It's More than a Game

It's More than a Game

We are long-term investors here at MyWallSt and recommend companies that we believe will have consistent growth for years to come. Updates are an opportunity for us to reaffirm our stance on a company while keeping you up to date on its developments. By renewing our comments with the latest information, we ensure that investors have confidence in our selections, regardless of their start date.

One of the strangest fads of our current day is Funko Pops, vinyl figurines of any and every pop culture character under the sun. Their manufacturer, Funko, prides itself on carrying over 1,100 licenses and creating figures of Betty White and the ‘Golden Girls’, a yellow marshmallow Peep, Mr. Bean with a turkey stuck on his head, in addition to the benign and ordinary cast of ‘Harry Potter’, ‘Ghostbusters’, and ‘Jurassic Park’. One thing fans of Funko Pops may notice though is that if they pick up a character belonging to the Marvel Cinematic Universe, such as Captain America or Baby Groot, it won't be a mere figurine but a bobblehead. This is because Hasbro got there first.

Hasbro owns the license to all Marvel action figures. In order to get around this license, Funko was forced to differentiate their figurines to make it clear they were for display purposes and add a disclaimer on the bottom of the box. The same rule applies to characters in the Star Wars universe, which Hasbro has owned the master license to since purchasing Kenner Products in 1991. This is an example of how Hasbro has grown to become one of the most dominant players in the toy and entertainment space: control intellectual property that the public loves.

Like Disney, which has spent the last decade building an empire of IP and products centered around it, Hasbro has attempted to license or buy just about any brand that kids and adults will spend money on. Today, this includes partner titles like Marvel, Star Wars, and Roblox, but also self-owned franchises brands like ‘Peppa Pig’, ‘Power Rangers’, ‘My Little Pony’, ‘Magic: The Gathering’, ‘Transformers’, ‘G.I. Joe’, NERF, ’Dungeons & Dragons’, in addition to its retro titles like Monopoly, Furby, and Stretch Armstrong. All of this means that Hasbro can create toys that consumers will love and are already familiar with, giving it an undeniable advantage over competitors.

That being said, the real growth for Hasbro is no longer just toys, but rather how these legacy toy brands can find new and lucrative ways to constantly capture the public's attention. Luckily, Hasbro would appear to have a strategy for just that.

Coming out of the pandemic, the shining star of Hasbro's most recent earnings report was ‘Magic: The Gathering’. The 90s collectible card game was recently adapted into a mobile app whose demand "exceeded the company's expectations" and increased user spending. Magic belongs to Hasbro's Wizards and Digital segment, which in Q2 2021 saw revenue and operating profit jump by more than 100% year-over-year, thanks to some lucrative releases of booster packs and growing player numbers. One analyst even stated his belief that Hasbro is no longer a toy company but rather a "geek game company with toy and entertainment divisions" but I wouldn't go so far. While Hasbro has expertly managed the resurgence of its fantasy card games, demonstrating why a diverse product offering is so important, the company's focus remains holistic and would appear to include a few cinematic universes.

In a move that I'm going to call the reverse-Disney, Hasbro recently acquired Entertainment One with the goal of producing a number of television shows and films centered around their famed IP. Rather than creating the merchandise for a film, Hasbro is going to allow their merchandise to spawn a film, a move that proved successful in the past with the Transformers franchise. By placing these productions on streaming services, Hasbro is hoping that existing fans will be excited, new fans will be acquired, and money will pour into all three of the company's segments: consumer products, wizards and digital, and entertainment. In summation, Hasbro wants to create a content and product cycle, which will keep consumers in contact with the brand for longer and generate more revenue.

So while short-term investors are excited by the growth in a single segment, helping the company grow overall revenue by more than 50% and recover from the pandemic, long-term investors should see a much larger opportunity for growth. Hasbro has already penned deals with Netflix for ‘My Little Pony: A New Generation’ and the ‘Magic: The Gathering’ T.V. show, set to debut in 2022. While COVID-19 temporarily slowed these productions, they are now on track and will be the first test of the company's efforts to create its own universe. Eager investors should definitely keep a watchful eye.

In light of Hasbro's recent moves, we have updated our comments on the stock. To read them, click on the stock button below.

Anne MarieAnne Marie

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