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WIKI ANALYSIS
Hasbro, Inc. (NYSE: HAS) is the second largest U.S. toy company, behind Mattel (MAT) by revenue, with a portfolio of brands and products in the toy market that target traditional trading card and board-game audiences, family game consumers, and educational/developmental toy consumers. Its core brands include the educational toy line Playskool, trading-card and role-playing games Magic: the Gathering and Dungeons and Dragons, traditional board and family games Monopoly, Battleship, and trademarked franchises such as Star Wars and Marvel action heroes. The company reported global net sales of $4 billion in 2010 and net earnings of $398 million.[1]
As a toy company that focuses mainly on delivering traditional gaming experiences through board games and role-playing games, Hasbro faces increased pressures from age compression of its core demographic as children turn to more sophisticated gaming experiences offered by electronic media at an increasingly younger age. The company has increased more of its focus on the entertainment industry and on its popular movie franchises Transformers, Iron Man, and G.I. Joe.
Company Overview
Hasbro's gaming products are delivered through different media, including traditional board and card, role-playing, hand-held electronic, and DVD games. In addition to products crafted purely for entertainment purposes, Hasbro also offers electronic learning aids and puzzles.
Business Segments[2]
Hasbro divides its business into three segments:
- U.S. and Canada (60% of revenue)
- Boy's Toys (36% of revenue): Core brands include Brony stuff,GI Joe, Transformers, Star Wars, Marvel, etc.
- Games and Puzzles (33% of revenue): Major brands include Cranium, Trivial Pursuit, Monopoly, Battleship, Game of Life, Scrabble, Risk, and others. Core role-playing and trading card games include Magic: the Gathering and Dungeons & Dragons.
- Girl's Toys (19% of revenue): Core brands include Littlest Pet Shop, Strawberry Shortcake, My little pony/etc
- Preschool Toys (11% of revenue): Core brands focus on aiding growth and development of infant and preschoolers and are mainly marketed under the Playskool trademark. Examples of popular products in this category include Mr. Potato Head and the Ages & Stages system, which seek to help children and parents during each stage of infant and child development.
- International (36% of revenue)
- Entertainment and Licensing (4% of revenue): Revenue from this segment represents growth in lifestyle licensing, digital licensing, movie, television, and online entertainment revenues.
Business Growth
FY 2010 (ended December 26, 2010) [1]
- Net sales decreased 1.6% to $4 billion.
- Net income increased 6% to $398 million.
Trends and Forces
Turning Toys into Movies Means an Expanded Market for Hasbro
The movie industry has proven to be extremely profitable for Hasbro. The company has reaped the benefits of its movie franchises Transformers, Iron Man, and G.I. Joe. The demand and popularity of movies based on toys and comic book characters has increased since the turn of the century and Hasbro has been there to fill the need. Toys and comic book characters have the appeal that they have been in existence for so long that many generations of people, mainly males, can share a bonding experience over an ageless medium. The increased popularity of these movies means higher revenues for Hasbro. The market for toys based off these movies has proved to be very profitable as well.
Age Compression Forces Hasbro to Target the Lower-Margin Tween Demographic, but Face Competition with Popular Video Games
As 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. This forces Hasbro to target the "tween" 8-12-year-old demographic in order to maintain its market size through selling electronic-based games, which have a shorter lifespan and lower margin.
Games and Puzzle Revenue Depend on Constant Demand of Classic Games
A third of Hasbro's revenue comes from the sale of games such as Monopoly, Battleship, and Scrabble. However, these popular classic games have been around for decades and by now millions of these games are sitting in homes all across the world. These games can be passed down from generation to generation without losing its appeal or fun. As a result, the demand for brand new sets of these games tends to fall. Thus it is up to Hasbro to be innovative in trying to keep up the demand for these classic games.
Competition
Hasbro's broad range of internationally recognized brands is rivaled only by Mattel (MAT). Mattel designs and manufactures and markets toy products worldwide through large retailers as well as directly to consumers.
- Focus on Trademarked Franchises: Like Hasbro's royalty relationships with the Marvel, Star Wars, and Transformers franchises to market toys and collectibles based on these popular icons, Mattel has alliances with several profitable franchises, including Disney Classics, High School Musical, Batman, Kung Fu Panda, and Dora the Explorer.
- Brand: Similar to Hasbro, Mattel also markets toys in Girls' and Boys' categories, including its renowned Barbie dolls and accessories for girls as well as its Hot Wheels and Tyco R/C.
- Educational: Competing directly with Hasbro's Playskool core products, Mattel's Fisher-Price and Sesame Street brands focus on developmental and educational toys targeted toward parents of infant and preschool-aged children.
References
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