Hasbro Quarterly Report: Universes Beyond Royalties Negatively Affecting Growth

Hasbro has released a quarterly earnings report for Q4 2024 that confirms the repercussions of Universes Beyond, Magic's crossover initiative. On February 13th, the report details the growth percentages for the company and its various branches, including Entertainment One (now owned by Lionsgate), Larian Studios, and Wizards of the Coast.

Hasbro's Quarterly Report, In Summary

In the report, the long and short is that Wizards did splendidly, but was outshone by Larian Studios, who had just released the video game Baldur's Gate 3. Moreover, royalty costs for the massively successful Lord of the Rings: Tales of Middle-Earth expansion for Magic stymied their growth to a net gain in operating profits of -2% that quarter. Even though Wizards' revenue increased by +1%, the operating profit margin declined by 36.1%. According to the report:

• Revenue increase of 10% driven by increase in Licensed Digital Gaming revenue behind Baldur's Gate III from Larian Studios and Monopoly Go! from Scopely.
• Tabletop revenue increased 1% behind growth in MAGIC: THE GATHERING with a strong performance from the Universes Beyond Lord of the Rings: Tales of Middle-earth sets.
• Operating profit declined 2% and operating profit margin of 36.1% due to higher royalty costs associated with Universes Beyond.

Over the 2023 fiscal year, Magic: the Gathering's revenue increased by approximately $20 Million for Hasbro, ferried on the back of Tales of Middle-Earth. We don't know just how much the set's royalties cost Wizards and Hasbro, and may never find out. However, we know it was enough to slow growth considerably for the game's profits.

Amid these concerns over royalty costs, Wizards of the Coast still performed better than any other sector of Hasbro's corporate empire. Due to various strikes in the entertainment industry last year, Hasbro's entertainment sector faltered. Furthermore, consumer goods outside of Wizards of the Coast's sphere of influence saw a 19% decrease in revenue. That said, Transformers, G.I. Joe, and Furby all saw growth, according to the report.

The Ramifications Of Royalties

Despite the issue of licensing fees and royalties, Wizards announced that same day that they are seeking to pursue two Universes Beyond sets as big as Tales of Middle-Earth per year starting in 2025. However, certain opinions put the consideration of smaller UB releases into doubt. MTGRocks remarks that smaller crossover products, such as the Jurassic World tie-in to last year's Lost Caverns of Ixalan set could be cast aside in favor of Hasbro's bottom-line. These kinds of releases might be pushed aside if costs become too big a concern for Wizards.

Universes On The Horizon For Hasbro

However, it's much too late for Wizards to close this box of intellectual properties. Universes Beyond releases for Fallout, Assassin's Creed, and Final Fantasy are on the horizon, with the Marvel set soon to follow. With these issues at the forefront of Hasbro's financial report, Hasbro may need to rethink its stance on yesterday's announcement. Fiscally, if royalty costs are too heavy, Wizards will need to be more careful about what intellectual properties they consort with for Universes Beyond. Alternatively, reverting to a model like the Secret Lair x The Walking Dead release could possibly do well for longevity. Ultimately, it is likely to depend on the state of costs going forward.