What's going on?
Game on! American toymaker Hasbro reported better-than-expected profits in its most recent quarter thanks to sales in its digital games division – and its stock price hit an all-time high!
What does this mean?
Sales from Hasbro’s gaming division went up 24% compared in the first three months of 2017, which includes digital gaming along with well-known board game franchises like Monopoly. The company also said that it expected the bump in sales to continue through this year, in anticipation of toy sales related to upcoming Star Wars, Marvel, and Transformers movies. Altogether, profits from entertainment and licensing more than doubled versus a year ago — and investors were excited enough to send the stock up by over 5% on Monday.
Why should I care?
For the stock: Hasbro is winning the toy war with Mattel.
For the first time since 2000, the size of Hasbro’s quarterly revenues surpassed that of its chief rival, Mattel, another American toymaker producing brands like Barbie and Hot Wheels. While Mattel has historically outcompeted Hasbro, the tables started to turn last year when Hasbro won a big contract for the rights to manufacture dolls from the 3D Disney hit Frozen – the kind of deal with Disney that had long been reserved for Mattel. Mattel reported worse-than-expected earnings last Friday, and Monday’s results confirm that the tide is still moving in Hasbro’s direction, thanks to its growing advantage in franchising.
The bigger picture: Hasbro is trying to bring traditional games into the 21st century.
The rise of electronic gaming has been a competitive threat to traditional toymakers like Hasbro, but it’s responding with its own initiatives. For example, it is launching a subscription service that will deliver three new board games every three months to customers’ doorsteps. It’s also launched apps and digital interfaces for Dungeons & Dragons, one of its best-selling board games. Mattel, for its part, has hired a former Google executive to be its new CEO, and she’s promised to boost Mattel’s offerings in mobile games. One big question is whether these companies can use their existing brand power to drive success in a digital setting.