In September 2018, newly installed Mattel CEO Ynon Kreiz revamped the toy company’s Hollywood aspirations and launched a films division with plans to bring its toy franchises to the big screen in licensing and partnerships with studios after options had lapsed on big titles, including a Sony Pictures’ adaptation of Barbie with Anne Hathaway attached to star.
A year later, its rival, Hasbro, set its sights beyond licensing its big franchises (Dungeons and Dragons, Transformers, G.I. Joe): it wanted to become Marvel Studios and produce its own films, too. So Hasbro snapped up producer Entertainment One for $3.8 billion in August 2019 to cement those ambitions.
Fast forward to this year and the diverging paths — Should you build and buy or license content? Do you go all in or let partners play a bigger role? — have played out for the toy companies, with Hasbro changing course toward Mattel’s playbook of licensing and partnerships with the major studios.
Mattel’s Barbie, made by Warner Bros., has eclipsed the $1 billion box office milestone at the summer box office. Hasbro, meanwhile, has sold eOne for $500 million, a couple of billion less than it purchased the producer for, after its own house bets to become Marvel didn’t pan out as planned.
When Hasbro scooped up eOne, then longtime Hasbro CEO Brian Goldner’s strategy was working with Paramount Pictures to produce and distribute film and TV content based on Hasbro toy brands like Transformers, G.I. Joe and My Little Pony. Its eOne produced Paramount film, Dungeons & Dragons: Honor Among Thieves, grossed an underwhelming $208 million globally after its release this past March, while Paramount’s Transformers: Rise of the Beasts, the next installment in the series based on the Hasbro toy, has grossed $433 million worldwide.
Before drastically shrinking its film and TV production footprint with the sale of eOne, Hasbro prized the one-time indie studio for a 6,500 title library it could mine for IP for the multiplex, popular cartoons like Peppa Pig and PJ Masks and drama series like Yellowjackets. The toy maker behind My Little Pony and Play-Doh also expected that nabbing eOne would allow Hasbro to find licensing revenues from newly acquired family brands and to develop non-core IP not part of the separate long-term deal with Paramount to jointly finance projects that the Hollywood studio distributes worldwide. (Other TV shows that eOne has backed include Cruel Summer for Hulu and The Recruit for Netflix.)
But following Goldner’s death in 2021, Chris Cocks, his successor as Hasbro CEO, set about to turn the toy maker into a digital gaming giant, rather than an entertainment powerhouse as envisioned by Goldner. And that pivot put eOne in the position of being non-core to the company’s new strategy. In the end, Hasbro saw value in focusing on its toy businesses, which put eOne on the auction block late last year, before Lionsgate on Aug. 3 unveiled its $500 million acquisition ($375 million in cash, subject to certain purchase price adjustments, and the assumption of production financing loans).
Hasbro is now focused on turning legacy tabletop games for popular franchises like Magic: The Gathering and Dungeons & Dragons into digital video games. For Hasbro, the eOne sale and its expansion into digital gaming puts in the rear view mirror films based on toy franchises that became box office disappointments.
And it gets Hasbro’s Hollywood strategy closer to Mattel, which takes popular toys whose brands are well known to audiences and looks to manage them as franchises in partnerships with major studios. Here Mattel is developing a feature with Universal based on Rock ‘Em Sock ‘Em Robots, which has Vin Diesel attached to star, as well as an adaptation with MGM of doll line Polly Pocket, with Lily Collins starring, and a Hot Wheels movie with J.J. Abrams’ Bad Robot producing. “For a long time, we were just a licensee — so people would come to us and option our brands from us — and we weren’t controlling that storytelling,” said Mattel Films vp Elizabeth Bassin in March at a SXSW panel, months ahead of the Barbie release. “And now we’ve seen that power of toys in the marketplace as storytellers and we have realized that if we’re not in the driver’s seat, those stories might not get told in the way that we want them to be.”
Wall Street has adjusted its expectations for the toy companies accordingly. Roth MKM analyst Eric Handler recently lowered his financial forecasts for Hasbro’s current year based on the firm’s second-quarter earnings report. “The entire downward revision to our 2023 estimates is driven by weakness from the entertainment segment, much of which is being sold and will be gone before year-end,” he highlighted. “The announced sale of eOne’s live-action assets will accelerate the deleveraging process and aid margin expansion in 2024.”
Stifel analyst Drew Crum also cheered the eOne sale. “A weaker entertainment outlook led management to lower ’23 guidance, though with the planned divestiture and subsequent adoption of an asset light model for entertainment, we view this as less of an issue,” he wrote in a report, describing the idea behind the deal “addition by subtraction.”
Wall Street observers tell The Hollywood Reporter that Hasbro’s desire to own and operate film and TV production and distribution businesses itself, based on the vision of former CEO Goldner, was an entertainment strategy that could have worked, but came with key risks. For example, it took the company beyond its core competencies that it has traditionally focused on. Owning eOne also complicated Hasbro’s asset mix, several experts said, using up cash flow, while generating what they called inferior financial returns. After all, film is a capital-intensive business that is hit-driven.
No surprise then that this led to skepticism, including an unsuccessful proxy fight in which an activist investor pushed Hasbro to spin off its fast-growing Wizards of the Coast and Digital Gaming division to unlock shareholder value. Some also mention the COVID-19 pandemic as having further hurt Hasbro’s Hollywood ambitions due to production and cinema shutdowns. The result: Wall Street has come to prefer the Mattel model for making a splash in Hollywood.
Fresh off the blockbuster success of the Barbie movie, Mattel is betting on its two-decade long partnership with Warner Bros. to create products for fans. The toy giant, continuing to develop and produce movies based on the company’s toy brands, has renewed its licensing deal with Warner Bros. Discovery Global Consumer Products, making it the official licensee for toys, dolls, vehicles and games for more than 50 of WBD’s brands and franchises.
Among the WBD brands that Mattel produces toys based on are the DC Comics universe and Harry Potter franchise, as well as programs like Ted Lasso, Friends and Seinfeld. Mattel has been a licensing partner to Warner Bros. for some 20 years.
On Mattel’s earnings call in late July, Kreiz doubled down on the company’s approach to Hollywood after the release of Barbie. “This is a milestone moment for Mattel in a showcase for the cultural resonance of our IP, our ability to attract and collaborate with top creative talent and the capabilities of our franchise management organization,” the CEO said. “This also speaks to the potential of Mattel Films and the significant progress of our strategy to capture the full value of our IP.”