Hasbro 2011 Annual Report Download - page 22

In 2009 we entered into a joint venture with Discovery Communications, Inc. Through that joint venture, we
launched a children’s and family entertainment channel called THE HUB in October of 2010. In connection with
this joint venture effort, we also developed a wholly-owned studio, called Hasbro Studios, which is responsible
for developing and producing television entertainment media, based on our owned and licensed brands. The
television programming developed by Hasbro Studios is offered in the United States on THE HUB and is
distributed on other networks internationally.
THE HUB is competing with a number of other children’s television networks in the United States for
viewers, advertising revenue and distribution fees. There is no guarantee that THE HUB will be successful.
Similarly, Hasbro Studios’ programming distributed internationally competes with programming from many
other parties. Lack of consumer interest in and acceptance of programming developed by Hasbro Studios or other
programming appearing on THE HUB, and products related to that programming, could significantly harm our
business, particularly given that we are investing significant sums of money developing that programming.
Similarly, our business could be harmed by greater than expected costs, or unexpected delays or difficulties,
associated with our investment in THE HUB, such as difficulties in increasing subscribers to the network or in
building advertising revenues for THE HUB. During 2011 the Company incurred $80,983 for programming
developed by Hasbro Studios and anticipates that it will continue spending at comparable levels in 2012 and
future years.
At December 25, 2011, $343,835, or 8.3%, of our total assets represented our investment in THE HUB. If
THE HUB does not achieve success, or there are subsequent declines in the success or profitability of the
channel, then our investment may become impaired, which could result in a write-down through net earnings.
U.S., global and regional economic downturns that negatively impact the retail and credit markets, or that
otherwise damage the financial health of our retail customers and consumers, can harm our business and
financial performance.
We design, manufacture and market a wide variety of entertainment and consumer products worldwide
through sales to our retail customers and directly to consumers. Our financial performance is impacted by the
level of discretionary consumer spending. Recessions and other economic downturns, or disruptions in credit
markets, in the U.S. and in other markets in which our products are marketed and sold can result in lower levels
of economic activity, lower employment levels, less consumer disposable income, and lower consumer
confidence. Similarly, reductions in the value of key assets held by consumers, such as their homes or stock
market investments, can lower consumer confidence and consumer spending power. Any of these factors can
reduce the amount which consumers spend on the purchase of our products. This in turn can reduce our revenues
and harm our financial performance and profitability.
In addition to experiencing potentially lower revenues from our products during times of economic
difficulty, in an effort to maintain sales during such times we may need to reduce the price of our products,
increase our promotional spending and/or sales allowances, or take other steps to encourage retailer and
consumer purchase of our products. Those steps may lower our net revenues or increase our costs, thereby
decreasing our operating margins and lowering our profitability.
Given the difficult economic conditions in the United States over the past few years, we have been
challenged in our efforts to grow our U.S. business and improve its profitability. As long as economic conditions
in the U.S. remain difficult, this will be an additional challenge we must face and overcome if we are to succeed
in our efforts at growing this business. Similarly, while our European business has grown significantly in recent
years, our future success in Europe is dependent upon economic conditions in Europe. A European sovereign
debt crisis or other significant negative shock to European markets could lead to a recession in Europe, which
would negatively impact consumers and in turn, sales of our products in the European markets.
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