Once again TFW2005 sat down to participate live on another Hasbro Financial Call. What’s so interesting about the call this time is the fact that we are now looking at the outcome of Transformers: The Last Knight, since 2017 Q2 was allocated to the revenue of the movie, toys and licensed merchandise. Hasbro CEO Brian Goldner and Hasbro Vice President Debbie Hancock joined with us today.
Despite the fact Hasbro had smooth sailing during the presentation, three journalists, back-to-back had one important question during the Q&A Session: “What Happened To Transformers: The Last Knight?”. We painstakingly transcripted all the info for you to read.
Question 1: There seems to be a narrative that movie properties did not performed to expectations during the quarter which seems to be at odds with your commentary on the Transformers franchise [see after the jump]. Could you address how you see the the company’s position for the second half in terms of inventory level, shelf space and retailers dedicate to your brand?
Brian Goldner: 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 POS was very strong. The brand is up considerably. And then of course we also have the Robots In Disguise products that’s around the television. We also have Universe product [he meant Generations] that’s focused on our fans. That is also selling incredibly well and there is of course preschool product Rescue Bots that 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 [movie] for a moment Brian because you mentioned the strength of Global POS (Point Of Sales) that is up significantly year-over-year and against 2014 which was your last movie year. I’m just wondering if we could take those comments and translate them into absolute dollars. 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 it’s 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 [HUGE emphasis on the word] brand is performing at a much higher level than it was in 2014 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 per fan-economy. And 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 out on content that streams with Machinima. 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.
Follow-up question: To clearly 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 U. S. In China, we just surpassed 225 million dollars and the movie’s done more than 550 million dollars so far. It’s coming from a number of new areas of our capabilities that we’ve developed over the last three years.
A question was asked by a journalist regarding the delay of royalty revenue (timing is off by at least a quarter) compared to entertainment releases (Franchise Brands such as Transformers). Debbie Hancock replied “For entertainment and licensing… typically when we have consumer product sales, we work with external third party licensees who take that product and make the T-Shirts and Backpacks and all the great things that are sold around our brand. Their revenue at retail for example could be in the second quarter and they wouldn’t report that to us until early in the third quarter so generally what we see with that is it’s about a quarter in arrears from when the sales actually occur at retail. With our entertainment this year with Transformers coming out in June and we have are My Little Pony movie coming in October, we would expect to see some of that revenue in the fourth quarter.“
Additional Transformers related remarks from the Financial Call can be found after the jump. Several related slides are attached with this News Post as well.
Hasbro CEO Brian Goldner stated:
“On a reported basis, Hasbro’s Franchise Brand revenues increased 21%, with growth in Transformers, Magic: The Gathering, Nerf and Monopoly. Retailers and consumers continue to support Hasbro brands backed by stories and innovative, cross category merchandise programs.
The Transformers franchise performance was strong, fueled by robust multi-screen entertainment. We are successfully executing our strategy to develop and leverage entertainment for multiple audiences and screens. This is emblematic of how we are executing across the Brand Blueprint. In total, global point of sale for the franchise is up significantly not only versus last year but also against 2014, the last movie year
Entertainment and Licensing segment revenues declined 1%. Growth in digital gaming, led by Backflip Studios, was offset by a decline in entertainment-related revenues. Boulder Media is contributing to the top line this year, but was offset by the timing of film and television revenues versus last year. Consumer product revenues were essentially flat in the quarter. We have robust consumer products programs for both Transformers and My Little Pony in the second half of the year. We generally record licensed revenue in the quarter after it is sold at retail by our licensing partners
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.”
beardy
The recent leaked reveals had a blackout shown that wasn't the voyager, it was shown with the Leader re releases.
Louise Belcher
It's still not good enough and not a continuous improvement; look how they made Wolfwire and Topspin/Twintwist with covers for the hand hollow arms and then went back to their old habits. You also forget to mention how they stopped painting the poor miniature titanmasters and even went as far as replacing the paint for the regular TF with cheap lousy stickers.
To me it seems you take it as personal issue that I criticise your beloved toys which are inanimate objects and therefore cannot be "personally attacked" as you claim. If you bothered to see my previous comments, you would see I mentioned in detail about the low quailty issues.
Seth Sunthay
The only thing i see is personally attacking for toys as if they offended them or killed someone from their family rather than reclaiming for good quality.
GizmoTron
Well nothing has to hit clearance yet, although Wal-Mart has recently put Titan Masters on clearance despite that price point carrying over into PotP's, so make of that as you will.
The problem here is that it's July, which is always a month that gets stuck with a gap in new toys. I have one Wal-Mart near me that has had a Transformers endcap that has set nearly empty for a month since literally no new toys are being brought into the store right now. It's all waiting for the reset. After that, though, there will be a ton more sightings of Wave 2 TLK toys and more than enough product to carry us into the new year.
Moy
Leader Blackout? Where was that said?
stad
Yeah, I was talking about (in this case) just the movie and the studio. I wouldn't think that Hasbro would take too big of a hit, but like Autobot Burnout pointed out, unsold product that ends up being clearance out as well as a sizeable gap in product on the shelves could be a bad thing for them. Of course, they could probably move up the December launch to November (if it wasn't already planned to be anyway, and it would probably be a good thing) if not sooner, and they are still lacking in Overlord, Sky Shadow, Blitzwing wave, deluxe wave 5, etc. – these can be caught up on shipping.
GizmoTron
I think the TLK line was built to run longer with less waves, how fast and well it is selling is also anecdotal as some places it is selling well. Plus a whole portion of the toyline like the Leader Class figures only just started hitting retail.
RID also launched a bunch of Combiner Force toys and Titans Return still has a bit left to go. Really the only reason for any summer droughts is the same as every year: the new toys set in August/September at all the stores, and places like Wal-Mart won't start ordering and bringing in more toys until they're ready for the reset.
Autobot Burnout
Not sure if it can be calculated with publicly available information, but the ramifications of TF5's failure are still massive. Just look back at the first film where they had to invent extension lines like Premium and AllSpark Power to keep the product line going due to how much of a smash hit it was in sales. Then ROTF simply blew all that away with a superior (mostly…*glares at Sideways toy I don't own*) toyline that doubled down tremendously with the NEST subline of pure excellence.
Now? The first wave of toys aren't moving from shelves and the film's basically all but vanished from theaters because it performed so poorly. What else does Hasbro even have as a major flagship line to carry Transformers long enough for the BB film next year? RID is basically non-existent and Power of the Primes doesn't kick in for another few months.
GizmoTron
You have to wonder, though, since a great deal of those expenses are from Paramount's end of things, and Hasbro still seemingly is moving the toys and merch, how much of a loss did Hasbro really take?
stad
Factoring in those numbers, TLK is certainly a "flop" at this point. Once you consider the film's budget, add in the PR budget, and the percentages of total box office that the studio gets (especially the believed lower percentage of international), it is at least possible that with a worldwide take of $551,209,673 it has not yet broken even yet.
ZapRowsdower
International numbers are ALSO down. It is a flop in America AND International, by virtue of apples-to-apples comparisons to the previous release.
And honestly, I think the data was in the numbers. You could tell TLK would under perform (comparative to the previous films).
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Actually, you'd expect International numbers to be up, right? But like I've said before, it made no sense for Hasbro to cut China (i.e. Chinese actors and locations) out of TLK (I think they did that because of the lawsuits from China after AoE). It's either that… or maybe international audiences are also losing interest because it feels like more of the same?
kaijuguy19
People are always going to find something to gripe about even if we have it so good.
No one's saying that complaining isn't good and no one where wants badly made toys. It's just that a lot of the current toys are actually doing a better job on how they handle hollow parts and making sure the plastic isn't bad compared to the FOC era where it was much worse. Also the older lines also had their share of bad plastic like the infamous GPS that broke dozens of toys.
Louise Belcher
So wanting good quailty toys in good prices is spoiled complaining now?! We are Hasbro customers, not fans.
Autobot Burnout
How are you in this fandom for so long and not know that we'll bitch about anything?
Louise Belcher
Come on, they many other plastic products besides disposable water bottle which require high quailty plastic.
Indeed, I really miss the feeling of soild, strudy, heavy high quailty plastic we used to have.
NotRamjet97
…why's everyone getting so bent out of shape?
C'mon guys, we're getting a Predaking, we're getting CHUG Dinobots, we're getting Leader Blackout, Stinger, maybe a new AOE Lockdown, Leader Rodimus Prime, Leader Optimus Primal, Terrorcons, and Femmebots!
harrismonkey
Except that oil prices have actually been depressed for a while now (years). That was the DOTM/transformers Prime era excuse.
I will say, I do feel like the quality of the toys this time around actually improved a bit (we're still in the basement though). But between franchise fatigue, general decreased interest in toys, and them deciding to fill shelves with repaints of toys mostly not even in the movie the improvements in quality won't translate into sales for them.
Nightrain
Tell that to Hasbro.
Spin-Out
Distribution's a pain here, too.
Because toys require better-quality plastic than, say, a disposable water bottle.
Darkwing48
All I know is… I have a harder time finding the non initial releases of Post "Dark of the Moon" Figures in the stores than finding the G1 reissues in the early 2000s. Because of it I have to turn to the internet. While you guys get wave 2+, All I see in SolCal is wave 2 of 1-step Transformers.