Insider: Analyzing Hasbro’s Third-Quarter Earnings

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It’s that time again, the most exciting time of the year! No, I’m not talking about Khans or draft or really, anything directly related to Magic.

Instead, it’s earnings report time! If you don’t get the sarcasm, it’s because this time of year lots of annual reports come out, and financial journalists have to write dull articles reporting on the results on all of them. It’s a pretty hated time of the year for them.

Fortunately, I only have one annual report I care about! Unlike some of the other finance minds in Magic, I don’t play the actual stock market other than to simply park all my funds into a well-managed Mutual Fund and let compounding interest do the rest. So, since I only care about Wizards’ annual report, I actually look forward to writing these rather than dreading it.

If you’re wondering why we even care about Wizards of the Coast’s annual report, it’s because of what I’ve termed the “secret” reason for growth in the price of cards. For the last several years people have pointed at new cards and new formats and exciting developments, and they’ve cheered as the cards went up without understanding this basic truth of the matter:

Player growth has been on an insane upward trajectory for the last five years.

That’s been one of the biggest catalysts of growth in that time period, much more so than some universal truth of “Magic cards always go up.” It feels that way because the game has done nothing but grow for the past seven or eight years, and that’s more than enough to create that narrative.

In that context it makes a lot more sense why the annual reports matter. This is where we get our only glimpse into how Magic is doing as a brand. It’s not perfect, but it’s more than we get just from looking at things from the outside, so I think it’s well worth exploring.

Digging In

So, how did we do this time around? I’ll start with the most important piece of news.

"Franchise Brands are up 36 percent year-over-year. All seven brands grew double-digits year-over-year."

That’s the most important thing there is, and it exists in the Earnings Presentation Hasbro presented to investors. While the year-to-year comparison looks at the third quarter of 2013 compared to the third quarter of 2014 and takes into account revenue rather that players, this is huge news. Year-to-year growth of at least 10 percent is huge, and that’s great news moving forward.

Next up:

“Segment operating profit in the U.S. and Canada increased 16% in the quarter, reflecting the higher revenue levels, favorable mix and improved expense leverage in the quarter despite being partially offset by a challenging environment in Canada. We also continued to invest in our business including support of key initiatives such as MAGIC: THE GATHERING.”

Great news again. Again we see not just revenue increasing, but profits as well. We also have “continued investments” in Magic. I’m not sure exactly what that means,  but I imagine it’s Organized Play investments as well stuff like the Duels of the Planeswalkers expansion and the like.

“MAGIC: THE GATHERING also grew globally, increasing in both the U.S. and Canada segment and International segment. The response to the July release of the Magic 2015 Core Set and September release of Khans of Tarkir positions the brand well into 2015. We believe there is tremendous future potential for MAGIC: THE GATHERING as it continues to grow around the world. We are investing in the brand, both in digital and analog play, through technology and storytelling.”

Just some fancy language here to say that “stuff is selling!” I find the inclusion of M15 in that a little odd since the high price of the set clearly shows it hasn’t been opened all that much, but it still seems Magic as a whole is chugging along well, and that includes M15.

Another really important note here is the future growth they believe there is in the digital market. That means that, regardless of what see of from the outward perception of Magic Online, there is some money continually being put into it. Hopefully that will (someday) result in a more stable client.

Then came the Q&A session, and while I don’t know who Sean McGowan of Needham and Company is, he’s a hero for asking specific questions about Magic, including how well the newest releases have done. Here’s the answer to that question from the president and CEO of Hasbro.

BRIAN: “Yes, Tarkir has been a great release. The fans have really enjoyed it thus far. Still early days, because you know it’s just been released. We talked about earlier in the year the fact that the releases really do matter. This is a storytelling brand first and foremost and engagement with characters is critical. So this is on track with our expectations and Magic continues to demonstrate both short and long-term great potential and we continue to invest in the brand both on the analog and digital side as we see great opportunities not only for this year, but for many years to come in Magic and growing it as a true global brand, as one of our major franchise brands.”

SEAN: And are you seeing an increase in the percentage of the total revenue that’s coming from digital?

BRIAN: "Yes, we continue to see digital continue to grow over time and we’d expect over time that it would continue to grow.”

Another interesting tidbit from the Q&A is this:

BRIAN: “So year-to-date Magic is up mid-single digits. In the quarter it was up double digits. So it’s the momentum is building but Magic year-to-date through the third quarter was up.”


That’s actually a decent bit to work with. I would love to link you to the full transcript, but it’s not available without paying for it, so that doesn’t do anyone much good.

But the news is good. Magic may not be growing at the 20% clip it was for a year or two, but as long as we’re positive in terms of revenue we’ve got a growing game. While we don’t know exactly what that single digits is, it’s upward growth and the faith that Hasbro seems to have in the brand is certainly appealing.

The note about Magic Online is also interesting. I know people say it has nothing going for it, but we see it’s still growing in terms of percentage of revenue for the game, and that means it’s not going anywhere, nor is it buckling under the weight of competitors like Hearthstone. All good things for the future of the brand, and of your investments.

We have a few more months until the final report comes in, and I hope that in that one we get a little more concrete info, given that it will be an end-of-year presentation.

Until then, all the news from Hasbro seems to be positive. Slowing growth, yes, but still positive growth and none of the warning signs like declining revenue we saw last quarter.

Full steam ahead!

Thanks for reading,

Corbin Hosler



Speaking of moving forward, the next stop for me is Worlds weekend in Nice, France in December. I’ve been added to the coverage team for the event, and I’m really excited for the opportunity. If any of you are lucky enough to be there, I’ll see you there!

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Corbin Hosler

Corbin Hosler is a journalist living in Norman, Oklahoma (also known as the hotbed of Magic). He started playing in Shadowmoor and chased the Pro Tour dream for a few years, culminating in a Star City Games Legacy Open finals appearance in 2011 before deciding to turn to trading and speculation full-time. He writes weekly at and biweekly for LegitMTG. He also cohosts Brainstorm Brewery, the only financial podcast on the net. He can best be reached @Chosler88 on Twitter.

View More By Corbin Hosler

Posted in Earnings Report, Finance, Free, Free Insider, Unlocked

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10 thoughts on “Insider: Analyzing Hasbro’s Third-Quarter Earnings

  1. I don’t understand the comparison to Hearthstone. How is this product competition? Hearthstone is a free game that occupies your time much like Bejeweled or Farm Heroes. It is not a revenue-generating game that has a direct link to a paper version.

    Am I in the Twilight Zone?

    1. That’s like saying world of Warcraft wasn’t affected by and has no correlation to any of the numerous free to play mmorpg’s…just because you can’t turn your hearthstone cards into paper, does that mean there aren’t people who have stopped playing mtgo and switched to hearthstone? I seem to remember lots of magic online players talking about and even writing articles about hearthstone…I suppose I don’t understand your confusion, could you explain further?

    2. It is definitely competition, especially in the pc market against MTGO.
      It has a much better interface, easier to understand for new players and is similar enough to Magic that anyone who has the played Magic before has a very low learning curve. Lots of people in the MTG community have been buzzing about Hearthstone and how its MTGO’s direct competitor. Just because its free doesn’t mean it can’t hurt the competition. Hell the fact that it is free hurts significantly as its a free option.

    3. Do you just have no understanding of what Hearthstone is? It’s precisely a Magic competitor. Mechanically it is very similar to the Portal expansions from Magic’s early years which were meant to be less complex and introduce new players. It is the exact same genre of game as Magic except instead of costing a ton of money to play it’s free if you want, it comes with a great on ramping experience and a well produced digital offering you can play anywhere. How you get the idea that it’s anything like Bejeweled is beyond me or that it isn’t generating tons of revenue (and more importantly, profit). That there’s no paper version is essentially irrelevant.

  2. FWIW Hearthstone is what got me back into magic. It is actually a ton of fun and it’s not exactly the same model as freemium games. Once you get into it, the amount of time you have to spend grinding the cards vs just spending some money to buy some packs make it worthwhile if you have any reasonable amount of income. Unless you are doing the f2p for the challenge I expect most people to spend at least 30 bucks. Hearthstone is raking in money hand over fist to the tune of half a billion+ so far. MTGO is much different and obviously a lot more complex. HS lack of depth left me wanting more which is the reason I got back into magic. I don’t want to rehash the whole HS vs MTGO argument but I think there is a real possibility HS actually benefits magic in general (maybe not MTGO?) there are a lot of people like myself that kind of left magic behind over a decade ago and had their love of card games rekindled by HS.

    Also FYI earnings transcript can be found here:

    and audio here:

  3. Hearthstone’s ‘free-to-play’ model is very similar to MTGO’s. Yes, they give the core cards away for free, but there are Arenas to be played in, and packs to purchase and open. Granted, they don’t charge nearly as much as MTGO, but the paid collections do exist in Hearthstone. There is definitely a case for comparison between the two.

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