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Special Report: The Future of Hasbro

By Gary Symons

TLL Editor in Chief

The ‘Play and Entertainment’ conglomerate Hasbro has for the first time outlined its future plans in a live investor event, and as expected, the news will be game changing for the company and for its licensing partners worldwide.

Sit down and grab yourself a coffee or tea, because it’s a LOT.

At the core of the announcement, Hasbro has outlined its “strategic growth drivers” for the near and medium term, and has unveiled new product segments aligned to these drivers. In other words, the company is restructuring, and it’s doing so in ways that it feels will better prepare Hasbro for a rapidly changing environment.

The new financial reporting segments are: Consumer Products, including toys and games; Wizards of the Coast (Wizards) and Digital Gaming; and Entertainment.

“The integrated and assembled value of consumer products, Wizards and digital gaming, and entertainment is how we unlock the next level of return for our business and for our stakeholders,” said Brian Goldner, Hasbro’s chairman and chief executive officer. “We have simplified our structure to maximize our growth and provide a clearer view to the drivers of Hasbro revenues, profit, margin, and cash generation.

“Our Brand Blueprint thrives as we create value from these three areas of our business,” Goldner added. “We are building scale behind them to drive more profitable revenue and meet the needs of our consumers and audiences with innovation and creativity for a modern era.”

The restructuring comes following major changes that transformed Hasbro from being primarily a toy company to becoming a conglomerate that focuses on three main market segments. One continues to be in the traditional toys and games sector, but as well, Hasbro is now a major player in the digital gaming market, and through the acquisition of Entertainment One, or as it’s often known, eOne. That new division was formerly a Canadian studio involved in the acquisition, distribution, and production of films, music, and television series.

Among the many successful projects eOne was involved with, it developed the rapidly growing Peppa Pig franchise, PJ Masks, and was heavily involved with Steven Spielberg’s Amblin Entertainment.

Entertainment One was acquired by Hasbro on Dec. 30, 2019, and the partnership was quick to bear fruit. Peppa Pig, for example, has become one of the world’s top toy brands, and in February 2021 Hasbro announced a deal that will see Merlin Entertainments building an entire Peppa Pig theme park as part of the massive LEGOLAND resort in Florida.

Unlike Mattel, which managed to overcome supply chain issues and returned to profitability in 2020, Hasbro did not earn an EBITDA (earnings before interest, taxes, depreciation, and amortization) profit in 2020, but sees its investments in entertainment and digital as strategies that will pay off handsomely in 2021 and beyond.

“Our expectation is that we return to growth in revenues, earnings and EBITDA in 2021,” said Goldner. “This includes revenue growth in all three segments to potentially achieve double-digit revenue growth across Hasbro for the year. After increasing adjusted operating profit margins by 110 basis points last year, we believe we can maintain a similar level in 2021 while supporting new gaming and product launches and returning to 2019 levels of TV and film revenue.

“Our investments and plans are intended to drive revenue growth across each segment over a multi-year period,” Goldner adds. “As we grow, we expand the reach of our brands to deliver higher operating margin and enhanced cash generation with the potential for Hasbro to reach operating margin levels greater than 16% and cash generation close to the billion-dollar level over the medium term.”

New Reporting Segments

Those new product segments—Consumer Products, Wizards of the Coast and Digital Gaming, and Entertainment—will be supported by a new management structure, which means the company, like Disney, will start rolling out a significant realignment of its senior management. Also, the company will begin reporting these segments with the first quarter earnings release in April 2021. In the Investors Event, Hasbro has already provided historical data for the new segment structure below and in the tables attached.

Full-Year Major Operating Segments1

$ Millions

Net Revenues

Operating Profit
(Loss)

Adjusted
Operating
Profit

EBITDA

Adjusted
EBITDA

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Consumer Products

$3,649.6

$4,005.9

$308.1

$361.3

$308.1

$361.3

$443.3

$545.0

$480.3

$586.9

Wizards of the Coast and Digital Gaming

$906.7

$761.2

$420.4

$294.7

$420.4

$294.7

$434.9

$304.9

$444.3

$312.5

Entertainment

$909.1

$1,168.9

($141.1)

($20.8)

$90.1

$122.2

($47.0)

$79.2

$92.4

$147.9

1 For comparison, the quarters and year-ended Dec. 29, 2019 includes the pro forma results for the eOne acquisition. Pro forma reconciliations are provided in the 2020 quarterly Earnings Release tables. Schedules attached to this release include historical quarterly and full-year results by segment. Reconciliations are included in the attached schedules Reconciliation of Adjusted Operating Profit and Reconciliation of EBITDA and Adjusted EBITDA.

The New Reporting Segments, Explained

The new segments essentially simplify Hasbro’s management and reporting structure, and the move is designed to make it easier to gain visibility into each segment, and make faster, smarter decisions to maximize revenues and profits.

Consumer Products includes the revenue associated with the sale of Hasbro toys and games globally, as well as all licensed consumer products revenue. This segment is the primary entry point for licensing partners with the corporation overall.

The Consumer Products segment also includes the Company’s Global Operations, which services the supply chain for Hasbro’s toy and game businesses.

Wizards of the Coast and Digital Gaming includes all revenue associated with Wizards of the Coast tabletop and digital games, including Magic: The Gathering and Dungeons & Dragons, as well as licensed Hasbro digital gaming across the portfolio.

Entertainment includes all revenue associated with Hasbro and eOne entertainment across Family Brands, TV and film, and music.

 

Product Announcements

Hasbro’s Investor Day came with an avalanche of announcements specific to various product lines and initiatives that cover all three of the new Hasbro reporting segments. They include several new animated and live action TV or film releases connected to popular product lines, such as Peppa Pig, Transformers, My Little Pony, Dungeons and Dragons, and Magic: The Gathering.

One big shift is that Hasbro expects its consumer products revenue will increase well above the growth rate for the industry as a whole, fuelled largely by a greater accent on its e-commerce business. Hasbro predicts e-commerce will make up roughly half of all its consumer product sales by 2025, which has major ramifications for toy and game retailers.

As part of its e-commerce DTC channels, Hasbro will launch the new Hasbro Pulse portal in the UK first, adding additional markets once the kinks are ironed out. Hasbro also detailed a new, expanded partnership with logistics behemoth Amazon on its PlaySkool brand, with a new focus on learning and sustainability for pre-school audiences.

On the digital front, as reported in February by The Licensing Letter, Hasbro is extending its successful partnership with Epic Games, whose primary product is the wildly popular Fortnite video game. The deal will see Hasbro continuing its current licensed roster of Fortnite-branded products, like Nerf guns and games, but it will also see Hasbro diving headfirst into an array of action figures and role play products.

In terms of games, Hasbro has been working hard on its Monopoly line, which celebrated a major anniversary this year. The company has announced three new product launches for the franchise, those being Monopoly Builder, Monopoly Crooked Cash, and the community-based Monopoly campaign launching on March 19.

The company is also eyeing new innovation in the digital gaming space, working with Google to integrate the digital assistant Alexa into its gaming offerings with The Wanted Bounty Hunters board game, a titles that gives players an in-game connection to Alexa and the cinematic world of The Mandalorian.

Wizards of the Coast

People outside the gaming communities for Magic: The Gathering and Dungeons and Dragons often have no idea how popular these adult-oriented gaming franchises are, or how lucrative they’ve become. This segment now extends from the more traditional board game approach into the world of video gaming, and according to Hasbro the ‘Wizards of the Coast’ sector is, “‘approximately halfway to achieving its target of doubling revenue from 2018 to 2023.”

In 2020 Wizards of the Coast revenue was $816 million, with Magic: The Gathering revenue up by 23 per cent and Dungeons and Dragons revenue up by 33 per cent for the year.

The segment will continue to grow, Hasbro says, with new digital game launches for both Magic: The Gathering and Dungeons & Dragons. For example, the unit has detailed new crossover products within the collectables and social play space with partners Warhammer by Games Workshop, and Middle Earth Enterprises, to include characters from The Lord of the Rings universe.

Major Goals in Entertainment

The growth of an entertainment segment to support its toy and game divisions has been a major objective for Hasbro, and the acquisition of eOne is key to the company’s growth plans. This can be seen this year as Hasbro currently has more than 200 projects underway across TV and film.

These programs are centerd on Hasbro products. For example, Transformers has a feature film for a planned release in 2022, a new animated feature film in development, a third instalment of Transformers: War for Cybertron on Netflix, a new 20-episode animated comedy series on Netflix called Transformers: BotBots, and a new original animated Transformer series with Nickelodeon.

The rapidly growing Magic: The Gathering franchise also has a feature film in development with Fox, as well as a premium animated series in production with Netflix. The equally popular Dungeons and Dragons franchise is also getting its own feature film in a partnership with Paramount Pictures, and a number of television projects are in the works.

Other projects include a CGI film for My Little Pony on Netflix, alongside a new animated series; new content for Peppa Pig and PJ Masks; and Hasbro will also be supporting an ambitious slate of new projects for this year which include TV series or films linked to GI Joe, Ghostbusters, Marvel, Star Wars, and Disney Princess new releases.

So, how big is this investment in the entertainment segment? According to Hasbro, the company will invest between $675 million to $750 million in 2021, but they also point out that about 70 per cent of the product lines are pre-sold and licensed, greatly reducing the company’s risk.

It’s also worth noting that Hasbro was the world’s largest producer of children’s content on YouTube, with 48.4 billion views in 2020.

Transformers

      • Feature film in partnership with Paramount slated for summer 2022.
      • New animated full-length feature film in development.
      • The first two chapters of the fan-based animated trilogy Transformers: War For Cybertron have successfully launched on Netflix, with the third installment to be released July 2021.
      • Transformers: BotBots, a new 20-episode animated comedy series at Netflix.
      • Partnering with Nickelodeon to co-produce an original animated Transformers series (26 half-hour episodes) to premiere exclusively on Nickelodeon in the U.S. before rolling out internationally.
    • GI Joe
      • Feature film Snake Eyes starring Henry Goulding, is set for a global theatrical release in October 2021.
      • New partnership with Amazon and Paramount to create premium scripted television series based on GI Joe.
    • Magic the Gathering
      • Feature film in development at Fox.
      • Premium animated series in production for Netflix.
    • Dungeons and Dragons
      • Feature film in partnership with Paramount Pictures is preparing to start principal photography in Ireland.
      • Engaged several writers to develop premium television projects designed as a foundation for a new robust brand universe.
    • Risk premium scripted series in development and Clue primetime animated series with FOX in development.
    • My Little Pony
      • New CGI film debuting on Netflix later this year with an all new cast of ponies.
      • All new computer-animated series coming to Netflix.
  • Peppa Pig new content through 2023.
  • PJ Masks new content through 2023.
  • Greenlit new animated preschool series, Kiya, for linear and digital broadcast platforms including Disney Jr. and Disney + globally and France Télévisions.
  • Film:
    • In production on 9 feature films.
    • 15 unique releases slated for 2021, with talent such as Mark Wahlberg in Arthur the King, Chris Pine in All the Old Knives, and Ben Affleck in Deep Water.
    • Adaptation of the children’s classic Clifford the Big Red Dog coming to theaters later this year.
  • TV:
    • Currently in production on eight scripted series and expect another two to four to be ordered in the year.
    • Returning series include The Rookie on ABC, Nurses on NBC, and The Walking Dead on AMC.
    • Premiering new exciting shows later this year, such as Yellowjackets for Showtime and Cruel Summer for ABC Freeform and Amazon Prime.
    • Unscripted business continues to grow, with over 70 projects anticipated for delivery this year and 38 projects currently in production.

If you’d like to see the presentation for yourself, the event was webcast live and is available for replay on Hasbro’s investor relations page at https://investor.hasbro.com.

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