transcript july 21, 2008 hsbro earnings conference call and business overview

Storminator · Jul 29, 2008

joethelawyer said:
Again, these meetings are where you toot your horn and make small achievements seem bigger than they are to impress financial analysts at the big wall street firms.

i guess in the eyes of hasbro DnD (to quote an old high school teacher) is just a pee hole in the snow.

joe

If I had limited call time, I'm pretty sure that I'd stick to Iron Man, the Transformers, Star Wars, Monopoly, and apparently Littlest Pet Shop. I'm hard pressed to imagine a D&D fan that would seriously put D&D sales in that company...

PS

Korgoth · Jul 29, 2008

Remathilis said:
Fine by me; less Hasbro people mucking with D&D and M:TG, the better.

I think you'll only ever see Hasbro mucking with D&D if WOTC has a couple bad quaters. Then they might get told to trim the fat.

keterys · Jul 29, 2008

Thanks for posting this. Very interesting.

manhammer · Jul 29, 2008

Along a similar vein, Wizards of the Coast was conspicuously absent from San Diego Comic Con this year. A person at the Hasbro booth said they were gearing up for Gencon. I have been attending SDCC since about 1991 and I can't remember D&D not being there.

My opinion is that there are real concerns to be had with the health of the brand.
I feel that if 4th edition and more importantly (I believe) Insider doesn't perform to Hasbro expectations they will probably divest themselves of the brand.

As we have all seen this can be good and bad.

Personally, I think the Gleemax closure and the fact that the Character Creation portion of the Insider are really BAD signs.

Thanks for the info. Cool to see everyone's reactions.

Dedekind · Jul 29, 2008

Son_of_Thunder said:
So I wonder if Hasbro believes the RoI is worth it.

I would speculate almost certainly. At tops, Hasbro needs to net 12% profit from WotC to meet expectations (they are about 50/50 debt and equity).

There is likely some short term shortfalls from D&D, but with MTG, DDMinis, Star Wars and the other CCGs, it is not too big of hit. Further, book margins are pretty good (it's the inventory costs that get you). Even if 4e core books are slimmer margin to entice buyers, the rest of the books for the year will probably be the full margin and a high volume. (The core books are high volume also.)

From the annual report, I think HAS expects DDI to become a cash cow. $10 a month equal $1.2 million sales a year for every 10,000 users. If we define a successful DDI as one that puts out a Dragon's and a Dungeon's worth of material a month plus a game table, we already know the content can be profitable at $10 a month (given the cover prices of Dungeon and Dragon). (Less leasing revenue or whatever to Paizo.)

I will grant that HAS has been doing so well that 12% may be low compared to the other divisions and WotC may come under pressure to do better. But it certainly isn't a drag on Hasbro and that means a lot.

Dedekind · Jul 29, 2008

manhammer said:
Along a similar vein, Wizards of the Coast was conspicuously absent from San Diego Comic Con this year. A person at the Hasbro booth said they were gearing up for Gencon. I have been attending SDCC since about 1991 and I can't remember D&D not being there.

They may also be scrambling to get ready for GenCon since there was some uncertainty over them attending. It wasn't for sure until... April? May? I just recall there was the Lucas Arts lawsuit with GenCon that prevented Hasbro from participating.

Umbran · Jul 29, 2008

joethelawyer said:
if 4e really did well they would have been talking about it here.

"Well" is a relative term. It may be that 4e has done very well indeed, for what it is, and still not be an issue worth mentioning in this call. Note that their overall revenues seem to have been over 3/4 of a billion dollars for the quarter. That means they're pulling in a quarter-billion dollars a month! Probably much more in the winter holiday season.

D&D simply isn't big enough to merit a mention in that kind of revenue stream.

What this call does is give us a sense of proportion. Economically speaking, our hobby is a blip. Get used to it.

Scurvy_Platypus · Jul 29, 2008

Umbran said:
What this call does is give us a sense of proportion. Economically speaking, our hobby is a blip. Get used to it.

There was belief that the hobby (or even the industry) was anything other than a blip?

I've known that for the past 2 decades. I thought this bit in MSNBC would have kinda confirmed that too...

http://www.msnbc.msn.com/id/23903817/ said:
D&D had about six million players worldwide last year, according to a survey by Wizards, though Rouse said the figure may be somewhat inflated. Many of those players probably yield little revenue for the company. The gamers buy books and sometimes miniatures, but only one player in the group needs to own a copy of each book.

Wizards does not reveal sales figures, but Pramas estimates the overall market for traditional role-playing games at $30 million annually.

Son_of_Thunder · Jul 29, 2008

Dedekind said:
I would speculate almost certainly. At tops, Hasbro needs to net 12% profit from WotC to meet expectations (they are about 50/50 debt and equity).

There is likely some short term shortfalls from D&D, but with MTG, DDMinis, Star Wars and the other CCGs, it is not too big of hit. Further, book margins are pretty good (it's the inventory costs that get you). Even if 4e core books are slimmer margin to entice buyers, the rest of the books for the year will probably be the full margin and a high volume. (The core books are high volume also.)

From the annual report, I think HAS expects DDI to become a cash cow. $10 a month equal $1.2 million sales a year for every 10,000 users. If we define a successful DDI as one that puts out a Dragon's and a Dungeon's worth of material a month plus a game table, we already know the content can be profitable at $10 a month (given the cover prices of Dungeon and Dragon). (Less leasing revenue or whatever to Paizo.)

I will grant that HAS has been doing so well that 12% may be low compared to the other divisions and WotC may come under pressure to do better. But it certainly isn't a drag on Hasbro and that means a lot.

I agree about DDI. There is some guaranteed revenue IF, big IF, they get it to work. I just don't know at this point though.

Dedekind · Jul 29, 2008

Interesting. So, if WotC can get 1% of the 6 million player population to do DDI at $10 a month then that would be $7.2 million a year. A significant boost for WotC (albeit tiny for Hasbro).