How Hasbro Plans to Revive Its Toy Business

The toy and game maker suffered a weak holiday season and a 9% drop in revenue during 2022, the first year that Chris Cocks served as chief executive of the producer of Monopoly, Play-Doh, Transformers action figures and the Dungeons & Dragons fantasy game. By contrast, revenue jumped 17% at rival Lego last year, while revenue at Barbie manufacturer Mattel was flat.

This year, the toy industry in general faces tougher times amid a slower economy and high inflation, analysts say. In late January, Cocks announced plans to eliminate about 15% of the company’s global workforce—the biggest job cuts in its 100-year history. The longtime gamer, a former Microsoft executive who joined Hasbro in 2016, says he thinks the company strayed too far afield from its core toy and game business. He adds that he hopes to reignite revenue growth and increase market share partly by wooing customers “from both ends of the age spectrum."

In an interview, the 49-year-old Cocks spoke about his multigenerational strategy and the role of physical playthings in an increasingly digital world. Edited excerpts follow:

Lost sight of play

WSJ: What major challenges face Hasbro?

COCKS: The biggest is market-share loss in our toy business for the last three to four years. We lost sight of play, the center pillar of Hasbro, and underinvested in our core toy business. Because of that, our innovation flywheel wasn’t spinning as fast as our competition’s.

Our second challenge is we bought an entertainment company in 2019 [Entertainment One]. An awful lot of entertainment that company makes isn’t play-related. We’re never going to have an action figure based on the reality TV show “Naked and Afraid,’’ produced by that unit. We can probably do what we need to in entertainment with a much smaller footprint. [Hasbro intends to sell most eOne TV and film assets that aren’t related to Hasbro’s intellectual property.]

WSJ: You have predicted a further drop in overall revenue this year. How will you restore an upward trajectory?

COCKS: We’re spending sizable sums to attract experienced industry leaders and improve operations, such as through an enlarged consumer-insights team and expanded data analytics. We also unlock value within business units by letting multiple people make key decisions rather than a single person.

WSJ: Why has Mattel nevertheless captured a bigger share of the toy market?

COCKS: They have been growing some share. We don’t strive to be the biggest toy company in the world. We strive to be the best company in five categories, which represent about 54% of the global toy and game market. We can build our overall market share, build up overall profitability and still be pretty well diversified. A happy side effect might be we’ll get the biggest share of the toy industry.

Five categories

WSJ: Tell us what steps Hasbro will take to lead in all five categories: action figures, preschool toys, games, arts and crafts, plus outdoor and sports items.

COCKS: Preschool is the only area where we’re not No. 1. We’re a fast-growing No. 4 globally. In a lot of ways, our preschool business is just action figures for smaller hands.

We can build relationships at the age of 2 or 3 with favorites like Peppa Pig.

We’re also doing things with Walt Disney like Young Jedi Adventures, a kids’ version of Star Wars. It’s an animated series that made its debut this spring. There’s a new line of Hasbro action figures and play sets celebrating the heroes-in-training.

And you’ll see old favorites age down. There are fun ways to introduce more Transformers toys to kids at age 3. A kid typically gets into Transformers at around 5 or 6.

Transformers EarthSpark, an original animated series, helps our youngest fans get introduced to the brand. We have toys to coincide with that series, launched at the end of last year, such as 1-Step Flip Changer action figures.

WSJ: How will you attract more toddlers to your popular crafts such as Play-Doh?

COCKS: We could have really interesting play experiences with Play-Doh and similar compounds, fusing in action figure or doll-based story play. That will be something quite innovative for 2024. The idea of imagination for each Play-Doh kid is different, and some need thought-starters to begin play.

WSJ: In trying to shrink its huge product lineup, Hasbro has shed several toy brands. How do you choose which brands to stop selling and license instead?

COCKS: We’ve been doing that with brands like Easy Bake and Lincoln Logs. We’ve got 1,500 brands and trademarks. We tend to focus on brands that are $25 million or bigger in revenue with at least a 10% operating profit margin and in a focus category we like. The balance is available to our licensing teams to find partnerships that keep those brands alive. Anything that’s not an action figure, preschool brand, board game, arts and crafts brand or outdoor brand would be on the potential license docket.

Adults who play

WSJ: People 18 and over accounted for 14% of U.S. toy-industry sales in the 12 months ended June 30, 2022, according to market researcher Circana. That’s up from 9% in 2019. Why do “kidults" play Dungeons & Dragons and collect retro toys like G.I. Joes?

COCKS: As they are becoming adults, a lot of people become more intense in their loyalties toward brands nurtured when they were kids. Forty percent of our annual revenue comes from people aged 18 and older. I could easily see it being 50% five years from now. The heart and soul of our adult fan business is delivering to 30, 40, 50-plusers the toys of their dreams from when they were kids.

With Dungeons & Dragons, most people start playing at the age of 11 or 12 and never stop playing even when they are a 49-year-old CEO of a company like me. I still play about once a month.

WSJ: What will you do next with Hasbro Pulse, your website geared to adults? It offers an exclusive lineup of toys that includes a voice-controlled Transformers robot for $999.99.

COCKS: Super-high-end Transformers create special collectible and play moments. You could expect more pop culture, entertainment-based intellectual property from games companies as well as movies. You’ll also see us expand the countries Hasbro Pulse is available in.

WSJ: Which toys will be highly popular among adults this year?

COCKS: Trading cards, whether Magic: The Gathering or Pokémon, will continue to be very popular. Action figures with movie and games tie-ins are going to be very popular.

WSJ: The seventh Transformers movie is now out. Previous ones generated nearly $5 billion in global box-office sales and spurred sales of related Hasbro products. But why should the toy industry keep relying on movies for brand building?

COCKS: Movies still are important, but increasingly not the only game in town. Videogames are the preferred form of multimedia entertainment for new generations.

Smartphone competition

WSJ: Have Hasbro’s toy and board-game sales also been hurt because youngsters often spend hours a day glued to smartphones?

COCKS: We’ve had a long history of adapting our brands for the way people play—whether it’s a physical toy, a show that people watch, a movie they go to theaters for, or a game. We’ve been some of the original innovators in the concurrence of digital and physical play. Besides building our digital-games capability, we also have a fairly big digital-licensing team that helps generate hits like Monopoly Go, a mobile game launched this year.

We continue to feel there’s a robust market for physical things, whether it’s kids who want to play with toys, families who want to play a board game or, increasingly, adult fans who love to collect their dream toys from when they were a kid.

WSJ: However, your digital games business generates fatter profit margins than toys. Why not exit your core business entirely in favor of digital games?

COCKS: Digital and physical toys and game products will live together. A toy helps you develop, explore your imagination and play with others. I don’t see a world where moms and dads don’t want to get toys for their kids. Certainly not in my lifetime.