It's all fun and games at Hasbro, the #2 toy maker in the US (after Mattel) and the producer of such childhood favorites as G.I. Joe, Play-Doh, Tonka toys, Mr. Potato Head, Nerf balls, and My Little Pony. Besides toys, Hasbro makes board games under its Milton Bradley (Scrabble, Candy Land), Cranium, and Parker Brothers (Monopoly, Trivial Pursuit) brands, as well as trading cards including Magic: The Gathering (through its Wizards of the Coast unit) and Dungeons & Dragons. Hasbro also makes Star Wars action figures; the company's the licensee of action figures and games for the the entire franchise. In addition to Disney and Disney's Marvel Entertainment, Hasbro licenses popular names and characters for other toys and games.
Hasbro rings up about 50% of its sales in North America. Europe is its largest international market, accounting for nearly two-thirds of overseas sales. Other important foreign markets for the toy company include Latin America and the Asia Pacific Region. Hasbro has operations in emerging markets including Brazil, China, Czech Republic, Korea, and Colombia.
Sales and Marketing
Hasbro relies on a few customers for more than a third of its sales. Wal-Mart (with 16%), Toys R Us (10%), and Target (9%) are its top three major customers. In the US, approximately 61% of the toy maker's net revenue is derived from these top three chains.
Except for a slight increase in 2011 due to positive currency exchange rates, Hasbro has reported flat or slightly lower revenue for years. It was $4.1 billion in 2013, down $7 million, not even 1%, due to disappointing results in its Beyblade, Marvel, and Star Wars licensed products for boys. My Little Pony, Fury, and other items for girls performed well and nearly balanced out the results. Net income fell 15% to $286 million as expenses, and an arbitration payout, rose against the flat revenue. Cash from operations, which had been holding strong against the flat revenue, gave ground in 2013 and posted a $134 million decline, taking it to $401 million. Cash used in accounts receivable and inventories was the main culprit, in addition to the reduced revenue and net income.
To ignite sales growth the toy maker is looking to revitalize its existing brands, while developing new ones on a global scale. In North America the company is looking to entertainment experiences such as movies, TV, publishing, and digital gaming to promote its brands. Beyond North America Hasbro seeks to expand in Eastern Europe and in emerging markets in Asia and Latin and South America.
Hasbro is looking for growth from The Hub, its multi-platform joint venture with cable programming giant Discovery Communications. The children's TV channel offers family and educational programming targeted at children ages 11 and younger based on Hasbro's brands, including G.I. Joe, My Little Pony, and Scrabble. The partners also run a website (hubworld.com) that features related interactive content. To supply its joint venture with content and programming, the company operates Hasbro Studios.
The TV and online venture exemplifies Hasbro's long-term strategy to extend its brands into the digital world via long-term partnerships. To that end, the company teamed up with Electronic Arts (EA) to create video game versions of some of its classic board games, such as Monopoly, Scrabble, and Yahtzee. Titles are available for major platforms, including gaming consoles, mobile phones, and PCs. EA has a full line-up of games that incorporate the toy maker's classic brands.
To further its digital strategy, the company purchased 70% of mobile game developer Backflip in 2013 and will purchase the rest if certain milestones are met. Backflip will continue to develop its own games while also turning out those based on Hasbro properties.
Hasbro also hopes to capitalize on a licensing agreement with Sesame Workshop to make Sesame Street toys and games with the rights to the Elmo, Big Bird, and Cookie Monster names. Hasbro has also been busy enlisting more superheroes to bring rival Mattel and its Barbie down a notch. Via its partnership with Marvel Entertainment, the toy maker has access to some 5,000-odd Marvel characters (such as Fantastic Four, X-Men, Captain America, and Ghost Rider) thanks to a licensing agreement with Marvel (signed in 2006) for the sale of Marvel-branded toys and games. Hasbro doubled down on its Marvel and Star Wars licenses in 2014 when it signed deals for all properties through 2020. The company also looked to its traditional brands for growth, launching a line of Nerf products for girls under the Nerf Rebelle banner as well as Doh Vinci branded arts and crafts products. It also introduced Nerf dog toys.
Mergers and Acquisitions
In 2013 as way to continue expanding its brands into the digital world, Hasbro purchased a 70% stake in US-based mobile game developer Backflip. It will purchase the rest of the company if certain milestones are met.