Hasbro Q2 2023 earnings conference call

[lastmaximal]

They're selling eOne to Lionsgate by the end of 2023 for $500 M. They're also establishing Hasbro Entertainment:

"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."

Transformers and Spider-Man brands are benefiting from the recent films, with SPider-Man sales up by over 100% vs Q2 last year.

Hasbro disclosed a $25 M process asset impairment charge for D&D: Honor Among Thieves.

Part of the strategy going forward is to "double down on fewer, bigger brands".

And a ton of numbers.

https://investor.hasbro.com/news-releases/news-release-details/hasbro-reports-second-quarter-2023-financial-results

Also:

"This sale fully aligns with our strategy, and we are pleased to bring the process to a successful close,” said Hasbro CEO Chris Cocks. “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.”

Which is the first I've heard of a movie adaptation of Monopoly. But then I've been living under several rocks, so.

 

[CoffeeHorse]

Selling eOne sounds like a big deal (and that price difference... woof) but they're not really selling all of it. They're keeping the IPs they bought it for in the first place. So those revenue streams won't go away.

 

[lastmaximal]

Yup, just the film and TV assets, not the properties. Sorry about that.

 

[Steevy Maximus]

Selling eOne sounds like a big deal (and that price difference... woof) but they're not really selling all of it. They're keeping the IPs they bought it for in the first place. So those revenue streams won't go away.

Yeah, sounds like Hasbro is just offloading the TV and film production assets and the media assets that don’t align with Hasbro franchise focus (while popular, Yellowjackets and The Rookie are hardly the kinds of properties that fit Hasbro’s IP catalog). But they are keeping Peppa Pig and PAW Patrol.
That’s easily half a billion in value right there.

Most of this is just “more of the same”. The biggest notables to me were the official announcement of the eOne dump, and the information on how the film is effecting Transformers buy in. Again, even if the movie fails to hit the high Paramount wants, Paramount still gets a slice of them toy sales.

Which is the first I've heard of a movie adaptation of Monopoly. But then I've been living under several rocks, so.

Hasbro’s been trying to get Monopoly going for, I want to say, a good 15 years. I seem to recall it gaining some momentum with Ridley Scott in a producer role shortly after the success of TF 2007. It’s like Stretch Armstrong where it seemed to “bubble up” every few years in terms of news or a development of some sort…but never quite went anywhere.

 

[CoffeeHorse]

It's definitely more of the same. Hasbro has a long history of spending way too much on odd acquisitions and partnerships. At least they got some stuff out of this one.

 

[Steevy Maximus]

It's definitely more of the same. Hasbro has a long history of spending way too much on odd acquisitions and partnerships. At least they got some stuff out of this one.

It actively blows my mind that for all their fuss about making a AAA game development studio within Wizards of the Coast, they missed out on buying SquareEnix’s western assets for a measly $300 million. Hell, gaining the experience and resources of Crystal Dynamics ALONE would have been worth that price, but it would have granted them Eidos Montreal (which made the well received Guardians of the Galaxy as well as the modern Deus Ex and Thief). It was a god-damned bargain they slept on.

But no, they got to spend another few billion on a company they just sell off piece meal a few years later…

 

[Swerve]

Too bad about the D & D movie. It was really good, but just didn't seem to get a big enough audience. Did it just come out at the wrong time?

 

[Steevy Maximus]

Too bad about the D & D movie. It was really good, but just didn't seem to get a big enough audience. Did it just come out at the wrong time?

I mean, I can see several factors you COULD point to. Among them the…questionable…quality of prior films barring the name. Maybe audience were getting a little “fantasy fatigued” given the amount of fantasy series released in the fall of 22 (House of the Dragon, Rings of Power, Willow, Wheel of Time, etc).
I’m just as inclined to cite the broader audience shift in theatrical consumption. Short a few notable examples (The Super Mario movie, Barbie, Sound of Freedom, Spiderverse 2), a LOT of the “Major theatrical releases” have had soft performances at the US box office across the board. The ultimate answer Is probably a mix of those factors.

I mean, if you have MAX/HBO or Amazon Prime, you were getting a theatrical quality fantasy series on a weekly basis last fall. Why go out and spend money at the theatre, when the streaming service(s) you already subscribe to are giving you comparable content? And with the pandemic and attempts to claw out more subscribers, companies (especially Disney) ended up putting films onto services quickly and ended up eviscerating the “value” of low and mid-tier budget films and animated family films.

That said, it’s possible that the strong audience response and ancillary “boosts” the film provides could justify investment on follow ups and sequels (see Batman Begins, a film which underperformed, but strong critical and audience response lead to the HUGELY successful sequel). I could also see D&D garnering a strong following on home viewing (see Dredd, a box office failure but was hugely acclaimed and become a cult classic).

 

[CoffeeHorse]

Remember the time Hasbro wanted a stronger presence in videogames so they bought Atari and sold it off a few years later when it turned out they didn't really know what they wanted to do with it?

 

[Steevy Maximus]

Remember the time Hasbro wanted a stronger presence in videogames so they bought Atari and sold it off a few years later when it turned out they didn't really know what they wanted to do with it?

From what I’ve half assed researched, Hasbro Interactive was largely successful. The division posted a loss in 1999, but that could well have been attributed to over-aggressive expansion and investment done in 1998. What ultimately killed Hasbro Interactive was the dot-com burst.
Hasbro’s (and almost everyone else) saw their stocks crash and, in need of some quick cash, sold off HI. Mattel got hit with the same thing in regards to the back to back hits of a loss year and the dotcom bust. All told, Mattel came out even worse when it sold off Mattel Interactive and The Learning Company.

That said, you CAN point to things like the joint venture with Discovery (where Hasbro paid for half a channel ownership, but ultimately took on 100% of the operation of it without any support from Discovery), or the myriad of studio purchases (Boulder Media and Backflip come to mind) where Hasbro tried to expand into new ventures without a defined plan or commitment. Leading them to be sold off later, usually for less than paid for.

 

[CoffeeHorse]

I don't disagree. Hasbro Interactive was largely fine. I'm just saying the Atari acquisition didn't amount to much.

 

[Steevy Maximus]

I don't disagree. Hasbro Interactive was largely fine. I'm just saying the Atari acquisition didn't amount to much.

I disagree. In 1998, Hasbro paid a mere $5 million for all of the consumer Atari assets and IP. Even though Atari, the gaming company, was largely irrelevant by the mid-90s, the names and IP still retained value. Especially as 80s/retro nostalgia started to kick in around the turn of the century. I’d even argue that sales of Centipede probably justified the investment alone.

Had Hasbro not dumped their entire video game division for some quick cash to Infogrames , I think we might have seen those IPs put to better use later.

 

[MrBlud]

It sucks because Disney very visibly keeps Hasbro hamstrung by threatening not to renew the Marvel and Star Wars licenses so Hasbro can’t (for example) buy Dreamworks and perhaps grow into an actual IP powerhouse.

 

[The Phazer]

Too bad about the D & D movie. It was really good, but just didn't seem to get a big enough audience. Did it just come out at the wrong time?

A bit, but the main issue is that the budget skyrocketed due to Covid and it was simply so expensive to make in the end that it needed to be a monster hit to even break even, which it wasn't.