Hasbro evolves to remain profitable

The toy business is changing again—dramatically—and Hasbro is at the helm of its most recent evolution. After announcing layoffs of 170 employees here at home and abroad (see our previous post of March 7), the creator of such classic toys such as GIjOE and Mr. Potato Head is now attempting to fight its way back from of the effects of a struggling national economy and sluggish sales, by morphing itself into a new entertainment/licensing/merchandising COLOSSUS.

Using star power to sell toys, Bruce Willis is shown in a scene from Hasbro's upcoming movie, "GIjOE Retaliation." (Photo: Hasbro-Paramount)

With all of its media guns blazing, Hasbro appears to doing well so far. By creating its own entertainment vehicles (TV shows, animation, films, etc.), while similtaneously owning all the licensing and merchandising rights, it has cast a much wider net for potential future profits.

For example, their franchise-based movie “Transformers” grossed 2.6 BILLION worldwide and the first GIjOE movie earned over $302 million. That’s some serious moolah! Plans for films based on Stretch Armstrong and the Candyland board game are also in the works. Hasbro has even created its own TV channel known as “The Hub” which is akin to running commercials for itself 24/7. Every base is being covered. And every possible avenue for profits is being controlled—by Hasbro.

Poster from Hasbro's upcoming movie, "Battleship," clearly inspired by their classic 1960s board game of the same name. (Photo: Hasbro-Paramount)

As the exclusive rights holder to such famous properties, it seems as if Hasbro should be garnering tremendous profits at every turn. But with the increased ownership (of everything) comes increased risk. When a TV show or movie flops, its toy line sits on store shelves unsold and the resulting financial losses can be quite heavy.

In addition, trends indicate that children nowadays are simply playing less with toys. Modern-era distractions such as video games, cell phones and the Internet are causing many children to grow up more quickly, leaving less time to simply PLAY. It’s an alarming trend that hasn’t escaped the notice of toy makers like Hasbro.

But Hasbro has high hopes for its new approach to the toy industry and their business in general. According to Reyne Rice, a “toy trend expert” quoted in a recent New York Times article

Hasbro plans to base an entire movie on the classic 1970s toy, "Stretch Armstrong." Introduction of a new/old toy line can't be far behind. (Photo: Kenner-Hasbro)

“Hasbro is ahead of its competitors with its brand strategy. By investing in their own properties, they are making the company more profitable. It becomes a revenue stream for them in the form of royalties from licensed products.”

This business trend is quickly becoming the new norm. Hasbro has even announced the opening of a new Transformers ride at the Universal Studios in Hollywood. And in the same NYT article, Hasbro’s Chief Executive, Brian Goldner states…

“Our four movies made $3 billion at the box office. But we made $1.6 billion in sales of merchandise because we own the I.P. and all the merchandising rights.”

Hasbro has clearly jumped in with both feet. But its new “own it all” approach to business and merging with the entertainment industry comes with great risks. Hollywood will tell you that each new film release is a huge gamble, nothing is ever guaranteed. But if successful, the financial rewards can often be HUGE—for those who own the rights. But seriously guys…Candyland?

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