in turbulent times parents turn to toys
to keep their kids happy
that has helped propel sales at some of
the biggest toy makers in the u.s
including hasbro the largest producer of
board games
hasbro has over 1500 brands including
monopoly
plato and transformers and designs and
distributes toys for some of the biggest
names in the entertainment world
such as marvel and star wars it also
makes tv shows
movies and digital games in the first
quarter of 2021
hasbro had net revenue of 1.1 billion
dollars
a one percent increase from the previous
year the toymaker's consumer products
segment jumped 14
during that period and the toy industry
actually put up one of the strongest
growth years we've seen at least in my
20-year career
cracking it and we've not seen you know
double-digit kind of mid-teens mid-upper
teens growth rates
in the traditional toy category in a
long time during the early days of the
pandemic
we saw our games business accelerate
very
substantially and you know people were
looking for ways to
be together and to play together while
they were at their homes
we really also saw that creative play
brands like plato performed incredibly
well
and it's not just kids who hasbro sells
games to
the toymaker has a roster of over 40
million competitors worldwide
who play fantasy world building games
like magic the gathering
and dungeons and dragons in 2020
hasbro's wizard of the coast studio
had its biggest year ever with revenue
of 816 million dollars
a 24 increase from a year earlier but
once the pandemic subsides
will family game night endure and what
does the future of toys and games look
like for hasbro in its rivals lego and
mattel
hasbro traces its roots back to
providence rhode island in 1923
hillel and henry hassenfeld brothers who
emigrated to the u.s to escape
persecution in what is now poland
got their business chops selling rags
and remnants from the textile industry
in new york's garment district the duo
later moved into making wax crayons and
pencil boxes
for school children in new england they
would buy wooden pencil boxes
line them with these remnants that was
their innovation and then put in them
you know things like pencils and
compasses and whatever and sell them to
parents for school kids and they became
very popular
at the beginning of the second world war
the family-run business made its first
foray
into the toy industry selling junior air
raid warden kits and doctors and nurses
kits to kids
but it was the 1952 launch of mr potato
head that helped change the trajectory
of the company
and the toy industry mr potato head the
first toy advertised on tv
and the first television commercial
aimed directly at children
sold a million units in its first year
alone the original toy
required a potato or similar size
vegetable the
vegetable and potato and pepper thing
didn't really work out because kids
would lose it under the couch and then
it would rot
and that was considered wasteful and
also kids began
you know sort of stepping on these
plastic parts and whatever so
they again innovated and this has really
been the story of house for innovation
after innovation
by making it entirely plastic about a
decade later the company had one of its
first major flops
in 1963 it launched flubber a gooey
plastic putty
after the product hit store shelves
reports of skin rashes
lawsuits and an fda investigation led to
a company recall
reeling from the mistake the toymaker
was on the hunt for a new hit
in 1964 it introduced the first action
figure
to rival the popular barbie doll made by
mattel the 11.5 inch
male figure wore us military world war
ii uniform and had 21 moving parts
gi joe turned out to be a blockbuster
for hasbro
the company went on to produce a string
of other hits too including 1983's my
little
pony in 1984's transformers and to
broaden its consumer base even further
hasbro is buying its competitors in 1984
it bought shoots and ladders maker
milton bradley for 360 million dollars
and in 1991 hasbro took the top board
game slot
by play-doh maker tonka including its
parker brothers division that makes
monopoly
and trivial pursuit but in addition to
the successes
there were also setbacks and headwinds
it was boom and bust
and you would you'd put all your money
into market research and
sales and advertising and you might get
a hit and
oftentimes you didn't get a hit and that
certainly was true
for hazard in the 70s and 80s it's one
of the things in the toy business that
always gave me a lot of anxiety as an
analyst
it was really a one shot on goal year
right you plan you planned you planned
and then you kind of crossed your
fingers you hoped the consumer responded
and you put a lot of dollars behind
these big key items to try to drive the
holiday season in the mid-2000s hasbro's
play school division recalled more than
250 000
team talking tool bench toys following
the death of two young children
around the same time hasbro easy-bake
governs were recalled after the company
received 249 complaints
of children getting their hands or
fingers caught in the oven store
there were 77 reports of burns and one
report of a serious injury
the toymaker faced a different kind of
obstacle in 2018
when toys r us announced plans to sell
or close all of its 885 u.s stores
prior to the bankruptcy toys r us was
hasbro's third largest u.s customer
and its second largest customer in
europe but the company quickly adapted
making new products and finding new
markets for its toys and games
by 2020 59 of net revenue in the us
and canada was derived from just three
customers walmart
amazon and target hasbro is one of the
biggest toy makers in the us
with a may 12 2021 market cap of 13.6
billion dollars
with people stuck at home and widespread
lockdowns in place
u.s toy sales reached 25 billion dollars
in 2020
a 16 increase from the year earlier that
gave a boost to some of the biggest toy
makers including mattel
lego and of course hasbro in late march
and early april last year in the us
when categories like construction or
brands like lego
arts and crafts games and puzzles
those categories really started to take
off and we saw
weekly sales numbers that were just
unprecedented even bigger in some cases
than the holiday season
in the first quarter of 2021 mattel had
net sales of 874 million dollars
up 46 higher than a year earlier driven
by growth
of barbie dolls and hot wheels in their
latest earnings report
lego said consumer sales surged 21 in
2020.
the danish toymaker had revenue that
year of about seven billion dollars
up 13 from the year prior
it was a similar story for hasbro in the
first quarter of 2021
hasbro revenue was up one percent to 1.1
billion dollars from the year earlier
its consumer products segment made up of
games like plato
jenga and nerf rose 14 and its wizards
of the coast and digital gaming segment
surged 15 hasbro is the largest
producer of board games traditional
board games and so they
saw a lift to their entire business but
certainly we have to call up brands like
monopoly
and the company has done an outstanding
job of taking what was really a classic
play pattern
this idea of this around the table board
game competing for ownership of property
and they've layered on
licenses they've extended the brand
parents were really just looking for
great experiences and so you know our
nerf business and
nerf toys were selling well it gave kids
an opportunity to have
adventures outside to get outside the
house but
you know safely in the backyard in 2020
hasbro had net revenue of almost 5.5
billion
down 8 from the year earlier due to a
decline in its latin american
and asian markets in lower tv and film
revenue
due to cover 19 related shutdowns
consumer products like toys and board
games
made up almost 67 percent of 2020 net
revenue
wizards of the coast and digital games
made up 16.5 percent
and entertainment net revenue for movies
and tv made up almost 17
and while the company saw a drop in the
sale of its licensed content for partner
brands
like disney and marvel it did see a
surge in growth from one blockbuster
franchise
fueled by the sale of toy lightsabers
and baby yodas seen in the mandalorian
sales of its star wars products grew by
70 in 2020
another trend for toy makers in 2020 was
the shift to online shopping
according to analysts e-commerce has
given toy makers like hasbro
the ability to showcase their brands in
a whole new way
so you're starting to see the
convergence of content and entertainment
and consumption this idea that i can go
on to walmart.com and i can type in
transformers
and in addition to the product i might
be able to see a little clip from the
movie
or the most recent animated series and
so you're starting to see companies like
hasbro with their own internal
entertainment capabilities they're
saying how do we now use this as a
marketing vehicle
with retail stores closed and consumer
social distancing in place
hasbro reported over a billion dollars
in e-commerce revenue in 2020
a 43 increase from the year prior making
up just under 30 percent of global
revenue
for the super fans in 2019 hasbro
unveiled pulse
the direct to consumer site offers
devotees and collectors
exclusive products some of which are
crowdfunded
for example the four foot long star wars
the vintage collection jabba sale barge
comes with a 64-page booklet containing
set photos as well as behind the scenes
development updates the price points are
really what the fans are looking for and
then they
give us their commitment and in return
then we go and produce the product and
we
take them along the journey we're
offering them early booklets on the
blueprints of the sale barge
from star wars and then you know taking
them along the journey meeting the
designers and the
developers of the product hasbro is
making moves in other parts of its
business too
in 1999 the company acquired fantasy
world building business
wizards of the coast wizards had its
biggest year ever in 2020
generating revenue of 860 million
dollars 24
higher than the previous year that
growth was led by record-breaking years
from magic the gathering
up 23 in dungeons and dragons up 33
this gaming area is just huge and
there's huge fandom and it continues to
grow very rapidly
for many years these were analog
businesses where magic the gathering was
played as a
trading card game was played face to
face we would run
on average in 2019 we ran nearly a
million
tournaments globally now some of those
tournaments were literally
friday night magic as we call it at your
local hobby shop with
15 people the game eventually went
digital
moving to the pc and in march 2021 went
mobile
we've seen incredible success and
millions of downloads
people are playing magic arena about
nine hours
a week online which is uh you know an
amazing statistic
and it's really building the whole 24
hour
engagement with the brands and the toy
maker might have even bigger plans for
its own iconic properties on the big
and small screens in february 2021
hasbro announced plans for dozens of new
films and television shows
the projects include films based on
dungeons and dragons
and gi joe scripted series based on risk
and clue
and potentially unscripted tv shows
based on monopoly and plato
the key is to start with strong brands
start with strong
evergreen brands that are based on play
patterns that will always exist for
children and then build upon that
with the storytelling and the content in
the media while hasbro has been part of
the entertainment industry for years
with blockbuster films like its
transformers franchise
its 3.8 billion acquisition of
entertainment one
is expected to triple the number of its
projects while a byproduct of the
pandemic may have been a resurgence of
traditional toys and games
analysts think that hasbro with its
diversified portfolio and storytelling
capabilities
might have an edge over its competitors
as consumers seek out new forms of
entertainment in an increasingly
digital world i think what we're seeing
now particularly through hasbro
is the like the de-seasonalization of
their business you're
bringing brands to life in the spring
you're bringing brands to life in the
summer and you're really anchoring that
around
gaming experiences digital experiences
entertainment
and you're less and less reliant on that
gift-giving season for children in
the holiday period
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