WotC Some Takeaways From Hasbro's Latest Reports

Hasbro's latest quarterly conference call included a number of interesting details regarding Wizards of the Coast and Dungeon & Dragons.

CEO Chris Cocks reported a successful quarter, with the 2024 Player's Handbook selling 50% more copies than anticipated.

He also talked about D&D Beyond, the official D&D online platform. With 19 million registered users, he reported that a massive 60% of D&D's revenue was direct to consumer sales--as recently as 2022 when Hasbro purchased D&D Beyond from Fandom, that figure was 0%.

However, WotC's revenue was down 5% from the same period last year--and this despite Magic: the Gathering reporting a 3% increase. Tabletop sales overall were up 2%, but digital sales have dropped by a whopping 19%. Cocks attributed WotC's drop to the high peak caused by Baldur's Gate 3 last year.

• WotC down 5%
• Magic: the Gathering up 3%
• Tabletop up 2%
• Digital sales down 19%
• Total Hasbro gaming down 6%
• Toys down 10%
• Entertainment down 17% (not counting the eOne sale)

Hasbro's profit for this quarter was $223.2 million; the same period last year saw a $171.1 million loss.

 

[mamba]

For your analysis, yes.

For investors’ analysis, no.

given that there was a lot of talk of spinning WotC off, I doubt that

They have to disclose their financials. They have to provide forward looking statements. If they don’t say certain things, they know investors will take that as a negative sign.

and yet investors do not like conglomerates for precisely the reason that they can obfuscate so easily and have muddled / complex stories due to having their fingers in so many pies

There is little alignment between the messages they are sending out to the investment community and the D&D community.

this I agree with

 

[bedir than]

and yet investors do not like conglomerates

Apple, Alphabet, Microsoft and Amazon are four of the top five companies by market cap. They are all conglomerates.

Investors don't care.

 

[Emerikol]

Apple, Alphabet, Microsoft and Amazon are four of the top five companies by market cap. They are all conglomerates.

Investors don't care.

I don't think having multiple product lines makes you a conglomerate. Perhaps owning completely unrelated businesses is a better definition. I could stretch and say yes to Alphabet and Amazon. I think Microsoft and Apple aren't.

 

[bedir than]

I don't think having multiple product lines makes you a conglomerate. Perhaps owning completely unrelated businesses is a better definition. I could stretch and say yes to Alphabet and Amazon. I think Microsoft and Apple aren't.

Apple TV, Apple TV+ would be my examples that Apple isn't just a computer company. They've launched a massive media organization. They do both hardware and software. They attempted to launch a car.

Microsoft used to own a cable station, they have a servers network, consumer software, hardware, video games and more.

 

[Emerikol]

Apple TV, Apple TV+ would be my examples that Apple isn't just a computer company. They've launched a massive media organization. They do both hardware and software. They attempted to launch a car.

Microsoft used to own a cable station, they have a servers network, consumer software, hardware, video games and more.

They are all heavily technological devices with a lot of overlap though. And in the early days, all computer makers provided the software.

 

[bedir than]

They are all heavily technological devices with a lot of overlap though. And in the early days, all computer makers provided the software.

Famously, we all watched Dell channel on the Dell OS using the Dell TV screen in our Dell Car

More to the point of this story, D&D is both a franchise brand and a game. Hasbro reports on the brand overall, but not the game because the brand is revenue relevant while the game is not.

This is the same reason that when there's a GI Joe movie out they'll report on the GI Joe brand, but not the action figures.

 

[TiQuinn]

given that there was a lot of talk of spinning WotC off, I doubt that

Talk where? Here? Or in a business publication?

and yet investors do not like conglomerates for precisely the reason that they can obfuscate so easily and have muddled / complex stories due to having their fingers in so many pies

There’s conglomerates and then there’s CONGLOMERATES. Hasbro is a toy and game company that makes the majority of its money through licensing. There are other companies that do this and so there’s investors can compare how Hasbro runs its business to other entertainment companies to create as close as a like to like as possible. Obviously, no two companies are completely alike but that’s what analysts are paid to do.

As for whether analysts like conglomerates, that comes and goes. They liked them when they could diversify and be successful in multiple areas and create “synergies”.
Analysts don’t like conglomerates when they are caught by surprise because one or more divisions weighs heavily on the rest of the company. They loved General Electric until they hated General Electric. They love Amazon, until one day they maybe hate Amazon.

Hasbro is nowhere near as complex a company as those.

 

[occam]

Talk about obfuscation; you're mixing up numbers from two different quarters (2023Q4 and 2024Q1), thus confusing things.

Baldur's Gate 3 Has Made a Ton of Money for Hasbro

Though it didn't make Baldur's Gate 3 directly, Hasbro is still cashing in big on the success of last year's wildly-popular Game of the Year.

gamerant.com

"Hasbro has made $90 million through licensing deals for Baldur's Gate 3, contributing to a 7% increase in earnings for Wizards of the Coast."

This article is referencing 2023Q4.

1Q2024 report: 'First quarter growth in [...] DUNGEONS & DRAGONS (+3%)'

A 7% increase for WotC is significantly more than a 3% increase for D&D, so the rest of D&D contracted.

But here you're talking about 2024Q1. And your conclusion is suspect.

In 2024Q1, revenues for Wizards of the Coast and Digital Gaming were up 7%. In fact, they happened to be up 7% YoY in both 2023Q4 and 2024Q1, thus making your reference to the 7% increase correct even though you mixed up the quarters.

Also in 2024Q1, the Tabletop portion of WotC & Digital Gaming was up 3% over the prior year, and it's parenthetically mentioned that D&D (whatever's included in that: tabletop, digital, licensing, etc.) was up 3% (and MTG was up 4%).

But as for the main components of WotC & Digital Gaming revenue (seen on slide 14 of Hasbro's 2024Q1 presentation), we don't know the breakdown for Tabletop (up 3% YoY), Digital Game Licensing (up 7%), and Digital Games (down 3%) between D&D, MTG, and everything else in there, so you can only make variously informed guesses as to how much, say, the D&D portion of Tabletop may have grown or declined. Hasbro doesn't make that clear for this quarter, and claims of certainty outside of insider knowledge are dubious at best.

In 3Q2023 the report said '40% revenue growth in Wizards of the Coast and Digital Gaming segment behind strong launch of Baldur’s Gate III' which YTD was 7% at the time with Wizards Tabletop at 1%, which to me means D&D shrank because MtG grew by more than that.

As to the impact of BG3, here is the 3Q2023 breakdown 'Franchise Performance Third quarter growth in DUNGEONS & DRAGONS (>+100%), [...] MAGIC: THE GATHERING (+20%) and HASBRO GAMING (+3%)'

So yeah, either this is sop obfuscated as to be next to useless altogether, or D&D declined in 2023 / early 2024

Here you're back to 2023Q4.

And in this quarter, Hasbro explicitly calls out (on slide 18 of their 2023Q4 presentation) "declines in DUNGEONS & DRAGONS ahead of 5th edition release". The magnitude is unknown, but revenues for Tabletop are shown as down 1.3% YoY. If Hasbro was trying to obfuscate that, they did a terrible job of it by clearly mentioning it in their presentation. Trust Hasbro to screw up concealing the decline in D&D, amirite?!

 

[mamba]

Apple, Alphabet, Microsoft and Amazon are four of the top five companies by market cap. They are all conglomerates.

Investors don't care.

investors do care, that is often why companies are being spun off, that does not mean that no conglomerates exist

 

[mamba]

More to the point of this story, D&D is both a franchise brand and a game. Hasbro reports on the brand overall, but not the game because the brand is revenue relevant while the game is not.

So what are the D&D brand numbers then? They are not separating out D&D as a brand or a game…