Hasbro recently conducted its quarterly earnings conference call for the second quarter of 2023.
Notable here is the announcement that the eOne film and TV business will be sold to Lionsgate; the ~$500M sale is expected to close late 2023. This will allow Hasbro to renew focus on “core toy and game brands”. Hasbro had previously announced intent to sell in late 2022, at the time also stating an intent to pivot to becoming a “digital gaming powerhouse”. This is interesting in light of the current strike, which has had an impact on the entertainment industry.
Notable statements from CEO Chris Cocks:
- “Importantly, we announced an agreement to sell our eOne Film and TV business to Lionsgate, where it will be in good hands, and expect to close the transaction by year end.”
- “Lionsgate’s management team is experienced in entertainment and adept at driving value, and we’re glad to have found such a good home for our eOne film & TV business. We look forward to partnering with them, especially on a movie adaptation of Monopoly.”
- “Storytelling is part of our mission, and Hasbro will keep producing compelling entertainment that helps bring our beloved brands to life. The sale allows us to focus on our core toy and game expertise, partner with the industry’s best, and strengthen our balance sheet as we invest to drive long-term growth and return cash to shareholders.”
- “Entertainment remains a priority for Hasbro. Hasbro will continue to develop and produce entertainment based on the rich vault of Hasbro-owned brands. We will also bring to life new original ideas designed to fuel all areas of Hasbro’s blueprint including toys, publishing, gaming, licensed consumer products, and location-based entertainment. As part of the sale, we expect to move to an asset-lite model for future live action entertainment, relying on licensing and partnerships with select co-productions.”
This doesn’t mean Hasbro is exiting entertainment entirely, as Cocks also announced Hasbro Entertainment. From a transcript of the conference call:
“Hasbro will use the proceeds to retire a minimum of $400 million of floating rate debt by the end of the year and for other general corporate purposes. Hasbro Entertainment will be the new marquis for our ongoing entertainment efforts after the sale closes, under the leadership of Olivier Dumont, the current Head of eOne Family Brands. Hasbro Entertainment’s mission is to develop finance and produce entertainment based on the rich vault of Hasbro-owned brands. We’ll bring to life new original ideas designed to fuel all areas of Hasbro’s blueprint, including toys, publishing, gaming, licensed consumer products, and location based entertainment.”
We will retain a focused team of creative development and business affairs experts to shepherd the 30 plus Hasbro-based projects in development, working with the best studios and distribution platforms in Hollywood, including ongoing development of the TRANSFORMERS and GI JOE franchises, PLAY-DOH, D&D, MAGIC: THE GATHERING and our board game portfolio. As part of the sale, we expect to move to an asset-lite model for future live action entertainment, relying on licensing and partnerships with select co-productions like our previously announced Transformers One animated film and the D&D live action television series, both with our partners at Paramount. The sale of eOne is another important milestone in our transformation at Hasbro. Last year we articulated a plan to turn around Hasbro, driving growth in fewer, bigger, more profitable brands; improving our consumer focus, execution and innovation; and building our operational excellence to fuel our bottom line and create sustainable performance.”
Other salient details:
- Hasbro Pulse point of sale increased by 54% in the second quarter.
- Transformers experiences 83% growth in the second quarter of 2023, showing that the Transformers: Rise of the Beasts film (“one of the top box office performers of the year”) has helped the brand considerably.
- Efforts to wrangle costs via the Operational Excellence Program have been successful, with “$84 million of cost savings” in the first half of 2023.
- A $25 million process asset impairment charge was noted for Dungeons and Dragons: Honor Among Thieves. Nevertheless, D&D saw “significant Q2 revenue growth”, up 74%.
- The Peppa Pig brand grew (up by 15%) while Hasbro Gaming was “flat” and other franchise brands “declined”.
- Hasbro revenue declined 10%, but this was ahead of the expected amount, thanks to strong consumer products sale trends.
- Magic: The Gathering released 3 sets in Q2 2023 to Q2 2022’s 4 ($128M vs $1032M average revenue per set).
- Transformers, Play-Doh, and Monopoly saw point-of-sale growth, with Monopoly regaining “#1 property rank among games” according to Circana.
- Spider-Man: Across the Spider-Verse, alongside other channels like evergreen marketing and the preschool series, did very well for the Spider-Man brand, resulting in “an over 100% increase in point-of-sale year-over-year”.
- Hasbro noted a pivot in reducing “portfolio brands” to increase support for “franchise brands”. This is part of Blueprint 2.0, namely the move to “double down on fewer, bigger brands”. The decline of partner brands was noted, with exiting licenses identified to be behind 60% of this decline.
The webcast and presentation and other information are found on Hasbro’s official site here.