Hasbro 2010 Annual Report Download - page 34

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the 2007 motion picture TRANSFORMERS. In addition, in August 2009, the motion picture G.I. JOE: THE
RISE OF COBRA was released by Paramount Pictures Corporation. The Company developed and marketed
product lines based on these motion pictures. In 2011, the Company expects the second TRANSFORMERS
sequel, TRANSFORMERS: DARK OF THE MOON, to be released. As a result of pairing these core brands
with motion picture entertainment, both the movies and the product lines benefited. In addition, the Company
has entered into a strategic relationship with Universal Pictures to produce at least three motion pictures based
on certain of Hasbro’s core brands, with the potential for production of two additional pictures. The first
movie under this relationship is expected to be released in 2012. As part of its strategy, in addition to using
theatrical entertainment, the Company continues to seek opportunities to use other entertainment outlets and
forms of entertainment as a way to build awareness of its brands.
The Company is a partner in a joint venture with Discovery Communications, Inc. (“Discovery”) which
runs THE HUB, a television network in the United States dedicated to high-quality children’s and family
entertainment and educational programming. Programming on the network includes content based on Hasbro’s
brands, Discovery’s library of children’s educational programming, as well as programming developed by third
parties. THE HUB debuted in October of 2010 and was available in approximately 60 million homes in the
U.S. upon launch. In connection with its television initiative, the Company established Hasbro Studios, an
internal wholly-owned production studio that is responsible for the creation and development of television
programming based primarily on Hasbro’s brands. Hasbro Studios creates programming for distribution in the
United States on THE HUB, and for distribution on other networks in international markets. The Company
incurred a certain level of investment spending leading up to the debut of THE HUB in October 2010, as well
as costs in 2010, and expected in the future, related to the production of television programming by Hasbro
Studios. The Company believes that its television initiative of developing programming based on its brands for
distribution in the United States and in international markets supports its strategy of growing its core brands
well beyond traditional toys and games and providing entertainment experiences for consumers of all ages in
any form or format.
While the Company believes it has built a more sustainable revenue base by developing and maintaining
its core brands and avoiding reliance on licensed entertainment properties, it continues to opportunistically
enter into or leverage existing strategic licenses which complement its brands and key strengths. The
Company’s primary licenses include its agreements with Marvel Characters B.V. (“Marvel”), for characters in
the Marvel universe, including IRON MAN and SPIDER-MAN; Lucas Licensing, Ltd. (“Lucas”), related to
the STAR WARS brand; and Sesame Workshop, related to the SESAME STREET characters. The majority of
product offerings under the Sesame Workshop license will commence in 2011. During 2010 the Company had
significant sales of products related to the movie release of IRON MAN 2 in May 2010 as well as continued
strong sales of STAR WARS products. During 2009 the Company had a high level of revenues from products
related to television programming based on SPIDER-MAN and STAR WARS.
The Company’s long-term strategy also focuses on extending its brands further into the digital world. As
part of this strategy, the Company is party to a multi-year strategic agreement with Electronic Arts, Inc.
(“EA”). The agreement gives EA the worldwide rights, subject to existing limitations on the Company’s rights
and certain other exclusions, to create digital games for all platforms, such as mobile phones, gaming consoles
and personal computers, based on a broad spectrum of the Company’s intellectual properties, including
MONOPOLY, SCRABBLE, YAHTZEE, NERF, TONKA, G.I. JOE and LITTLEST PET SHOP.
The Company is investing to grow its business in emerging markets. During the last two years, the
Company expanded its operations in China, Brazil, Russia, Korea, Romania and the Czech Republic. In
addition, the Company is seeking to grow its business in entertainment and digital gaming, and will continue
to evaluate strategic alliances and acquisitions which may complement its current product offerings, allow it
entry into an area which is adjacent to or complementary to the toy and game business, or allow it to further
develop awareness of its brands and expand the ability of consumers to experience its brands in different
forms of media.
While the Company remains committed to investing in the growth of its business, it also continues to be
focused on reducing fixed costs through operating efficiencies and on profit improvement. Over the last 8 years
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