Hasbro 2014 Annual Report Download - page 26

having the largest global potential. As we concentrate our efforts on a more select group of brands, our future
success depends to a greater extent on our ability to successfully develop those brands across our brand blueprint
and to maintain and extend the reach and relevance of those brands to global consumers in a wide array of
markets. In 2014 revenues from our seven franchise brands, LITTLEST PET SHOP, MAGIC: THE
GATHERING, MONOPOLY, NERF, MY LITTLE PONY, PLAY-DOH and TRANSFORMERS, totaled 55%
of our aggregate net revenues. Our key partner brands, such as DISNEY, MARVEL, LUCASFILM, SESAME
STREET and ROVIO, also constitute a significant portion of our overall business. Together our franchise and
partner brands are critical to our business. If we are unable to successfully execute this strategy and to maintain
and develop our franchise and key partner brands in the future, such that our product offerings based on these
brands are not sought after by consumers to the extent required to maintain and grow those brands, our revenues
and profits will decline and our business performance will be harmed.
Consumer interests change rapidly, making it difficult to design and develop products which will be popular
with children and families.
The interests of children and families evolve extremely quickly and can change dramatically from year to
year. To be successful we must correctly anticipate the types of entertainment content, products and play patterns
which will capture children’s and families’ interests and imagination and quickly develop and introduce
innovative products which can compete successfully for consumers’ limited time, attention and spending. This
challenge is more difficult with the ever increasing utilization of technology and digital media in entertainment
offerings, and the increasing breadth of entertainment available to consumers. Evolving consumer tastes and
shifting interests, coupled with an ever changing and expanding pipeline of entertainment and consumer
properties and products which compete for children’s and families’ interest and acceptance, create an
environment in which some products can fail to achieve consumer acceptance, and other products can be popular
during a certain period of time but then be rapidly replaced. As a result, individual child and family entertainment
products and properties often have short consumer life cycles. If we devote time and resources to developing
entertainment and products that consumers do not find interesting enough to buy in significant quantities to be
profitable to us, our revenues and profits may decline and our business performance may be damaged. Similarly,
if our product offerings and entertainment fail to correctly anticipate consumer interests our revenues and
earnings will be reduced.
Additionally, our business is increasingly global and depends on interest in and acceptance of our child and
family entertainment products and properties by consumers in diverse markets around the world with different
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
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