Not many people read through the Earnings
release that Hasbro sends our way every quarter, and not everyone can attend the freely available conference calls either. To help us out this time, Hasbro has also offered a full
transcript and
presentation to anyone - rather than having news sites transcribe things themselves - and we've copied below the more salient and relevant parts to the Transformers brand.
But first, along with the slides that were used during the call, we've also listened to the call again to make sure we noted down a number of questions related to Transformers: The Last Knight and the brand in general, toys in particular, affected the way that the company will be directing its efforts in the coming quarter and future development of the 'brand blueprint', courtesy of Debbie Hancock and Brian Goldner (who calls the Generations line Universe, but hey). The UK and Brazil have not ideally impacted the company either, but the overall Latin American and European markets have remained positive, and most noteworthy of all: despite the not ideal performance of the movie in general, everything seems to be much better in toy and merchandise perspectives compared to 2014 with Age of Extinction.
Read more below, and note that actual revenue from licensed material for The Last Knight will only appear in the fourth quarter!
Question 1: There seems to be a narrative that movie properties did not perform to expectations during this quarter, which seems to be at odds with your commentary on the Transformers franchise. Could you address how you see the company position for the second half in terms of inventory level, shelf space and retailers dedicate to your brand?
Brian Goldner: Of course, Drew. Entertainment continues to drive our business through and if you look at Transformers, we now have entertainment across multiple screens and in fact we are targeting and presenting stories to an infinite number of demographics around the brand. Certainly Transformers: The Last Knight products sold very well and point of sales was very strong. The brand is up considerably. And then of course we also have Robots In Disguise products that’s around the television. We also have Universe product that’s focused on our fans.
That is also selling incredibly well and then there is of course preschool product Rescue Bots which is also selling quite well. So we are seeing a great sell-through around the brand, recognize that this is a brand that’s becoming Increasingly Global, Increasingly International. We’re seeing great growth in places like China around the brand and around our international market.
Question 2: Can we go back to Transformers for a moment Brian because you mentioned the strength of Global POS and that is up significantly and against the last movie (2014). Would it be fair to assume that The Last Knight could generate revenue higher than the 2014 movie, which you said at the time was kind of in-line with the 2011 movie?
Brian Goldner: Yeah, I think Transformers is in fact emblematic of what we’re doing across the company over the last three years; we have developed digital capabilities for stream content and putting content on a multitude of screens. That capability is really being born out in the Transformers business. So the overall brand is performing at a much higher level than it was in 2014, and in part that’s because the movie product is performing at a higher level than the prior year but also because we are seeing great growth in the Transformers: Generations products for the fan-economy. The Robots In Disguise product that’s been around the television. Television viewership is strong, our streaming on Netflix is very strong, and then of course the fan-oriented stream product that goes, our on content that streams with Machinima and MCM. That’s how I look at it as an expansion of storytelling. The brand did perform quite strongly in ’14 but also performed strongly in ’15 and ’16. This is clearly more in line with the movie year performance being up for the brand.
So to understand: movie-to-movie it seems like this movie is better and then you layer on kind of everything you do with your brand blueprint and how you kind of expand brands and then kind of putting it all together. The franchise in general has grown but the movie also seems better?
Brian Goldner: Yeah, it is. The performance is good. Remember that that movie has continued to perform incredibly well globally outside the US. We just surpassed 225 million dollars in China, the movie’s done more than 550 million dollars so far. And also with all of our entertainment globally, yes we are over POS compared to the last movie year. It’s coming from a number of new areas of our capabilities that we’ve developed over the last three years.
Brian Goldner: Royalty expense increased 14% to 8.1% of revenue. Higher royalty expense was the result of higher Partner Brand revenues, but also a strong contribution from Transformers: The Last Knight movie product which carries some external royalties. Our investment in product development remained flat year-over-year but declined as a percentage of revenues. We continue to invest in innovation at an industry-leading level.
