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Toy giant Hasbro on Monday reported a decline in second-quarter entertainment and licensing revenue and operating profit as it unveiled an extension of a strategic merchandising agreement for Walt Disney’s Marvel characters by two additional years.
The company also said that boys toys revenue dropped as it didn’t have the support from major film releases like last year.
But management on an earnings conference call said the company’s entertainment pipeline is looking stronger for next year and beyond. Transformers 4 from Paramount Pictures based on the Hasbro toys will hit screens in 2014 as will Guardians of the Galaxy, The Amazing Spider-Man 2 and Captain America: The Winter Soldier from Marvel. Those will be followed in 2015 by Disney/Lucasfilm’s Star Wars: Episode VII, for which Hasbro has the toy rights, and The Avengers 2 from Marvel.
Hasbro also continues to have other films based on its franchises in development with studio partners, including Stretch Armstrong and Micronauts, whose script Bad Robot, Paramount and Hasbro are currently working on, Hasbro CEO Brian Goldner said.
Asked why those have taken so long to develop, he said, “That’s the nature of making movies,” highlighting that it also took Hasbro several years to get the first Transformers film off the ground.
Over the next couple of years, he vowed to launch new boys brands in movies, TV or other new ways.
Meanwhile, the Marvel toy deal amendment extends Hasbro’s global rights to Marvel characters through 2020, so that Hasbro can continue to develop a range of toys and games for Marvel’s universe of more than 8,000 characters, including Spider-Man, The Avengers and Iron Man.
“Following the acquisition of Lucasfilm by Disney, the two companies sought to align the terms of both the Marvel and Lucasfilm agreements,” Hasbro explained. “The Marvel extension is in line with the term for Hasbro’s rights for the Star Wars franchise, which also runs through 2020. Both agreements cover entertainment, including all film and television properties, for the respective franchises during the period and include similar product categories.”
In accordance with the extended term of the Marvel deal, Hasbro said it would guarantee an additional $80 million in royalties to Disney contingent upon additional Marvel theatrical releases.
“Additionally, in anticipation of the next three Star Wars sequel motion pictures and the release of other potential Star Wars-related entertainment, which were not contemplated under the previous agreement, Hasbro will pay up to $225 million in guaranteed payments to Disney,” the companies said. Star Wars: Episode VII is scheduled for a summer 2015 release. It will be directed by J.J. Abrams.
Hasbro on Monday reported second-quarter entertainment and licensing segment revenue of $35.3 million, down 18 percent from $43.2 million in 2012. The drop “reflected a higher mix of revenues from television programming sales for digital distribution,” the company said.
Its entertainment and licensing segment operating profit declined 55 percent to $3.7 million in the second quarter.
Goldner lauded “growth in our girls, games, and preschool categories” in the second quarter. “This growth, however, did not offset the decline in our boys revenues, which faced difficult comparisons due to major motion pictures in 2012.”
Hasbro’s overall quarterly revenue declined 5.6 percent to $766.3 million from $811.5 million in the same period a year ago. Earnings of $38.3 million were down 11.8 percent from $43.4 million.
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