Hasbro Layoffs

 

In case you missed it, Hasbro gave about 1100 of its employees an early Christmas present by announcing their layoff off last Monday.  (See “Hasbro to Lay Off Another 1100 Employees”). From the lists of those laid off I have seen, it looks like a lot of design staff from the Dungeons and Dragons and Magic the Gathering development and promotional area, which seems silly to me since those departments are where Hasbro is currently making its profits.  Should you want to read it, here is the email announcing the layoffs from Hasbro CEO Chris Cox (copied from the Wall Street Journal):

“Team,  

A year ago, we laid out our strategy to focus on building fewer, bigger, better brands and began the process of transforming Hasbro. Since then, we’ve had some important wins, like retooling our supply chain, improving our inventory position, lowering costs, and reinvesting over $200M back into the business while growing share across many of our categories. But the market headwinds we anticipated have proven to be stronger and more persistent than planned. While we’re confident in the future of Hasbro, the current environment demands that we do more, even if these choices are some of the hardest we have to make.

Today we’re announcing additional headcount reductions as part of our previously communicated strategic transformation, affecting approximately 1,100 colleagues globally in addition to the roughly 800 reductions already taken.

Our leadership team came to this difficult decision after much deliberation. We recognize this is heavy news that affects the livelihoods of our friends and colleagues. Our focus is communicating with each of you transparently and supporting you through this period of change. I want to start by addressing why we are doing this now, and what’s next.

Why now?

We entered 2023 expecting a year of change including significant updates to our leadership team, structure, and scope of operations. We anticipated the first three quarters to be challenging, particularly in Toys, where the market is coming off historic, pandemic-driven highs. While we have made some important progress across our organization, the headwinds we saw through the first nine months of the year have continued into Holiday and are likely to persist into 2024.

To position Hasbro for growth, we must first make sure our foundation is solid and profitable. To do that, we need to modernize our organization and get even leaner. While we see workforce reductions as a last resort, given the state of our business, it’s a lever we must pull to keep Hasbro healthy.

What happens next?

While we’re making changes across the entire organization, some functional areas will be affected more than others. Many of those whose roles are affected have been or will be informed in the next 24 hours, although the timings will vary by country, in line with local rules and subject to employee consultations where required. This includes team members who have raised their hands to step down from their roles at the end of the year as part of our Voluntary Early Retirement Program (VRP) in the U.S. We’re immensely grateful to these colleagues for their many years of dedication, and we wish them all the best.

 

The majority of the notifications will happen over the next six months, with the balance occurring over the next year as we tackle the remaining work on our organizational model. This includes standardizing processes within Finance, HR, IT and Consumer Care as part of our Global Business Enablement project, but it also means doing more work across the entire business to minimize management layers and create a nimbler organization.

What else are we doing?

I know this news is especially difficult during the holiday season. We value each of our team members – they aren’t just employees, they’re friends and colleagues. We decided to communicate now so people have time to plan and process the changes. For those employees affected we are offering comprehensive packages including job placement support to assist in their transition.

We’ve also done what we can to minimize the scale of impact, like launching the VRP and exploring options to reduce our global real estate footprint. On that note, our Providence, Rhode Island office is currently not being used to its full capacity and we’ve decided to exit the space at the end of the lease term in January 2025. Over the next year, we’ll welcome teams from our Providence office to our headquarters down the road in Pawtucket, Rhode Island. It’s an opportunity to reshape how we work and ensure our workspace is vibrant and productive, while reflecting our more flexible in-person cadence since the pandemic.

Looking ahead

As Gina often says, cost-cutting is not a strategy. We know this, and that’s why we’ll continue to grow and invest in several areas in 2024.

As we uncover more cost savings, we’ll invest in new systems, insights and analytics, product development and digital – all while strengthening our leading franchises and ensuring our brands have the essential marketing they need to thrive well into the future.

We’ll also tap into unlocked potential across our business, like our new supply chain efficiency, our direct-to-consumer capabilities, and key partnerships to maximize licensing opportunities, scale entertainment, and free up our own content dollars to drive new brand development.

I know there is no sugar-coating how hard this is, particularly for the employees directly affected. We’re grateful to them for their contributions, and we wish them all the best. In the coming weeks, let’s support each other, and lean in to drive through these necessary changes, so we can return our business to growth and carry out Hasbro’s mission.

 

Thanks,

Chris”

A couple of thoughts:

1.       While Cox does mention increased supply chain efficiencies (which I bet still rely heavily upon southeast Asia) and increased direct to consumer capabilities (i.e. promotion and sales) there is no mention of any increase in focus on the retail part of the channel. We have already see increase focus on B2C, with an increase in monthly Secret Lair releases and Hasbro Pulse, so it will be interesting to see what else Hasbro moves into the direct channel

2.       No use of the term firing anywhere in the letter, just reductions and transitions.

3.       If a business needs to cut costs, letting staff go is almost always the first option as payroll is always “low hanging fruit” in an organization. The supply chain modifications mentioned by Cox usually take years to make, hence why we saw no rapid shifts in distribution during epidemic (“See JIT, ROE and the Pretty Overblown Trucker Shortage”)

WotC Layoffs

 Here is a list of a very few of the 1200 layoffs at Hasbro/Wizards of the Coast this week. According to what I can see from the list, a lot of people in their art department got axed. It also looks as if most of the tose cut came from the Dungeons and Dragons side of the company.  I hope this does not mean we will see a lot of AI gnerated art in future D&D releases.

Alta Fox Proxy Fight

 

After my interview with a reporter from NPR for a story about the proxy battle brewing inside of Hasbro (See FCBD Rating Problems, Hasbro Responds to Alta Fox), I came away learning one thing and getting reminded of another:

1)      Reporters spend a whole lot of time talking with their interviewees and only a fraction of the material discussed appears in the story. The reporter, Wailin Wong, and I spent just under an hour discussing Wizards of the Coast, Hasbro, Dungeons and Dragons and the proxy battle Alta Fox has brought seeking seats on Hasbro’s board. From that material, only about 45 seconds worth made it into the actual story. Wong said, when I asked after listening to the story, that was not atypical. She had conducted 2 hour interviews for Planet Money with only a fraction of the material making it into the published work.

2)      Everybody, and I mean Everybody, likes to talk about their characters. One of the reasons Wong asked to get assigned to this story is that she plays D&D so, of course, we spent several minutes discussing her 5^th level druid and my 3^rd level cleric.  Everyone likes talking about their character and their adventures. However, unless you are well acquainted with them, do not do so in stores with the store staff. Not everyone is as fascinated with your character as you are, and the staff cannot readily walk away (See Did You Know People Still Play Boardgames).

I    Incidentally, the attempt by Alta Fox to put three of its nominees on the board was, as Hasbro put it, "soundly defeated".

II

Alta Fox

 Venture Capital company named Alta Fox is pushing Hasbro to spin off the WotC Division of the company. Essentially, Alta Fox thinks WOTC is more valuable on its own than as part of Hasbro and that the value of the company will increase if freed from the strictures of Hasbro. Doubtful that will happen in the near future as Alta Fox just started pushing for the spin off a couple of months ago and Hasbro's boards is quite set against it.

Emphasizing the "Collectible" in TCG

 

I fear that WOTC/Hasbro has glommed onto the “ collectible” aspect of the collectable card game aspect while downplaying the “game” aspect of it. The introduction of Set Boosters and Collector Boosters do little to enhance gameplay, but instead target the collector market and, while collecting has always been part and parcel of the Magic universe, it was subsidiary to gameplay:  “How will this card improve my deck?” While early sets of Magic did, on occasion, include multiple tyles of the same card, the various season illustrations on Urza’s Tower for example, they were few and far between, with most players happy to have 4 to put into their deck, without worrying about getting all the variants. From what I can tell, WOTC’s current marketing plan, with the introduction of Alchemy  focuses on moving actual play online, as I have had a number of customers comment, while promoting the collectible aspect of the game with a number of variants of each card available with each release. Set boosters and Collector boosters are specifically designed for this market, which, according to WOTC is large enough to drive demand for the two additional varieties of card sets within the past two years to what is essentially a segment of the Magic target market. Add in, by my count, 45 Secret Lair releases in the past year and the Magic market has seen a lot of product flooding into the market within a short period of time.

Of Cauldrons and Lawsuits

 

Well, the release of Tasha’s Cauldron of Everything reinforced my long held belief that player accessories outsell DM accessories by a factor of, oh about 10 to one or so.  Case in point, we blew through our order of 25 copies of Tasha’s Cauldron in about 2 days and have yet to sell one of the Wilderness DM Screens.. Wizards, more player sourcebooks, fewer $50 campaigns.

The lawsuit filed by Gale Force 9 against WOTC is the second high profile lawsuit filed against Wizards in the past few months. https://icv2.com/articles/news/view/47010/gale-force-nine-sues-wizards-coast  The first, a lawsuit by Margaret Weis and Tracy Hickman, was filed last October and alleges that, after entering into an agreement to publish a new series of Dragonlance novels with Weis and Hickman in 2017, WOTC notified the authors that it would no longer approve any future drafts, effectively killing the project. You can read the Weis and Hickman lawsuit here https://www.scribd.com/document/480740675/Margaret-Weis-LLC-and-Tracy-Hickman-v-Wizards-of-The-Coast-LLC?campaign=SkimbitLtd&ad_group=66960X1516586X335a223495fd2afffb96e5e4c7f7c54f&keyword=660149026&source=hp_affiliate&medium=affiliate#from_embed&referrer=polygon.com&sref=https://www.polygon.com/2020/10/19/21523673/dragonlance-authors-weis-hickman-sue-wizards-of-the-coast-dungeons-and-dragons&xcust=___pl__e_21287714__r_jenniferrpovey.medium.com/so-

Both lawsuits come on the heels of moves by Wizards to ban controversial Magic cards https://icv2.com/articles/news/view/45914/rolling-for-initiative-another-week-turmoil-discuss  and to eliminate the concept of inherently evil races as well  as cultural stereotyping (see Vishanti for example) from Dungeons and Dragons materials https://dnd.wizards.com/articles/features/diversity-and-dnd and one could be excused for thinking that the decision not to publish the contracted Dragonlance novels could have something to do with Wizards desire to eliminate the concept of inherently evil races from its published materials. After all, the concepts of good, evil and neutrality are core concepts in the Dragonlance mythos and draconians have been presented in the series from the start as an inherently evil race, something that Wizards is disavowing and actively working to distance itself from.  Speaking as a non-lawyer with no inside information about the situation, since the first novel was completed before Wizards’ change in view of evil races, it is reasonable to assume that the ethical views found throughout the previous Dragonlance novels would appear in the new ones, leaving Wizards with a few choices, kill the project completely, publish the first novel as presented under contract and risk backlash or go back to Weis and Hickman and ask for a rewrite of the approved first novel to bring it into line with current Wizards/D&D standards none of which are a particularly cost0-effective option. My bet is this drags out for a few years, like the long gestating D&D movie, and then the parties quietly settle https://icv2.com/articles/news/view/32214/d-d-movie-set-move-ahead

The Gale Force 9 situation has more direct impact on the game industry, especially game retailers. While the Weiss Hickman lawsuit deprives stores of an additional property to sell, the Gale Force 9 suit threatens to put an end to the sales of their more profitable ancillary product lines, the D&D 5^th edition spell cards.  These, and the D&D/Pathfinder miniatures from WizKids are our best-selling non Wizards Dungeons and Dragons products.  As noted above, I am not a lawyer but from my reading of the complaint, it appears that WOTC has seized upon something that could easily be rectified by GF9 and is using it as a justification for getting out of the contract. Why? Maybe 6^th Edition on the horizon and Wizards is cleaning up its licenses? Your thoughts on either lawsuit? Email castleperilousgames@gmail.com.

 

New Games From Renegade Press

 Renegade Game Studios just announced that they have acquired licenses from Hasbro for GI Joe, My Little Pony and Transformers games. Rather weird since Hasbro already publishes games.

New WizKids Miniatures

WizKids just announced a partnership with Hasbro to make miniatures based on GI. Joe, Transformers and My Little Pony in painted and unpainted versions. Since the press release does not say so, I would bet these are simply miniatures and not HeroClix figures. The D&D figures WizKids created last year have done so well that Hasbro likely saw WizKids as a good partner to come out with another line of figures. No indication as to what scale the figures will run.  Just imagine, painting your own MLP or Transformers figure. 

WOTC Sales

Hasbro posted significantly higher sales than expected for both the 4th quarter of 2016 and the entire year. Some 80% of WOTC sales were through hobby game stores such as ours and similar outlets, which I would take to mean comic shops and hobby stores, not the mass market such as Walmart and Target.

Unfortunately, much of WOTC's focus for the future is towards the digital version of the game, as mentioned in missives from the company CEO. Much discussion about the online version of Magic, no mention of the physical game.

D&D Movie Lawsuit Proceeding

According to The Escapist, there will be no further attempts to reach an out of court settlement and the lawsuit over who has the rights to make a movie based on Dungeons & Dragons will proceed to trial September 16. Hasbro has sued Sweetpea Entertainment, the company that made the original D&D movie, stating that the rights to the D&D property reverted to Hasbro when Sweetpea failed to make additional movies within the time stipulated by the contract.

Of course, Sweetpea disagrees with this and countersued Hasbro, meaning we likely won't see an official Dungeons & Dragons movie before 2016, at the very earliest.

Magic Sales Up

According to the fourth quarter earnings call from Hasbro, Magic sales for 2013 were up 20% over 2012 and WOTC sales had climbed by 23%.  Hasbro profits overall were down about 15%, mainly due to big drops in sales of Beyblade and Marvel products. 

It appears the company is quite enthusiastic about the potential of a Magic movie (as well as a D&D movie if done right) to drive even more sales of Magic.

D&D Movie Going to Trial

Looks as if the trial date to determine who controls the rights to make the next D&D movie will go to trial March 25.  The presiding judge dismissed Hasbro's claims for direct infringement of its rights to D&D last Friday but allows the suit for contributory infringement and the countersuits to continue. 

Here's betting that negotiations continued and something gets worked out between the parties just prior to March 25. It the suit goes to trial, one side loses and neither side wants to be that one.  By setting a trial date, the judge has effectively said "This is the deadline for the two of you to work out your problems.  After that, I decide and it becomes more expensive for both of you."

Still More on Dueling D&D Movies

Last week, Sweetpea Entertainment, producer of both D&D movies, filed a motion for summary judgement, asking the court to toss out Hasbro's lawsuit on the grounds that Hasbro failed to provide written notice that it was revoking Sweetpea's rights to the D&D property with the opportunity to cure (Read the motion here).

Hasbro it also claiming copyright infringement, which Sweetpea argues is impossible since there is no property yet on which to infringe copyright.  Stay tuned.

More on Dueling D and D Movies

Hasbro/WOTC has filed suit against Sweetpea Productions to stop it from proceeding with a D&D movie in conjunction with Warner Brothers.  SweetPea is the Courtney Solomon production company that produced the original 2000 D&D movie and two television sequels in 2005 and 2012.  WOTC's lawsuit argues that the original 1994 contract between it and Sweetpea required a theatrical release within 7 years after the release of the original movie and that a television release did not satisfy that requirement sufficiently to reset the rights.

TSR, the previous owner of the rights before acquisition by WOTC, had sued Sweetpea in 1998 over non-production of a D&D film but the two companies settled the lawsuit out of court, leading to the 2000 production.  However, at the time, no other company had shown interest in making a D&D movie.  Not the case here, so doubtful this will get settled quickly.

D&D Movie(s)

Looks as if two D&D movies may head into production, or more likely into court to determine who has the rights to them.  Warner Brothers announced Tuesday that it has acquired the rights to make yet another D&D movie and has moved fairly far along on it, prior to the announcement, with a script by the writer of last year's remake of Wrath of the Titans, David Leslie Johnson.  Apparently Johnson based his original script on E. Gary Gygax's original Chainmail game.  Warner's bought the script and has had him rewrite it to better fit the Dungeons & Dragons property.

Not so fast, says Hasbro, which publishes the D&D game through its WOTC division.  Hasbro claims movie rights to Dungeons & Dragons and has announced its own D&D movie as a vehicle for first time director (and writer of the last 5 Fast and the Furious movies) Chris Morgan in conjunction with Universal Studios.

However, Warner Brothers has an ace in the hole in that the studio has Courtney Solomon as one of the producers on its version of the movie.  Why is he important?  Solomon directed the 2000 Dungeons & Dragons movie and, at the time, according to both his and Warner's lawyers, acquired indefinite rights to the Dungeons & Dragons name, with no rights reversion clause.  This means Hasbro can make movies set in the Dragonlance world or the Forgotten Realms, but is on shaky legal ground should it want to make a "Dungeons & Dragons" movie.