Tag Archives: hasbro expert

Hasbro To Buy Mattel? How Likely Is That?

HASBRO TO BUY MATTEL? HOW LIKELY IS THAT?

Wow – what a topsy turvy year this is turning out ot be for the global toy industry!

After the disappointment of the worst movie box office numbers in more than a decade and the unfortunate Toys R Us situation, reports have been circulating in the last day or so about an alleged approach by Hasbro to takeover Mattel!

While speculation on this topic will keep analysts and journalists buys for the next few days at least, a report of an approach is a long way from the reality of an exxecuted takeover. So how likely is it that one of these two toy behemoths might buy the other? Especially bearing in mind their long term rivalry, perhaps even emnity?

The reality is that is hard to predict unless you sit in certain offices within the companies concerned, however, we can look at some factors which contribute to increasing and decreasing the likelihood:

 

INCREASED LIKELIHOOD FACTORS

New Management At Mattel

So far Mattel’s new CEO, Margo Georgiadis, has made some bold statements and taken some bold steps…as you would expect from someone who came to Mattel from that most disruptive of internet pioneers (Google). Could this mean that an approach from Hasbro’s management to a new Mattel leadership less entrenched in the history of Hasbro vs Mattel is more likely to succeed? I would argue that it could easily be more likely.

Mattel’s Share Price

More pragmatically, when a company’s share price tanks, it costs considerably less to buy, and Mattel’s share price is significantly lower than the $40 peak we saw not that long ago. Therefore Mattel could be purchased for a ‘snip’ of a price based on shire price history.

Hasbro’s need for growth

Hasbro CEO Brian Goldner has been hugely successful. I left Hasbro’s employment soon after he joined, since which Hasbro’s share price has more than quadrupled. Mr. Goldner’s strategic vision to move Hasbro closer to Hollywood has proven to be both the right strategy and the right long term vision thus far. However, like all strategies, it is hard to keep growing forever using the same strategy/in the absence of significant acquisition. Mattel and Hasbro have largely (albeit not entirely) complimentary Brands. Mattel’s strength in what was once called ‘Girls’ and the strength of their Fisher Price business in what is still called ‘Infant/Preschool’ compliments Hasbro’s strength in what was ‘Boys’, especially movie action figures and playsets and Games. Imagine a company which could boast all of the following iconic and highly lucrative brands: Barbie, GI Joe, Fisher Price, Monopoly, American Girl, Furby etc.

Major license savings

This factor has already been highlighted in the media. The idea being that the historical competition between Hasbro & Mattel to win the hottest licenses has in fact increased the total licensing costs for both parties. Therefore (so this strand of thought from the media suggests) should the two erstwhile competitors become one entity, major licensees would not be able to get the two to bid ecah other up for licensed rights. This factor could in theory be particularly motivating to Hasbro as a defensive measure, as they currently have so many licenses from Disney for instance (including Marvel, Disney Princess, Star Wars etc). The reality may not prove to deliver quite so many cost savings as expected due to the strong deal making skills of Disney, but it could at least be a driving factor in any attempted takeover of Mattel by Hasbro.

 

DECREASED LIKELIHOOD FACTORS

Competition concerns

This factor is routinely mentioned when the idea of a Hasbro-Mattel merger or takeover has arisen over the years. However, I have no evidence to offer here, you would need to talk to the authorities to gauge how they would see this one!

Corporate Ego & Self interest

Clearly a Hasbro takeover or even a joint merger would lead to ‘synergies’ – that most horrible and unfeeling euphemism for job losses. Therefore, it would seem likely that there could be quiet significant forces of resistance should the alleged takeover turn into reality.

Transaction Cost

The speculation of a takeover could lead to increased valuations for both companies which may inadvertently make the takeover itself less viable.

Clearly there are other factors that may have an influence beyond those I have highlighted here, but one thing I would confirm is that in my opinion, a takeover or merger seems more likely/possible than at any other time in recent history. Mattel’s current weakness and Hasbro’s need to acquire to continue to grow seem to point towards this transaction being more likely than ever before. However, as this topic has arisen every few years for as long as I have been in the toy business, and never happened yet, more likely doesn’t equal going to happen!

Either way though, these are interesting and challenging times in the toy business. But thank the heavens for demographics – global population growth will ensure the toy industry will grow in the medium to long term regardles of short term fluctuations and any seismic shift in the market place/among the global toy behemoths!

Transformers 5 Disappoints: What Next For Hasbro?

TRANSFORMERS 5 DISAPPOINTS (?)…WHAT NEXT FOR HASBRO?

 

It has been widely reported that Hasbro & their movie studio partners have a 10 year map for the Transformers franchise. This includes numerous additional Transformers films, plus an array of spin off movies. This should not be surprising, as this is increasingly the way blockbuster movies are going – extended franchises going ever deeper into each character’s story/background. X Men would be the most obvious example – with 10 (big box office earning) movies in the franchise since 2000, total box office gross of over $5bn, with a per movie average of over $500m.

According to media reports, Transformers 5 has been a major disappointment at the box office & in terms of critical reception. Yet the movie is still set to gross well in excess of $500m against a production budget of around $220m, and could even reach $600m at the global box office, putting it on a par with the franchise average of the X Men series. Admittedly this looks like being the lowest box office gross for the Transformers franchise since the 2007 movie, but $500-600m is hardly a disaster. It may be significantly less than expectations, and significantly less than the 2 previous movies which grossed over $2.2bn between them, but likely to be about on a par with X-Men Apocalypse, the last full ensemble X-Men movie which grossed c. $540m in 2016.

The question for Hasbro & their movie partners is whether Transformers 5 failing to live up to expectations is a reason to question the strategy/volume of movies & spinoffs planned going forward or not. As an acknowledged Hasbro expert (I worked for Hasbro for 6 years in the noughties & regularly advise investment companies on Hasbro’s prospects & outlook), I just can’t see how that would be the case for several reasons:

Hasbro & the movie people can’t afford for Transformers to fade from the movie scene, so you can be sure many of the top minds in the movie business will be on it to ensure future success.

While much has been made of Transformers 5 suffering from bad review/poor critical reception, the reality is that aside from the 1st in the modern franchise series in 2007, none of the Transformers movies have reviewed that well.

Spin offs allow franchises to have more frequent movies with less ‘franchise fatigue’ effect, as the story while being linked to the main narrative is different, the action is different, setting etc – for instance The Wolverine (2013) is a great example of a spin off which is unlikely to cause franchise fatigue – the setting in modern day Japan, the Yakuza, the particular ‘baddies’ etc. all significantly differentiate the movie from the main franchise, despite the lead character being one of the lead characters in the broader ensemble. So I would not expect the disappointment of Transformers 5 to have any impact on the forthcoming Bumblebee spin off (aside from much scrutiny from those at the top) to ensure the movie is a hit.

Licensing & merchandising is the big profit driver with this kind of franchise – the reality is that the movie has as much space on shelf as any other brand around the launch date. While this is outside Q4 peak season for toy sales, that means the licensed products almost sell themselves due to the noise around the release & the very prominent in store presence. Maybe this will wane more quickly in the run up to peak season than it might have done if Transformers 5 had been a $1bn grossing movie, but nevetheless, a disappointing movie doesn’t stop kids loving the concept, the characters and the past movies (these past installments of a franchise have never been more accessible with Netflix & other content platforms prevalent today). For sure, there’s likely to be a few less kids recruited into the franchise from Transformers 5, which has to be a concern, as kids are generally in the toy space for this kind of franchise for around 3-4 years max before moving on…yet there is the Bumblebee spin off movie in 2018, which is likely to do at least $300-500m at the box office, meaning the cumulative audience for both Transformers 5 & Bumblebee should be not far off the past smash hit sequels in the franchise. Therefore I see any financial impact as being short term – the franchise will keep going strong.

So, in conclusion, Transformers 5 may have disappointed based on sky high expectations, but $500m-600m is hardly a disaster, and still puts this movie on a par with the X Men series average box office.

N.B. All box office numbers quoted in this article are taken from: www.the-numbers.com

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading toy expert consultancy to toy companies around the world, which helps people & companies to get ahead in the toy industry, find the right toy & game factories and to consumer research test their products with kids and parents. Steve is an acknowledged Hasbro expert, and regularly advises investment firms on Hasbro’s strategy & outlook via leading expert networks including Gerson Lehman & others.