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Hasbro (HAS)Stock (Consumer Products Industry, Media & Entertainment Industry, Toys & Games Industry)
 Hasbro's broad range of internationally recognized products is rivaled only by Mattel (makers of Barbie). For Q1 2008 Hasbro reported total revenue of $704.2 million, up 13% quarter on quarter.[1] Bank of America estimates that as much as 30% of Hasbro's yearly revenue comes from sales of its top 6 brands, and as much as 15% from licensed products. Most analysts agree that the Marvel license will be profitable, but many also acknowledge the risk of guaranteeing Marvel a minimum of $205 million over 5 years regardless of sales. However, positive signs generated by the revision of retail expectations for the Iron Man, Indiana Jones, and Hulk movies to be released throughtout 2008, indicate higher potential sales for Hasbro's Marvel products.
[edit] Business OverviewHasbro, Inc. began as Hassenfeld Brothers, selling textile remnants in 1923, and entered the toy business in the 1930s. Currently the second largest U.S. toy company, Hasbro employs 5,800 people (3,200 in the U.S.) through its two business segments: North America and International. Hasbro sells toys through a wide portfolio of brands, including Transformers, My Little Pony, G.I. Joe and Playskool. As the world's largest producer of board games, Hasbro and its Parker Brothers, Milton Bradley and Wizards of the Coast brands have created such hits as Monopoly, Clue and Magic: The Gathering. The substantial majority of Hasbro toys are manufactured in China, although some components and accessories are manufactured in the U.S. and elsewhere. 52% of Hasbro's 2007 consolidated net revenue was generated through sales to its top 3 customers, Wal-Mart, Target and Toys R Us.[2] Hasbro's business strategy is to strengthen its "core brands" and enter into lucrative licensing agreements, while keeping an eye out for upcoming trends in a market that is very sensitive to customer whims. Bank of America estimates that Hasbro's 6 best selling brands account for up to 30% of its revenue, and sales of licensed products as much as 15%. In recent years Hasbro's licensing strategy has been to acquire licenses with corresponding major motion picture releases, especially blockbuster movies like Star Wars and Spider-Man.
[edit] Trends and Forces[edit] Rising Cost of MaterialsMost toys are made with plastics, so the toy industry is even more vulnerable to rising prices of the fossil fuels from which plastics are created. Hasbro generally establishes set prices each year for raw materials such as paper, plastics and cardboard, but these prices must be renegotiated in the event of severe increases in costs to their manufacturers. [edit] Age CompressionAs a natural part of growing up, kids trade their traditional toys for more sophisticated forms of entertainment such as video games and electronics. However, each year it happens at a younger age, so that the age range to market toys is shrinking. Age compression is a major issue across the toy industry and is not specific to Hasbro. [edit] Tapping the "Tween" DemographicAlthough they're no longer interested in playing house or cowboys and Indians, it is still possible to market toy products to the elusive 8 to 12 year old "tween". Children in this age range want to emulate their parents and older siblings, and thus are drawn to toys that facilitate a more sophisticated form of role-playing. [edit] Interactive and Electronic ToysHasbro was quick to discover the changing interests of the "tween" child, bringing products such as the ChatNow phone and iDog to market. However, it didn't take long for competitors to catch on, and the market is quickly filling up with interactive toys designed for a more sophisticated child user. In the long run Hasbro believes it can capitalize on the popularity of many of its brands by creating digital gaming content around them. However, instead of aiming for the console gaming market, where games can take 18 months and $15 million to develop, Hasbro is likely to aim for a more casual internet-based gaming market, where a $600,000 investment can turn out a product in 6 months.
[edit] Comparison to CompetitorsHasbro's broad range of internationally recognized brands is rivaled only by Mattel (makers of Barbie). This diversity of popular products helps to insulate Hasbro in an industry where customer whims rule; there is always pressure to come up with the next hit toy, like Furby or TMX Elmo.  As the toy retail industry shifts towards mass retailers such as Wal-Mart and Target and away from toy stores such as FAO Schwarz and KB Toys, Mattel and Hasbro, the two toy industry giants, enjoy an advantage over competitors. Their smorgasbord of popular brands and products allows them to claim the lion's share of shelf space dedicated to toys. Furthermore, the mass retailers do not keep much inventory on reserve, shifting the costs of product storage to the toy companies, who must maintain warehouses and keep supply chains moving efficiently to meet customer demand. A large company like Hasbro has an easier time shouldering these additional costs.  While Hasbro does distribute its toys through internet "e-tailers", the advantage here goes to smaller companies. With just one hit toy, smaller companies can draw traffic to their websites and thus give exposure to, and boost sales of, lesser known products. 
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