket and I had no idea what the hell am I gonna do. So I started Walking.

Literally on La Brea Boulevard I walked for eleven miles one day Going to every gas station seven eleven. You name it asking for a job and everybody said no to me. Until I got to a Place called uh Spire's coffee shop.

And I asked them for a job and They said sorry they have nothing open. And so they're behind the Counter was

This guy with the white hat. He was a cook. You could see it when you were sitting in the coffee shop. And I left, I started walking back. Really crying. And he he came and put his hand on my shoulder and I says he told me far see it. Iran yes, are you Persian? And they said.

Yes. He says Are you hungry? I said yes. He said Come back.

He made me liver and onion which I still taste and I still go once in a while there to have it. It tasted great. It just happened that he was Persian. All your life. So uh

So he told me the only job that they have is graveyard shift uh washing dishes and it's from eleven to seven in the morning and pays dollar sixty five an hour. And I multiply down to sixty five times. The Pergin Rick. I said yes, I took the job right away. All right, so you get you get this job at this restaurant called Spire's. And over time, I guess I guess you worked at a a bunch of different restaurants while going to college

And we went to college and and and eventually graduated, got a civil engineering degree from Cal State, LA. Right. And I guess your plan was to what, to like go back to Iran and and go work there? Yes, it was. So when I graduated I went back to Iran to see What's going on? But when I went to Iran, it was fascinating for me. All of a sudden the streets looked a lot smaller than I remembered them.

And the revolution was Happening. And I said. You know what? This is not for me, I'm gonna go back.

So the revolution was underway, the Islamic Revolution, which would obviously transform Iran. You knew that this was not going to be the place for you to start a life. Right. No. I just said to myself, This is not for me, I'm not gonna

Do this. I'm gonna go back to America. Did you try to encourage your mom and dad and the rest of your family to come too? Yeah, I did. And my b dad was very stubborn. He says, No, this is where we belong and we're not coming. I brought my brother, younger brother, uh, to America. This is Far Hard. Yeah, Farhead. And eventually things got so bad that uh

I was pushing for my parents to come. And they basically were smuggled across Afghanistan. Across Pakistan, literally on horses and back of pickup trucks. Yeah.

And they applied for a Uh refugee visa. Hm. And they finally got that and came to America. Wow.

And I guess in the meantime, you had already come back to Los Angeles and and this time you came back with your brother Farhad and And I guess you started a mail or business in LA called uh Surprise Giftwagon. Wha what did you sell? Brath Gift Word. These are like little figurines, unicorns, etcetera.

Right. And then eventually you moved into selling uh consumer electronics. U what was the name of that company? If you recall them company ABC International, and the reason I chose ABC because at that time there were yellow pages. And I wanted my the company name to be right at the top. Right, exactly. Exactly. But basically thony Walkman had come to America and they were in big big demand and I had learned about

Importing. With surprise gift wagon. So I started looking for uh in Japan, in Singapore, in Hong Kong. Literally I would get their yellow pages from those CDs.

And go look for electronic And then I would buy from them. Because they were selling them cheaper in Japan than they were selling it in the USA. Yeah. And I would import those Ten, twelve pieces at a time and selling them.

Wow. So and would you go to Tokyo and to Hong Kong? Yes, I finally did go first time to Tokyo. And I thought, wow, I'm in heaven, all those electronic stores And literally I had at that time saved about I think eighteen thousand dollars and I would go to Store to store and do you have Sony Walkman tree? Yes. How many do you have?

four, I buy all four or Then I would take it to the hotel and come back again. And one day one story told me, you don't have to do that. You can just put it in a taxi, they'll take it to the hotel. And it will be there when you get there. I couldn't believe that was gonna happen. You do that in New York or LA, you probably won't see it. They'd keep it.

And did you just pack your suitcase with all this stuff and then come home? Yes. And then you'd take out ads and magazines for Sony Walkman and then you would just and it was like arbitrage. You could just buy them cheaper and sell them for double the price. Exactly. Well. You started this business with your brother. Farhad, who um I think it goes by Fred now. And tell me about uh how that business went. I mean you were basically you just Take out Made of Order and sell Walkman.

Yes, but again I wanted to Go bigger. So There was a company called Olympic Sales selling Sony Walkman's Apple computers, etc. So one day I put 18 of my uh phony walk my trees in the trunk and went to the store.

Went upstairs and asked for the owners. This short French uh Moroccan guy watch out He says I'm Francis Raval. Uh I said I have so new watchments.

And he's a Are they stolen? I said no. So how many do you have? I said eighteen. So I went to my car and brought him up, uh, in the lobby and showed it to him. He examined all of'em. He still didn't believe that they were original he says okay I'll buy him but I give you a post-date check

It's only valid two weeks from now. Because he wanted to know by then he would find out. If they're gonna fall apart. Yeah. Yeah, exactly. And boom, they both did the check cash. And I had made forty dollars a unit in profit. I said, Oh my god, this is Big.

How big was that check that he wrote you? I think a that chick was um literally eighteen times uh hundred and thirty dollars each. So he was a big check. So you went beyond Walkman, I'm assuming. Oh, yeah, yeah. I went to all kind of consumer electronics. I was called the king of gray market.

Yeah. Because that's what it's supposed to be parallel import. It's called gray market. How did you get a better deal than, you know, Circuit City or or some of these bigger companies? They were buying from The manufacturer representative in USA. First of all, there was a shortage. Like they would buy it from Sony of America.

There was a shortage. Secondly Japanese companies sold the product in the USA at a much higher price than they did in In Japan, Singapore, or Hong Kong. So I had two things to my advantage. I had a supply

And I had a better price and they started buying from I'm just curious, were you buy when you're buying them directly from Japan, do they have like Japanese characters on them? They or was it in English it wasn't in English, right? I remember seeing those Walkmen. I probably bought one of your Walkmen.'Cause people are like, Wait, I can't read this. What does this say? Yeah on the thing, right?'Cause it was in Japanese. Yeah, it was in Japanese and I went and there were people who were complaining. You were the guy. You got me my Japanese walkman. But you bought it cheaper. I did. I got a good deal. But people would complain. They would say, I can't read this. Yeah, so I started translating the instruction to English, making photocopies and putting it in the in the units. I mean How big did you guys get? I mean, how big did ABC Electronics get? What were you doing a year in revenue?

We were doing seventy million dollars in ye in a yeah. Wait, w seventy million at at your height, but that was I mean, that must have come A few years later. Yes, of course. Yeah, it came a few years later, but this was huge. Wow. Unbelievable. And this is the you seventy million dollars. So you were At this point I'm assuming you were you were selling to not just consumer electronics stores in LA, but all over the US.

Yes, I was. I was selling it all over the US. I sold it to Crazy Eddie in New York. I sold it to everybody. How does a guy from Iran named Isaac Larry and with no connections. How is he able to find the best deals? I mean, I know this is gonna sound, you know, a little bit of a cliche and forgive me, but you did come you did grow up as a k boy Going to the bazaars, negotiating for textiles

Right. I mean so I'm assuming you probably had that Skill. Absolutely. Find a deal. Yeah. And the funny thing is my son Jason, when he was growing up, He was I think 22, 23, and we went to Bloomingdale to buy suits.

And I picked two and he picked one And I told him go ask the guy. For a discount. He got red in in the face and he says Dad, this is not the bazaars of Tehran. They won't give you a discount. I said trust me, we are buying three, they will give us a discount.

And he says, No, you're embarrassing me. So I went to the salesman, I said we buy all these three I want 15% discount. The guy says no way, we cannot do that. This is blooming deal. I said okay, then we've been buy it. And my son was so pissed off. We walked over to the elevator. And the guess what the supervisor came and says

Sure. Okay, come back. We cannot give you 15%, but I can give you a 5% discount. Everything is negotiable. You know, I knew the salesman at Bloomingdale make fifteen percent uh or twenty percent commission. So okay, give me five percent of it. You still make ten percent is more than zero. Amazing. I need to go sho I need to go cloth shopping with you next time. Yeah, I'm coming. You need to be my personal shopper. Okay, so this business is getting really big and

And I guess i there was a something that happened and I remember this'cause I was a boy. That you basically got the license to distribute these Nintendo game watches. And I remember they were like these rectangular little games and they had a crystal LED screen and uh You could play like Pong or you know basic games with two buttons. Donkey Brother. I had a bunch of them. They were like little squares. They were you know about As thick as like ten credit cards stacked. Exactly. This blew up. This was a huge

Huge thing for you, right? Yeah, it was a huge thing because I was reading Wall Street Journal and Nintendo had become the king of consumer electronics and they done five billion dollar in sales. It was crazy. This was in like what, nineteen eighty six, eighty seven? Yes, exactly. About that time. So I went to uh I found out where their headquarter is within Kyoto. And I literally took the bullet train.

Went to their headquarters. And uh I have to talk to the export manager. And if you have dealt and you've been in Japan. You you don't just walk into some place and say, I want to see the expert manager. So The receptionist picked up the phone, said something in uh

In Japanese on the other side and said to me, sorry not available. I said, What's his name? And then she did the same thing and says, Sati cannot give you the name. So it's okay.

I'll wait. Until he's available. So I sat there and there's this big tall guy Walks, talks to her, looks at me. And leave.

and comes back from lunch and comes to where I'm sitting and he says, I am Mr Tuduri. What can I do for you? I said I want to buy a Nintendo game and watch For America. As a distributor and I'll pay cash and litter credit. And he says.

Sorry, not interested. And I said, Can I have your business card? Reluctantly he gave me his business card. And I came to America and I opened the letter of credit For a million dollars. Full wire.

Two Nintendo Attention Message to Dory. And then I called him three days later. I said, Did you get the letter of credit? And he says, Yes, but I told you we're not interested. I said, I just want to show you that I'm serious about buying and distributing Nintendo game and watch. So he says,

Okay, we can ship you in three months, but it's gonna be all in Japanese packaging. And I said, That's fine, I'll take it. And uh so I've made the name of the subsidiary of ABC International Micro Games of America. And that's how I felt it. So you were gonna basically these games came in, you were gonna take them out of the box and repackage them in an English language box. Yeah, I I did, yes. Wow. And this guy said no to you three times. Yes, he did. But that turned into a massive that went

Bonkerable, like tens of millions of dollars in sales. Yeah, the first year, you know, when you're in consumer electronics you're happy to make a 10%. Yeah. And toys

I m was making thirty-two percent profit. And the first year I felt$23 million of Nintendo Game and Watch, I thought I've died and gone to heaven. I I mean just the Audacity to sit there. And to have the guy look at you and say, I'm not interested. I mean

A lot Would feel humiliated. And walk away from that and say, Okay, but y it doesn't sound like you suffer from any feelings of humiliation. Like you don't care. No, I don't care. I mean ca for a lot of people that would have hurt their ego. No, I didn't care.

I tell my people The selling starts when the buyer says no. When we come back in just a moment, how Isaac decides to pivot once again from electronic games to dolls. and sets a goal that seems impossible to meet. Build a doll.

That's better than Barbie. Stay with us, I'm Guy Roz, and you're listening to how I built this. Hello guy. This is James Caton from Ivan Maria, Florida, and my favorite episode. is your interview with Kendra Scott.

That is my twelve year old daughter's favorite brand. And your episode allows me to have a conversation with her around grit and perseverance and what it takes to be successful, and that it isn't as easy as it seems at the end. There's a story behind every famous person. Every famous brand and every famous woman. If you want to share your favorite episode of how I built this, Record a short voice memo on your phone telling us your name, where you're from, what your favorite episode is, and why.

a lot like the voice memo you just heard. And email it to us at hibt at id.wondery.com and we'll share your favorites right here in the Ad Breaks in future episodes. And thanks so much. We love you guys. You're the best. And now Back to the show. Hey, welcome back to How I Built This. I'm Guy Raz.

So it's around 1987 and Isaac's toy company, MicroGames of America, has just had its first big success, importing and distributing the Nintendo Game<unk> Watch. Ай, со huge fat. I mean I had him as a kid, I'm sure people listening Remember game and watch.

But I guess about like with many things in children's toys That was a fab that kind of passed, right? It about two years in, sales started to fall. Right. Just because what? Because kids at certain point moved on? Yeah, they were they were looking for something new. That's what something I learned from that. Literally two years on. I was sitting in ten million dollars of inventory. And it wasn't moving. No, and the interest rates were nineteen percent at the time.

Wow. And I had a line of credit with Meet Three Manufacturers Bank, I didn't have money to pay them. So I liquidated that merchandise. For twenty five cents to a dollar.

Oof. So You saw that there was something in toys, but you also got burned by toys. When game and watch kind of that fad sort passed. It was also the Rise Nintendo had another product that they released called the Game Boy. And you did not have the license for that.

Uh w how come you didn't get the license to that? Nintendo watched the success That I had with Game and Watch. And I still to date say that Nintendo was inspired by the success of my game and watch to come up with Game Boy. And of course they didn't want to give me Game Boy. I asked for it. They wanted to control the distribution of it. Yeah.

So you did not get the Game Boy license and In the meantime, I guess the consumer electronics business was keeping you afloat, right? Yes, but I also decided to go to licensed Handheld games. Handheld games like Like Nintendo, but for different

franchises like like Star Wars and and Batman and things like that. Exactly. So I got the license for Star Wars. My son Jason at the time was uh fascinated with power ranges. So I went to Heim Saban and got the license for How you negotiate with that guy, I don't two master negotiators sitting across from each other at the table I mean I don't even know how that conversation begins. Yeah, yeah, it was it was fascinating, I gotta tell you, and Haim I don't know if he remembers this or not, so power engines are so strong and we were selling so much And uh I called him one day, I said

Can I come and see you? His office was in Bairbank. I have a big royalty check for you. So He said, Yeah, sure. I went there, he made me Angel hair pasta. It was delicious. I gave him a check for$720,000. And guess what? Week after He sent the auditors to come and audit us because because he thought and I still talk to him and laugh about it because he thought I was cheating him.

It could have been more. But in the end you got you you were cleared. Oh yeah. Exactly. You never let him hear the end of it. If I I'm you're listening, Isaac is not gonna let you hear the end of that. Yeah. But you know, fair enough. Fair enough. Listen, you gotta be in their choice, right? Okay. Right. All right, so you're you're doing some licensing and I think a lot of what you were doing was electronics games. Right. But I think around ninety six, um this guy named Joe Trucius, I think is his name, he came to you

With the doll that he had created and he had pitched to Battel, but they didn't want it, and it was a basically a doll that bounced and when you bounce it it would sing something like that? Right. Bouncey, bouncy, baby me, I still remember that song. And uh He says I want you to make this doll. It's gonna be big. I said, Come on, Joe, you have gone to Mattel, you've gone to Taiko, you have gone to

Toybees they've gone to everybody. Everybody said no. Why would why would you come to me? I don't know how to make dolls. And he said they're stupid, they don't understand it, but you're an entrepreneur. Uh you understand that this is a good toy. And so I said, Okay. Uh let me try it. So I took the sample to Hong Kong, sat with

Two factories who make dolls for metal. Yeah. And I said if you make these for five dollars I'll buy two hundred thousand pieces. But did you just going back for a moment. This guy was rejected by every major toy company. Did dolls. You did not do dolls. You did electronic games.

How come you thought All right, let me do this. I mean you knew nothing about this business. I like the toy, you know, and I have the personality when somebody says to me, No, you cannot do it, I'll take that as a challenge and I made the sample, I went uh and sold it to Toys R Us. So to target.

So the to Kmart. They all liked it. You pitched it to them and you showed it to them and and they said, All right, we'll take it. Right, exactly. And at that time you had to make TV commercials and put it on Nickelodeon and Fox Kids to sell the product. And uh you needed to have at least four major retailers in order to be uh able to afford to go on T V. But then I went to uh A guy named Ron Stover who was the buyer at Walmart.

And he says, I won't buy it. I said, Come on, Ron, why? He told me, Isaac, you are micro games of America. Nobody will buy A doll from a company called Micro Games of America. I said Ron?

I'm gonna change the company named right now. I'm gonna call it an MGA. Yeah. Okay. And he says you're too fast for me, okay. All right, I'll buy it. And that just took off. Huge. Wow. And at the time, in order to get into those stores, it was like a chicken and egg thing. You had to have T V ads on Nickelodeon, which probably the just the marketing of that thing was what millions and millions of dollars, right? Right. So they would demand that you have an actual TV commercial when you want to pitch it. Ready. You had to have a commercial ready when you pitch it. So you had like a VHS tape that you put in and you had like a big T V and A V system and a boardroom and like this is the commercial. Exactly. Wow. So you had to you had to spend all that money just for the pitch.

I had to spend hundred and twenty-five thousand dollars to make that TV commercial. Well But by then, I mean by that point, you were doing well, but MGA was still a I guess a relatively would you call it a small business, or at that point would you call it. Tell me about what you took away from that experience with that singing bouncing baby doll. W was your mind kind of blown d or or was there a moment where you thought, uh oh, this could be like the Nintendo Game and Watch, you know, we might be stuck with ten million dollars worth of inventory that nobody wants in a year. Yeah, so I was actually I learned from my mistake, from my failure with Nintendo Game and Watch, and this time I did not buy inventory like crazy. I would sell to retailers.

and what you call FOB is free on board, so they had to open a letter of credit and buy it. So they own the risk, not me. And from one doll we became next year we had Bad Time Bouncy Baby, we had Gide Up Baby, and we became one of the biggest Doll makers. So essentially what you're saying is unlike the Nintendo Game Watch, which required you to buy the inventory, hold it, and then sell it. You sold

The dolls already before they were manufactured. Yes, most of it. Okay. So you've got the doll, but you're also doing a lot of licensing, as you mentioned, right? Because you've got the Power Rangers and I know you did licensing with Pac Man and

Space invaders. And so I wonder So when did you start to say to yourself, Maybe I need to focus more on on building IP? Um our own property. Frankly one of the things that was a turnaround for me. Was

When I got the license for Star Wars, nobody wanted Star Wars. And the license for Star Wars was to make a handheld game? Right, handed games and walkie talkie. Crazy. This is in the late nineties. Nobody wanted the Star Wars license. It's one of the most valuable properties on earth today. It's crazy. Yeah. So I got the license, I got it pretty cheap, and I got it exclusively. Uh then Lucas said he's gonna make a new movie.

And all of a sudden the demand for uh For Star Wars. Went up. But Then uh I still have the exclusive license.

And it's two years left of the contract. And when I went back to Lucas to renegotiate The contract, they said no. And they had given it to Tiger Electronics.

And that really Piss me off, to be honest with you, because I had worked all these years When nobody wanted a Star Wars. Mm. And we ended up in litigation with the Lucas film, which I won.

But that really put a bad taste in my mouth and I said The hell with it. I don't wanna work for These entertainment companies. I want to make my own IP. Yeah. Meanwhile, I I wanna I I wanna talk a little bit about uh something. That was happening in the background. This was your relationship with your younger brother, Farhat Fred.

who is also your business partner because From what I've read and understand there w there was tension between the two of you. You wanted the company to grow faster, he didn't, he wanted it to grow s more slowly. And you know, Isaac everybody's got family and and family is sensitive and so we But But I guess it got to a point where the tension was it just It wasn't working, and you offered to buy him out around two thousand.

And you guys valued MGA, your company, at twenty million dollars. Basically he had he had about 45% of the company, you gave him about nine million dollars. Right. But just putting aside the the financial transaction, from a family perspective. What did that do to your relationship with your brother?

You know, we had uh Mm. Frankly. I love

My whole family, I love my brother. And It bothered me that the business became Like business situation like this happened. And uh I had offered him because we were fighting every day, I had offered him either he buys me or I buy him.

And I did buy him. And you know, and I asked him to keep Some of his shares in the company. And he said no, thank you, good luck. Uh I'm gonna go on my own.

But uh unfortunately He sued me. Yeah. He sued you a few years later because because of the success of Bratz, which he felt he felt that you had known about it when you bought him out and that he would have made more money and and like anything, it's complicated. But of course money always Can always uh tear apart.

Friends and family. Right, absolutely. So to me that was really like a Stop. In my heart. It was In our culture.

It's unthinkable. To sue your own relative. Yeah, exactly. You won the case the court found in your favor. Um But I imagine was very tense, did it? What did it do for the f the extended family, I mean Yeah, it created a lot of rift and issues within the whole extended family. I mean Fred being the younger one, my mother

started saying that oh no give him money. You made money, give him some money. Give him the money. And My dad, may he rest in peace, told me. I know you didn't do anything wrong.

It is not Your fault, he made a mistake, but please forgive him. And Later on. We reconciled, but

I told him he's like a When you have an expensive Piece of porcelain. Uh It falls and it breaks. You can get

Crazy glue. I put it together. But still you can feel the crack. Yeah. And you're not the first or the last brothers.

And it's hard when you're somewhat estranged from family. Um all right, mean time, so you you buy him out and and Sometime around I guess late two thousand You're approached by this guy named Carter Bryant.

who was a I guess at the time he was a a freelance designer. And he comes to you with with some sketches for a new kind of doll. Yeah, so well ca uh but you're gonna go back a little bit. This guy Ron Stower who was the buyer I told you about Walmart. Yep. Why tough to sell products to. I can be the next doll. He said no. One day he took me to Walmart. Right across the street from Walmart headquarters.

And showed me this ninety eight feet of Barbie. Products. All in coffin boxes. He says I think you see these They do everything for me. They own ninety percent market share.

They come and set up the planogram, they sell, and I make my bonuses every year. Why would I take a risk and take a portion of that? I give it to you. Mm. I said Ron, what if I came up with something? that was better than Barbie and you didn't buy it, you're gonna feel it after that.

He said if and when you do that I will buy it. So I said okay. Remember this. I came back and told My design tip. Give me something that competes with Barbie.

And everything they showed me was a Barbie knockoff. Yeah. So one day and I used to take my kids to work and my daughter Jasmine I think at the time was ten or eleven. Uh This guy comes in, his name is Carter Bryant. And he says, I have

The next doll concept. He showed me these drawings. And they look like aliens. They were these like plump liped dolls. Yeah, probably big face. Big heads, yeah. Yeah, exactly. So I said, I'm not sure if this is gonna work.

And I asked my daughter and she says, Dad, they're pretty cool actually. So I asked this guy, okay, where did you how did you come up with this? And he says he's he works at Mattel. I said okay, but where did you make this? If this belongs to Matella, I don't want it. And he said, No, I did this in Missouri where

I was not working for anybody. That's okay. You quit tomorrow, you come here and work on this, you're gonna give it a chance. You say I don't wanna be an employee. So okay, what do you want? He said I want to get a royalty. I said okay fine, we give you three percent royalty on the dolls, but you must quit Mattel and come here right away. Alright, so wait, just just to pause for a minute,'cause I think this has been ruled on in court.

You're saying that Carter Bryan came up with this idea for Bratz on his own during a break, a period of time when he wasn't working for Mattel. Right. But then later when he approached you at MGA He was back to working for Mattel. Again. Right. And did he ever pitch brats to Mattel? No, because he I said to him, Why didn't you show it to Mattel? He said Mattel will never do A doll that competes with Barbie, Barbie was on the pet stool.

So the biggest mistake he made the guy was He decided to be a nice guy and give Mattel two weeks notice. To finish some of the things that he was working on. Because that two week period essentially later on would be the basis for a case that Mattel would file against you. Okay. Exactly. We'll get there. But he brings you this d so on the strength of your daughter saying, Hey, these are cool, because you thought they looked weird. Right. But on the strength of your daughter you said, Okay Let's see if we can maybe do something here. By the way, were they call did he call them brats, Carter, or did he have a name for them or no? Yeah, he called them brats. Bratz. Bratz with a Z. Yeah.

And these dolls were gonna be the anti Barbie in a sense because they were gonna have big heads and and different sort of street fashion and they l actually looked more ethnically different. Yes. They didn't look like a northern European white I mean there were there were other there were non white Barbie's but basically the archetypal Barbie was So we decided to make what we call Brad's pack. And I insisted we make all four four dolls. And sell all four together. In one package. Yeah. No, the retailers had to buy a pack of four. But as an individual, as an individual you could buy one. You could buy Sarsha, you could buy Jade, you could buy Yasmin. And what were they? Yasmin was she was spacing your daughter, so she was more sort of Persian looking. Yeah, but you know this what I didn't want to do is bring a stereotype. So like Sasha was supposed to be

Kind of African American. But d not African American or Jasmine. was supposed to have olive skin because she has olive skin, but not Persian. I mean, I remember I went to A whole bunch of kids. About Jasmine and they said oh she's Brazilian. She's Brazilian.

So basically we did that on purpose to make sure that it appeals across the world. And how long did so he brings this to you in two thousand. Yes. How long did it take to get a physical prototype of a doll that you could show to Walmart? Yeah. So I said We need to have Samples with packaging ready for Hong Kong toy show who it was on January second.

Yeah. And they said there is no way you're crazy. Yeah. It's not gonna work. I had a head of sales and marketing. Who worked for me, who used to work at Matal before. And he told me anybody who has taken a Barbie

Has gone out of business and gone bankrupt. Hasbro tried. Don't do that. You're gonna go out of business. I said, No, we're gonna do this. He quit. Because he says he doesn't want a failure on his resume.

Well. So I take these four samples to Hong Kong. And this is a trade show at Hong Kong. Right, yes. Okay. And this is an important trade show. Very important trade show. Okay. So we show this to Target, they like it. The buyer says yeah, it's different, we'll buy it. We showed these to Toys or Us.

They said yes, we would buy it. Banda in Spain, they liked it and they said yeah we will buy it. Comes round store. Again he says he won't buy it. The Walmart buyer. Walmart buyer. Okay.

I said Why? And he says They don't look attractive. So I was so pissed off at the time, I went all the way up to the CEO of Walmart. So he told them, okay, run by it.

So he says, Okay, I will buy it, but I only want Chloe. Only blonde dolls fell. And I said Ron You know, my daughter was born in America, but she has darker skin. She doesn't want a blonde doll. She wants a doll that

More looks like her. If you want to buy this, you have to buy all four, or I won't sell it to you. And he ended up buying it, but one pack. Only one, can you imagine? You had to look for it in the sea of Barbie. It was just one sort of like One part of the shelf. A tiny part of the shelf. Yeah, just one box at the bottom left corner. The worst area of the shelf.

So that's what happened. And we launch the doll. First, believe it or not, in the Spain. Hm. They were first in the market.

And the product sold out instantly. Infinity. Toys are us USA. Deborah Trell was the buyer. She gave us an order for six million dollars on FOB. Yeah.

And we started advertising. On Nickelodeon and the the usual channels. And Fox Kids. Yep. And the doll didn't sell. Well. The doll didn't sell in the US. At that time, no, it didn't sell well. But it was selling in Spain. Yeah, it was selling in Spain, but it wasn't selling well here.

And the reason was We were not putting enough advertising behind it. But you were advertising on Nickelodeon and Fox Kids. Yeah, but not enough GRP Two You know, instead of uh spending um two three million dollar, we were spending a million. And we were not getting enough eyeballs on it.

'Cause there wasn't awareness of the dolls. They might have been on the shelves at Target and at Toys R Us and Yes, exactly. But kids were just passing'em by. They didn't know what they were. Yeah, exactly. Okay. So Comes October of two thousand one. Cause arcers. Five and a half or six million dollars worth of brats.

Or there's. Well. I thought now for sure we're gonna go Uh the business So I went

Without my wife's approval. Got a second mortgage in our ha on our house. And put another one and a half million dollar. T V advertising and distalled.

And sales Went Through the roof. What was the ad that you did? I wanted to have a live action animation combined.

Uh With the great music. Because that was gonna cut through the clutter on Nickelodeon. It will be different. And now we pumped that T V commercial. And it was so catchy. The sales went through the roof.

And Toys and Us came back to us. I think two days before Thanksgiving. So we want to buy that. Order that we want to buy it back, that order that be cancelled. And I said, Those goods I don't have anymore. But I have goods in LA. And they cost twenty five percent more. And they bought it. They bought it and I paid off the money. That is unbelievable. So so basically the dolls were not selling

Right. Toys R Us had canceled their order. Right. Many people would have just kind of said, Okay, this is not gonna work and let's figure out how to reconstitute the business, but you had probably invested. How much had you invested in Bratz at that point? Oh my god, I had put everything we had behind it. Like how much, do you think? Ten, twenty, thirty million? More than fifteen million dollars. More than fifteen million dollars. So if that didn't work, I would not be in business right now talking to you. I would have gone bankrupt. You bet the farm on the same. I bit the farm and my house on it. When we come back in just a moment, how Bratz and Barbie and their parent companies wind up in court in a bitter dispute that lasts for years.

Stay with us, I'm Guy Raz, and you're listening to how I built this. Welcome back to how I built this. I'm Guy Raz. So it's 2003 and Bratstalls are a huge hit. MGA Entertainment sells a billion dollars worth, and that cuts deeply into Barbie's dominance of the doll market. So the maker of Barbie, Mattel? Starts to investigate.

They started to find out about the origins of this product because They had a feeling that maybe it was stolen from them. The IP was stolen from them. They have basically used litigation. as a bizas tour to put Companies are the business. And this is, by the way, this is a playbook that many big companies use um to try and quash.

Up starts, but your trajectory was so fast it must have overwhelmed Mattel. I mean, you got to a billion within a year and a half, and then by the end of two thousand five, two two and a half billion dollars of brats had been sold to you Really, it was like And what was the appeal of these dolls? Why do you think that those dolls just landed with girls? They struck a cord with the girls because they were first of all didn't look blonde. They had what they call passion for fashion. Their fashions were new. Baggy jeans, baggy cargo pants, sort of

the crop tops and things like that. Right. I mean, I guess'cause Barbie was, you know, sort of the let's just say the country club. Dull and Bratz was like I maybe was perceived to be more more rock and roll, maybe. Exactly. So When they found out it's not a fad, they tried to knock it off. They they basically tried to make a Bratz knockoff.

Yes. And they called it Mycene Barbie. Mycene Barbie. Yes. Yes. It didn't work. Then they came up With a line called flavors. Flee was was like urban looking doll with graffiti packaging, et cetera. And I did an interview with uh the Wall Street Journal, you can pull it up. And they told me what do you think about

flavors and I told Wall Street General They look like gangster Barbie. The only thing that's missing is is the cocaine while she wrote that in the article. Why did you say that? Why did you did you not have somebody sitting next to you saying Isaac, shut up. Keep your mouth shut. No, I didn't uh you say that, and I'm assuming that pisses Mattel off.

Well, I did more than that beside the cooking, but Bob Eckert, who was the CEO of Mattel, came from craft foods. And I also sell making and selling toys. And selling cheese are two different things. And apparently Bob Eckert said Sue that son of a bitch.

I'm not surprised. You pissed them off. I didn't know. Why did you poke that bear? I shouldn't have. So they sued you for what? They didn't sue me first, so they sued Carter Bryant first. They sued Carter Bryant, your designer, basically saying, Hey That's our intellectual property.

And then they leaked that lawsuit to Wall Street Journal. And I am Walking in to this restaurant katana once at the Japanese restaurant. My cell phone rings in the Wall Street Journal. Hi, Isaac.

I want to talk to you about this lawsuit that Mattel just filed. It's a what lawsuit? So these loss they filed against Carter Bryan saying that

He walked. at Mattel for two weeks while he was working for you. I'm right. And I called Carter Bryant right there. I said, I was just told about this with Wall Street Jr. Did you work at Mattel two weeks while at the same time working a Bradstall? He said yes.

I got so angry, I said, why the hell did you do that? Because now give him a cause to bring this lawsuit. Anyways, that's how The lawsuit started. And we can't food Matal.

For uh Copyright infringement with my sind doll. I see. Okay. And we counter suit them for Theft of trade secret Because I thought there's a mole in my company to be honest with you. I thought Matala had a mole.

In my company. Okay. Uh here's what I understand. By two thousand six, Bratz had about forty percent of the worldwide toy market in dolls, the number two doll in the US market. Right. Now you begin what will be a protracted battle there been articles, books, there been documentaries about this.

This war between Mattel and MGA. I've read I've read some of these case studies. And I've walked away from this just thinking, oh my God, all the money that lawyers made from this. Oh my God. Queen Emmanuel, the law firm that the present Mattel made four hundred and fifty million dollars. Unbelievable, right? Okay. So this now you begin what would be a protracted legal battle, but I think a ra certain point A court basically said you had to stop selling the Bratz dolls. Two thousand eight. Two thousand eight. Okay. They said you cannot sell brats dolls while this litigation is happening. So what did that mean I mean, all I mean this is a billion dollar Yeah, so Dave Dave I Mattel asked for an injunction.

Worldwide injunction. You gotta pull All the brats, toys and products. You had to stop selling brats. So the injunction came literally On week before Thanksgiving. Which is like the time you've got to start selling for Christmas. Right.

So we went to an appellate lawyer. And the appellate lawyer says, We gotta file for an emergency appeal. So we filed our appeal and Literally guy the day before I had to sign the paperwork.

Was the hearing and the ninth circuit. Can I just mention one thing part of the ruling by the previous court was also that you had to pay Mattel a hundred million dollars in damages. Yeah, that's exactly. And that Mattel would have the rights to the doll. Yeah, they belong everything belonged to the Totally a dragoon. I mean you guys got absolutely hammered in that. Exact everybody thought we're gonna go bankrupt. I thought we were gonna go bankrupt. To be honest with you, I became for the first time in my life suicidal. Wait, wait, stop.

That's a serious thing that you just said. I mean You felt that you were finished. Yes. No if you were gonna

Survive. I really But you're but Isaac, you're you're a fighter. You're the guy that sat Nintendo and no and you felt like this really you were gonna be defeated. Yeah, it was I mean, every ruling was coming against us.

Did you, Isaac Because I I've talked about this on the show before and I certainly times in my life I've I've been depressed and have had depression and and uh I've learned to manage it over over the course of my life. You don't strike me, and maybe this isn't fair to say, as somebody Who dealt with that, but did you or were you are you prone to getting depressed? I am yes, I have been diagnosed with depression because the way I grew up. I mean I didn't have a childhood I worked since I was eight or nine years old. So

And I went through a lot of hardship and yes I do have depression and I've tried to manage this with a lot of things I meditate I still go to therapy all the time not ashamed about that. Coming from a macho culture to acknowledge that. No, for me it wasn't. I mean people who know me they say, Oh my God, Isaac, at the drop of anything he starts crying. So I'm not afraid of being in touch with my own Internal emotions. But that time with that injunction, I mean they took me

'Cause you thought you were having a heart attack? Yeah. How did you ma I mean this is a long period of time and a long period of time under stress. It was like two years while you were fighting this. Ten years. Well, ten years, but the most the injunction over the court order and Yeah, that was the hardest part. How did you manage through that?

Yeah. Yeah. Personally for me, because I don't like to quit, I hate quitting. I did not want my children to see that oh my god our father is defeated. And

Ain't the Persian closely knit? environment. I don't I don't want people to see that I'm a failure. And There were days that I was so down, but then I would get energized and I said, I'm not doing anything wrong. So I would go back and fight harder.

Mm. So let me take you back to the timeline for a moment, Isaac. Back to I think two thousand nine. when you're finally gonna have your appeal hearing on your lawsuit with Mattel. What happened there? So

You know, when we went to that appeal hearing literally it was The day after was supposed to be the recall. And During the break I told uh Josh Rosencrantz, who was a parent lawyer, I said, Josh Go ask the judges.

For A stay. A stay that would enable you to sell the dolls again. It's the day in junction, yes. By four PM I was in the car driving to Pasadena. To my office. And Josh called me and says, Isaac, you don't believe it.

Court of appeal just issued. State injunction. And It was Oh my god.

And boy, I again As usual, I burst into crying, I screamed, I called my wife, got my whole company people together. And I told them this, we opened the bottle of champagne and I said, Now let's bring Bratz back and kick Mattel's ass. That was not the end of of it'cause you would go back to court and it's too long and complicated to get into all the details, but eventually You won. You were Mattel was originally ordered to pay a over three hundred million dollars in damages and then it was uh it was it was a long time of fighting against each other.

hundreds of millions of dollars in legal fees, hundreds of millions of dollars in damages and in judgments. But I have to assume that you walked away from all those lawsuits. Down, like in the red. You didn't make any money from it. You actually lost a lot of money, even though there were judgments in your favor. In the end you actually lost a lot of money. Guy for six months I sat in court. I would not come to my office. I hired a guy named John Barber to run my company while I'm in court. You know, I one of the things I remember

vividly when the jury verdict came, and of course all the press was there in the courthouse. And my son Cameron, who at the time was nineteen years old, The Elliott Times reporter started asking him How does it make you feel? Now that your father has won.

This long badger. He said to the reporter Yes, my father won this case. But Mattel took away. our father from us for the past ten years.

Well. I still have pain. About the lawsuit. I still do. You can tell.

I mean you can hear it. Okay. Right there. But I mean I It goes back to my childhood.

And coming home bloody than my mother thing. That if you ever come back bloodied I'm gonna hit you, go back and fight. Don't be bullied. I don't like to be bullied and I think in general and I tell my kids

If you're right. and you believe in something that you're right. You fight to the end. Yeah. And I will not change that. You know, it's interesting because

Uh, Mattel had a obviously a resurgence last year with Barbie and the Barbie movie, and the Barbie film was so successful and I imagine it's had an impact on their sales. Um And clearly They also have um not forgotten because I'm sure you saw are aware of it, but there is a scene in the Barbie movie When Barbie goes to high school and the the high school girls are kind of like berating her with this brutal honesty, and they are named after the original Bratstalls. The girl the mean girls are Yasmin, Sasha, Chloe, and Jade. Exactly. And so they're taking a dig at you. Yeah. Yeah, they were. They were. It was funny. You know what?

It's a good thing they did that, because Bratz is under resurgence and growing again. So on my LinkedIn I thank them. Yeah. Thank them for this. Alright, so you've now now Bratz is back, but you know Again, like, you know, these things could be cyclical. And so I have to imagine because I know that you in the meantime were trying to expand. We didn't we didn't really get into this, but you actually bought

Another company. Yeah, Pixel Zoo in Australia. And I b I bought actually About Zap, which is the German company. Little Tyks, which makes like the coop. Right. And toys for little kids and but this was Bratz was still kind of the center of M G A and I wonder You had to be thinking like we can't this can't be the center of our business.

Forever because it might not be a forever toy. Right. So we came with many, many new toys. Yeah, I wanna talk about one of them. This is this came out in twenty sixteen. It's like a doll that that you uh unbox and layer. And anybody who's got kids.

knows that many kids for a long time have been obsessed with these unboxing videos of other kids just opening things. Tell me about the genesis of Lol Surprise. How did that come about? So You know, my kids were saying to me, Dad Do you know? What unboxing is

People buy Apple iPhones. Go in front of the camera. Unbox it and they get eighteen million Be news. And some of them have v YouTube channels like Ryan's World that

turn into multi-million dollar businesses. Exactly. Huge. So the next day I couldn't wait. I came to my office. And I went to my head of design, I said, I want to have the ultimate unboxing toy. We had something called baby brats.

Yeah. And I said, I want these to be At the center of the ball once people unwrap it. So it's a ball and you would unwrap it and in different layers there'd be a little surprise, like uh stickers or something. But in the middle would be this doll. Right. And it became The biggest toy ever that we have launched. Much bigger than Brad.

It Amazing'cause there's so many elements of this story that were like even the name LOL surprise I guess came from a consultant that you had who said, look, if you do searches in YouTube, you'll see a lot of L O L or Surprise. And so let's just combine them and call them that because it'll it'll show up in search. Exactly. I mean it's well the reason why I point this out is because To build something out of nothing oftentimes can be a failure. Right. And you've had I mean there there have been plenty of I'm sure dolls that you've had that just didn't go anywhere. Yeah, like we had the doll line call nobi stores.

That everybody in the retail So it's gonna be huge. Novi stars. Right. Okay. It was based on aliens. And I thought it's gonna be a biggest seller. It was the biggest failure we ever had.

But but why didn't they w they are kinda weird and creepy, but why didn't they work? Because I thought as an adult they look good. Retailers thought they look good. But then after they failed we went to research And the kids said they don't like aliens.

They get scared of aliens. So so what you just don't know if something's gonna work, right? You just don't really know. Fifteen to a hundred failures. I call toy business legalized gambling. Mm.

Because you have to constantly come up with new Innovations'cause kids are fickle, right? They're into something for a short period of time. Yeah, exactly. The keys to be able to Listen to them and translate what they're saying.

Yeah. I'm curious today, I mean, it's been reported that the company, you know, at various times does over Five, six billion dollars in in revenue. You're not an upstart. I mean, you are as big, if not bigger, than Mattel. We're not as big as Matter, but we are the number one privately held toy company.

In North America. Uh so we're big, but I always think like an upstart, and so does my team. So even though you're still a uh you're a competitor to Mattel and Hasbro and you still see yourself as a as an outsider, as like the guy fighting these giants. Absolutely. How long until you I mean here you are now.

You've become a billionaire. Right. In toys. I mean When do you feel like You don't have to fight anymore. That's a very, very good question. You know I told you I go to therapy. And one of the things that my psychologists keep telling me is Isaac

Okay, I know your childhood and you had these issues. Tough hard upbringing. But uh you're still fighting. You gotta change and relax. And unfortunately

I think Some ingrained habits is hard to break. And as you get older it becomes harder. I have tried to get better.

I work less. I am much calmer with my people. with my family etc. But for good or bad I still have that fighting instinct in me.

You have obviously you know, made a lot of money and done it very well. You've got a pri it's privately owned. Right. You're seventy. You've got a long life to live, but I wonder what you think about the future of M G A, I mean at what point do you sort of stop going into the office every day and running the operation? I gotta tell you. I still enjoy what I'm doing. I love it. I mean, I just came up with five new toy ideas. I got Covid, so I was home for five days.

I came with five new toy ideas while at home. Huh. I mean when you think about The journey you took, you know, from Where do you came from?

Coming to the US No connections, very little English. to you know, building now the largest privately owned toy company in North America, one of the largest in the world privately owned, and becoming hugely financially successful

How much of of that do you attribute to the hard work you put in and how much do you think has to do with The luck? The fortune that you met. Yeah I don't believe in luck.

And uh I never put my hand in front of anybody for a dollar. So it is the hunger. You need to The pride of winning. I'm succeeding and I have lived the American dream.

I could not have done what I've done. in any other country. This country has a lot of issues. But if you work hard and you believe in who you are, And you're not afraid of failing? you can become successful. There's no other country like it.

That's Isaac Larion, founder and CEO of MGA Entertainment. By the way, Isaac's planning to keep the business in the family. He's training his son Jason and his daughter Jasmine to take over MGA once he retires. Jasmine's already built a successful brand of her own, it's a fashion label called Cult Gaia, and random bit of trivia? The co-founder of Sweet Green, Jonathan Neiman, is Isaac's nephew, and if you scroll back in our podcast queue to 2020, you can hear the story of how they built Sweet Green.

Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show and as always, it's free. This episode was produced by Alex Chung with music composed by Ramteen Ara Blue. It was edited by Neva Grant with research assistance and fact checking from Carla Esteves and Cecile Davis Vasquez. Our engineers were Gilly Moon and Robert Rodriguez. Our production staff also includes JC Howard, Casey Herman, Sam Paulson, Carrie Thompson, John Isabella, Chris Massini, Catherine Cypher, and Malia Agadello. I'm Guy Raz, and you've been listening to how I built this.

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