Uglydoll

How serial entrepreneur Drew Matilsky helped Uglydoll capture the hearts of the masses

By Marie Griffin / Photography by Mindy Best

For Drew Matilsky, it has been a long journey from a working-class neighborhood in Union County, NJ, to Hollywood.

The 52-year-old serial entrepreneur, who got his start in business selling clothing at flea markets when he was 16, now runs an idiosyncratic portfolio of businesses out of his Green Brook, NJ, global headquarters: Luxury residential rental properties in Union City, NJ, and vacation rental homes in St. John, U.S. Virgin Islands; Drew’s Entertainment, which sells and licenses “sound-alike” recorded music in a variety of formats; and Pretty Ugly, LLC, the marketing and licensing company for the Uglydoll brand, of which Matilsky is executive managing partner.

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So, where does Hollywood come in?

In May 2015, Pretty Ugly inked a deal with STX Entertainment to develop “multi-platform family franchises across film, television and digital” around Uglydoll characters and their “uglyverse” world. A full-scale animated film featuring Uglydolls is in the works.

Matilsky runs the business side of the Uglydoll franchise, which was created in 2001 by two Parsons School of Design graduates, David Horvath and Sun-Min Kim. Matilsky and Horvath will serve as executive producers for STX’s Uglydoll animated feature; billionaire Jean “Gigi” Pritzker and her film production company OddLot Entertainment will co-produce.

The connection is born

Before meeting Matilsky in late 2001, Horvath was personally selling Uglydoll plush characters to a few specialty retailers in California, New York and Tokyo, and Kim, who was located in Korea, was hand-sewing the dolls from Horvath’s sketches. “The plush dolls were selling out as quickly as we would drop them off or deliver them, and we realized we needed to ramp up production quite quickly,” Horvath recalls.

“At that time, we wrote out the basic structure of the business model, which was to keep [the Uglydolls] very limited in production numbers and sell them in high-end boutique stores, museum stores, and other places where you would not usually find toys or character toys,” Horvath says. Although he had some discussions with major toy companies, “they did not quite understand the method we wanted to use” to market and brand Uglydoll.

Matilsky, meanwhile, was focused on his company Drew’s Entertainment and continuing to build his Drew’s Famous Party Music brand. He was working with artists, making and marketing CDs, and selling them to party store chains and mass retailers. “I had been a retailer and then I sold to all kinds of retailers. My expertise was operations, retailing, merchandising and marketing, but not toys,” he says.

However, Matilsky says he is always open to exploring new ideas and businesses. When a mutual connection suggested thata he check out what Horvath was doing with Uglydoll, Matilsky agreed to meet with him.

Horvath and Matilsky first met at a Manhattan Starbucks with huge windows facing the street. Matilsky propped up a few of Kim’s hand-sewn Uglydoll characters by the window. “People started coming in, going to the counter, and asking if they could buy them. The cashiers pointed to David and people came over to us. It was a phenomenon like I never saw before,” Matilsky remembers. Afraid that these people might have been friends of Horvath’s, Matilsky suggested they go to another Starbucks — where the same thing happened.

 

Although Matilsky believed there was something special about Uglydolls, he also wanted to double-check his instincts, so he turned to his friend Gerald Rittenberg, then CEO (now executive chairman) of Party City Corporation.

“When Drew showed me the Uglydolls, I liked them,” Rittenberg recalls. “They had a unique personality and I recognized it immediately. I said to Drew, ‘I see what you see. These are pretty good.’ He said, ‘Would you get involved with me?’ I said, ‘Absolutely not. I don’t get involved in outside activities.’”

Matilsky was undeterred. “I can’t tell you how many times I said ‘no,’ but Drew is extremely persistent,” Rittenberg shares. “Eventually, I put up some of my own money, not a great deal of it. I mainly advised. I wasn’t active in the business.”

Rittenberg, who has known Matilsky for more than 20 years, says, “The definition of an entrepreneur is Drew Matilsky. You find people that have one great idea and they stick with it forever and they think they’re entrepreneurs. A true entrepreneur continually comes up with new ideas and tries them out. If they fail, they learn from it. Drew takes risks and makes things happen,” he adds. “He knows how to execute, and that’s 99 percent of the formula for success. He will figure out what it’s going to take to make an idea work.”

Branding with a long-term vision

From the inception of Pretty Ugly, the company they created together, Matilsky, Horvath and Kim agreed to build the Uglydoll brand for the long term. “Compared to the feedback we were getting from the larger toy companies, Drew was open to taking the slow road,” Horvath explains. “Drew understood that this would be a very long journey because we were not going to start out shipping tons of product to the mass market.”

The brass ring the trio hoped to capture, even in the early days, was a movie deal with a major studio, and their retail distribution strategy was the path to achieving that goal. “We had a strategy to create an animated feature film under the Uglydoll brand,” Matilsky explains. “We chose to brand Uglydoll through a retail strategy, targeting the artist and luxury community of retail, and protecting, protecting, protecting the brand.”

Exclusive distribution helped turn Uglydolls into coveted collectibles rather than another line of stuffed toys.

“We flew in the face of the traditional toy industry. We used the term ‘ugly,’ which to us means being yourself and celebrating uniqueness, and we used the word ‘doll,’ which usually guarantees that a boy won’t go near it,” Matilsky says. “However, Uglydolls have proven their appeal with both girls and boys, and their popularity might actually weigh slightly more toward boys. Plus, they appeal to adults as well as children.”

Since they debuted in stores in 2002, Uglydoll retail sales have added up to more than $150 million. Three years ago, the Wall Street Journal reported that more than 2 million Uglydoll-branded items are sold on an annual basis.

When the Uglydoll movie gets its green light, that is, a scheduled release date, Pretty Ugly will expand its licensing division in a big way and get ready to place Uglydoll products in the heretofore avoided mass market. Still, the company will not abandon its allegiance to the upscale and specialty stores that have built the brand.

“We will have two separate lines, classic merchandise and movie merchandise,” says Matilsky, and the merchandise will be differentiated by look and quality. For example, the classic pillow-like plush characters will remain in specialty stores, while the mass market might get characters that look slightly more like traditional plush animals.

Once the movie deal with STX went through, Pretty Ugly and STX started building a global licensing model. “From this point forward, we want the feature film to be the driving force for the products we license,” Matilsky explains.

After protecting the Uglydoll franchise and minimizing the number of licensees for so many years, “the movie merchandise will be everywhere and in every category,” he says.

What’s more, mass retailers are already well aware of the Uglydoll brand. “For years, they have been asking for the merchandise, but we have been holding the demand back. So, when we explained the movie licensing plan to all the major mass retailers, they immediately came on board,” Matilsky notes.

With everything STX Entertainment can bring to the party in terms of content creation and marketing, Uglydoll could become a massive worldwide brand in a few years, Matilsky believes. “The brands we would compare ourselves to, once we have a movie backed by a major studio, have sales in the billion-dollar range when you count the box office plus licensing,” he says.

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Unexpected turns of the movie business

Noah Fogelson, STX’s executive vice president for corporate strategy and general counsel, declined to comment on the $1 billion figure. “The only thing I would say is that our hopes and aspirations for the brand — with all the content created around the brand in films, television and digital platforms, as well as consumer products and licensing — are that it can be an extraordinarily successful brand on a global basis,” he says. “We believe that Uglydoll has the potential to absolutely be a powerhouse brand.”

Adds Adam Fogelson, chairman of the motion picture group at STX Entertainment (and Noah Fogelson’s brother): “If we do our job on the movie side, we will be creating a world that should allow for multiple Uglydoll films. The global opportunity in movies alone is gigantic.”

Formed in 2014, STX Entertainment bills itself as “the first major entertainment and media company to be launched at this scale in Hollywood in more than 20 years.” With a reported $1 billion war chest to fund its first five years, STX is backed by private-equity firm TPG Growth; STX founder and chairman-CEO Robert Simonds Jr.; Hony Capital, a private-equity fund based in China; and some private investors.

The Uglydoll project will be the first undertaken by STX’s new “Family Division” and its first animated feature. Noah Fogelson points out that not all of STX’s family content will be animated, “but animation will be a major piece of the kind of content we create. And it won’t just be films. It will be films, television, digital, consumer products and licensing.”

Adam Fogelson adds that three big studios have enjoyed a virtual lock on the animated movie market, and “there is a real demand for another player in this space,” a role STX is eager to fill.

Why did STX select the Uglydoll brand to anchor its new family-oriented enterprise? “Any time I have watched people, young or old, interact with these dolls, I get an immediate sense of their affection and appreciation for them,” says Adam Fogelson. “People are drawn in and want to spend more time with the Uglydolls and to learn more about who they are. To be able to build a movie around characters like that is as good a starting point as there is.”

The Uglydoll brand is especially well suited to a globally focused company like STX, Adam Fogelson adds. With one, two or three eyes, their wide variety of colors and shapes, and their core theme of celebrating the uniqueness of every individual, Uglydolls are innately appropriate to bridge geographic and cultural divides.

Asia is currently the fastest-growing market for Uglydoll, and China is the fastest-growing market for the movie industry. According to an article in The New Yorker, box-office revenue from movies in China is expected to surpass North America within two years.

Before joining STX in fall 2014, Adam Fogelson was Universal Pictures chairman from October 2009 to September 2013, and it was during this time that he first encountered Matilsky, Horvath and Uglydoll. In May 2011, a major studio had announced a deal to develop an Uglydoll animated feature, but the movie was never made.

This is not an unusual situation in the movie industry, Adam Fogelson points out. “We’re not breaking new ground by taking on a project that didn’t get all the way to the starting line somewhere else,” he says, adding that “we have no reservations” about starting a new movie project with Pretty Ugly and the Uglydoll franchise.

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Noah Fogelson applauds the way Matilsky has managed the brand up until now “with a very, very small infrastructure and without having the benefit of a major film, television or digital component. He has maintained the integrity and quality and heart and soul of the property — which David and Sun-Min created — over a long period of time.”

If the Uglydoll movie had been made with the original studio as expected, it would probably be in theaters by now. When the STX animated feature does come out, Matilsky, Horvath and Kim will have invested years in their limited distribution strategy.

“To be honest, with my background in the music industry, I don’t think that’s a long time. We never knew how long it would take to get the right studio to make a movie that really resonated with the brand,” says Matilsky. “We have always kept our focus on building an evergreen brand, like Thomas the Tank Engine or Winnie the Pooh. Keeping the integrity of the brand has always come first.”

Matilsky adds that Adam Fogelson’s “passion for our brand” surpassed that of any other studio executive. Although the Uglydoll movie did not get to the market as soon as he, Horvath and Kim had hoped, Matilsky is very happy with the resources and attention Uglydoll is getting from STX. “They understand everything it takes to build the brand, and together we’re building a massive global licensing plan,” he says.

Marie Griffin is a freelance writer based in the New York City area. Contact us at editorial@smartceo.com.

THE UGLYDOLL STORY

After dating while they were both studying at New York’s Parsons School of Design, David Horvath and Sun-Min Kim were separated when her visa expired and she returned home to Korea in 2001. In his letters to Kim, Horvath drew a round, long-armed, short-legged character with ears at the top of its head, big round eyes, a straight mouth with a couple of fangs and an apron tied around its waist. The apron signified that the character, called Wage, was a worker — as Horvath pledged to be on behalf of the couple.

Kim surprised Horvath by turning his drawing into a pillow-like stuffed character that she sewed herself. While the fangs and protrusions at the top of its head made Wage look somewhat like a stuffed monster, its simplicity and texture (a blanket-like fabric rather than traditional plush animal “fur”) made it approachable and appealing.

Horvath carried the original Wage into a trendy pop-culture store in Los Angeles called Giant Robot, where he showed it to the owner, Eric Nakamura. Assuming Horvath wanted to sell him the doll, Nakamura ordered several as a test. Kim sewed the Uglydolls by hand and sent them to Los Angeles, where they quickly sold out.

To the couple, their creations sent a very clear message. “The theme is that ugly is the real beautiful,” Horvath explains, “that you should not hide who you are inside or out, but you should shout your very being from the rooftops — and that the whole world benefits when you do so.”

The pair went on to design and stitch many more characters to populate the “uglyverse” they envisioned. According to an article in the Los Angeles Times, Kim constructed about 1,500 Uglydolls in the first 18 months of the enterprise. After Uglydolls hit it big at the toy industry’s annual Toy Fair and the partnership between Uglydoll and Drew Matilsky was formed, manufacturing moved to a factory in Korea, then China.

All the classic Uglydolls are constructed from just two pieces of proprietary fleecy fabric with one connecting seam, giving them a smooth front and back. Each one has its own name and story, which is printed on the tag that comes with the doll, and a unique combination of Uglydoll characteristics: One, two or three big round eyes — or an X where an eye should be — a straight thin mouth with teeth or fangs placed in various positions along the line, and round bodies with disproportionately small appendages — any number of legs with or without feet, ears standing up (like a cat, teddy bear or a bunny) or down like a dog, and arms or bat-like wings. Of course, there are exceptions to almost every rule, such as Uglyworm, who is shaped like a comma with no appendages at all.

THE ONGOING EVOLUTION OF DREW’S COMPANIES

Throughout his career, Drew Matilsky has shown an uncommon ability to change with the times, whether that meant starting a business, selling a business or taking an existing business in a new direction.

When he was in his early 20s, Matilsky took the skills he learned as a flea market vendor — and his bar mitzvah money — and opened his first retail store selling apparel. It had become a small chain by the time Matilsky sold the business 12 years later. Next, Matilsky decided to sell casual unisex clothing to retailers and founded a company called Relax America.

After selling that business, Matilsky took a short break until a new idea hit him while he was at a party. “It was the early 1990s and everyone was dancing to songs like the Electric Slide, Y.M.C.A. and the Chicken Dance,” he says. “I realized that music can make or break a party, but most of Middle America can’t afford to hire a band or a DJ.”

In 1994, Matilsky formed a company called Turn Up the Music, which sold music compilations under the Drew’s Famous Party Music brand. To keep the cassettes and CDs affordable for consumers, he didn’t aggregate songs from the original artists but used professional musicians who could emulate them, known in the trade as “sound-alike” music. For party-goers, Matilsky points out, his musicians are the equivalent of a good cover band.

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In addition to party stores, Turn Up the Music sold to mass retailers and an array of outlets that had not previously sold music, such as supermarkets and drug stores.

Gerald Rittenberg, executive chairman of Party City Corporation, recalls that the chain had about 11 stores when Matilsky started supplying Party City, which had never sold party music before and didn’t have a place in the stores for it.

Like Drew’s music compilations, Party City stores are organized around party occasions, such as birthdays and Halloween, and themes, such as Hawaiian/luau or ‘70s/disco. “Drew came up with fixtures that would sit on the end of the shelves right in front of each of the occasions or themes,” Rittenberg says.

Not only did Matilsky provide a practical and innovative solution for displaying his music, but he also “had the fixtures manufactured, paid for them and delivered them. When needed, he had people put them into the stores,” Rittenberg adds. “Drew is very aggressive and he makes things happen.”

Matilsky admits to being competitive. “I don’t like to lose shelf space to anybody else,” he says. So, as the music business began to shift away from CDs toward music downloads and streaming music services, Matilsky expanded his music catalog distribution to iTunes, Spotify and many other digital music sites. Matilsky saw digital and streaming as a new opportunity to expand the party music offering worldwide.

Drew’s Entertainment, the current name for Matilsky’s music business, has developed several new ways to capitalize on its catalog of 200,000 master recordings of popular songs, such as providing in-store music to retailers. In addition, the music is increasingly being licensed for use in movies, commercials and on TV, and Drew’s Entertainment is leveraging its relationships with copyright owners to help other companies secure the rights to use various songs, “which is a profit center for us,” Matilsky points out.

Beyond the music

Although the music business has been transformed by the internet, forcing change, Drew’s Entertainment isn’t the only one of his businesses that Matilsky has chosen to evolve.

The business model for Pretty Ugly, LLC underwent a strategic shift four years ago, when Matilsky decided to get out of the manufacturing and distribution business and concentrate solely on licensing the Uglydoll brand.

“For all my companies, I want to be making money in just two ways — either licensing or renting,” Matilsky says.

Most of his rental income comes from the luxury residential buildings he owns in Union City, NJ, which feature views of the Hudson River and New York City. More recently, Matilsky purchased three villas on the Caribbean island of St. John, which are rented on a weekly basis. Since he renovated and upgraded the properties, they are typically rented for 40 or more weeks of the year, he notes.

Even with his seemingly full plate of diverse businesses, Matilsky always keeps an eye out for new opportunities.

Ivan Baron, general counsel at Roseland, a Mack-Cali Company, has been a personal friend of Matilsky’s for more than 20 years. Recently, the two have been evaluating a business they might do together.

“Drew is always thinking, always looking, and always trying to come up with the next great idea,” Baron remarks. “Now that we’re in a discussion about joining together in a business, I can really see the persistence and the drive that has made him successful.”

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