Earlier, we covered the booming success of Barbie’s new online world, Barbie Girls.

Now on the heels of major product recalls in several other industries surrounding products from China, Mattel has been hit hard twice. The first recall covered about 1.5 million of their Fisher Price toys with concerns about lead paint. Now about 265,000 “Sarge” cars from the “Cars” movie with lead paint concerns and 9.3 million toys with tiny magnets.  Overall 18.6  million magnetic toys and 436,000 die cast toy cars are being recalled.

A list and photos of Mattel toys being recalled with 1 August 2007 and 14 August 2007 recalls is online at Mattel Consumer Relations

Several Elmo items are on the list.

The lead paint issue has been in the news a while and nobody was releasing the name of the company involved in China. Lee Der Industrial Co. Ltd was recently identified as the Chinese company and a co-owner, Zhang Shuhong, committed suicide over this past weekend, reminiscent of the death of Robert Solomon over financial troubles with Dream Pets in 2004. Once again we are reminded,  the toy industry has intense pressures. Its not all fun and games for those employed by it.

Mattel’s Barbie is an icon in the doll industry. As we continue to try to put together a history of virtual pets, we become more aware of the contribution of dolls through out the ages. In addition they have been behind Pixel Chix, Barbie Girls, and many other virtual pet efforts.

Some writers are starting to question if Mattel will make it through this recent recall. Consumer confidence among those with young children is going to be hard to restore. The current recalls are all over the news, the morning shows, and now I see the legal arena – a company in Seattle is suing them in a class action for the lead paint issue.

The bulk of toys in many categories are made in China to keep the price low, but with the rash of recalls, there may be a new push for Made in America in virtual pets as well as other toys?

Mattel tries to make a case for their efforts in the future on their Voluntary Safety Recall Facts Page which includes an online video with Bob Eckert, Chairman & CEO talking straight to their plans as well as apologizing for the problem.

MGA’s Bratz has been gaining ground on Mattel’s Barbie the last several years, but Mattel’s new online world, Barbie Girls, has been a huge success and is helping them pull out further in front again. Plus they have received a tremendous amount of free publicity recently in coverage of Barbie Girls audience growing from zero at rates faster than any other major online social networking site. We even covered it here. Mattel stock took a nice jump for several days surrounding the announcement, but has since settled back down.

The Be-Bratz site will require purchase of a special Bratz doll (like Webkins requires the purchase of a pet) to participate. But the Bratz doll comes with a special USB key (thumb drive). You can choose your on screen name, a Bratz avatar that can be dressed to your specs or a custom character designed from scratch, you can customize rooms, chat with other users, “buy” clothes for your avatar at an online store using virtual currency you earn by playing the game. An online theater will show clips from the Bratz movie to be released August 3rd (looks like they are tying the online world to the movie release date for cross promotion).

The Barbie site does have some additional features if you buy a $60 MP3 player with a USB port. Mattel especially thinks the MP3 player will help them win back some of the older preteen girls.

Both sites try to address the dangers young people face online. They restrict free chatting and force the use of predetermined scripted messages and do not allow the display of personal information (names and addresses).

But, as the Journal mentions, even with all their efforts, Be-Bratz will be similar to Barbie Girls which has been online since April – and you don’t have to buy a doll to participate. MGA CEO Isaac Larian says any similarities between the sites are only coincidence and that he’s never visited the Mattel site.

As the battle heats up between them, both companies report they have committed to two year research and development timelines, boosting inhouse design operations, hiring outside programmers, and using lots of girls in focus groups.

The two companies continue to fight in court over the actual rights to Bratz with Mattel claiming Carter Bryant, the designer of Bratz, was employed by them when he did the initial Bratz designs. MGA now accuses Mattel of copying Bratz designs into their “My Scene” Barbie line.

The battle between these two companies will now be moving forward on four fronts:

1. In the stores – Doll & doll accessory sales

2. In the theaters & on DVD – both companies have movie

3. Online – Barbie Girls vs. Be-Bratz

4. In the courtroom – legal rights to Bratz design

Looks like there will not be a lot of love lost between MGA and Mattel for a while, unless a common enemy comes on the scene (like a new hot doll from Japan?)

Although Barbie is facing tough competition from Bratz in the stores, she’s winning strong online. In mid July Mattel is reporting Barbie Girls reached 3 million registered users in 60 days, making it the fastest growing virtual community ever. Plus they are currently adding over 50,000 new members a day!

Some are comparing Barbie Girls fast rise to that of Second Life which took three years to hit a million users.