Hasbro Enters the Movies

Marco BoassoRyan HuelsmannTim Stewart

INTRODUCTION

Company Background Management Competitors Financial Highlights Alternatives Decision Making How Hasbro Entered the Movies Hasbro’s Role Results

Company Background

Founded in Providence Rhode Island in 1923 Hassenfeld brothers – Polish immigrants Company first operated as textile remnant

business Started making school supplies “Transformed” into making toys from 1930s to

1960 1952 Mr. Potato Head (first toy to advertise on

TV) 1964 G.I. Joe – in 2 years it accounted for 2/3 of

company sales - $40 million

Company Background

1968 went public 1975 discontinued G.I. Joe Company in poor financial situation by 1979 1982 G.I. Joe returned 1984 Transformers toy line is launched as

well as cartoon 1980s and 1990s major acquisitions took

place▪ GLENCO – infant products▪ Knickerbocker Toy Company – Raggedy Ann and

Andy dolls

Company Background

▪ Milton Bradley – 1984▪ Coleco Industries – Cabbage Patch Dolls▪ Tonka Corporation and Tonka’s Parker

Brothers unit, the maker of Monopoly▪ Kenner Products – Batman figures and

Strawberry Shortcake doll▪ 1991 - Established operations in Greece,

Hungary, Mexico▪ Nomura Toys – Japanese toymaker

Company Background

1995 Mattel approached Hasbro for merger▪ Hasbro board turned it down due to fear of antitrust

issues 1997 Hasbro purchased license for Star Wars

$600 Million and gave 7.4% stake of company Steep losses from drop offs in Star Wars toys

and Pokemon cards in late 20th century and early 21st

21st Century - Company started refocusing on traditional toy lines – G.I. Joe, Monopoly, Mr. Potato Head

Management Team 2005

Alfred J. Verrecchia ▪ President and CEO▪ COO from 2001 to 2003

Brian Goldner ▪ Chief Operating Officer▪ Executive Producer of the first

Transformer movie▪ Chief Architect of brand drive movies

David D.R. Hargreaves ▪ Chief Financial Officer

Competitors

Mattel▪ Barbie▪ Hot Wheels▪ Fisher Price▪ American Girl

JAKKS Pacific▪ Club Penguin▪ Hello Kitty

Financial Highlights from 2000 to 2005

HASBRO (In thousands)

2000 2001 2002 2003 2004 2005

Net Rev

$3,787,215

$2,856,339

$2,816,230

$3,138,657

$2,997,510

$3,087,627

OpProfit

($104,277)

$211,330 $219,291 $344,616

$293,012 $310,521

Margin (.2%) 7.4% 7.8% 11% 9.8% 10.1%

MATTEL (In millions)

2000 2001 2002 2003 2004 2005

Net Rev $4,565.5 $4,687.9 $4885.3 $4,969.1 $5,102.8 $5,179.0

Op Profit $370.6 $579.3 $733.6 $785.7 $730.8 $664.5

Margin 8.1% 12.4% 15% 15.8% 14.3% 12.8%

Alternative 1: Buying Brands Hasbro has a

history of purchasing companies and their brands Milton Bradley

(1984) Tonka Corporation

with Parker Brothers and Kenner Brothers (1991)

Wizards of The Coast (1999)

Alternative 1 Continued

Pros More product

brands for a diversified brand portfolio

Expand their limitations with Hasbro’s capital/knowledge

Cons Costly Underperforming

brands

Alternative 2: Licensing

Entering into Licensing agreements LucasFilms’s Star

Wars Marvel’s Avengers Sesame Street

Workshop

Alternative 2 Continued

Pros Have access to

successful brands Focus on creating

toys/games instead of creating new brands and brand identities

Cost effective

Cons The shows/movies

may not be successful thus the product lines will falter as result

Product line can still falter despite success of brand. Remember Lego and Harry Potter

Limited supply of brands available to be licensed

In the 80’s, Hasbro had two animated series and comic books showcasing : G.I. Joe A Real American Hero (1984) and Transformers (1984)

In addition, spinoffs of these series were created during the 90’s & early 00’s showcase on various television networks, animated movies and comic books.

On 10/10/10, the Hub was launched. A joint venture between Hasbro and Discovery Communications to

launch more programs showcasing its various brands.

Alternative 3: Television Series/Spinoffs

TRANSFORMERS 80'S THEME

Alternative 3 Continued

Pros Successful strategy that

worked in the past Variety of animation styles Best example would be

Transformers spinoff Transformers:

Beast Wars (96-99)

Cons Limited control over

networks such as time slots

Show could get cancelled product line will not succeed. G.I. Joe Sigma Six lasted 14 episodes.

Lots of competition against other networks TV programming

Alternative 4: Featured Films Building off the brands’

successes from the past, Hasbro now enters the realm of featured films to extend these brands to new heights

Aligning with certain studios that will respect the brands such as Paramount/DreamWorks and directors that can deliver such as Steven Spielberg or Michael Bay

Transformers Trailer

Alternative 4 Continued

Pros Expanding market share New technology in

movies vs. the anime from the 80’s

Revive/create new product lines

Semi-familiar with the entertainment industry through TV programs

Don’t have to worry about networks competing against TV programs

Cons Cost New area for Hasbro

by going into this venture

Not finding the right creative talent who will respect the brand or deliver an exciting movie

Die hard fans disappointed or upset with the movie

How Hasbro Entered the Movies

Brian Goldner Joins Hasbro in 2000

Success of Spider Man movie reinforces idea of brand name could resonate as a motion price

Goldner vision “re-invent, re-ignite, and re-imagine core brands to create new experiences for consumer

How Hasbro Entered the Movies

Studios rejects Hasbro Transformers concept In 2003, Goldner contacts Bonaventura of

Paramount Pictures about using GI Joe brand Producers Don Murphy and Tony DeSanto

optioned the film rights and began writing a Treatment for Transformers

Steven Spielberg signs on as Executive Producer

DreamWorks Studios sold to Paramount’s Parent company Viacom

Hasbro Role: Transformer School Spielberg recruits

Michael Bay as director

Bay travels to RI and meets with Goldner to learn:▪ What Transformer

brand is about ▪ Stories that had to be

told▪ Family tree of

characters and how they relate with each other

Results: Transformer the Movie Movie released and becomes blockbuster

hit during summer of 2007 Grosses more than $700 million worldwide Spurned 2 sequels that debuted in 2009

and 2011 Laid the groundwork for other Hasbro

brands to enter the big screen Re-sparked the brand on a massive scale

that other brands like Kre-O work solely adjunct to the Transformers brand

Results Hasbro MoviesMovie Domestic

Gross ($)Foreign Gross ($)

Total Worldwide Gross ($)

Opening Weekend ($)

Awards

Transformers (2007)

319,246,193 390,463,587

709,709,780

70,502,384 with #1 in 4,011 theaters

Nominate for 3 Oscars

Transformers: Revenge of the Fallen (2009)

402,111,870 434,191,823

836,303,693

108,966,307 with #1 in 4,234 theaters

Nominate for 1 Oscar

G.I. Joe Rise of Cobra (2010)

150,200,000 151,800,000

302,000,000

54,700,000 None

Transformers: Dark of the Moon (2011)

352,390,543 770,805,646

1,123,196,189

97,852,865 with #1 in 4,088 theaters

N/A

Results: Upcoming attractions GI Joe 2 Retaliation Battleship Ouija Monopoly Clue

Risk Stretch Armstrong Candyland Micronauts

Results: Revenue from Transformer Movie

No money from box office revenue Revenues from movie tied to product

sales: Transformer toy sales for 2007: $470

Million up from $30 million when Goldner joined

in 2000

Results: Financial Performance (in thousands, except per share data)

2006 2007 2008 2009 2010

Net Revenues

$3,151,480 $3,837,557 $4,021,520 $4,067,947 $4,002,161

Operating Profit

$376,363 $519,350 $494,296 $588,598 $587,859

Operating Profit Margin

11.9% 13.5% 12.3% 14.5% 14.7%

Net Earnings

$230,055 $333,003 $306,766 $374,930 $397,752

EPS (Diluted)

$1.29 $1.97 $2.00 $2.48 $2.74

Cash & Cash Equivalents

$715,400 $774,458 $630,390 $636,045 $727,796

Long-term Debt (current portions)

$494, 917 $845,071 $709,723 $1,131,998 $1,397,681

Questions????