Hasbro 2013 Annual Report Download - page 27

with planned media releases. Not only our efforts, but the efforts of third parties, heavily impact the timing of
media development, release dates and the ultimate consumer interest in and success of these media efforts.
The ultimate timing and success of such projects is critically dependent on the efforts and schedules of our
licensors, and studio and media partners. We do not fully control when or if any particular motion picture
projects will be greenlit, developed or released, and our licensors or media partners may change their plans with
respect to projects and release dates or cancel development all together. This can make it difficult for us to get
feature films developed, plan future entertainment slates and to successfully develop and market products in
conjunction with future motion picture and other media releases, given the lengthy lead times involved in product
development and successful marketing efforts.
When we say that products or brands will be supported by certain media releases, those statements are based
on our current plans and expectations. Unforeseen factors may increase the cost of these releases, delay these
media releases or even lead to their cancellation. Any delay or cancellation of planned product development
work, introductions, or media support may decrease the number of products we sell and harm our business.
Lack of sufficient consumer interest in entertainment media for which we offer products can harm our
business.
Motion pictures, television, digital products or other media for which we develop products may not be as
popular with consumers as we anticipated. While it is difficult to anticipate what products may be sought after by
consumers, it can be even more difficult to properly predict the popularity of media efforts and properties given
the broad array of competing offerings. If our and our partners’ media efforts fail to garner sufficient consumer
interest and acceptance, our revenues and the financial return from such efforts will be harmed.
Hub Network, our cable television joint venture with Discovery Communications, Inc. in the United States,
competes with a number of other children’s television networks for viewers, advertising revenue and distribution
fees. There is no guarantee that Hub Network will be successful. Similarly, Hasbro Studios’ programming
distributed internationally and Backflip Studio’s digital products compete with content from many other parties.
Lack of consumer interest in and acceptance of content developed by Hasbro Studios and Backflip Studios, or
other content appearing on Hub Network, and products related to that content, could significantly harm our
business. Similarly, our business could be harmed by greater than expected costs, or unexpected delays or
difficulties, associated with our investment in Hub Network, such as difficulties in increasing subscribers to the
network or in building advertising revenues for Hub Network. During 2013 the Company spent $41,325 for
programming developed by Hasbro Studios and anticipates that it will continue spending at comparable levels in
2014 and future years.
At December 29, 2013, $321,876, or 7.3%, of our total assets, represented our investment in Hub Network.
If Hub Network does not achieve success, or if 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.
Our business is seasonal and therefore our annual operating results will depend, in large part, on our sales
during the relatively brief holiday shopping season. This seasonality is exacerbated by retailers’ quick
response inventory management techniques.
Sales of our toys, games and other family entertainment products at retail are extremely seasonal, with a
majority of retail sales occurring during the period from September through December in anticipation of the
holiday season, including Christmas. This seasonality has increased over time, as retailers become more efficient
in their control of inventory levels through quick response inventory management techniques. Customers are
timing their orders so that they are being filled by suppliers, such as us, closer to the time of purchase by
consumers. For toys, games and other family entertainment products which we produce, a majority of retail sales
for the entire year generally occur in the fourth quarter, close to the holiday season. As a consequence, the
majority of our sales to our customers occur in the period from September through December, as our customers
do not want to maintain large on-hand inventories throughout the year ahead of consumer demand. While these
techniques reduce a retailer’s investment in inventory, they increase pressure on suppliers like us to fill orders
promptly and thereby shift a significant portion of inventory risk and carrying costs to the supplier.
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