Hasbro 2013 Annual Report Download - page 24

tastes and preferences. As such, our success depends on our ability to successfully predict and adapt to changing
consumer tastes and preferences in multiple markets and geographies and to design product and entertainment
offerings that can achieve popularity globally over a broad and diverse consumer audience.
The challenge of continuously developing and offering products that are sought after by children is
compounded by the sophistication of today’s children and the increasing array of technology and
entertainment offerings available to them.
Children are increasingly utilizing electronic offerings such as tablet devices and mobile phones and they
are expanding their interests to a wider array of innovative, technology-driven entertainment products and digital
and social media offerings at younger and younger ages. Our products compete with the offerings of consumer
electronics companies, digital media and social media companies. To meet this challenge we, and our
competitors, are designing and marketing products which incorporate increasing technology, seek to combine
digital and analog play, and capitalize on new play patterns and increased consumption of digital and social
media.
With the increasing array of competitive entertainment offerings, there is no guarantee that:
• Any of our brands, products or product lines will achieve popularity or continue to be popular;
• Any property for which we have a significant license will achieve or sustain popularity;
• Any new products or product lines we introduce will be considered interesting to consumers and achieve
an adequate market acceptance; or
• Any product’s life cycle or sales quantities will be sufficient to permit us to profitably recover our
development, manufacturing, marketing, royalties (including royalty advances and guarantees) and other
costs of producing, marketing and selling the product.
The children’s and family entertainment industry is highly competitive and the barriers to entry are low. If
we are unable to compete effectively with existing or new competitors or with our retailer’s private label toy
products our revenues, market share and profitability could decline.
The children’s and family entertainment industry is, and will continue to be, highly competitive. We
compete in the United States and internationally with a wide array of large and small manufacturers, marketers,
and sellers of analog toys and games, digital gaming products, digital media, products which combine analog and
digital play, and other entertainment and consumer products, as well as with retailers who offer such products
under their own private labels. We face competitors who are constantly monitoring and attempting to anticipate
consumer tastes and trends, seeking ideas which will appeal to consumers and introducing new products that
compete with our products for consumer acceptance and purchase.
In addition to existing competitors, the barriers to entry for new participants in the children’s and family
entertainment industry are low, and the increasing importance of digital media, and the heightened connection
between digital media and consumer interest, has further increased the ability for new participants to enter our
markets, and has broadened the array of companies we compete with. New participants with a popular product
idea or entertainment property can gain access to consumers and become a significant source of competition for
our products in a very short period of time. These existing and new competitors may be able to respond more
rapidly than us to changes in consumer preferences. Our competitors’ products may achieve greater market
acceptance than our products and potentially reduce demand for our products, lower our revenues and lower our
profitability.
In recent years, retailers have also developed their own private-label products that directly compete with the
products of traditional manufacturers. Some retail chains that are our customers sell private-label children’s and
family entertainment products designed, manufactured and branded by the retailers themselves. These products
may be sold at prices lower than our prices for comparable products, which may result in lower purchases of our
products by these retailers and may reduce our market share.
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