Today, I’m talking with Chris Cocks, CEO of Hasbro.
You know, Hasbro — the toy and game company that makes some of the most iconic products in the world, from toy lines like Transformers and My Little Pony to board and tabletop games like Monopoly, Magic: The Gathering, and Dungeons & Dragons.
Chris was last on the show three years ago, as he was first stepping into the role, and we spent quite a bit of time then talking about his plans to collect more data, spin off parts of the company, and think about the future of collectibles… which, at that time, meant NFTs. Look, a lot’s happened in three years! NFTs just weren’t one of them. You’ll hear Chris laugh about this throughout, actually.
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You know what did happen, though? A global supply chain and manufacturing nightmare precipitated by tariffs, the AI explosion, and, of course, the endless chaos of the video game industry. Oh, and there’s the relentless continuation of a trend that defines the modern toy industry: more and more toys and games are made for adults, who have a bunch of money, instead of kids, who don’t. Chris and I talked about that quite a bit, and I think his point of view is at once totally logical and also completely surprising.
Chris and I also talked a lot about Hasbro investing so heavily in games and digital media. For example, you’ll hear Chris mention several times how big the mobile game Monopoly Go is for Hasbro. And while Magic: The Gathering and Dungeons & Dragons are already huge, load-bearing brands, Hasbro is also trying to expand more into the video game space with original games, like Exodus, which is slated to release next year. That’s another huge set of challenges, in an era where video game studios are shutting down more or less weekly, and the distribution market is controlled by a small handful of players, like Sony and Microsoft.
And being an IP company also puts Hasbro right at the nexus of a bunch of thorny cultural issues, too. Fans have very strong feelings about the stories they love and the creators they maybe don’t love so much. Hasbro just signed a big deal to distribute Harry Potter merchandise for the next several years, so I had to ask about that, too.
There’s a lot going on in this one; I really think you’re going to like it.
Okay: Chris Cocks, CEO of Hasbro. Here we go.
This interview has been lightly edited for length and clarity.
Chris Cocks, you are the CEO of Hasbro. Welcome back to Decoder!
Thanks for having me!
I’m excited to talk to you. It’s been about three years since our last conversation. I was looking at that episode. Boy, we talked about NFTs a lot three years ago.
If we talked about it at all, we talked about it too much.
It was interesting that you were worried about that, and you had just changed the license terms for Magic: The Gathering, you were chasing Creative Commons, and you’re trying to protect against NFTs, and that feels like it all essentially came to nothing. Would you say it came to nothing?
Yeah, I’d say, largely, that form of the technology came to nothing. Collectibles have taken off. I’m sure there’s going to be a digital collectible, I’m just not quite sure we found the right version of it yet.
I get that feeling, and I also just feel like we now know crypto is mostly for crimes. It’s amazing how even in the crypto industry, it’s like, “Yeah, we’re mostly for crimes. It’s digital gold and crimes, and that’s what we do here.”
The Attorney General of Washington State, seven or eight years ago, successfully blocked me from ever investing in crypto, and I never picked it up. So there you go. Everyone in Washington and everyone in Hawaii basically didn’t pick up the habit.
There you go. So that was one aspect of our previous conversation. I think we can set that aside. I think we’ve dispatched with that.
The other thing that was really interesting about that conversation is that you were just about one year into the job, and you were in the middle of a reorganization of the company. And you were also about to sell eOne, which you have now done. It was actually one of my favorite episodes at the time because you talked a lot about reorganizing and restructuring a hundred-year-old company. Since then, you’ve completed that restructure. I want to talk to you about how that’s going, and if there are any more changes to come. You’re also moving the company from Rhode Island to Boston. I’m curious about that decision.
Let’s just start at a very high level: You’re not the new CEO anymore, you’re just the CEO. What is Hasbro to you today?
I think it’s the same as what it was three years ago and what it’s always been when it’s at its best — it’s a company about play. I think the biggest thing we’ve articulated in the three years since you and I talked is this concept of what our superpower is, and it’s kind of borrowing from one of my favorite business authors, Jim Collins. He talks about the Hedgehog Concept, and it’s “What’s the thing that you are best in the world at or could be best in the world at?” And I think Hasbro’s superpower, what we’re best in the world at, is inspiring a lifetime of play. We do it across more categories, more brands, and more things than just about any company in the world.
And what we’re super good at is building a relationship anchored in play, and pretend, and imagination with two, three, four-year-olds up to teenagers, and then kind of never letting go. We just keep giving them something that they want to collect, that they want to game with their friends, that they want to play with for an entire lifetime. And I’m kind of the customer one on that superpower. I’ve been playing with our stuff since I was two years old, and I continue to play with it today.
Can I ask you about that trend in particular? I think it’s obvious to people who pay attention to toys — it’s maybe less obvious from the outside — but the idea that toys are now a thing that adults buy and collect and play with, and adults have a lot of money, so the toys can get more expensive. That’s pretty new in this industry.
It’s not so new that it’s like a surprise, but it’s new in terms of how a company like Hasbro would conceive of itself. What’s the balance there? Because I think there’s a lot of criticism that, while making this stuff for adults is really lucrative, you might lose sight of the kids who are the primary audience for the toys.
I think kids are always the first handshake audience, the people that you want to build a relationship with as young as possible, and kind of grow with them. But I think just looking at the basics and the fundamentals of the addressable market, there are fewer kids being born today than there were 10 or 20 years ago, and there are more substitutions than ever. So you’ve got a smaller base of children, especially in Western markets that we tend to distribute in, like the US, Europe, and a lot of Asian countries. Those kids start to shift decisively into video games, mobile phones, and digital experiences at younger and younger ages. So as an industry, you can either say, “Okay, I’m going to accept that my traditional market is declining,” or you can say, “Okay, what else could I do?” And I think adults are kind of the natural space, and it’s not artificial.
I think going back to Baby Boomers, but certainly Gen X, Millennials, Gen Z, we like to collect stuff, we like to play, it’s how we socialize. Usually, when you talk to a group of millennials, or you talk to a group of Gen Zers, if you ask them, “Name your top 10 brands, especially entertainment brands,” fully five or six of them, the majority of them, are going to be either from video games or games in general. So it makes sense that we would want to cater to that audience. I think it’s lucky for us and fortunate for us that a 26-year-old has more spending power than a 6-year-old, and they tend to want more sophisticated playthings and collectibles. And so if you’re a company that has the expertise in that and has the brands for that, like Hasbro, I think it’s pretty good for you.
I’m curious about that shift broadly. One, I think just the demographics you outlined are true, and it’s really interesting… I have a 7-month-old, and it’s just interesting to see what toy brands exist now that didn’t exist for our 7-year-old. So even in that time period, just seven years, you see some brands have just left this market behind, and there are some new brands that exist now. And then there are things like Cocomelon, which, when my 7-year-old was a baby, was pretty nascent, and is now this juggernaut. And I’m curious if you see the dynamics that are changing.
You talked about digital experiences. Do you see more… like at Hasbro, classically, when I was a kid in the 80s, you would advertise toys during Saturday morning cartoons, and this is where you would find the customer, and now, it’s like a bunch of weird YouTube slop. You know what I mean? Is that the space where the new toy brands are going to come from, and you’re just not willing to play there quite as much? Or is the dynamic of the industry changing more aggressively than that?
I think there are a bunch of things happening in the traditional toy space. A, it’s never been easier to become a toy company. You can go to a city in China, just a couple of hours’ drive north of Hong Kong, called Shantou, and walk through 10 Costcos worth of a showroom of toys that a thousand different manufacturers are coming with you. And if you have a decent-sized checkbook, you can go on a walk-through and say, “I’m going to pick that one, and that one, and that one,” and buy a bunch of toys, and suddenly, you are a toy OEM. And then you have a massive amount of distribution options ahead of you, especially with the rise of e-commerce. But on this flip side, it’s never been harder to be a traditional toy company; there’s more competition than ever.
As we talked about before, there’s more substitution, especially from digital, than ever, and you’ve got a narrowing set of customers to be able to appeal to. So the great thing about that is there’s going to be more choice for a kid, and there’s going to be a higher cycle time. The bad thing from a business perspective is that it’s really hard to establish a moat, and the kids cycle through, and they learn about things in unpredictable ways. A lot of kids are exposed to social media, even though they’re not supposed to do it at an earlier and earlier age. They watch YouTube, they watch all these kinds of influencers, and the whole notion of Saturday morning cartoons or even just watching cartoons after school on a linear network has totally flipped upside down. So I think as a toy company, you have a choice: you can either double down on that market and try finding these big entertainment moments that really punch through, or you can try finding a different market to be able to appeal to and build a more durable moat in those spaces.
And I’d say that we have been doing both. We certainly license with a bunch of huge mega brands. We just announced Harry Potter, we do KPop Demon Hunters, we announced Voltron and Street Fighter, and the Walt Disney Company, with whom we’ve been in business since 1954, with Marvel and Star Wars. So we do a lot that appeals to kids, and then we have some of our own house brands like My Little Pony, Peppa Pig, and Transformers. But increasingly, I think we’re choosing to invest our capital and some of our best talent in that older audience, where you can build a play system. You can establish more kinds of strategic brand moats and distribution moats, and it’s a little harder for new competitors to edge in. And the brand loyalty tends to last a bit longer than the attention span of a typical 4-year-old.
Can I ask you about KPop Demon Hunters? For a variety of reasons — one, I’m personally curious, and two, my daughter will kill me if I don’t ask you about KPop Demon Hunters. It’s the IP that runs our house.
Is it true that KPop Demon Hunters was a surprise to the industry, and you weren’t ready for Christmas this year?
Oh yeah. Netflix, to their credit, shopped that around quite a bit, and no one bit. And I remember it was the weekend it came out. I’m an old business person, so I was flipping through LinkedIn, and someone was posting about KPop Demon Hunters as, “Not only my daughter’s favorite show, but it’s my favorite new movie of the year.” And I was like, “KPop Demon Hunters, that sounds like a cool title.” So I picked it up on my Netflix queue and started watching it, and a half hour in, I texted our head of toys, Tim Kilpin, and I won’t include the explicative I used in the text message, but I was like, “What the heck? Why didn’t we pick this up? Who has this?” And he’s like, “No one has it.” And we called Netflix, I think, on Sunday night and said, “Hey, we want in.” Then on Monday and Tuesday, every other toy company on the planet did the same. But yeah, yeah, the industry was surprised by it.
Take me inside that negotiation. You saw it, nobody wanted it, suddenly, it’s super hot. You obviously understood, watching it, with a little bit of LinkedIn validation, importantly, that it was going to be the hottest thing. What’s that negotiation with Netflix like?
Well, by that time, Netflix knows they have a… I think they have a pretty sophisticated piece of data that says everyone’s watching this, and it’s the number one movie on the planet basically. And not only are people watching it, but people are rewatching it, and the songs are starting to chart on Spotify. So we basically come in and be like, “Okay, hey,” we give them our pitch, “Hey, we think this isn’t a typical children’s movie, we think this is multi-generational. We specialize in products that appeal to all ages. We have multiple categories that we can execute in.” And I think within two weeks of us having that initial conversation with them, which probably happened on the Monday or the Tuesday, we were pitching them, showing them full-featured products.
And two years ago, that would’ve been impossible. But now, with the advent of AI-enabled design tools, we can go in and do what used to take us two or three months in basically two or three weeks, sometimes, two or three days. We can come in with very high-fidelity pitches and very high-fidelity product lines, and not only just show it digitally, but when you couple that with 4K level of 3D printing with full color, we can actually come in with models. And that used to take us six to eight weeks because you’d have to go to Hong Kong or Shenzhen and be able to source it from there. And so we had really good conversations with them. The rest of the industry also wanted to pitch them. They may have taken a little more time than us, but eventually, it kind of materialized that Mattel, Hasbro, and Lego came out on top, and we kind of split the license.
When you say you used AI tools to make fully featured models to show them, how does that process work now? Is it that your designers went away and came back with ideas? Did you personally prompt ChatGPT to make you Rei Ami toys? How does that work?
I don’t do that for our products, but I do that all the time for just personal passion projects, and I DM… Dungeons and Dragons is kind of my jam, and I DM probably three or four groups. There is so much AI-based animation, images, text, sound effects, and voice cloning on my PC, it would floor you. But basically, our design teams are all enabled with a suite of the latest tools from basically every major company. Then we’ve trained a bunch of models ourselves with our IP. And so from doing that, we can have pretty sophisticated renderings pretty fast of products and ideas.
When we have a little bit more time, we can even program in a character, and the character from the IP can actually be a co-designer with us and help us with ideas and help us with like, “That’s authentic, that’s not authentic.” And that’s actually been pretty wonderful in how we’ve been creating things.
Wait, so you code in the personality of a character from one of your franchises?
Yeah. So we have Peppa Pig co-design Peppa Pig products with us. Optimus Prime co-designs Optimus Prime Transformers products with us. Optimus Prime and Megatron are two of the DJs that we have in the main hall of our office building, where people can ask them to play songs. And Optimus is always very serious and tells you the soulful reason about the song, and Megatron basically makes fun of you for not picking thrash rock. And it’s just a fun way to bring the creative process to life.
At the end of the day, it’s a bit of garbage in, garbage out; it’s really a human that’s kind of making the decisions, and a human that’s inspiring the good ideas, and a human that’s selecting them and then taking them to the next level. But man, the amount of content we can create, and the speed at which we can create it, just transforms how good we are at being able to bring an idea to life and pitch things.
That back and forth between the taste of your designers, the people who manage your brands, and the ability to generate slop at massive amounts of scale, feels like the tension for every entertainment company right now. And I’m wondering how you see it. I know Hasbro’s talked about… you’ve talked on earnings calls about how you’re past experimenting with AI, it’s just integrated into your workflows, and people can use it however they want inside the company, but that tension between slop and quality, slop and productivity, it’s not going away in this industry. It feels like it’s only rising. How are you thinking about it?
I’m thinking about it a lot and in a lot of different ways just to be at the 50,000-foot level. At the concepting… I suppose it depends on the context. From a creative context, I think you have to think about it very carefully. There are some brands that the audience, the creators, just don’t want it, so we don’t even have it in our pipelines for our video games or for Magic: The Gathering, or D&D. For things like toys where we’re basing it on existing IP, or like a long legacy of ideas, we are able to use it and use it pretty effectively. And in that concept phase, especially when you’re figuring out different ideas for toys and clever derivatives of play patterns, it’s pretty magical. Yeah, you might generate 1,000 ideas and 999 of them aren’t that good, but one of them might be magical, and it’s basically free to be able to create it.
What we find is that it’s a lot more than 999 out of 1,000 are pretty good, especially when you pair it with a really good set of designers and a good team that’s brainstorming with the system. And then once you get to a decent idea at a decent fidelity, or a couple of different ideas, you can take them and use the AI to simulate focus groups and simulate play test labs. Then you can have real humans doing play test labs as well, and get a better idea and a second opinion on how good the ideas are. Basically, it just kind of turbocharges this whole process where, in the past, maybe we could take one or two things to that full prototype phase; now, we can take 10 or 20 things to that full prototype phase. And I just think we have a richer selection and better idea about what the audience ultimately wants at the end.
I think from a just basic productivity perspective, we’re deploying it across the company, and we’ve employed it as a general productivity tool for everyone in the company. We’re seeing people using that probably, on average, 20, 30, maybe 40 times a week. It’s helping to save time in crafting emails, and in taking action steps from meetings, and just with idea generation and researching. It’s probably saving the average person in the company maybe an hour or two from a productivity perspective. And then in pockets, we’re able to employ it on a much deeper basis as basic agents. One example that’s probably the farthest along is that we process a huge number of purchase orders every year to buy toys from mom and pop toy stores to huge mega giants like Walmart or Target.
And our IT systems just traditionally haven’t been super effective at being able to standardize those orders. We’re able to use AI agents to take hundreds of thousands of man-hours out of the system, where we don’t have to touch orders; they can be standardized, processed in our system, and it nets out in material savings for us. A lot of that work was outsourced already, so that’s not necessarily saving our employees a lot of time, but it is kind of saving the bottom line a bit of time. So when we did a couple of different gut checks on what we think the impact of AI was going to be this year, we saw it in the neighborhood of a million to a million plus man-hours of savings that we can redeploy.
A lot of that work wasn’t the fun work. No one likes to write the action steps from a meeting, no one likes to kind of touch an order from a toy store in Peoria, and instead, we can invest it back into, I think, what ultimately counts: delivering for our customers and kind of dreaming up new ideas and new ways to play.
I hear a lot from creatives who listen to the show, who read The Verge in other ways. The fear in the audience is that being a creative has been a pretty hallowed, special role, especially at a company like Hasbro. And AI makes everyone feel like they can have taste. You can prompt Gemini, and you can just get a Nano Banana image of whatever, and you’re like, “Now, I’m creative too.” The audience can participate in that with your brands and your IP as well, and there’s something there that has a lot of people very skittish.
You can see it in games, actually. You mentioned gamers don’t want AI anywhere near their games. Even the audience in some categories really doesn’t want this to happen. How are you managing that inside a company like Hasbro? How are you keeping your designers and your creatives protected or empowered instead of fearful?
Well, it’s really giving them the tools and putting them on the vanguard of it. And if Joe or Sally Sixpack feels like they’re suddenly like an avant-garde creative with these powerful tools, take a legitimate avant-garde creative and give them these tools, and they just level it up way more. And I think what we’ve found is when our creatives have a chance to use it, and then they’re able to collaborate with other creatives who are using it and see all the playful ways that they can bring ideas to life, it hasn’t been a difficult tour to get us to get people to adopt. And at the end of the day, it’s all about delivering a better idea. Who knows what’s going to happen with an explosive technology like this? So I don’t want to make too many long-term prognostications because I’ll be as wrong about this as I was about NFTs.
But from our perspective, I don’t see it costing creatives jobs, I see it only making the quality of the creative we have better. And that’s how we’ve been deploying it to date, and that’s how I think we’ll continue to deploy it. It’s a tool that kind of levels us up and makes what we make better.
I actually want to take one step back and ask the Decoder questions to set some of that up. From the outside, just in talking about Hasbro as we have been, it seems like the IP is at the center, whether it’s you’re going to go get the license from Netflix or KPop Demon Hunters, or you have your own, like Magic and Monopoly, there’s other stuff. It feels like the IP licensing, having that, is really at the center of the company. And then you’ve obviously restructured. So just talk about how Hasbro is structured now, and how the IP licensing flows through the structure you have now.
Sure. Well, I’d say at the center is the… call it the customer insight or the market insight, that’s how we structure everything, that’s how we craft our strategy. And basically, the customer insight that is animating the company and animating our strategy is this acronym that we call GEM Squared. It’s gamified, entertainment-driven, multi-purchase, and multi-generational. That’s what we think the power core is of play and the future of play. That’s where things are growing, that’s where people have purchasing power, and they have passion. So everything we do and everything we invest in is geared towards that GEM Squared insight. We’ve organized around it, we’ve built our strategies around it, and I think you’re going to see more and more of our products geared toward that and our partnerships geared toward that. So like I said, gamified entertainment-driven multipurchase, multigenerational. We then apply it to a play company that we think our superpower is inspiring a lifetime of play.
Then we kind of flow it through the businesses that we have. And we organize our businesses across three primary lanes: there’s games, which is really anchored by Wizards of the Coast, and then Hasbro Games, which is our beloved four-game portfolio of Monopoly, Clue, and The Game of Life. Then there’s licensing and entertainment, which is, “Hey, how do we take our brands and execute them more broadly across categories that we’re not experts in, or we don’t have powerful distribution in?” And so we do that with entertainment companies, with location-based entertainment, which is a fancy word for theme parks and quick service restaurants, and things like play centers that you’d go to in a mall or something, publishing, and the other toy and soft good categories. And then the last area we execute is probably the area that most people… if you met someone from Hasbro at a cocktail party and they said, “I work at Hasbro,” it’s toys. So the toy and game aisle.
We execute that GEM Squared insight and that Inspiring a Lifetime of Play mission through those three categories. And then we break down kind of like how we address that GEM Squared insight across about five or six building blocks in the company. So, how do we become relevant in digital games? How do we scale through partners? How do we age up? How do we make play available anywhere and on more occasions? How do we win more occasions where you could pick a candy bar, or you could pick a toy? How do we convince you to pick a toy? And then last but not least, how do we expand the demographics of who we serve and the playographics of who we serve? So, Hasbro, to date, overindexes with play patterns and collectible patterns more associated classically with boys. So we want to win more with people who identify as girls.
Likewise, Hasbro is very strong in markets like the US, France, and the UK, and for Wizards of the Coast, in Japan. But really, we’re only servicing a market of call it a billion and a half people on a planet that has 8.5 billion. So then how do we execute kind of GEM Squared-based products to the other seven billion people that we aren’t building for and that we aren’t distributing for? And so that kind of manifests into a bunch of different product categories that we drive, and how we think about where we want to invest versus where we want to leverage partners. And also, which partners we want to license with that we think really powers that kind of particularly gamified and entertainment-driven kind of insight, and where do we think we can best service?
How does that work with the IP? So let’s say, Monopoly. You’re like, “We make the Monopoly board game, that’s one division, but we want to make a Monopoly movie, and then we want to make a Monopoly video game.” Who gets to make those decisions across the structure?
We have a person called a global play lead, and they’ll sit in a different part of those three verticals that we execute from, depending on what we think the power center is of the brand. So the monopoly global play leader sits inside of toys, they execute our board game product strategy, but they work with our entertainment team to forge a movie and reality TV show slate like we have today. They’ll work with our licensing team to figure out soft goods, t-shirts, and other toys that might be related to Monopoly, and then they’ll work with our digital team to drive Monopoly-based games. And I think there are probably two dozen Monopoly-based video games and casino games that you can play, with the biggest being Monopoly Go, which is the biggest mobile game in the world. Then they think about how to bring… what are the franchise moments associated with Monopoly?
How do I take my retail distribution and make a bigger marketing moment for more of our licensing partners? And as the other verticals launch things, like if Monopoly Go does something big, how can I parlay that into everything else? If a movie comes out with our partners at Lionsgate, how do I parlay that into everything else? And so you basically build a multi-year rhythm associated with it.
Can I just ask you, what is the Monopoly play lead like? Do they wear the hat and the monocle? What is that person like?
No, his name’s Brian Baker, he’s very boring, very much like me. He likes Monopoly. I don’t know if he and his family cheat quite as much as my family does when they play, because cheating’s our favorite part of the game. But yeah, he’s a big board gamer, former Nike.
That’s really fun.
Yeah, it’s fun. And so we replicate that across. So Peppa Pig would be more of an entertainment-driven platform where the global play leads live over inside of entertainment and licensing, and toys helps support them. Magic: The Gathering and D&D are anchored in Wizards of the Coast and what we do with the hobby channel, but increasingly, we’re doing more video games, we’re doing more entertainment across those. So the three verticals operate independently, but then they are also highly collaborative with each other, utilizing the brands.
So it’s a pretty hybrid structure, right? It sounds like these play leads, they sit in the division that is most naturally associated with whatever property, and they get to use all the functions of the other divisions. There are some resource constraints there. You can see how there’s some division of who gets to do what at what time, depending on the capabilities of all these divisions, and how many resources you have overall. Who breaks those ties?
Usually, it’s me. So we have to do prioritization. Not every brand is built equally. We have a hierarchy for our brands called grow, optimize, and reinvent. So our growth brands are the ones where we see the highest three-year continuous growth potential, we see the highest operating profit margin potential, and we see them operating in markets that are pretty buoyant; they tend to be more blue ocean and less red ocean. And so those growth properties tend to get first pick on available capital and available talent. Optimized brands tend to be in lower growth categories. We tend to see them as kind of steady eddies, maybe low growth. They still do a decent operating profit for us, and so then they get the next tranche. And then reinvent brands are, like we talked about at the beginning of the discussion on toys, toys are kind of a fast fashion cyclical business. What’s popular this year is likely not going to be popular three or four years from now.
The reinvent brands tend to be the ones that are in that late stage cycle where they’re either rest investing, or we’re thinking about what the next phase of them is, so that they can be a future growth brand. And so they get mostly conceptual product development and market research support, but not a lot of go-to-market or inventory support.
Where do new ideas come from in the system? This is the thing I worry about most in our current information environment: that existing IP has so much value associated with it because you don’t have to try to get attention for it. And new things… you’re just sort of waiting for the next weird influencer to show up with an idea that goes viral. You know what I mean? Did you have a meeting where like, “We have to make a six-seven toy”? I don’t know where the new ideas come from-
No, we didn’t have a meeting on that, but we did carefully avoid saying six-seven around little kids in any play test labs. I think we purposely capped our rating scale at one to five and not 1 to 10.
That’s pretty good.
To be perfectly candid, I think it’s a structural weakness of most large companies: thinking about new category development. You tend to get focused on your existing business and very obvious adjacencies, and then you tend to lose sight of, “Hey, this new thing that’s kind of coming up the pike.” And I think we’ve been as guilty of it as anyone. The way that we’re countering it is in two ways. The first way is that our licensing business isn’t just a very high-profit, high-growth business for us; we also use it as a learning lab. We tend to be very liberal in how we license out many of our brands, especially in marketplaces… or in markets or regions where we don’t have a lot of go-to-market capacity, so like China. And we’re able to learn from the local partners about what’s hot and what works in a fantastic collectible and innovation market like China and Southeast Asia.
We actually learn about new categories popping up there. The great thing about that is that it’s a real win-win for the partner. They basically get a clear market where we’re not really competing with them, we get a learning lab, and then we can apply the lessons from that learning lab, like the winners from it, to our distribution, our marketing, and licensing muscle outside of that core market. So that’s actually been pretty powerful for us. An example of one that we learned a lot from was My Little Pony. With My Little Pony, three years ago, maybe we made $5 or $10 million on it in 2024. I think our partner in China, Kayou, did more like $400 million of trading cards on My Little Pony, and they’ve parlayed that into a whole line of teen-oriented collectibles. And it’s kind of reinvented how we conceive of the brand and what the potential is of the brand, and we’re starting to execute against that outside of that core market, both with Kayou and ourselves. So that’s been pretty valuable for us.
And then the second area where we’ve done it is what we call CEO initiatives. We take high-performing people out of our business units, out of a traditional global play lead role, and we give them an assignment for six to nine months and say, “Hey, go run after this.” And we keep their job on the side, and they can go back to it at any time. We recognize that probably 9 out of 10 times, those things aren’t going to yield fruit, but it’s a fun stretch assignment for a high performer, a high-potential person, and sometimes, it yields something fun. So that’s a relatively recent thing that we’ve been doing over the last two years. You’re probably going to see the first fruits of those probably within the next six months. We’ll do our first announcement of those, and I think you’ll think it’s pretty cool.
Let me ask you the other Decoder questions, and I want to get to tariffs, I want to get to video games; there’s a lot of stuff left on my list here. You’ve kind of answered this already in a way. How do you make decisions? What’s your framework?
Well, I think first and foremost, it’s starting with the customer and starting with that insight. So that GEM Squared acronym, it’s memorable, and it’s very accurate. It replaces kind of kidults, which is a term I hate, because I think it’s like trying to describe someone else rather than being actually descriptive about what they want. You start off with the customer, and then I think you’re going to go through our strategy. We call our strategy playing to win, and we try to inject and remind the idea of play in everything we do. And so, “Hey, does this hit the insight? Hey, when do we execute against this? Does it hit one of the strategic goals that we think adds value and adds capability to our superpower of inspiring a lifetime of play?”
And then you think through the dollars and cents of it like,” Does it make money? Does it have a return? Are we investing sensibly given the opportunity? If we think it’s like a flash in the pan, a cool idea, but not going to be durable, you take one investment profile on it. But if you think, “Hey, this might be a new power kind of play pattern and a new category,” then I think you go in with the expectation of, “Hey, I don’t need to make money on this for the first couple years, what I need to do is establish capability in it and establish presence in it, and then the market will take care of itself.” So that’s generally the paradigm I go through.
I think that makes sense in the context of creativity and making stuff. There’s a set of decisions you’ve had to make recently that just seem on the ground, in the weeds, about how to manufacture things in the world that we live in today, especially around tariffs. Tariffs are obviously uncertain; they’re coming, and they’re going. You’ve had a lot of layoffs, some of which you’ve attributed to tariffs. There were two pretty big rounds in ’23, and smaller rounds in ’24, and then in ’25. What do you think the tariff situation is now? How are you making decisions around that now as you make toys?
I’d say most of the headcount reductions we’ve had to do had nothing to do with tariffs; it had to do with… we lost sight of our core business, and we had to correct it. So we got over our skiis, and unfortunately, there’s a human impact to it, and it’s probably one of the worst decisions you have to make, but sometimes, you have to make them. In regard to tariffs, I think we took the perspective that they were going to change and they were going to be unpredictable. And so in a world that is unpredictable and subject to pretty sudden changes, we need to have more options and more resilience. I think the tough thing about that is that it just costs more money, because rather than tooling a line once, you have to tool it three different times for three different factories and three different countries.
But I think the smart thing about it is it allows us to kind of shift with the changing policy environment and not allow us to be overly exposed to one region, one manufacturer, or one set of policies. So it has added costs to the business. They’re manageable, albeit unwelcome, just to be honest, but I’m glad we did it, because I don’t think that unpredictability is going away anytime soon, and it’s nice to have options.
Are you going to sue for tariff refunds? I saw today that thousands of companies are suing for tariff refunds.
We did submit a brief to, I think, the… I’m not sure which court, but one or two courts. So yeah.
And if you actually get refunds, would you pass them back to consumers, or would you just keep them?
Well, the funny thing about that is we didn’t really pass along many of the costs to our consumers. We took a couple of targeted price increases at the end of last year, but it was only on a couple of SKUs in our line. So, I don’t think there will be a lot of rebates to consumers, and then it’s kind of difficult to calculate how you’d even do that. Our perspective was that we’re a pretty diversified company, and we have a pretty sophisticated supply chain, so we’re able to absorb the initial impacts of it. I think the tariffs are… some form of tariffs are going to stick around, so the price increases we did make, they didn’t cover the previous tariffs, depending on what the tariffs set allowed at, they probably will roughly cover those. So, I’m not sure there’s going to be a lot to give.
The goal of the tariff policy, as stated by the administration, is to move manufacturing back to the United States. You were just talking earlier about how easy it is to go to China and just become a toy manufacturer because that capacity is there. Have you moved any manufacturing back to the United States? Is it worth it to do so?
We do about… let me see what the last… I think we do something like 35 percent, maybe upwards of 40 percent of our manufacturing in the US. We’re a different kind of toy company; a lot of our toys are board games, a lot of our stuff is trading cards, and then we do a lot of licensing. So that tends to be more nearshore production. We did retain more domestic production here, particularly for board games, than we otherwise planned to. I think the tough thing about toys is that it’s a super low-margin business, especially in manufacturing. It’s a very labor-intensive business, and the SKUs change a lot every year. I think close to 60 percent of our toy SKUs are new every year. So it’s tough to automate just because stuff changes. I think that’s a tough business to nearshore to the US.
The way you nearshore is usually through automation. I think for there to be meaningful nearshoring for something like toys, you would need a step-change technology. You’d have to really be able to figure out 3D printing on a mass scale, which was the equivalent quality and cost of mass-produced plastic mold injection. And-
I was looking at the website just before we started. I went to hasbro.com. There’s a Green Bay Packers Transformer, which is laser-targeted at me; it’s $27.99 on the website. I’m assuming you’re not making that here. How much would it cost to make something like that here in the United States?
A typical toy… it depends on the category. It’s probably in the neighborhood of 50 to 60 percent more to make a toy in the US than it is in Southeast Asia, and that’s a factor of labor.
And so you’re saying you would need massive automation to equalize that labor cost to do it here?
Yeah, you’d need real automation, real standardization, or some kind of massive process innovation, like a whole new way to make things. And then it would just kind of negate a labor advantage, because it wouldn’t really create a lot of net new jobs. So many of those jobs would just be automated.
Let me ask you about the other piece of automation. So the last time you were here, in 2023, you talked a lot about a system called Blueprint 2.0. It was a $100 million investment into a brand insights platform, like a data platform that would help you figure out what to make and how much to make. We’ve already talked a bunch about AI. I’m reliably told that you can now just buy Cloud Code for 20 bucks and build $100 million brand insight platforms.
Is that working out? Did that investment pay off the way you wanted it two or three years ago, and how are you seeing it now in an age of AI software development?
That $100 million was kind of all into outsized data sourcing, new data analysts, custom market research, and all that kind of good stuff. I would say it’s worked out pretty well. Certainly, businesses like Magic: The Gathering, which I think, since we talked, is maybe 80 or 90 percent bigger. It has really worked out. It’s really helped us be able to understand what the customers want, how to segment products, and who to partner with that would appeal to that customer base. I think it’s helped us in making better toys that are more targeted and really turning around a pretty negative point of sale trend that I inherited when I first started, where we were… In 2022, we were probably indexing 15 to 18 points behind the market in terms of our growth versus the market growth. And today, I think we’re at or ahead of the market.
So it’s been good in all those aspects. I think in terms of the future about how we engineer things and how we build platforms… I just had a conversation with our CIO the other day where he was taking me through, like, “Hey, this is how we’re AI automating the company and how we’re building in new workflows,” and the number one question I had for him was, “Hey, how are we doing it inside of IT? How are we building more capability inside of our own coding organization and inside of our own kind of engineering organization?” And he had to take that back and think through that a little bit.
My personal point of view about what AI is going to do to at least… I can’t talk about the economy as a whole, but what it’s going to do to how we employ people and how we deploy people is… I think it’s going to be a labor savings tool, but I think it’s going to be ultimately savings that you redeploy into the product and you redeploy in the partners. So there might be some changes about the nature of who we employ or what we pay for, but the total number of people that we pay and the total amount of labor that we deploy, I don’t see going down. My hope is that redeployment drives growth, and that goes up.
I definitely think it will affect stuff that we’ve already outsourced. Stuff that we’ve already outsourced tends to be kind of that grindy, “low value” operational or process level work, and stuff like touching a bunch of orders and making sure that they’re filled out correctly, like nothing that’s super glamorous. And so we already outsource that outside of the US. I think those will be the first work streams that get AI automated. I think everything else is more enrichment and feeds people… gives people hours back in the week that they can go and hopefully exceed what they did the prior year.
One of the iron laws of Decoder, for however many years I’ve been doing this now, is that once you start investing in software, your investment only ever increases. So once you hire a software engineer to make you a software platform like Blueprint, you’re only going to hire more software engineers and spend more on the software. And I feel like… I’m curious–
The goal at Microsoft was not worry about what it costs to make, but what it costs to maintain.
Right. And it just feels like every Decoder conversation for years now, I could just rely on that. Maybe AI changes that, right? Where maybe you’re not making an infinite investment in software over time because you can hold it steady with automation. Does it feel like that’s real to you?
I think what we’re seeing in the early stages of AI is if you take that million man-hours of savings that we’re estimating, which is kind of a rough and tough number, but I think directionally right and probably on the low end, that basically translates to a low single-digit to mid single-digit productivity gain for every employee. And that’s just at the early stages. At that level, you’re basically just covering inflation for how benefits and salaries increase for your base. So I don’t think it’s going to massively decrease like any of our given functions. Once again, you’re in this hyper-competitive industry where expectations rise every year, and you want to delight your consumers in a new way and get them to buy something. Logically, if you were an economist, you’d say, “This is an illogical purchase. It’s a passion-based purchase.” So you’ve got to delight them and go bigger.
So that’s not a recipe for cutting back on your development or cutting back on your customer support, that’s a recipe for figuring out how you get more efficient so you can do more with the same.
All right, noted. Chris does not think the SaaS apocalypse is here. We’ll have you back in a few years, and we’ll see if that’s true. Let’s talk about video games and-
I really hope I’m more correct on that than I was with NFTs.
I want to wrap up here by talking about video games, and then the culture, and IP broadly, because I feel like the way fandoms respond to IPs over time is changing, and I really want to get your take on it. Let’s just start with video games broadly. Do you know how to fix the video game industry? Because it doesn’t seem like they know.
I think what’s happening with the video game industry is you have… It’s growing, but it’s not growing like double digits; it’s growing kind of like mid-single digits, and it probably will continue to. They’re starting to suffer from more substitution, which is probably just a… If you look at it in hindsight, it’s just a different way of delivering video games, but you have this massive cost inflation for delivering the amount of content. If you want to develop a AAA video game, it’s a thousand man-years of effort minimum.
So with an audience that’s growing, but not growing leaps and bounds with more kind of substitution or new categories with inflation — which is going significantly faster than what your market is growing or what your pricing power can support — I think you have to think about things differently, I think you have to think about like, “Hey, when you make a game, are you always going to go to San Francisco or Austin, Texas to recruit that team, or are you going to go to these fantastic areas of talent in Southeast Asia, or China, or Eastern Europe and pair them with the team who really understands the market in question?” I think a lot of gamers don’t like AI in games today, but I think eventually, someone’s going to figure out how to use AI in a way that’s high quality and is fun and makes games better. So I also think you have to think through that.
So I really think it’s just kind of this classic equation of, “Hey, your input costs are X, your output is Y. How do you make sure the ratio between X and Y is acceptable for the risks that you take?” Because any given video game has a 20 to 30 percent chance of being successful. You have to be able to cover a whole bunch of unsuccessful bets within whatever you invest.
So I’m curious about this in your own slate of games. You got a big bet this year on Exodus. It’s supposed to be a big cornerstone IP; it’s a huge investment. You also just had Baldur’s Gate 3, made in the system you’re describing, right? That studio was in Belgium, but they’re not working on-
Yeah, they had resources in Eastern Europe, Europe, and Canada. They had them all over the world.
But you’re not working with that studio anymore, and you’ve got a big bet on a new IP. It feels like a different set of risks; you’ve maybe balanced that risk differently than what you’re describing. How’d you make those decisions?
Well, when we think about digital games, we think about, okay, what does the audience want? What brands do we have, and what capabilities do we have that we feel are relevant to those needs? And then what’s the best way to kind of build that capacity? So we decided that we had a really relevant brand and IP, and design sensibility, and communities to hardcore role-playing games and action adventure games. And then inside of… And card games, of course, from Magic. And so we decided, “Hey, those make sense for us to execute, but it’s going to take time for us to execute them.” So, as we build that capacity, we have a lot of brands that are relevant. How do we partner with some of the best in the business to go execute on our behalf while we build our capacity and build our learning to be able to do that?
And I think Baldur’s Gate 3, and what we did with Larian, was a fantastic example of that. Probably a best-in-class example of that. And then on an ongoing basis, since we’re going to focus on more hardcore gamers and these more traditional PC and console audience genres, like role-playing games and action adventure… That covers maybe 700 to 800 million gamers, but there are probably 3.5 billion gamers in the world. So what can we do to appeal to those other 2.8 billion gamers around the world? And that’s really where our licensing team comes in. We’ve got the biggest digital licensing business in the world by, I think, a significant margin. And we’ve got this fantastic board game portfolio, great hardcore games, like Magic and D&D, that we license out with some of the best in the business, and Scopely being one of them in mobile.
That’s pretty lucrative and pretty high growth for us and helps to pay the bills. So that allows us to have a long runway to be able to invest in our own studios and our own publishing capacity, and it also derisks those efforts. It’s not like we’re making a “bet the company” bet on any individual game. If a game does well, it’s great for us, but if a game underperforms or we need to delay it so that we can make sure it’s good, we’ve got this fantastic licensing business that can help cover it for us. I think we’ve been pretty smart with it.
I’m curious about Exodus in particular. This is a big investment; it’s one of the big games you’re talking about. The studio head left in December, right after the last trailer launched. Does this feel stable to you? Does this industry feel stable to you? Because from our perspective, from the audience’s perspective, everything just feels up for grabs all the time in gaming right now.
I think you get into games because it’s a passion play, and you can do amazing things with the technology and the art. I don’t think you get into games because it’s a stable and predictable career, day in and day out. It’s like the ultimate confluence of art and technology, and it changes all the time.
The team on Exodus has been working on it since 2019. Our goal is to ship it in the first half of next year. I think it looks pretty good based on what I’ve played of it. I’m pretty bullish on it. And then we’ll be pairing that with another game called Warlock later in the year from a team up in Montreal. So I think we won’t just have Exodus, we’ll have Warlock, and we’ll have this fantastic stable of digital games. And so, as I said, any individual game has probably less than a 50 percent chance of being in the money, but when you hit, it hits well. And our perspective is that this is one of those businesses.
As I referenced earlier, we don’t think digital games are just a flash in the pan market. We’re going to be patient, we’re going to invest, and if we lose money in the short term, we’re going to build up our community, build up our capacity, and build up our ability to be able to execute with excellence. And I think over time, it’s going to be a difference maker for us and something that we’re happy we invested in.
Talk about being in the money in video games. I feel like I’ve spent a lot of time trying to understand the economics of video games, and I still kind of don’t. Based on the industry, maybe no one does.
Do you have to be on Game Pass to get distribution? Is all the money DLC? Are we just going to do prediction markets in video games… How do these things make money over time in a way that’s sustainable?
I think there are a ton of different ways to make money in video games, and it’s kind of publisher-dependent and brand-dependent. Well, the three ways that we do it. First off, we have Magic: The Gathering Arena, which is a fantastic extension of one of the biggest card games in the world. People love it, it’s highly sticky, and it’s been around since 2018. It’s good, nice business for us. We do it with digital licensing, working with some of the best people in the world. That’s a super high margin, very large scale for us, which helps us really propagate and drive reach for our brands. And then we’re selectively investing in publishing where we want to build that relationship with consumers. We’re doing that with a more traditional business model, and not doing a whole bunch of complex battle pass or free-to-play economics. We’re doing it more like, “Hey, here’s the price for your game. You get 40 to 50 hours of content, you have a lot of fun, and then hopefully, you want to go buy the sequel.”
And we think that works with our brands. Based on the economics and the studios that we have, as I said, the first couple of games are going to cover a bunch of startup costs. So those might not be as profitable as we want, but we think over time, as we start to optimize those studios, figure out how we leverage great talent spots like Eastern Europe and markets like Montreal, where we have one of our biggest offices, we think we can get profitable at that over time and delight a lot of people in the process.
I want to wrap up by just talking about the relationship between these franchises, these brands, all this IP, and fandoms. I have this joke in our newsroom right now that copyright law doesn’t exist anymore, it’s just a framework for business negotiations. But then you go out on the internet, and everything’s up for grabs all day long. You can open Instagram, and you can see literally any cartoon character punching any other cartoon character in the face, and it’s just like, “I don’t even know what’s going on here anymore.” There’s a part of that that might be bad for business, whatever, there’s a part that’s great for individuals because you get to participate more, and there’s a part where the creators have totally lost control of their creations.
Where do you stand on this? Do you feel like the fandoms have an appropriate amount of authority over your IP? Do you think you need to take some more back? Do you think OpenAI has stolen it all from you? Where are you situated in all this?
Oh, I think the fandoms have a lot of authority over our brands and what we make. Anyone who makes a great game that endures or a great IP that endures has to listen to their fans. They have to be able to figure out the noise, signal through the noise, but that’s always been the case.
My view on AI and user-generated content is that, as owners of multiple brands, you can’t ignore it, you can’t stick your head in the sand. And it’s not a game you’re going to win if you just play defense, and you have to figure out a way to engage the fans, engage the platform, and hopefully, empower people to use your brands and your content responsibly. And hopefully, figure out a way that you can make an ecosystem where everyone wins, from the voice talent, the writers, and the creators behind the properties, to the fans who just want to have some fun with their friends and share cool things with each other.
And is it going to be disruptive? Yeah. Have people figured out the business model yet? No. But people were writing about the demise of the music industry back in 2000 with the rise of Napster, and I think, last I heard, the music industry is more profitable than ever because they figured out a way through it.
Yeah, but I would say middle-class artists are not more profitable than ever.
I hope we don’t have to go through a couple of decades in between. Yeah.
That’s what I’m curious about. The music industry might make more money than ever, but it’s Spotify and a bunch of big labels. Musicians themselves are making maybe less money than ever. When I look at, you know… I open Instagram and there’s the Monopoly man doing the Electro Breakers dance with Donald Trump. I’m like, “I think the only person making money here is Mark Zuckerberg.” Do you think the platform should have to pay you when your IP gets used in that way?
I think it’s such a hard question. What I think they should do and what I think will happen, I think are probably two different things. So I think you have to accept what’s going on and figure out a way to work with it rather than trying to work against it. Because I think with AI and user-generated content, the genie’s out of the bottle, and it’s not going back in. So you either accept that and you figure out how you work with it, or you don’t accept that, and I think it’s probably going to be an even bigger negative for you if it’s going to be a negative.
I’m also very curious about fandoms and IPs, how they live and die, how they persist, and how they find new audiences. Actually, Harry Potter is a good example of this. You have a big deal upcoming with Harry Potter. That fandom, I can’t tell if it’s reaching younger people, or if it’s just the particular audience of Harry Potter from its height, getting older and having more money to spend. You know what I mean? And I can’t tell if there’s new fan creations happening that would sustain Harry Potter in a way that you might need that to sustain IP now.
I think going back to that acronym, GEM Squared: gamified, entertainment-driven, multipurchase, and multi-generational. I think Harry Potter is a power brand that exemplifies all four of those aspects. I can’t share the research data we have, but certainly, it’s a very powerful multigenerational brand. It’s almost like a rite of passage for a lot of kids to read the stories or watch the movies. I know with my kids, we spent three years for each of them reading the stories at bedtime, and it was probably one of the nicest memories I have with them. I go to theme parks… I probably go to three or four theme parks every year. I’m a huge theme park fan, and I don’t do it professionally; I do it because I’m a big nerd. When you go to the Harry Potter world inside of Universal Studios, A, they’re some of the best theme parks ever imagined, and B, it’s all ages.
It’s little kids holding stuffed Hedwig owls, to adults who have the Harry Potter glasses and showing their school colors, “Go Slytherin,” I suppose, in my case. I just think it’s something that is really powerful. And to that prior question about AI and user-generated content, when you have a brand that has an authentic connection with people and has a powerful core of lore and an authenticity associated with that, I think fans respect that. They might make other stuff. I saw a pretty cool Dinobots movie, probably made with Seedance 2.0, over the weekend. It was pretty neat, but people know what the authentic Michael Bay movies are, and people know what the authentic toys are.
And I think when you have that and you have that power center like a Marvel does, like a Star Wars does, like a Harry Potter does, yeah, you need to protect it, you need to make sure people are using it responsibly, but I think you also need to have confidence in it that it will help drive you through these sea changes. And that’s certainly kind of what I think.
This is why I’m asking about Harry Potter specifically. I know what a Michael Bay movie is, because Michael Bay made those movies, he’s the author of those movies, and I think Michael Bay’s entire worldview is explosions. I know what his politics are, and it’s like, “Stuff should blow up more.” J.K. Rowling has very loud politics that are turning off a lot of younger consumers. Her transphobia is turning off a lot of younger consumers; this is why I’m talking about fandoms coming to an end.
I can see in the feedback we get when we write about Harry Potter, with younger people saying, “Why would I support this fandom? Why would I support this IP?” And maybe she should just shut up, and it would be fine, and it would become the power center that it is.
But you’ve got creatives on your team. The last time you were on the show, you talked about being stewards of inclusion. How do you make this decision when the creator of the property is sort of actively reducing the fandom, and in fact, hurting a lot of people in that fandom?
For me, it’s separating the art from the artist and going to what the core fans want. And I’m not going to get into the politics around it other than to say we very strongly support diversity and inclusion inside of Hasbro, we’re very proud of it. We’re very proud of the diversity of viewpoints and backgrounds that we have in our employee base. I think Harry Potter is a wonderful franchise. I think it’s done a great job of bringing joy to the world, and I’m looking forward to being part of that, just like I am with all the other brands we support.
Yeah. How do you think broadly about… again, when I say new IP, all the people who make new IP are also out on the platforms. Every new creator is an influencer, and they have a huge library of things they’ve said and done in the past. Is that something that you think of as a danger? Is that something that you’re on the lookout for, or is it your laser focus on the commercial potential of the franchise?
I definitely think you have to be cognizant of it, and I think you have to make a business decision. You have to balance… Again, I tend to focus more on the art than the artist, but obviously, you have to think about both.
Chris, what’s next for Hasbro? What should we be looking out for?
Oh gosh. Well, I think you’re going to see some cool aged-up properties or toys and collectibles from brands that you wouldn’t expect. We have a new Play-Doh line called Blooms, which takes the whole flower mystique and applies it to Play-Doh, geared towards adults. It’s pretty cool. I think it was probably one of the best in show at the New York Toy Fair last week. I think you’re going to see some of those exciting new innovation initiatives that I talked about, which we’ve been incubating for the last couple of years. And then obviously, my hope is that you’re going to see some really kick-ass video games come from us that are going to blow you away.
You’re going to have to come back sooner than three years. Thank you so much for being on Decoder.
Thanks so much for having me.
Questions or comments about this episode? Hit us up at decoder@theverge.com. We really do read every email!