Mattel isn't totally behind the curve. Though Barbie gross sales dropped 15 percent, American Girl sales were up six percent. Mattel also notes the purchase of MEGA brands in their earnings report, for $423 million. MEGA brands, which you might know as Mega Bloks, are a Lego competitor: another plastic, colorful block.

Mattel is gearing up for a strong holiday season. Bryan G.Stockton, Mattel Chairman and Chief Executive Officer, said in a statement, "In the second quarter, we made significant progress across a number of initiatives to better position Mattel in the second half of the year and beyond. For example, we completed the acquisition of MEGA Brands, reduced inventories, strengthened our management team, shifted marketing spend to the back half of the year, and exercised strong controls on SG&A expenses." With the acquisition complete, Mattel might be fighting the toy battle with blocks, not Barbies, this Christmas.