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key points
- Hasbro acquired eOne in 2019 for approximately $4 billion.
- The goal is to create its own shows based on its intellectual property, much like Disney does.
- Hasbro realized that outsourcing content creation was more cost-effective than owning a media company, so it is now selling eOne.
Hasbro was intrigued by the idea of ​​programming toys based on the toys it developed, and in 2019 bought media company eOne. Fast forward to today, when the toymaker announced plans to sell the eOne in a stunning reversal.
That’s why Hasbro bought eOne in the first place, and what it hopes to achieve with the asset sale.
What is eOne?
Entertainment One, commonly known as eOne, is a media company that produces content for television, film and home brands. It creates content in the Comedy, Drama, Fact and Improv categories.
The company has script writing, development and production capabilities.
Apart from this, it also includes development studies in the United States, Canada, South America, United Kingdom, Australia, and China.
eOne has participated in the creation and production of many famous games. Its Family Brands division owns Peppa Pig, My Little Pony, Power Rangers, Ricky Zoom, PJ Masks and Transformers, among other popular children’s animation brands.
Why did Hasbro acquire eOne?
In December 2019, then-President Brian Goldner decided to acquire Canada-based eOne for approximately $4 billion. At the time, eOne owned Peppa Pig and other intellectual property aimed at younger audiences.
The purchase of eOne gives Hasbro the ability to own and control its own programming and tie it to the production of physical merchandise.
Goldner believes Hasbro needs to be in a better position to provide content for streaming services. Buying the eOne gave Hasbro a new set of children’s entertainment intellectual property that it didn’t have before.
The eOne acquisition includes the eOne Music division, which owns Death Row Records, Dualtone Records, and music catalogs from Lumineers, RZA, Chuck Berry, and more.
However, Hasbro later sold the music division to an entity owned and controlled by Blackstone for $385 million.
Why sell eOne?
Hasbro quickly regretted buying the eOne, discovering that it likely overpaid. A proxy battle with activist investor Alta Fox, which is trying to get Hasbro to sell its gaming division, is going nowhere.
The death of CEO Brian Goldner in October 2021 also played a role in the current CEO’s decision to explore selling eOne.
Analysts believe that eOne’s media products are not entirely suitable for Hasbro, and the sale of eOne will help the toymaker focus on improving its current intellectual property and product line.
One investor, Fred DiSanto, said in a letter to Hasbro leadership that the company “doesn’t need to own an eOne to bring Dungeons and Dragons to the big screen,” basically The above is to say that Hasbro could have easily contracted out the work to a studio like eOne for less money instead of paying exorbitant prices to own a media production company.
Indeed, at some point it will be cheaper to own a studio outright. However, this can only be achieved if the company is able to expand its production operations. Whereas a company like Disney has hundreds of properties to create content for, Hasbro has limited options in those areas.
Hasbro’s plans move forward
On October 17, 2022, Hasbro announced plans to sell eOne, but retained Peppa Pig and possibly other rights. It intends to keep its home content division, but strike production deals with established studios and production houses to create content for its various intellectual properties.
The move was praised by Wall Street as it allowed the toymaker to focus more closely on its current products and scale them down to a manageable size.
However, on October 14, 2022, analysts at Bank of America said Hasbro was “destroying its long-term value Magic: The Gathering Gain property by selling too many collectible cards. “
This statement caused investors to sell and resulted in a sharp drop Hasbro shares fall value. The decision to dilute a Magic game with excess cards will only disrupt pack sales and devalue existing cards.
It remains to be seen whether Hasbro’s management team will walk away from this decision, or apply a similar strategy to its other intellectual properties in an attempt to generate short-term profits while jeopardizing stability.
Ultimately, it’s too early to tell what’s next for Hasbro, which faces a slow holiday season and relies on discounts to sell its merchandise, as do major retailers.
Overall, Hasbro plans to have three billion-dollar brands by 2027 and expand its licensing business in the near future. It expects mid-single-digit annual growth and $8.5 billion in revenue through 2027.
the bottom line
Selling the eOne made sense for Hasbro because it would be more cost-effective to outsource production. The real question that remains is how much Hasbro will get back when it sells the eOne.
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