September 26, 2023

Game maker Hasbro.

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About three months after Hasbro completed its $ 3.8 billion acquisition of Entertainment One, the pandemic struck and weighed on the entertainment industry.

Covid ceased production and limited personal contact between the Rhode Island-based toy company and the Toronto-based studio known for “Peppa Pig” and “PJ Masks.”

Although Hasbro more than tripled the number of entertainment projects it worked on last year, the company has yet to fully leverage eOne’s capabilities as a manufacturing house.

The collaboration promised to transform Hasbro from a toy manufacturer involved in film and television into a full-blown media competitor with the ability to produce and distribute content worldwide. At a meeting with investors on Thursday, Hasbro revealed additional entertainment plans.

“With eOne, Hasbro has established preschool brands and a company that is able to develop entire series and films based on [in-house] IP, “said Eric Handler, director of media and entertainment equity research at MKM Partners.

While eOne’s sales declined in 2020, the fourth quarter earnings offered a positive sign for the future. Hasbro’s TV, film and entertainment segment saw sales of $ 214.5 million, up 20% as the company completed and monetized a number of projects with its TV partners. Still, like many others in the industry, it was forced to cut costs and recently laid off 10% of its film and television staff, or about 60 employees.

“Sometime between 2022 and 2023, you should see two to three of our films and three to four shows streamed every year,” said Brian Goldner, CEO of Hasbro. “And then we’ll scale that as we add new IPs as we also do the following seasons of the shows that we already have [created]. “

Hasbro stock fell from a 52-week high of $ 101.24 in mid-January. The stock closed at $ 90.91 on Wednesday, a year-to-date decline of 2.8% and a year-over-year increase of only 4.4% for a market value of approximately $ 12.46 billion.

Handler expects the entertainment business to grow in importance in the coming years.

“If you look at Hasbro in five to ten years from now, they will most likely still have a very strong toy business, but you will see a lot more contributions from movies, television, and video games with Wizards of the Coast,” Handler said. “You are seeing an emerging media story here.”

Entertainment is in its DNA

Hasbro is no stranger to the entertainment industry. In the early 1980s, the company and Sunbow Productions began creating animated series based on Transformers and GI Joe products. After a three-decade partnership, Hasbro has regained its animated series and started creating its own programs.

For the past decade, Hasbro’s franchises have hit the big screen. The Transformers films, produced in association with Paramount Pictures, grossed more than $ 4.8 billion at the global box office, and the two GI Joe films totaled nearly $ 700 million.

Other forays, such as Hasbro’s attempt to make a battleship film, were less successful. While “Battleship” made a profit at the box office, it was condemned by critics. The film scored only 34% on Rotten Tomatoes and was criticized as poorly written and too formulaic.

Transformers franchise

Source: Dreamworks | Paramount

Hasbro also created television shows for brands like Transformers and My Little Pony, which premiered on Cartoon Network, Netflix and YouTube.

“Hasbro really had no stop in the production and development of their own intellectual property, so many partners used them to bring their intellectual property to life,” said Darren Throop, President and CEO of eOne.

The company will continue to work on existing contracts with studios like Paramount. With eOne as their production company, Hasbro now has a dedicated team that brings their toys to life on screen. It’s number one priority, said Throop.

The Peppa Effect

Throops eOne is best known for its Peppa Pig programming, which was the best-streamed kids’ show last year, and Hasbro’s No. 1 licensed franchise, which sells over $ 1 billion worth of merchandise annually.

By generating engagement first through content, eOne was able to increase demand later through toys and consumer goods – a model that is set to be replicated in the future. While Hasbro has turned big franchises like Star Wars and Marvel into toys, most of its entertainment production has been based on turning its toys into content.

Throop said both strategies are equally effective.

Julian Parker | UK Press | Getty Images

In one case, fans are already familiar with a game or toy, and it is their nostalgia or love for the brand that leads them to buy movie tickets, tune into weekly episodes, or watch an entire season on a streaming service . The other strategy is to get consumers excited about a show or movie and then introduce products that they can buy based on the content.

With the acquisition of eOne, Hasbro can now do both on a large scale.

Independent of distribution

For the most part, this content will be based on Hasbro IP or a new creation from eOne that will later evolve into a toy line. However, Hasbro is not limiting eOne’s production schedule.

Prior to its takeover, eOne was the international distributor of titles such as “12 Years a Slave” and “1917” and produced titles such as ABC’s “The Rookie” with Nathan Fillion. Throop’s division is allowed to continue to move outside the toy industry to create content that is profitable without a consumer goods line.

EOne is already producing a show called “Cruel Summer” for Freeform and Amazon by Michelle Purple and Jessica Biel. It also released the movie “Happiest Season” on Hulu over the holidays. Financial terms for these deals were not specified.

Even if traditional media companies are increasingly switching to streaming services, Hasbro is not planning to start its own platform, according to Goldner. Instead, the plan is to take advantage of major entertainment brands like Disney, HBO, and Paramount, which offer competing services.

“We found that all major studios are streaming services and are increasingly sticking to their own IP,” said Goldner. “As an independent provider, we have the ability to bring top-notch, high-performance branded IP addresses to these streaming services like Netflix, Apple, Amazon, and several others who used to have access to other people’s content and are looking for great brands. “

Hasbro has dozens of projects in the works spanning theater, streaming, and cable releases. As “GI Joe: Snake Eyes” hits theaters, the animated series based on Clue goes to Fox.

“We’re agnostic about delivery,” Throop said. “We sell to everyone.”

Disclosure: Rotten Tomatoes is owned by Fandango, a subsidiary of CNBC owner Comcast.