How Spin Master Mixes Tech and Toys—And Keeps Mattel Looking Over Its Shoulder

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DESIGNING WOMEN: Nicole Perez, left, and Tracey Thurman led the Spin Master team that created the hit Liv dolls. | Photograph by Brad Swonetz

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The girls aisle is so different," says Spin Master Toys chief creative officer Ben Varadi with a sigh. He sounds very much like a boy used to playing with helicopters that can hover above open hands and laser-controlled race cars that zoom up walls. Which he is, because he helped invent those toys.

Varadi, 40, along with cofounders Ronnen Harary and Anton Rabie, have quietly built the fastest-growing and hottest toy company in North America, generating $650 million in annual revenue. Spin Master's deft melding of tech and play has produced such boys' favorites as Air Hogs, Tech Decks, and Bakugan, a board game featuring pieces that look like plastic golf balls until they're rolled across magnetic trading cards, at which point they pop open into detailed action figures. Spin Master has translated Bakugan into a massive multiplayer online game, and Universal will release a Bakugan movie in 2011.

But with nothing to offer in the girls aisle, Spin Master was still just half a business. To enter the big leagues with Mattel and Hasbro -- the only two North American toy companies larger than Toronto-based Spin Master -- Varadi knew he needed girls. Fashion dolls, he figured, could be a $400 million opportunity for the privately held company.

"To survive as a toy company now," says George Van Horn, a senior analyst at IbisWorld, "you have to be a risk taker." And there's no bigger risk than trying to reinvent the fashion doll, the modern icon of the toy business. Mattel invented -- and still dominates -- the doll market with Barbie. Just two years ago, Mattel solidified that position by winning a $100 million copyright lawsuit against rising rival Bratz, which effectively crushed the competitor.

But Varadi and a team at Spin Master saw opportunity -- and over the past year, their Liv dolls have captured girls' imaginations with better backstories and play-friendly breakthroughs in hair and poses. Spin Master has done it with flexibility, perfectionism, and Internet-age marketing that has set Barbie on her heels. Now the real fun begins.

Spin Master's first move into girls toys was a disaster. In 2006, the company paid an undisclosed sum for a doll prototype with an internal mechanism that let it move its arms and legs freely. "We're competing against other dolls," Varadi says, explaining his thinking, "but we're also competing against computers, video games, TVs, and cell phones. Why not bring the worlds together?"

The mostly male development team, led by Varadi, put what can only be called a "fashion robot" in front of focus groups of young girls. It flopped. That might have been the end of the experiment, a thankfully private embarrassment and tacit admission that the company should stick to boys. "If Ben wasn't so passionate about this, we wouldn't have pursued dolls for so long," says Rabie, who serves as president and co-CEO.

Rather than retreat, Spin Master doubled down. It opened a design studio in Los Angeles in 2007, a warren of rainbow-soaked offices and showrooms, dotted with beanbag chairs, cases of Red Bull, and mountains of figurines. Varadi wooed Nicole Perez, a Mattel vet who had "worked on everything but Barbie" before moving to Vivendi Video Games. As senior marketing director, she recruited her friend and former Mattel colleague Tracey Thurman to be design director. "When we came to Spin Master," Thurman says, "the team was just Ben and a sculpt of a head." Varadi gave them two years to produce.

The team, now 11 people strong, quickly set about developing a narrative for the still-unnamed dolls. "With boys, they want to know immediately what the toy can do," Perez says. "Girls want to use the toy to tap into a story, to create a connection." The story Spin Master developed centered around four friends at an imaginary high school, and they scouted local surf shops, malls, and fro-yo stands for inspiration and detail. While Barbie has built her empire around the glitz and glamour of make-believe -- Police officer Barbie! Astronaut Barbie! -- the Liv dolls are decidedly down-to-earth. Katie is an athlete who turns into a klutz when she's off her skateboard. Bespectacled Sophie wants to be a hairstylist when she's older and loves to practice on her friends. "The dolls needed to be pretty," Perez says, "because they're dolls and that's what girls want, but we also wanted to make the dolls approachable and real."

Perez and Thurman decided to incorporate diversity into the main narrative, not just present ethnic dolls as supporting players. Of the four Liv characters, African-American Alexis is the most fashion-focused of the bunch and plagued by a pesky younger brother; Hispanic Daniela is an aspiring musician. "Past age 6, girls start developmentally trying on different personalities, so they're very drawn to distinct storylines," says Reyne Rice, a trend specialist at the Toy Industry Association. "Liv dolls are still aspirational, but in a real-life way."