WotC Hasbro Bets Big on D&D

During today's 'Hasbro Fireside Chat', Hasbro's Chris Cocks, chief executive officer, and Cynthia Williams, president of Wizards of the Coast and Digital Gaming mentioned D&D, and about betting big on its name. This was in addition to the Magic: The Gathering discussion they held on the same call.

The following are rough notes on what they said.

D&D Beyond

• Leaning heavily on D&D Beyond
• 13 million registered users
• Give them more ways to express their fandom
• Hired 350 people last year
• Low attrition

What’s next for D&D

• Never been more popular
• Brand under-monetized
• Excited about D&D Beyond possibilities
• Empower accessibility and development of the user base.
• Data driven insight
• Window into how players are playing
• Companion app on their phone
• Start future monetization starting with D&D Beyond
• DMs are 20% of the audience but lions share of purchases
• Digital game recurrent spending for post sale revenue.
• Speed of digital can expand, yearly book model to include current digital style models.
• Reach highly engaged multigenerational fans.
• Dungeons and Dragons has recognition, 10 out of 10
• Cultural phenomenon right now.
• DND strategy is a broad four quadrant strategy
• Like Harry Potter or Lord of the Rings or Marvel
• New books and accessories, licensed game stuff, and D&D Beyond
• Huge hopes for D&D

What is success for the D&D Movie

• First big light up oppourtunity for 4th quadrant
• Significant marketing
• They think it’ll have significant box office
• It has second most viewed trailer at Paramount, only eclipsed by Transformers
• Will be licensed video games, some on movies
• Then follow up other media, TV, other movies, etc.
• Bullish on D&D.

 

[Oofta]

The VTT model isn't like building a house and leaving it, it's like building a factory to make new things to sell people.

We do know how WotC will .onetime the VTT yet, but no doubt DLC will be key. Of rheubare smart, the core free part will be robust enough to get people into it before they decide to spend a few bucks.

They actually discussed some of this recently. That the initial release will not have everything that they might want to add because they want to release and see how people use it while getting feedback. There are so many things you could do with a VTT like procedurally generating locations, populating the world with NPCs or adding more animation tools. Because they're not going with a web based option, there are a ton of things they could do that would differentiate them from other systems.

It will be interesting to see what they come up with, assuming it's ever anything other than vaporware. I'm hopeful, but we'll see.

 

[CommodoreKong]

I am not sure why they would need to keep 350 people once the VTT has been built either.

When you build a house, you also reduce the number of workers once construction has finished

It's not like the VTT is going to be a one and done thing, I imagine we'll continue to see official DND content come out just as quickly if not more quickly than the past few years. I'm guessing all newly made official WotC content will need to be in the VTT when it launches on Beyond and in print, including adventures which need to be programmed, have art and sound assets created, bug tested, etc. While they can likely cut the headcount down somewhat after the launch of the VTT it will likely need to be far higher than DND Beyond or the DND group have ever had for headcount.

 

[Parmandur]

They actually discussed some of this recently. That the initial release will not have everything that they might want to add because they want to release and see how people use it while getting feedback. There are so many things you could do with a VTT like procedurally generating locations, populating the world with NPCs or adding more animation tools. Because they're not going with a web based option, there are a ton of things they could do that would differentiate them from other systems.

It will be interesting to see what they come up with, assuming it's ever anything other than vaporware. I'm hopeful, but we'll see.

I think it will exist, and it's worth noting that the same Digital team at WotC has already delivered a major billion dollar a year piece of software, Magic: Arena...using the same engine. I think they can make it happen, whether it's worth it is another question, but I'm not the target audience myself.

 

[Oofta]

I think it will exist, and it's worth noting that the same Digital team at WotC has already delivered a major billion dollar a year piece of software, Magic: Arena...using the same engine. I think they can make it happen, whether it's worth it is another question, but I'm not the target audience myself.

I agree, I think it will be released as well. I also think they're taking the right approach, different from the competition but still using proven technology. But I'm always skeptical of pretty much any software actually seeing the light of day until I actually see it.

I may end up using it because a player moved (we currently use zoom and a camera pointed at our map) and another is moving before the end of the year. If it works as well as some early reports for in-person play and if we can simultaneously support a couple of remote people I'll consider it.

 

[mamba]

The VTT model isn't like building a house and leaving it, it's like building a factory to make new things to sell people.

to a degree, you certainly need more coders to build it than to keep improving it. What you still need is people making new assets, but depending on how much you built already (all old adventures ? all monsters?) you might need fewer as well.

There is a reason why I wrote ‘not need to keep’ rather and ‘let everyone go’. I am expecting some reduction, there is no way you need 350 to maintain / expand the VTT.

 

[darjr]

Here is a youtube of the chat

 

[darjr]

Full transcript in spoiler.

Note one important update, 350 people at WOTC not just DNDBeyond.

Spoiler

and thanks for joining us today everyone I'm arpina kocharia Leisure and gaming animals with UBS and we are really
excited to have with us for a far side chat Chris Cox Chief Executive Officer of Hasbro and Cynthia Williams president
wizard of the cost and digital gaming and Debbie Hancock kind of investor relations at Hasbro the focus of this
call is going to be Hasbro's franchise Brand Magic the Gathering and Hasbro's long-term strategy for its gaming
business excuse me but before I go any further as an investment analyst I'm required to
provide certain disclosures relating to the nature of my own relationship and that of UBS with any company on which I
expressively on this call today these disclosures are available at ubs.com disclosures or please reach out to me
and I can provide them to you after this call also there will be no discussion of any confidential restricted or material
non-public information on this call this is only a 30 40 minute call so we might
not have time to open the lives for Q a but feel free to send me questions by email if we don't address them on the
call with all of that out of the way Chris Cynthia Debbie welcome and thank
you so much for your time today thanks for having us our peanut thanks
it's great to be here thank you Debbie and I and I know you need to read some disclosures before we
begin I also I also have to do a short disclosure so um thank you for having us today
um just before we begin I want to remind everyone that we may make some forward-looking statements our management team may make poor looking
statements concerning our expectations goals objectives or similar matters and that there are many factors that could
cause actual results or events to differ materially from the anticipated results or other expectations expressed in these
forward-looking statements and the factors are in our annual report on form 10K our most recent 10q and other public
disclosures and we have no undertake no obligation to update any for looking statements made today to reflect events
or circumstances occurring after the date of this webcast very fantastic thank you thank you
Debbie Chris why don't we start with you um you've been CEO of Hasbro since February
obviously unprecedented times middle of a global pandemic supply chain challenges and disruptions but as we
look forward could you please update us on Hasbro's kind of granite entertainment strategy how how is that
different from what that strategy was before yeah well hey first off thanks so much
for having us uh it's great to be on and be able to share a little bit of insight on the company and particularly one of
our favorite Brands Magic the Gathering um I think Cynthia will have a wealth of information to share on that so in terms
of our corporate strategy uh the new strategy that we rolled out in October we call Brand blueprint 2.0 uh it's a
continuation and an evolution of the successful blueprint strategy that we've been deploying for a little over a
decade which is all around the concept of engaging and surrounding the consumer with a host of great play and
storytelling experiences that build Our Brands build our relationship with the consumer and help us build a profitable
and healthy business you know where I think the big points on um the pivot on the strategy are in a
couple areas first off we're shifting from a bit more of a breadth strategy with our old strategy to be more focused
on a depth strategy we call it fewer bigger better Brands Hasbro has over 1500 IP in our portfolio and we're
really going to focus in on about uh eight to ten Brands and really grow them
and those brands are going to be in places that we have a lot of strength as a company gaming being a big one where
we believe we could be the leader in the category where we can drive above category growth and where we can drive a
really nice profit profiles over the mid and long term the second aspect of the strategy is a
focus on the consumer and really doubling down on our consumer insights on understanding our consumers and then
also how we communicate with our consumers increasing our amp budgets uh driving new and Innovative experiences
with the consumer surrounding them with uh you know a host of Engagement opportunities whether that's big budget
movies like we have with the upcoming D honor among Thieves movies or great video games like we have with magic the
Gathering Arena and then last but not least the strategy is a focus on discipline really driving
incremental operational excellence as a company so that we compare the Fantastic
creativity and design we have with you know a stronger cost management and we
believe that we're going to be able to accrue significant value of that in October we talked about a goal to
generate 250 to 300 million dollars of cost savings annually over the next three years we believe we're on track to
do that and potentially even exceed that and you know I think that's just good business whether or not it's healthy
Economic Times or more challenging Economic Times civil position Hasbro to be able to invest in Our Brands and
deliver more cash to shareholders I think when you put it all together what blueprint 2.0 really is is it's a
redoubling and a refocusing on our traditional mission of play you know Hasbro is going to celebrate
our 100th anniversary next year you know we have this portfolio of amazing Brands and we've built those Brands through
Play Starting as early as the ages of two to three and extending on into adulthood and blueprint 2.0 puts our
Focus squarely on our biggest brands with our best consumer insight and driving a little bit more discipline uh
to pair with our great Innovation and creativity fantastic that was
great for opening Chris um thank you uh Cynthia you know as Chris mentioned Hasbro has a strong gaming portfolio on
Parallel really in the industry making up a significant portion of profits for the overall company could we talk about
um your largest Brand Magic the Gathering um and could you start by giving us a brief overview of where that business is
today and then I have a quick follow-up for you Cynthia sure uh well thank you arpanay for
having us first of all it's my pleasure to talk about magic it is really an amazing game with an incredible fan base
magic was created in 1993 and it's the world's first Trading Card Game
been played by over 50 million players to date in over 200 countries
the gameplay is highly strategic and customizable to any individual's play
style players take turns doing battle against each other by casting spells summoning
creatures and using artifacts that are depicted on individual cards that the
player draws from their personalized deck uh Magic also offers multiple formats of
play which determine the types of cards or the number of cards a player uses in
their deck some of those formats are more competitive and some are more
casual which offers a wide variety of Inland gameplay options
we release new cards through expansion sets multiple times a year and there is
really nearly a limitless combination that players can use to suit their
different play Styles and that all leads to a very high level of customization by
the player that's fantastic Cynthia when we when we
think about Hasbro we frankly we frequently think about kids but magic is
not typically played by kids what can you tell us and people on the call about the magic player today and how that has
been evolving sure uh we now we have multiple
multiple surveyed tens of thousands of magic fans on a variety of topics
related to the game uh the magic active tabletop player on
average is 30 years old uh players range from about 13 years old to over 45. I
think it's important to know that one-third of our players have less than three years of experience with the game
and another third has been playing for more than 10 years and so you end up with this wide range
of Engagement we also look at how and why they play uh
we've seen growth in casual players who we estimate represent about 80 percent
of the player base with the competitive player representing the remaining you
know in this single insight has really led to a major rethinking of our
offering how to serve a growing and more diverse player base
players and fans participate across multiple segments and they overlap for
example in the Casual segment the format that's most popular and played by more
than 70 percent of our players is a social format called Commander uh it's
played by four players at a time and it has a really unique and Cooperative rules that and we do specific product
releases to maximize this fan engagement over half of our players identify as
social players meaning that they enjoy the gaining for the social experience and about 50 percent are collectors of
some kind whether it be buying the cards for a themed commander deck strictly for
aesthetic purposes or as an outlet for self-expression through their gameplay
and finally I'd say we have over 10 million registered digital players with
magic Arena and in the past few years our fastest growing category of magic
players are the hybrid players meaning they play on both digital and tabletop
and this group tends to have the highest satisfaction rates with the game and the
highest level of spending in fact they spend 40 percent more than the average revenue of magic players across all
expressions that was just great I don't think I've
ever heard this much of good color on kind of the player profile so this is super helpful thank you
my next question is for both Chris and you Cynthia Chris you were leading
Wizards until earlier this year could you talk to us about how you grew that business and then Cynthia one of the key
questions I get on Magic is that after an incredible run of four or five years of above average growth and Arena
rollout that business is much bigger today so if you were to recap what's
next for magic and how you grow that business going forward because every gaming company on investors Minds saw
uptick during covet and now seeing the reversal of that why could MTG be different and how you intend to grow
that business uh going forward sure so I'll start off so
um you know magic has been gosh I would argue one of the biggest success stories in the games category
over the last probably decades I was fortunate enough to start in the business in 2016 after the business had
grown I think for seven straight years uh we had started to see a little bit of a plateauing in that growth in 2014 and
2015. and so we started to kind of really kind of understand okay why was
that and in 2016 when magic you know was probably around
350-ish million dollars maybe 400 million dollars at that time uh we really had a monolithic view of
the player we thought there was one player it was a competitive player and uh we knew that there were other player
segments that existed like casual players and collectors but we honestly
were a little afraid uh that if we built products that deviated it all from our
traditional approach of appealing to the competitive player that we would hurt
the business and what we found uh was actually the opposite um if we were able to segment our our
player profiles in just really simple ways so call it the competitive player the social player and The Collector
and build products that were bespoke to each of them we could make that each of
those segments happier we could engage them more uh we could get more of their
time and you know more of their share of wallet and grow the business as a whole
and as a result you know over that you know intervening six six and a half year period we'd probably either tripled or
come close to Triple uh the overall magic business and we've been able to do it across a wide set of products
um a wide set of segments that have made the business healthier than ever and we've been able to do it in a fairly
balanced way where we've been able to balance new player growth with lapse
player react position because there's probably like close to 60 million people in the world who have ever played magic
so actually people coming back to Magic is just as important to us as new players you've never played it before as
well as driving a little bit of Revenue growth per user through that segmentation approach which has been
good for us and it's been good for our Channel Partners uh whether the Tavi stores math stores or e-commerce
Partners like Amazon foreign
I'd love to talk about a little bit about our plans to continue to grow magic especially in 2023 and Beyond and
I will say we do have some good Tailwinds that are aiding us uh primarily that we are seeing this bold
return to in-person play you know magic really thrives on that face-to-face
interaction that wasn't able to happen during the pandemic our in-store play
participation numbers are trending up and they're already back to about 75
percent of where they were pre-pandemic uh we recently organized the largest
ever in-person event in Magic's history we had over 10 000 players Gather in
person in Las Vegas uh to kick off our 30th anniversary celebration it was such
an encouraging and fun fan event and we plan on having four more of those magic
cons next year our first one will be in Philadelphia on February 17th through
the 19th you know we've been releasing six tent pole sets for several years
we'll do that again in 2023 with our new player acquisition strategy focused on
the universe's Beyond line this year we have the Lord of the Rings as a big Tempo release and we also have
smaller sets like Doctor Who that will attract the new players in future Years
you'll see a student saying with Final Fantasy and Assassin's Creed which will join the franchise
and of course we'll be celebrating Magic's 30th anniversary with our fans um the magic cons I mentioned I will be
releasing new products and we're especially excited to help our trade partners and our fans by offering
exclusive promo cards from each year of magic that will be available exclusively
through our Wizards play network network stores with every Temple set release
no magic is bigger than it's ever been it's on Pace to become asbury's first
billion dollar brand and our surveys show that our net promoters for globally has increased to the highest point it's
been at in the past three years foreign
thank you that's very helpful I think that maybe this is a question for you regarding Arena which has been a
obviously a huge success um I remember back in the day before MTG digitization you know the big pushback
or concern for investors was whether there was going to be cannibalization of that business once you go digital and
now we know it was actually additive to the business but my question is is there more to do in terms of monetizing kind
of the digital aspects of the magic franchise absolutely now as I mentioned earlier
our hybrid players are the most engaged and they spend the most so our efforts
around magic digital will drive increased play and integration across both tabletop and our digital platforms
now Wizards play Network stores are telling us that they see new players
coming into their store who are ready to join that Community after they learn to
play Magic on Arena uh some magic the Gathering Arena has
been a great uh success for us but it still has room to grow as we continue to
invest to meet the needs of that wide range of players so in 2023 Arena will refactor our new
player experience to improve onboarding for new players and help them quickly
find the play experiences that appeal to them the most this will reinforce our acquisition
efforts and maximize the impact of our launch on Steam which is the biggest
gaming platform in the world outside of mobile and it will be our largest platform expansion since our mobile
launched last year we'll continue to engage uh new players
and long-time magic players with our expanding product releases and our event offerings including our first digital
universes Beyond set featuring Lord of the Rings we've seen really great engagement with our Premiere play launch
this year and 2023 we'll see our first full year of Arena championships and
qualifier weekends as well as our increasingly popular Arena opens
great thank you thank you and Chris maybe this is a question for you you
know inflation has been top of mind for investors and ability to take on pricing
also has been important and we have seen kind of more traditional toy sector take
on pricing throughout the past throughout the pandemic really but as I think about kind of price elasticity of
demand for magic in my mind at least that is an overall Less Price elastic customer versus a kind of more
traditional toy consumer first do you think my assumption is correct second do
you believe pricing along with unit growth could drive magic over the next couple years
yeah you know I I think just a the straight answer to your question is yes it tends to be a less priced elastic
customer but you know obviously there's logical limits to that um you know we're very aware across our
business of the pressures that the general consumers under and the general discretionary pressure
discretionary sectors under vis-a-vis inflation uh we have taken some pricing
actions across our lineup at Hasbro and you know this year we took a pricing
action on about half of the magic line uh the first time we've done that in 10 years and you know we're very reluctant
to do that um you know we've got a great brand we've got a great product and the the
challenge that we've had is there's just been a lot of costs build up inside of the General Paper Market uh paper pulp
is more expensive significantly more expensive than it's been over the last couple years and the general Trading
Card Market whether it's kind of fantasy or gamified trading cards like magic or
more Sports oriented trading cards have seen explosive growth so there's a fair amount of printing press
demand that drives up some cost pressures now all that said you know
when we look at how we think about growing magic over time um you know Cynthia would be the expert
at this but I I don't think it's about raising prices on magic cards or raising prices on Magic packs at the end of the
day it's about growing our player base and it's about and it's about leaning
into our segmentation strategy and adding products that our players want and have a lot of play value and
collector's values and I think Cynthia and the team have been doing a very Adept job at that you
know certainly we have some of the best experts in the company driving that course great and that's actually a good segue
to my question for Cynthia which is you know if it isn't price are you releasing then more product each year could you
sort of go through pillars of growth for magic um and if you can briefly address DND
but then we'll get back to DND in a bit but um if you could just sort of go through kind of those pillars of growth as you
see for magic and I'm sorry some of this could be a bit of repeat of what you said earlier Cynthia absolutely fine
um you know our growth is coming from both our customer and product segmentation strategy which is backed by
a lot of the data and insights and the Magics different fan bases we have innovated and experimented more in the
last four years than we did in the prior 26. and as a result we're serving more
player segments never before and so there's been a shift in how many skus we
release in a year so for example we've been on a Cadence of six Tempo releases
a year for over three years now and there are major releases that have the most to offer every kind of magic player
with each of those Tempo releases we have expanded the number of booster product types to meet player preferences
including adding set boosters and collector boosters and then we'll have smaller print run
products sprinkled between those Tempo releases that are opt-in
depending on what type of player you are and what resonates with you so we have a
collectible product line called secret layer and we do some smaller sets like Infinity that fall in that category but
if I were summarizing it I'd say our growth has come from monetizing more player segments and not just from
increasing the spend of the same core set of players and our product release schedule really reflects that
but I will say that in the second half of 2022 we had a really compressed
release schedule that was partially driven by supply chain issues
um we don't intend we will not schedule Tempo releases this closely together going forward the supply chain issue I
referenced resulted in two micro sets releasing on the same date in October
but in 2023 we will return to our preferred release Cadence of approximately two months between our
Temple sets with individual micro sets sprinkled in between uh you asked about DND really briefly
I'll say that you'll see us leaning heavily into the expansion of DnD
through DND beyond the acquisition that we did uh that closed this past may
we have about 13 million customers registered users there that we will
continue to serve by giving them more ways to express their fandom fantastic and we'll have time hopefully
if we have time to come back to DND briefly after we're done sort of with magic but Cynthia I have a
um I have a follow-up for you there has been this claim that you're printing too many cards what is your one
sense one sentence answer to that or maybe two sentences whatever you prefer I'm gonna go a little one in two
sentences you know yeah most of our magic releases and our skus are print to demand and this means that
we print and reprint products in a set to support players and customers who
want to buy it usually to play with it and after an initial selling period
prior to the launch of a set uh all reorders after that set reflect real
demand and our average post launch sales quantities for our Tempo Premier sets
remains unchanged in 2022 compared to 2021
um in aggregate there is no evidence that magic is over printed and the sentiment of magic needs to cut print
runs to support prices that's a misunderstanding of our business and our customers you know if
our prices for a print-to-demand product rise significantly soon after launch
well that simply means that we're not adequately meeting customer demand and we are making millions of players
unhappy at their lack of ability to acquire the cards they want to play
no that's really helpful um and and I do want to go back briefly
to distribution Cynthia with all these kind of player segmentation what is the
primary way you're getting magic product into players hands and how that has
changed versus five years ago sure um our partnership with the more than 6
000 Global Wizards play Network hobby stores that is the core sales channel
for our business it accounts for up to 70 of our sales in 22 year-to-date and
we are really delighted that we can support those passionate local small business owners to provide unique
opportunities for our fans to engage and organize play and to build community at the local level and this is really at
the heart of our engagement strategy and it has great benefits for both parties
as indicated by our survey data every year we carry out a survey among the wpn hobby stores and we collected
feedback this year for more than 2 200 of them uh it's a large representative sample and it gives us a really good
pulse on their health and we're pleased to see that this channel continues to grow has strong performance more than 80
percent of our storage reported that they are growing or equal to last year and over 60 percent report growth in
their business now over the last five years we've continued to evolve our omni-channel
retail strategy that involves continuing to expand our footprint at retail
globally e-commerce as well as are developing our direct consumer
collectible offering fantastic fantastic
um Cynthia maybe this is still for you there has been some chatter
um kind of secondary market for these cards and that that values are coming down uh because you're printing too much
is that something that you keep track of is that something that concerns you
you know first and foremost magic is a deep and strategic game that is played
in hobby stores on kitchen tables and online so our goal is to continue to
grow that player base and as I said previously we print and reprint products to meet demand from our players you know
magic will be our first billion dollar brand this year we're growing that brand ahead of the industry and pushing the
boundaries of where we can take the product more often than not we get that right like our universe is beyond
product Warhammer 40K which is already on its third reprint due to demand and
sometimes we step back and we listen to customer feedback like we did on our recent 30th Anniversary Edition where we
scaled back the expected Supply to assure a great collector experience now
that decision might not have been great for us in the short term financially but it was definitely the right call for the
long long-term health of the brand and it's good for our fans now we do understand that some players focus on
the collectible trading aspects of our product and we are always thrilled to see players enjoying and valuing our
product for years after the initial release but we don't participate in
secondary Market activity for magic products nor do we derive any revenue from Trading or selling
what we do hear from some of our wpn stores that trade and sell cards after
initial sale is that like any Market or any other collectible product some
products and individual cards do become more collectible than others and values
can change over time due to a multitude of external factors many entirely
unrelated to the number of cards printed now we have no indication that there has
been any broad negative changes to interest in trading or post-purchase
selling of magic products it could be easy for someone who is
unfamiliar with our pre-release sales strategy to draw a negative conclusion
about changes in resale values shortly after the release but the truth is that
magic products are regularly put on sale early exclusively through our wpn stores
as part of a pre-release program that is designed to encourage in-store play at
those stores it is common and expected for the secondary Market values for
those new products to shift dramatically and immediately following pre-release as
more products become available in the market those value shifts are simply
Supply catching up with demand yeah I do think there's a fair amount of
misunderstanding about all of this so thank you for that um and I am scanning through some of the
questions I've been getting but let me just uh sort of address one that I also has come up you know Talent acquisition
and retention I know has been and the fact that magic has to compete with a big Tech is something that has has been
pretty focused on as you uh built those teams um I'm wondering if that has eased
a bit in terms of hiring and retention um given what's going on in the big Tech
world yeah you know we've hired over 350 people this year at Wizards of the Coast
and given the macroeconomic climate we are also seeing some availability of
amazing talent in the market uh and our attrition is low compared with other
gaming companies you know people want to work at Wizards for a number of reasons uh primarily they're working on games
they love our games have incredibly loyal passionate fans who are excited to
work on and help shape the gains that they've grown up playing and of course it's always great to work on a business
that is growing and being invested in
great great um and this question is perhaps both for uh Chris and and you Cynthia
um I was wondering if you could share um your vision on how you approach
DND monetization and digitization and how that's going to be different from Magic
and really how you approach that in general um if we could give kind of an overview
of uh that here in terms of what's next for DND and how that franchise is
different from when you were looking at Magic back in 2000 2017 2018
oftentimes the question I get from investors is how do you digitize a game that's been around for 50 years right I
imagine DND is obviously older than magic a lot and along with that perhaps we can touch on how the integration of
DnD and Beyond is going um growth in transactions or whatever you could share
mind if I start Chris yeah yeah yeah I mean the only thing I'd have to add is every time you talk about
the hiring rate at Wizards I am just absolutely floored um you know my family still lives in
Seattle I live here in Providence and I I will go back to the Wizards offices and it's like I'm a senior it's like I'm
a graduated senior returning the next year to high school and I don't I don't recognize that class
it's a tribute to uh it's a tribute to that business and the great job that team's doing growing the talent pool
oh thank you Chris uh you know D D is has never been more popular and we have
really great fans and incredible engagement but uh the first thing I saw with it is the brand is really under
monetized uh earlier this year we acquired D Beyond and we're really
excited about the possibilities the platform provides and the positive
momentum we've already seen we made this acquisition uh to
strengthen our connection to players and to power our next phase of product development user acquisition and to have
live service tools through which we gain really valuable data-driven insights you
know with ddb we have a window into how fans are playing the game daily even if
they're playing around the dining room table many of our DND fans use Dungeons
and Dragons Beyond as a companion app on their phone to make the experience better and this gives us a look at how
people are playing in their homes that we never had before so when we think about our future monetization we start
here you know dungeon Masters which are the people who guide you through the
adventure they only make up about 20 of the audience that they are the largest
share of our paying players but the rest of the players at the table we believe
digital will allow us to offer a lot more options to create rewarding experiences post-sell that helps us
unlock the type of recurrent spending you see in digital games where more than
70 of the revenue in digital gaming comes post sale uh the speed of digital uh means that
we're able to expand from what is essentially a yearly book publishing model
to a recurrent spending environment and we're offering content that we know fans
want uh so we're super excited about the type of type of opportunities we have with DMD to expand beyond the tabletop
to reach highly engaged multi-generational fans all around the globe
yeah and uh I think the only thing I'd add to that answer is
you know if you look at like a super simplified view of the strategy it wasn't to the coast
um magic is this super deep single quadrant brand
um does a fantastic job engaging a very loyal and passionate audience
and I think our strategy at Wizards uh that you know Cynthia and the team are really leaning into
is growing that engagement and growing that player base uh over the next
several years so that our new player growth and our reacquired player growth are really kind of carrying the growth
of the brand and you can see that in the initiatives that we're investing in like uh
expanding distribution of Arena steam is the biggest PC distribution platform in
the world that should be a nice kind of leg up for arena we also continue to look at other platforms like consoles
there's another opportunity for that and then I can't understate how important universe is beyond this and
how much uh early success we've seen in you know crossovers like we did last
year with d and d which at the time was our best-selling summer set ever
um and then what we did most recently with Warhammer 40K which as Cynthia
mentioned is on its third demand trigger reprint like we can't keep up with the demand there and that's just a great way
to kind of engage that Warhammer fan base in a very similar similarly deep
and lore Rich Game and get them activated with us and we see a lot of
upside to that particularly with big Mega Brands like Lord of the Rings that we think will be important and uh trust
me we have a lot more uh plans for that and some exciting news that I think we'll be able to share with our fans
soon so Magic's a deep single quadrant strategy uh d and d d when I go to cocktail
parties and I say and people ask me what do I do you know you know what I used to say is hey I was president of wizards of
coast and they'd say what's that and um I'd say well we make magic gathering
and then we make and we make Dungeons and Dragons I'd have maybe a three and ten hit rate on people understanding
what magic was but if I did I would have an incredibly deep conversation and the cocktail party would effectively be over
for all other participants um or or like for d d though it was 10
out of 10. everyone knows TNT everyone grew up with it in the 70s and 80s played the video games in the 90s and
early OTS uh and knows it's a cultural phenomena right now and so like you know the the the the the
the D and D strategy if the magic strategy is a deep single quadrant strategy the D
and D strategy is a broad four quadrant strategy where we have this powerful brand that has similar awareness to like
uh Lord of the Rings or um Harry Potter and we're going to imbue
it with Blockbuster entertainment like we have with the movie coming up uh AAA
true AAA high-end gaming like we're gonna have with Baldur's Gate 3 next year and then just an amazing set of
products that we will activate as Hasbro across our blueprint whether that's what we're doing at DND beyond what we're
doing is hobby stores uh with new books and accessories or what our consumer products team and Licensing team are
doing to build out a host of new Collectibles and toys and games for a more casual fan
so I you know as excited as I think Cynthia and I are for Magic's growth
potential over the coming mid and long term I think D could be a real new leg
in stool for our gaming portfolio as a whole and for Wizard specifically
that was great thank you and I promised 30 for 40 minute call but let's take one
more question and that's it I'm trying to actually scan some questions to make sure I'm incorporating what I'm getting
by email as well uh and you already addressed that in some ways right next
year Hasbro has a much better film slate including the scheduled release of uh
Dungeons and Dragons honor among Thieves on March 31st uh I think 2023 how do you
define success with that film outside of the obvious kind of movie proceeds and upside to that economics what would it
mean for the DND franchise how do you define that success uh to me the the d d film is the first
big light up opportunity for that powerful four quadrant brand you know the DND film uh should
by all accounts we feel like it's going to have a healthy box office it's going
to have significant marketing you know uh Paramount uh prior to uh the latest
Transformers um the latest Transformers rise of the Beast um trailers that just that just released
last week D was on track to be one of the top uh viewed trailers ever by
Paramount uh Transformers took that took that honor uh most recently so we're
still happy about that but you know I think we're going to be able to light up d d awareness we're going to be active
be able to activate that awareness with the host products at retail gaming and online and then we're going to follow it
up um you know we're gonna follow it up with a host of video games that we
license out work with like great Partners like larion uh with Baldur's Gate 3 that we develop ourselves and
then follow that up with a host of new entertainment like to me Dungeons and Dragons is the
real poster child for blueprint 2.0 our overall corporate engagement story which
is doubling down on play supercharging play with great storytelling and entertainment and focusing on a category
that we're an early leader in the best innovator in and have every right to win uh and grow our profitability and grow
our return to shareholders so consider me long on D and D oh fantastic that's a
great note to end this call on um and we are actually over 40 minutes so I apologize
for that uh I think we're going to conclude the call here thank you so much this was great Chris Cynthia Debbie
thank you so much uh for making this possible and thanks everyone for joining
our PNA thanks so much and uh have a happy holiday you too thank you thank
you bye take care e

 

[doctorhook]

Full transcript in spoiler.

Note one important update, 350 people at WOTC not just DNDBeyond.

Spoiler

and thanks for joining us today everyone I'm arpina kocharia Leisure and gaming animals with UBS and we are really
excited to have with us for a far side chat Chris Cox Chief Executive Officer of Hasbro and Cynthia Williams president
wizard of the cost and digital gaming and Debbie Hancock kind of investor relations at Hasbro the focus of this
call is going to be Hasbro's franchise Brand Magic the Gathering and Hasbro's long-term strategy for its gaming
business excuse me but before I go any further as an investment analyst I'm required to
provide certain disclosures relating to the nature of my own relationship and that of UBS with any company on which I
expressively on this call today these disclosures are available at ubs.com disclosures or please reach out to me
and I can provide them to you after this call also there will be no discussion of any confidential restricted or material
non-public information on this call this is only a 30 40 minute call so we might
not have time to open the lives for Q a but feel free to send me questions by email if we don't address them on the
call with all of that out of the way Chris Cynthia Debbie welcome and thank
you so much for your time today thanks for having us our peanut thanks
it's great to be here thank you Debbie and I and I know you need to read some disclosures before we
begin I also I also have to do a short disclosure so um thank you for having us today
um just before we begin I want to remind everyone that we may make some forward-looking statements our management team may make poor looking
statements concerning our expectations goals objectives or similar matters and that there are many factors that could
cause actual results or events to differ materially from the anticipated results or other expectations expressed in these
forward-looking statements and the factors are in our annual report on form 10K our most recent 10q and other public
disclosures and we have no undertake no obligation to update any for looking statements made today to reflect events
or circumstances occurring after the date of this webcast very fantastic thank you thank you
Debbie Chris why don't we start with you um you've been CEO of Hasbro since February
obviously unprecedented times middle of a global pandemic supply chain challenges and disruptions but as we
look forward could you please update us on Hasbro's kind of granite entertainment strategy how how is that
different from what that strategy was before yeah well hey first off thanks so much
for having us uh it's great to be on and be able to share a little bit of insight on the company and particularly one of
our favorite Brands Magic the Gathering um I think Cynthia will have a wealth of information to share on that so in terms
of our corporate strategy uh the new strategy that we rolled out in October we call Brand blueprint 2.0 uh it's a
continuation and an evolution of the successful blueprint strategy that we've been deploying for a little over a
decade which is all around the concept of engaging and surrounding the consumer with a host of great play and
storytelling experiences that build Our Brands build our relationship with the consumer and help us build a profitable
and healthy business you know where I think the big points on um the pivot on the strategy are in a
couple areas first off we're shifting from a bit more of a breadth strategy with our old strategy to be more focused
on a depth strategy we call it fewer bigger better Brands Hasbro has over 1500 IP in our portfolio and we're
really going to focus in on about uh eight to ten Brands and really grow them
and those brands are going to be in places that we have a lot of strength as a company gaming being a big one where
we believe we could be the leader in the category where we can drive above category growth and where we can drive a
really nice profit profiles over the mid and long term the second aspect of the strategy is a
focus on the consumer and really doubling down on our consumer insights on understanding our consumers and then
also how we communicate with our consumers increasing our amp budgets uh driving new and Innovative experiences
with the consumer surrounding them with uh you know a host of Engagement opportunities whether that's big budget
movies like we have with the upcoming D honor among Thieves movies or great video games like we have with magic the
Gathering Arena and then last but not least the strategy is a focus on discipline really driving
incremental operational excellence as a company so that we compare the Fantastic
creativity and design we have with you know a stronger cost management and we
believe that we're going to be able to accrue significant value of that in October we talked about a goal to
generate 250 to 300 million dollars of cost savings annually over the next three years we believe we're on track to
do that and potentially even exceed that and you know I think that's just good business whether or not it's healthy
Economic Times or more challenging Economic Times civil position Hasbro to be able to invest in Our Brands and
deliver more cash to shareholders I think when you put it all together what blueprint 2.0 really is is it's a
redoubling and a refocusing on our traditional mission of play you know Hasbro is going to celebrate
our 100th anniversary next year you know we have this portfolio of amazing Brands and we've built those Brands through
Play Starting as early as the ages of two to three and extending on into adulthood and blueprint 2.0 puts our
Focus squarely on our biggest brands with our best consumer insight and driving a little bit more discipline uh
to pair with our great Innovation and creativity fantastic that was
great for opening Chris um thank you uh Cynthia you know as Chris mentioned Hasbro has a strong gaming portfolio on
Parallel really in the industry making up a significant portion of profits for the overall company could we talk about
um your largest Brand Magic the Gathering um and could you start by giving us a brief overview of where that business is
today and then I have a quick follow-up for you Cynthia sure uh well thank you arpanay for
having us first of all it's my pleasure to talk about magic it is really an amazing game with an incredible fan base
magic was created in 1993 and it's the world's first Trading Card Game
been played by over 50 million players to date in over 200 countries
the gameplay is highly strategic and customizable to any individual's play
style players take turns doing battle against each other by casting spells summoning
creatures and using artifacts that are depicted on individual cards that the
player draws from their personalized deck uh Magic also offers multiple formats of
play which determine the types of cards or the number of cards a player uses in
their deck some of those formats are more competitive and some are more
casual which offers a wide variety of Inland gameplay options
we release new cards through expansion sets multiple times a year and there is
really nearly a limitless combination that players can use to suit their
different play Styles and that all leads to a very high level of customization by
the player that's fantastic Cynthia when we when we
think about Hasbro we frankly we frequently think about kids but magic is
not typically played by kids what can you tell us and people on the call about the magic player today and how that has
been evolving sure uh we now we have multiple
multiple surveyed tens of thousands of magic fans on a variety of topics
related to the game uh the magic active tabletop player on
average is 30 years old uh players range from about 13 years old to over 45. I
think it's important to know that one-third of our players have less than three years of experience with the game
and another third has been playing for more than 10 years and so you end up with this wide range
of Engagement we also look at how and why they play uh
we've seen growth in casual players who we estimate represent about 80 percent
of the player base with the competitive player representing the remaining you
know in this single insight has really led to a major rethinking of our
offering how to serve a growing and more diverse player base
players and fans participate across multiple segments and they overlap for
example in the Casual segment the format that's most popular and played by more
than 70 percent of our players is a social format called Commander uh it's
played by four players at a time and it has a really unique and Cooperative rules that and we do specific product
releases to maximize this fan engagement over half of our players identify as
social players meaning that they enjoy the gaining for the social experience and about 50 percent are collectors of
some kind whether it be buying the cards for a themed commander deck strictly for
aesthetic purposes or as an outlet for self-expression through their gameplay
and finally I'd say we have over 10 million registered digital players with
magic Arena and in the past few years our fastest growing category of magic
players are the hybrid players meaning they play on both digital and tabletop
and this group tends to have the highest satisfaction rates with the game and the
highest level of spending in fact they spend 40 percent more than the average revenue of magic players across all
expressions that was just great I don't think I've
ever heard this much of good color on kind of the player profile so this is super helpful thank you
my next question is for both Chris and you Cynthia Chris you were leading
Wizards until earlier this year could you talk to us about how you grew that business and then Cynthia one of the key
questions I get on Magic is that after an incredible run of four or five years of above average growth and Arena
rollout that business is much bigger today so if you were to recap what's
next for magic and how you grow that business going forward because every gaming company on investors Minds saw
uptick during covet and now seeing the reversal of that why could MTG be different and how you intend to grow
that business uh going forward sure so I'll start off so
um you know magic has been gosh I would argue one of the biggest success stories in the games category
over the last probably decades I was fortunate enough to start in the business in 2016 after the business had
grown I think for seven straight years uh we had started to see a little bit of a plateauing in that growth in 2014 and
2015. and so we started to kind of really kind of understand okay why was
that and in 2016 when magic you know was probably around
350-ish million dollars maybe 400 million dollars at that time uh we really had a monolithic view of
the player we thought there was one player it was a competitive player and uh we knew that there were other player
segments that existed like casual players and collectors but we honestly
were a little afraid uh that if we built products that deviated it all from our
traditional approach of appealing to the competitive player that we would hurt
the business and what we found uh was actually the opposite um if we were able to segment our our
player profiles in just really simple ways so call it the competitive player the social player and The Collector
and build products that were bespoke to each of them we could make that each of
those segments happier we could engage them more uh we could get more of their
time and you know more of their share of wallet and grow the business as a whole
and as a result you know over that you know intervening six six and a half year period we'd probably either tripled or
come close to Triple uh the overall magic business and we've been able to do it across a wide set of products
um a wide set of segments that have made the business healthier than ever and we've been able to do it in a fairly
balanced way where we've been able to balance new player growth with lapse
player react position because there's probably like close to 60 million people in the world who have ever played magic
so actually people coming back to Magic is just as important to us as new players you've never played it before as
well as driving a little bit of Revenue growth per user through that segmentation approach which has been
good for us and it's been good for our Channel Partners uh whether the Tavi stores math stores or e-commerce
Partners like Amazon foreign
I'd love to talk about a little bit about our plans to continue to grow magic especially in 2023 and Beyond and
I will say we do have some good Tailwinds that are aiding us uh primarily that we are seeing this bold
return to in-person play you know magic really thrives on that face-to-face
interaction that wasn't able to happen during the pandemic our in-store play
participation numbers are trending up and they're already back to about 75
percent of where they were pre-pandemic uh we recently organized the largest
ever in-person event in Magic's history we had over 10 000 players Gather in
person in Las Vegas uh to kick off our 30th anniversary celebration it was such
an encouraging and fun fan event and we plan on having four more of those magic
cons next year our first one will be in Philadelphia on February 17th through
the 19th you know we've been releasing six tent pole sets for several years
we'll do that again in 2023 with our new player acquisition strategy focused on
the universe's Beyond line this year we have the Lord of the Rings as a big Tempo release and we also have
smaller sets like Doctor Who that will attract the new players in future Years
you'll see a student saying with Final Fantasy and Assassin's Creed which will join the franchise
and of course we'll be celebrating Magic's 30th anniversary with our fans um the magic cons I mentioned I will be
releasing new products and we're especially excited to help our trade partners and our fans by offering
exclusive promo cards from each year of magic that will be available exclusively
through our Wizards play network network stores with every Temple set release
no magic is bigger than it's ever been it's on Pace to become asbury's first
billion dollar brand and our surveys show that our net promoters for globally has increased to the highest point it's
been at in the past three years foreign
thank you that's very helpful I think that maybe this is a question for you regarding Arena which has been a
obviously a huge success um I remember back in the day before MTG digitization you know the big pushback
or concern for investors was whether there was going to be cannibalization of that business once you go digital and
now we know it was actually additive to the business but my question is is there more to do in terms of monetizing kind
of the digital aspects of the magic franchise absolutely now as I mentioned earlier
our hybrid players are the most engaged and they spend the most so our efforts
around magic digital will drive increased play and integration across both tabletop and our digital platforms
now Wizards play Network stores are telling us that they see new players
coming into their store who are ready to join that Community after they learn to
play Magic on Arena uh some magic the Gathering Arena has
been a great uh success for us but it still has room to grow as we continue to
invest to meet the needs of that wide range of players so in 2023 Arena will refactor our new
player experience to improve onboarding for new players and help them quickly
find the play experiences that appeal to them the most this will reinforce our acquisition
efforts and maximize the impact of our launch on Steam which is the biggest
gaming platform in the world outside of mobile and it will be our largest platform expansion since our mobile
launched last year we'll continue to engage uh new players
and long-time magic players with our expanding product releases and our event offerings including our first digital
universes Beyond set featuring Lord of the Rings we've seen really great engagement with our Premiere play launch
this year and 2023 we'll see our first full year of Arena championships and
qualifier weekends as well as our increasingly popular Arena opens
great thank you thank you and Chris maybe this is a question for you you
know inflation has been top of mind for investors and ability to take on pricing
also has been important and we have seen kind of more traditional toy sector take
on pricing throughout the past throughout the pandemic really but as I think about kind of price elasticity of
demand for magic in my mind at least that is an overall Less Price elastic customer versus a kind of more
traditional toy consumer first do you think my assumption is correct second do
you believe pricing along with unit growth could drive magic over the next couple years
yeah you know I I think just a the straight answer to your question is yes it tends to be a less priced elastic
customer but you know obviously there's logical limits to that um you know we're very aware across our
business of the pressures that the general consumers under and the general discretionary pressure
discretionary sectors under vis-a-vis inflation uh we have taken some pricing
actions across our lineup at Hasbro and you know this year we took a pricing
action on about half of the magic line uh the first time we've done that in 10 years and you know we're very reluctant
to do that um you know we've got a great brand we've got a great product and the the
challenge that we've had is there's just been a lot of costs build up inside of the General Paper Market uh paper pulp
is more expensive significantly more expensive than it's been over the last couple years and the general Trading
Card Market whether it's kind of fantasy or gamified trading cards like magic or
more Sports oriented trading cards have seen explosive growth so there's a fair amount of printing press
demand that drives up some cost pressures now all that said you know
when we look at how we think about growing magic over time um you know Cynthia would be the expert
at this but I I don't think it's about raising prices on magic cards or raising prices on Magic packs at the end of the
day it's about growing our player base and it's about and it's about leaning
into our segmentation strategy and adding products that our players want and have a lot of play value and
collector's values and I think Cynthia and the team have been doing a very Adept job at that you
know certainly we have some of the best experts in the company driving that course great and that's actually a good segue
to my question for Cynthia which is you know if it isn't price are you releasing then more product each year could you
sort of go through pillars of growth for magic um and if you can briefly address DND
but then we'll get back to DND in a bit but um if you could just sort of go through kind of those pillars of growth as you
see for magic and I'm sorry some of this could be a bit of repeat of what you said earlier Cynthia absolutely fine
um you know our growth is coming from both our customer and product segmentation strategy which is backed by
a lot of the data and insights and the Magics different fan bases we have innovated and experimented more in the
last four years than we did in the prior 26. and as a result we're serving more
player segments never before and so there's been a shift in how many skus we
release in a year so for example we've been on a Cadence of six Tempo releases
a year for over three years now and there are major releases that have the most to offer every kind of magic player
with each of those Tempo releases we have expanded the number of booster product types to meet player preferences
including adding set boosters and collector boosters and then we'll have smaller print run
products sprinkled between those Tempo releases that are opt-in
depending on what type of player you are and what resonates with you so we have a
collectible product line called secret layer and we do some smaller sets like Infinity that fall in that category but
if I were summarizing it I'd say our growth has come from monetizing more player segments and not just from
increasing the spend of the same core set of players and our product release schedule really reflects that
but I will say that in the second half of 2022 we had a really compressed
release schedule that was partially driven by supply chain issues
um we don't intend we will not schedule Tempo releases this closely together going forward the supply chain issue I
referenced resulted in two micro sets releasing on the same date in October
but in 2023 we will return to our preferred release Cadence of approximately two months between our
Temple sets with individual micro sets sprinkled in between uh you asked about DND really briefly
I'll say that you'll see us leaning heavily into the expansion of DnD
through DND beyond the acquisition that we did uh that closed this past may
we have about 13 million customers registered users there that we will
continue to serve by giving them more ways to express their fandom fantastic and we'll have time hopefully
if we have time to come back to DND briefly after we're done sort of with magic but Cynthia I have a
um I have a follow-up for you there has been this claim that you're printing too many cards what is your one
sense one sentence answer to that or maybe two sentences whatever you prefer I'm gonna go a little one in two
sentences you know yeah most of our magic releases and our skus are print to demand and this means that
we print and reprint products in a set to support players and customers who
want to buy it usually to play with it and after an initial selling period
prior to the launch of a set uh all reorders after that set reflect real
demand and our average post launch sales quantities for our Tempo Premier sets
remains unchanged in 2022 compared to 2021
um in aggregate there is no evidence that magic is over printed and the sentiment of magic needs to cut print
runs to support prices that's a misunderstanding of our business and our customers you know if
our prices for a print-to-demand product rise significantly soon after launch
well that simply means that we're not adequately meeting customer demand and we are making millions of players
unhappy at their lack of ability to acquire the cards they want to play
no that's really helpful um and and I do want to go back briefly
to distribution Cynthia with all these kind of player segmentation what is the
primary way you're getting magic product into players hands and how that has
changed versus five years ago sure um our partnership with the more than 6
000 Global Wizards play Network hobby stores that is the core sales channel
for our business it accounts for up to 70 of our sales in 22 year-to-date and
we are really delighted that we can support those passionate local small business owners to provide unique
opportunities for our fans to engage and organize play and to build community at the local level and this is really at
the heart of our engagement strategy and it has great benefits for both parties
as indicated by our survey data every year we carry out a survey among the wpn hobby stores and we collected
feedback this year for more than 2 200 of them uh it's a large representative sample and it gives us a really good
pulse on their health and we're pleased to see that this channel continues to grow has strong performance more than 80
percent of our storage reported that they are growing or equal to last year and over 60 percent report growth in
their business now over the last five years we've continued to evolve our omni-channel
retail strategy that involves continuing to expand our footprint at retail
globally e-commerce as well as are developing our direct consumer
collectible offering fantastic fantastic
um Cynthia maybe this is still for you there has been some chatter
um kind of secondary market for these cards and that that values are coming down uh because you're printing too much
is that something that you keep track of is that something that concerns you
you know first and foremost magic is a deep and strategic game that is played
in hobby stores on kitchen tables and online so our goal is to continue to
grow that player base and as I said previously we print and reprint products to meet demand from our players you know
magic will be our first billion dollar brand this year we're growing that brand ahead of the industry and pushing the
boundaries of where we can take the product more often than not we get that right like our universe is beyond
product Warhammer 40K which is already on its third reprint due to demand and
sometimes we step back and we listen to customer feedback like we did on our recent 30th Anniversary Edition where we
scaled back the expected Supply to assure a great collector experience now
that decision might not have been great for us in the short term financially but it was definitely the right call for the
long long-term health of the brand and it's good for our fans now we do understand that some players focus on
the collectible trading aspects of our product and we are always thrilled to see players enjoying and valuing our
product for years after the initial release but we don't participate in
secondary Market activity for magic products nor do we derive any revenue from Trading or selling
what we do hear from some of our wpn stores that trade and sell cards after
initial sale is that like any Market or any other collectible product some
products and individual cards do become more collectible than others and values
can change over time due to a multitude of external factors many entirely
unrelated to the number of cards printed now we have no indication that there has
been any broad negative changes to interest in trading or post-purchase
selling of magic products it could be easy for someone who is
unfamiliar with our pre-release sales strategy to draw a negative conclusion
about changes in resale values shortly after the release but the truth is that
magic products are regularly put on sale early exclusively through our wpn stores
as part of a pre-release program that is designed to encourage in-store play at
those stores it is common and expected for the secondary Market values for
those new products to shift dramatically and immediately following pre-release as
more products become available in the market those value shifts are simply
Supply catching up with demand yeah I do think there's a fair amount of
misunderstanding about all of this so thank you for that um and I am scanning through some of the
questions I've been getting but let me just uh sort of address one that I also has come up you know Talent acquisition
and retention I know has been and the fact that magic has to compete with a big Tech is something that has has been
pretty focused on as you uh built those teams um I'm wondering if that has eased
a bit in terms of hiring and retention um given what's going on in the big Tech
world yeah you know we've hired over 350 people this year at Wizards of the Coast
and given the macroeconomic climate we are also seeing some availability of
amazing talent in the market uh and our attrition is low compared with other
gaming companies you know people want to work at Wizards for a number of reasons uh primarily they're working on games
they love our games have incredibly loyal passionate fans who are excited to
work on and help shape the gains that they've grown up playing and of course it's always great to work on a business
that is growing and being invested in
great great um and this question is perhaps both for uh Chris and and you Cynthia
um I was wondering if you could share um your vision on how you approach
DND monetization and digitization and how that's going to be different from Magic
and really how you approach that in general um if we could give kind of an overview
of uh that here in terms of what's next for DND and how that franchise is
different from when you were looking at Magic back in 2000 2017 2018
oftentimes the question I get from investors is how do you digitize a game that's been around for 50 years right I
imagine DND is obviously older than magic a lot and along with that perhaps we can touch on how the integration of
DnD and Beyond is going um growth in transactions or whatever you could share
mind if I start Chris yeah yeah yeah I mean the only thing I'd have to add is every time you talk about
the hiring rate at Wizards I am just absolutely floored um you know my family still lives in
Seattle I live here in Providence and I I will go back to the Wizards offices and it's like I'm a senior it's like I'm
a graduated senior returning the next year to high school and I don't I don't recognize that class
it's a tribute to uh it's a tribute to that business and the great job that team's doing growing the talent pool
oh thank you Chris uh you know D D is has never been more popular and we have
really great fans and incredible engagement but uh the first thing I saw with it is the brand is really under
monetized uh earlier this year we acquired D Beyond and we're really
excited about the possibilities the platform provides and the positive
momentum we've already seen we made this acquisition uh to
strengthen our connection to players and to power our next phase of product development user acquisition and to have
live service tools through which we gain really valuable data-driven insights you
know with ddb we have a window into how fans are playing the game daily even if
they're playing around the dining room table many of our DND fans use Dungeons
and Dragons Beyond as a companion app on their phone to make the experience better and this gives us a look at how
people are playing in their homes that we never had before so when we think about our future monetization we start
here you know dungeon Masters which are the people who guide you through the
adventure they only make up about 20 of the audience that they are the largest
share of our paying players but the rest of the players at the table we believe
digital will allow us to offer a lot more options to create rewarding experiences post-sell that helps us
unlock the type of recurrent spending you see in digital games where more than
70 of the revenue in digital gaming comes post sale uh the speed of digital uh means that
we're able to expand from what is essentially a yearly book publishing model
to a recurrent spending environment and we're offering content that we know fans
want uh so we're super excited about the type of type of opportunities we have with DMD to expand beyond the tabletop
to reach highly engaged multi-generational fans all around the globe
yeah and uh I think the only thing I'd add to that answer is
you know if you look at like a super simplified view of the strategy it wasn't to the coast
um magic is this super deep single quadrant brand
um does a fantastic job engaging a very loyal and passionate audience
and I think our strategy at Wizards uh that you know Cynthia and the team are really leaning into
is growing that engagement and growing that player base uh over the next
several years so that our new player growth and our reacquired player growth are really kind of carrying the growth
of the brand and you can see that in the initiatives that we're investing in like uh
expanding distribution of Arena steam is the biggest PC distribution platform in
the world that should be a nice kind of leg up for arena we also continue to look at other platforms like consoles
there's another opportunity for that and then I can't understate how important universe is beyond this and
how much uh early success we've seen in you know crossovers like we did last
year with d and d which at the time was our best-selling summer set ever
um and then what we did most recently with Warhammer 40K which as Cynthia
mentioned is on its third demand trigger reprint like we can't keep up with the demand there and that's just a great way
to kind of engage that Warhammer fan base in a very similar similarly deep
and lore Rich Game and get them activated with us and we see a lot of
upside to that particularly with big Mega Brands like Lord of the Rings that we think will be important and uh trust
me we have a lot more uh plans for that and some exciting news that I think we'll be able to share with our fans
soon so Magic's a deep single quadrant strategy uh d and d d when I go to cocktail
parties and I say and people ask me what do I do you know you know what I used to say is hey I was president of wizards of
coast and they'd say what's that and um I'd say well we make magic gathering
and then we make and we make Dungeons and Dragons I'd have maybe a three and ten hit rate on people understanding
what magic was but if I did I would have an incredibly deep conversation and the cocktail party would effectively be over
for all other participants um or or like for d d though it was 10
out of 10. everyone knows TNT everyone grew up with it in the 70s and 80s played the video games in the 90s and
early OTS uh and knows it's a cultural phenomena right now and so like you know the the the the the
the D and D strategy if the magic strategy is a deep single quadrant strategy the D
and D strategy is a broad four quadrant strategy where we have this powerful brand that has similar awareness to like
uh Lord of the Rings or um Harry Potter and we're going to imbue
it with Blockbuster entertainment like we have with the movie coming up uh AAA
true AAA high-end gaming like we're gonna have with Baldur's Gate 3 next year and then just an amazing set of
products that we will activate as Hasbro across our blueprint whether that's what we're doing at DND beyond what we're
doing is hobby stores uh with new books and accessories or what our consumer products team and Licensing team are
doing to build out a host of new Collectibles and toys and games for a more casual fan
so I you know as excited as I think Cynthia and I are for Magic's growth
potential over the coming mid and long term I think D could be a real new leg
in stool for our gaming portfolio as a whole and for Wizard specifically
that was great thank you and I promised 30 for 40 minute call but let's take one
more question and that's it I'm trying to actually scan some questions to make sure I'm incorporating what I'm getting
by email as well uh and you already addressed that in some ways right next
year Hasbro has a much better film slate including the scheduled release of uh
Dungeons and Dragons honor among Thieves on March 31st uh I think 2023 how do you
define success with that film outside of the obvious kind of movie proceeds and upside to that economics what would it
mean for the DND franchise how do you define that success uh to me the the d d film is the first
big light up opportunity for that powerful four quadrant brand you know the DND film uh should
by all accounts we feel like it's going to have a healthy box office it's going
to have significant marketing you know uh Paramount uh prior to uh the latest
Transformers um the latest Transformers rise of the Beast um trailers that just that just released
last week D was on track to be one of the top uh viewed trailers ever by
Paramount uh Transformers took that took that honor uh most recently so we're
still happy about that but you know I think we're going to be able to light up d d awareness we're going to be active
be able to activate that awareness with the host products at retail gaming and online and then we're going to follow it
up um you know we're gonna follow it up with a host of video games that we
license out work with like great Partners like larion uh with Baldur's Gate 3 that we develop ourselves and
then follow that up with a host of new entertainment like to me Dungeons and Dragons is the
real poster child for blueprint 2.0 our overall corporate engagement story which
is doubling down on play supercharging play with great storytelling and entertainment and focusing on a category
that we're an early leader in the best innovator in and have every right to win uh and grow our profitability and grow
our return to shareholders so consider me long on D and D oh fantastic that's a
great note to end this call on um and we are actually over 40 minutes so I apologize
for that uh I think we're going to conclude the call here thank you so much this was great Chris Cynthia Debbie
thank you so much uh for making this possible and thanks everyone for joining
our PNA thanks so much and uh have a happy holiday you too thank you thank
you bye take care e

I look forward to the days when these auto-transcriptions include punctuation and become readable.

 

[Whizbang Dustyboots]

I look forward to the days when these auto-transcriptions include punctuation and become readable.

Apple's transcription service is pretty good in that regard.

The only thing it can't do, weirdly, is distinguish between different speakers, which Otter.ai (which requires a fairly expensive subscription nowadays) can do, although it's much worse at punctuation and spelling.