Hasbro Considers Sale or Restructuring of Entertainment Assets

Good afternoon from Los Angeles. As I mentioned last week, we are upgrading the look and feel of this newsletter, which you can see with the new header this week. I am also going to toy around with a few formatting tweaks.

The subject, tone and general structure of this newsletter remain unchanged. Let me know what you think (or what I should write about). 

The three things you need to know

• Inflation comes to sports rights. Paramount has agreed to pay about $1.5 billion over six years under its new deal for the Champions League, the top European soccer tournament. The annual value is more than double the previous deal. Also doubling its money? The Big Ten, which booked more than $1 billion for the TV rights to its football games. It’s the first football conference to hit ten figures.
• If you read one story this week, make it the Businessweek cover story on Adam Aron, the corporate turnaround artist turned meme lord who runs the world’s largest movie theater chain.
• Ashley Carman debuted her newsletter this week with a scoop about Oprah Winfrey

The world’s biggest toy company rethinks its Hollywood strategy

In August 2019, Hasbro Inc. announced it was paying about $4 billion to acquire Entertainment One (eOne), the Canadian media company best known for the kids’ TV series “Peppa Pig” and “PJ Masks.” 

Hasbro’s then-Chief Executive Officer, Brian Goldner, was on a mission to transform the toy company that makes Transformers action figures and G.I. Joe dolls into a global entertainment studio that also makes movies and TV shows. Goldner had previously held talks to buy DreamWorks Animation (home of “Shrek”) and Lions GATE Entertainment Corp. (“The Hunger Games”) but had been unable to seal a deal. 

eOne, which began as a Canadian music distributor in the early 1970s, is a hodge podge of assets. It owns stakes in several production companies, including Steven Spielberg’s Amblin, and produces dozens of films and TV shows such as “Yellowjackets.” It also distributes movies in foreign territories. 

In the two and a half years since the deal closed, almost everything that could go wrong has gone wrong. A global pandemic halted production and closed movie theaters, Goldner died at the age of just 58 and an activist investor acquired a stake in Hasbro and started agitating for some changes.

fought off the activist, and is now conducting a strategic review and reassessing its entertainment strategy. While the company is still committed to “branded entertainment” – aka more “Transformers” movies – it now feels there are large parts of eOne’s business that don’t fit into its future.

Hasbro is weighing two options, according to several people familiar with its plans. It can take the existing staff and redirect it to make branded entertainment (think “Peppa Pig”  movies), and shut down work on projects like “Yellowjackets” and “Designated Survivor.” Or it can sell everything it doesn’t want. It already sold the music company, which owned Death Row Records, for $385 million

Here’s what Hasbro had to say:

“Entertainment is a core foundation of Hasbro. As part of our strategic review process, we are always open to new and better ways to tell stories and bring people together through the power of play via our world-class family of brands.”

The retreat may have been inevitable as soon as Goldner died. Goldner helped Hasbro overtake Mattel Inc. as the world’s largest toy company by reviving My Little Pony, winning the Disney Princesses license away from Mattel and licensing its toys for the hit “Transformers” movie franchise.  

After watching Paramount’s huge success with “Transformers,” Goldner began to wonder why Hasbro couldn’t do the job itself. That led to talks DreamWorks Animation, and then Lions Gate and, eventually, eOne. Hasbro has taken a hands-on role in producing a “Dungeons & Dragons” movie at Paramount.

When the Hasbro board looked to replace Goldner, it had a choice between Darren Throop, eOne’s long-time chief, Eric Nyman, a Hasbro veteran, and Chris Cocks, who ran the division that made role-playing card games Magic: The Gathering and Dungeons & Dragons. The board chose Cocks, who was running the company’s most successful division.

Cocks joined Hasbro from Microsoft, where he once worked on video games such as Halo, and has succeeded at Hasbro by making an online version of Magic: The Gathering. While Cocks is all for making games or movies out of Hasbro’s trove of toys, he is not as enamored of Hollywood as Goldner was. He wants to leverage the company’s existing intellectual property instead of spending money to create a bunch of new properties. 

Hasbro is just the latest in a long line of companies to arrive in Hollywood with big dreams, only to realize that producing entertainment is both more expensive and less glamorous than most people realize.  

But it’s also hard not to see this as another sign of increasing austerity in Hollywood (and the broader market).

Hasbro thrived under Goldner by increasing its market share and sales, which worked when sales were booming. But investors are increasingly looking for profitability. Producing “Yellowjackets” for Showtime, while profitable, is a relatively a low-margin business.

Mattel, its biggest rival, has tried to avoid that trap by not investing as much capital upfront. Mattel has mimicked Hasbro’s push into film and TV, setting up more than a dozen projects, including a Barbie movie. But while Hasbro spent billions of dollars to buy an entertainment company, Mattel has chosen to invest less of its own money. It has hired a few people who are experts in entertainment and licensed the TV and movie rights to its toys to the highest bidders.

The market has rewarded Mattel more than Hasbro in the past couple years, and this year in particular. Though that is due in part to Mattel’s potential sale.

This is not a great time to sell an entertainment company. Hasbro bought eOne near the top of the market for production houses, when growing demand for new series meant seemingly every company was worth $1 billion. But valuations have dropped and Hasbro also has no interest in selling “Peppa Pig” or “PJ Masks,” two valuable pieces of intellectual property that can be exploited as toys, movies, TV shows and video games in keeping with Hasbro’s broader vision.

Hasbro will host an investor day in October to reveal the next phase of its strategy. While the company has yet to formally scale back on production (or put up a for-sale sign on any assets), you can expect more “Peppa Pig” and less “Designated Survivor.” — Lucas Shaw

The best of Screentime (and other stuff)

• Crypto Ads Starring Matt Damon, Tom Brady Vanish From Television
• High-Flying Travel Startup Pollen Collapses
• Netflix’s Mobile Games Are Growing, And So Are Its Gaming Ambitions
• Oscars Producer Will Packer Finds Fixing Hollywood a Never-Ending Job
• Live Nation Faces Mounting Questions Over Concert Safety

Amazon wants a film chief

Amazon is looking to hire a head of its film studio, and it has spoken with executives like Netflix film boss Scott Stuber, Disney’s Sean Bailey and former Paramount executive Emma Watts, among others.

Watts is a real contender for the job, per people close to the hiring, while folks close to both Stuber and Amazon say he is not. 

One big question for any candidate is where they will fit inside the Amazon hierarchy. Jennifer Salke currently oversees film and TV right now, and doesn’t want to give that up (if she doesn’t have to).

The current thinking at Amazon is that the new hire would still report to Salke. That’s fine with some of the candidates. But there are others who would rather report right in to Mike Hopkins, who oversees all of Amazon’s video business. (If you report to a CEO right now, as Stuber does, why would you want to report to someone who reports to someone who reports to the CEO of Amazon?)

Expect more names to circulate in the coming days for this job, which has great potential if Amazon ever figures out an original film strategy.

Streaming surpasses cable (the gauge)

People in the US spent more time streaming TV in July than they spent watching either cable or broadcast, according to Nielsen. This is the first time that’s ever happened.

Broadcast and cable may regain share in the fall due to football and the midterm elections, but this is pretty clearly the new normal in the long-term.

To see the growth of streaming look at this chart from May 2021:

And this one from July 2022:

Streaming gained almost 1/10 of all TV viewing from broadcast and cable in the last 14 months.

The latest on Netflix’s advertising plans

We’re starting to piece together some particulars about Netflix’s advertising-supported service, including:

• Netflix won’t air ads during kids’ programming or original movies (at least not at first).
• Customers of the ad tier won’t be able to download films or TV shows for offline viewing.

Many companies are still negotiating with Netflix over what they will get paid to allow Netflix to run ads in their shows. Read here to find out what Netflix is going to have to pay

At HBO and CNN, the cuts keep on coming

Warner Bros. Discovery is firing about 70 people who work under Casey Bloys, the chief content officer for HBO and HBO Max. It also parted ways with Brian Stelter, the host of “Reliable Sources,” CNN’s weekly show (and daily newsletter) about media. And it yanked even more titles from HBO Max. While there are specific reasons for each dismissal, we covered the rationale for most of this right here

Deals, deals, deals

• The world’s second largest theater chain is about to file for bankruptcy.Here’s why

• Activist investor Dan Loeb wants Disney to spinoff ESPN. Matt Belloni and I discussed what could happen next on “The Town.”

• Disneyland is raising the prices for its annual pass.

• Casino operator Penn National is buying full control of Barstool Sports.

• Spotify is getting into the concert ticketing business

Weekly playlist

Derek Jeter haunted my childhood. As a young Los Angeles Dodgers fan raised to hate the New York Yankees, I couldn’t help but see him as an overrated prima donna. So when ESPN released a seven-part documentary series about him, I couldn’t look away. It’s a hagiographic clip job, at time, but it provides more insight into Jeter than anything else I’ve seen.