• Choose a category
• All
• Classic-Fiction

The She-Ra state of war, however, far more than the Heart household's domesticity, reflected the atmosphere at Mattel during the dolls' development. By 1984, CEO Arthur Spear's diversification strategy had proved disastrous. Mattel was on the brink of bankruptcy. It had begun the year burdened by a staggering $394 million loss from the previous year. Like the executives at Warner Communications' Atari division, Spear had been seduced by the seeming boundlessness of the home video game market. To him, the country's craving for the likes of Pac-Man and Space Invaders looked insatiable. Inspired by Atari's gargantuan profits—from 1979 to 1980 Atari's sales increased from $238.1 million to $512.7 million—Mattel in 1980 introduced Intellivision, a competitor to Atari's home video system that in 1981 did, in fact, initially do well. The company's electronics division was also at work on a line of home computers.

But in 1983, when the home video game market crashed, Mattel crashed with it. Desperate to stay afloat, it began unloading its subsidiaries— Western Publishing, Circus World, Monogram Models—even its own electronics division. Ironically, all the companies whose stability was intended to offset the toy world's volatility were undergoing upheavals. And toys— particularly Barbie—were thriving.

It could be said that Barbie saved Mattel. Lured by her track record of profitability, venture capitalist E. M. Warburg, Pincus & Company, junk-bond king Drexel Burnham Lambert Inc., and merchant banking firm Riordan & Joseph supplied the toymaker with $231 million in capital in July 1984. It was, given her penchant for hanging out with celebrities, a classic Barbie moment. Her white knight at Drexel was none other than Michael Milken himself. The deal, however, was a huge gamble for Mattel's management and a reflection of its desperate straits. It had to risk losing control of the company to gain the funds to continue operating. The group was given a 45 percent voting interest in the toymaker; if, however, Mattel couldn't pay dividends on a new preferred stock held by the investors, each of their shares would inflate to 1.5 votes—giving them a controlling interest of 51 percent.

By December 1984, Mattel had rebounded, reporting an 81 percent increase in its fiscal third-quarter profit. This enabled it to pay off the dividends it owed on its preferred stock and, in 1985, to float another $100 million in junk bonds.

With Mattel's future resting on Barbie's slight shoulders, the Barbie team, like the warriors in Etheria, fought bitterly to rebuff her competitors—particularly a "full frontal attack," as Shackelford put it, from a doll called Jem. In the fall of 1985, Shackelford learned from undercover sources that Hasbro was planning to launch a new rock star fashion doll at Toy Fair in February. "All we needed to know was the theme," she said. "Within five minutes, we had a war council. Within an hour, we thought of what we were going to do." By the time Toy Fair rolled around, Mattel brought out an MTV version of Barbie—Barbie and the Rockers—with greater fanfare than Hasbro had prepared for Jem. Mattel even beat Hasbro at shipping its dolls to stores. But the thing that really killed Jem, doll experts say, was her size—twelve and a half inches—which made her too tall to wear Barbie's clothes. "If you're going to go up against General Motors," says doll dealer Joe Blitman, "you'd better be the same size."

Despite Barbie's constant triumphs in the marketplace, Spear stubbornly refused to place his faith in her. To attempt to reverse Mattel's fortunes, he launched new product lines—including Captain Power, a gimmicky electronic superhero that responded to cues in a Mattel-produced television cartoon program. In 1987, when Captain Power fizzled and Mattel reported a $113 million loss, John W. Ammerman, who had been in charge of its international division, replaced Spear as CEO.

Ammerman began his tenure with a machete; he slashed the payroll by 22 percent and refinanced $110 million of costly junk-bond debt.