The Energon Pub

[william-james88]

While we may think of Hasbro as a toy company, they have been trying to evolve into an IP driven company with a lot of digital content for gaming. And the recent Q2 earnings call (from end of July) showed that the company is finally in that space, with kids' toys almost becoming secondary in nature.

The bulk of increase in revenu came from the gaming and digital spaces, as indicated below:

Revenue increase of 20% driven by the launch of MAGIC'S Modern Horizons 3 set and continued strength in Licensed and Digital Gaming revenue behind Monopoly Go!, Baldur's Gate 3 and a benefit from an international publishing deal.
Tabletop revenue increased 3% behind growth in MAGIC: THE GATHERING.
Operating profit increased 74% and operating profit margin of 54.7% due to higher digital licensing revenue mix of revenues and lower royalty expense.

The Transformers brand was also talked about favorably. However, check how they refer to Transformers not in terms of toys, but in terms of entertainment. This is because a bulk of revenue will be coming from the upcoming Transformers 1 movie and its merchandise.

FURBY, PLAY-DOH and G.I. JOE performed well in the quarter; momentum building for 2H innovation in Beyblade and TRANSFORMERS entertainment.

So yes, adults (and teens) are now the main demographic using products that give Hasbro money. However, it's not mainly due to them spending money on toys but more on gaming and digital experiences. As you'll see below, when it comes to physical toys, Hasbro is still more focused on kids, which matches data of physical toy consumption from PYMNTS Intelligence.

“It’s about skating to where the puck is going as opposed to where the puck has been,” CEO Chris Cocks said. “I think physical products kids will always be important. But when you look at what the mega trends are inside of the business of play, play is aging up, play is going more international, it’s going more digital, it’s going more direct.”

The company generates over 60% of its revenue from consumers aged 13 and older, a group described as “kidults,” indicating a strong following among teenagers and adults. This demographic’s engagement is driven by a mix of digital innovation and strategic licensing partnerships. Hasbro’s ability to cater to this audience through products like Magic: The Gathering and digital platforms like D&D Beyond shows its adeptness at tapping into the interests of older consumers.

Still, PYMNTS Intelligence research finds that parents are hobby goods companies’ best customers. The study “The Last Transaction: Family Spending Habits Reveal Merchant Opportunities in Retail and Travel” found that 16% of those who are married with children in the household cited books, music or hobby goods as their most recent non-grocery retail purchase. This share was considerably higher than the 3% of those who are single and living with children, the 6% of those who are married and not living with children and the 10% of those who are single without children at home who said the same. Still, it is notable that the final group represents the second-greatest engagement.

Source from Hasbro: https://investor.hasbro.com/news-releas ... al-results

Analysis by PYMNTS Intelligence: https://www.pymnts.com/earnings/2024/ha ... e-digital/

[SkyWarpt]

Well…that’s kinda what happens when you barely stock shelves with a physical product for over a year. It’s called missed opportunities for sales.

[First-Aid]

A while back, Forbes published a list of the most profitable business markets. Near the bottom of the list, based on percentage of profits were grocery stores (profit margin of 1 cent for every dollar invested) and insurance (1.8 cents for every dollar invested). Sadly, businesses that were essentially set up to LOSE money included medical clinics (-6 cents for every dollar invested). Number 2 on the list was chiropractic care with 34 cents profit for every dollar invested. The top? Entertainment industry with nearly 88 cents profit for every dollar invested. In 2018, the entertainment industry added $2.2 TRILLION to the US economy. Considering the total economy that year was $20 trillion, that's over 10%. In contrast, the toy market is roughly $40 billion. That's less than 2% of the entertainment market gross and 0.2% of the national GDP. It's not that Hasbro is making and selling less solid product, it's that the entertainment/IP industry generates 50 times the income of the toy industry and is growing rapidly as a percentage of their business model. After looking at these numbers, I'm a little surprised that it's ONLY 60% of their income and not more, but they are pretty much just not expanding into that market.

[cloudballoon]

It's just a fact that kids are interested in less and less physical toys. It's all about phones/tablets/consoles. Other toy makers are smart in making better toys to create a "want" to increase buying interests. Hasbro on the other hand just mostly flood the market with more and more crappy (for kids & adults collectors) toys and laser-focus on cost savings. TF's collector lines (MP, MPM, CHUG & SS) mostly escaped that fate, thankfully. But still there are way too many gimmick lines for kids/parents to choose from, and sometimes at too similar price points, retailers are afraid to carry all the lines, distributions become a problem.

Yeah, I'm surprised it's only 60% too.

Man I hope Hasbro would be open to license out TF to licensees to make transformable TF figures that's better at their game than Hasbro. If for nothing but to root out the Chinese 3P market if the licensees can do just as good a job as those 3P but Hasbro would at least get the licensing money.