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What’s Going On Hasbro?

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First off, take everything I say in this article with a grain of salt. It is all speculative and my opinion alone. But the recent behavior shown by Hasbro has me wondering…

What’s wrong Hasbro?

Over the past year and a half, I have seen behavior from the toy giant that leads me to believe that it is in financial trouble. Again this is only speculation. But let’s go through some of Hasbro’s decisions as of late that drove me to my conclusions.

The Haslab projects

A lot of people took notice when start-ups began funding projects through crowdfunding. It is a lucrative way to bring in capital if you can market the campaign to the right audience. Campaign tiers made it even more appealing.  Allowing campaigns to reward backers for the level of assistance they are comfortable supplying. In essence a pre-order for a product not yet available.

Well-established companies saw this as an opportunity. An opportunity to fund dream projects that have little to no chance at retail. At least that was the initial thought.

Hasbro began its crowdfunding journey with Jabba’s Sail Barge Haslab. A behemoth playset that sold for $499 USD. It met its goal of 5000 backers easily and indicated to Hasbro that fans were willing to fork out big money for one-of-a-kind items. Then came the Transformers: War For Cybertron Unicron, X-Men Legends Marvel’s Sentinel, and a slew of others.

The first few projects were funded in a matter of days. With the exception of the Haslab Cookie Monster. It failed miserably. So much so, you don’t even see it on the Haslab homepage. But being a very niche product, it wasn’t too much of a surprise. Unfortunately for Hasbro, they began dipping into the Haslab cookie jar way too often to the detriment of future projects.

The first project to fail in a surprising fashion was the Star Wars Rancor. It missed its goal by approximately 500 backers. Many factors had pointed to its failure. From the price to poorly thought-out tiers, the timing, the amount of Haslab campaigns underway, and the impact of the last Haslab funded just a month prior. Was it greed, poorly executed campaigns, or something else? Whatever the case, it began a domino effect in which Haslab projects weren’t considered a sure thing anymore. Many more failures followed. Out of 16 proposed projects, 5 didn’t fund.

These projects are a good barometer of how the Hasbro teams see their customers. At some point, they saw the crowdfunding space as an endless cash cow that was always ready to be milked. Until the milk ran out and they needed to allow the fan space time to breathe before hitting them with another Haslab project. Then Hasbro tried a different tactic, slow things down but price them higher. As the Ghost Rider Engine of Vengence has taught us, this is a misstep as well.

So why crowdfund at all?

It does a few things for Hasbro. First, a crowdfunded project looks good in the books. They are presold inventory that can make quarterly financials look just a little bit better. Are they significant? Probably not, but that is why Haslab tried funding 3 different projects at the same time. Having 5 or 6 Haslabs in production could account for about $40 to $50 million in preorders. It is also a smart marketing initiative. Whether the project funds or not, the marketing cycle gets the word out to fans and collectors alike. From news articles to YouTube videos. It is a great way to get unsolicited marketing. And finally, it allows Hasbro to stay in touch with its core consumers.

Net revenue and earnings are down year-over-year

Hasbro has had it tough over the past year. Revenue and Earnings keep dropping. Shares of Hasbro lost significant value after it reported a steep drop in earnings for the third quarter, reaching their lowest level since 2015. A trend that Hasbro has had a hard time adjusting for. On November 18, 2022, the stock was trading at $59.52. a significant drop from the $82.47 it was trading at in September. Was inflation to blame? That was the easy answer, but I think it goes much deeper than that.

Price Hikes

Hasbro toys, specifically action figures have seen a steady increase. From a price of about $20 three years ago to $29 now. It is even worse here in Canada. We have seen an increase from $24.99 to a rise of $44.99. Yes, you read that right. After taxes, you are paying 50 bucks a figure. Long gone are the days when you could buy a G.I. Joe for under 5 bucks. So why the sudden increase? Inflation could be one factor, but I feel Hasbro is playing the short game. They are selling to retailers at an inflated price to help balance the books in the short term. They are doing so by offering the big retailers exclusives. Yes exclusives, the bane of all collectors.

How are those pegs Hasbro?

The issue with playing the short game is that in the long run, things tend to balance out. I don’t know when I’ve seen so many peg warmers filling up toy shelves. Hasbro product doesn’t sell like they used to. The quality is there, and the fan base is there, but the price unfortunately is prohibitive. As a collector, spending 50 bucks would bag me 2 maybe 3 different figures. Now I walk away with 1. This forces me and the consumer for that matter to be a lot more critical of what they buy.

So what got us here?

Licensing. Pure and Simple. Hasbro has leaned into licensing more so than any other toy company. Licenses to note; Disney’s Marvel Legends, Star Wars, Indiana Jones, as well as NBA, Ghost Busters, Power Rangers, and the list goes on. These licenses are expensive. Especially if they are coming from the Disney Empire. Would Hasbro dare to lose any of these licenses? Of course not. It’s their bread and butter. But can they sustain poor sales in a market they alone created? I feel they can’t unless significant changes take place. And some of these changes have started to take place, like the removal of all plastic packaging.

The D&D Fiasco

When a company is desperate, the bean counters try to get money from every corner of the company’s coffers. So where did they look next? They looked right at a brand they purchased back in 1999. Wizards of the Coast. And more specifically Dungeons and Dragons. Leaked earlier this week, some Executive at Hasbro thought it would be a good idea to change and maybe even remove the open gaming license that allowed hobbyists to create their own characters and stories under the Dungeons and Dragons ruleset. Effectively making any and all IP created under the open gaming license agreement now belong to Hasbro. As well, publishers using the aforementioned ruleset must pay Hasbro a 25% royalty fee for all sales. This has caused a shitstorm in the D&D community. With some actually pursuing a lawsuit if Hasbro goes forward with the change.

What now Hasbro?

In conclusion, Hasbro seems to be going through a rough patch that is only going to get worse. Are they in financial trouble? Most likely. Will they sell the company? Probably not. But there are a couple things they can do to right the ship. Stop the utter dependence on licensing. Sure a few licenses are fine, but when it means overpricing your product to a point of unaffordability, then you have gone too far. With the loss of Toys R Us in the States, make a push to smaller retailers. Make it profitable for them to carry your product. Mattel seems to do this well. Learn from them. And lastly, listen to your fanbase. We are the ones that spend the money, not Walmart, not Target. Us. The consumer. Keep us happy and you will see your stock price steadily rise again.

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