Hasbro 2014 Annual Report Download - page 44

pairing a licensed concept with an owned or controlled brand. By focusing on these brands, the Company is
working to build a more consistent revenue stream and basis for future growth, and to leverage profitability.
During 2014 net revenues from the Company’s franchise brands increased by 31% and totaled 55% of total
consolidated net revenues.
The Company’s innovative product offerings encompass a broad variety of toys including boys’ action
figures, vehicles and play sets, girls’ toys, electronic toys, plush products, preschool toys and infant products,
electronic interactive products, creative play and toy-related specialty products. Games offerings include board,
off-the-board, digital, card, electronic, trading card and role-playing games.
While Hasbro believes it has built a more sustainable revenue base by developing and maintaining its owned
or controlled brands and avoiding reliance on licensed entertainment properties, it continues to selectively enter
into or leverage existing strategic licenses which complement its brands and key strengths and allow the
Company to offer innovative products based on movie, television and other entertainment properties owned by
third parties. The Company’s primary licenses include its agreements with Marvel Characters B.V. (“Marvel”)
for characters in the Marvel universe, including SPIDER-MAN and THE AVENGERS; Lucas Licensing, Ltd.
(“Lucas”), related to the STAR WARS brand; Sesame Workshop, related to the SESAME STREET characters
and Rovio Entertainment Ltd. related to the ANGRY BIRDS brand. Both Marvel and Lucas are owned by The
Walt Disney Company (“Disney”). In 2013, the Company and Disney amended both the Marvel and Lucas
agreements which extended the term of the license for Marvel characters through 2020 and provides additional
guaranteed royalty payments with respect to both MARVEL and STAR WARS products in anticipation of
expected future motion pictures and other related entertainment through 2020. In September 2014, the
Company’s strategic merchandising relationship with Disney expanded to include product offerings, specifically
small and fashion dolls, based on the popular DISNEY PRINCESS and FROZEN brands, commencing in 2016.
Also in 2014 the Company entered into an agreement with Disney allowing the Company to offer certain
products based on the DISNEY DESCENDANTS brand beginning in 2015. In addition to offering products
based on licensed entertainment properties, the Company also offers products which are licensed from outside
inventors.
Sales of MARVEL products are dependent upon the number and type of theatrical releases in any given
year. In 2014, the Company had sales of MARVEL products related to three theatrical releases: CAPTAIN
AMERICA: THE WINTER SOLDIER,THE AMAZING SPIDER-MAN and GUARDIANS OF THE GALAXY.In
2013, the Company only had sales of MARVEL products related to the May release of IRON MAN 3; however,
these sales were not as significant as those sales of products in 2012 related to the theatrical releases of
MARVEL’S THE AVENGERS and THE AMAZING SPIDER-MAN. During 2015, the Company will market
products related to two planned theatrical motion picture releases based on MARVEL characters including
AVENGERS: AGE OF ULTRON. Furthermore, 2015 sales of STAR WARS products will be supported by the
highly anticipated release of STAR WARS: THE FORCE AWAKENS from Lucasfilm Ltd. as well as JURASSIC
WORLD from Universal Pictures.
The Company also seeks to build all-encompassing brand experiences and drive product-related revenues by
increasing the visibility of its brands through entertainment such as motion pictures and television programming.
Since 2007, the Company has had a number of motion pictures based on its brands released by major motion
picture studios including four motion pictures based on its TRANSFORMERS brand, two motion pictures based
on its G.I. JOE brand and two motion pictures based on its gaming brands, BATTLESHIP and OUIJA. The
Company developed and marketed product lines based on these motion pictures. The Company has also released
animated movies based on its MY LITTLE PONY and MY LITTLE PONY: EQUESTRIA GIRLS brands. In
October 2015, the Company plans to re-ignite an archived brand with the expected release of JEM AND THE
HOLOGRAMS by Hasbro’s own recently established film label, Allspark Pictures.
In addition to using motion pictures to provide entertainment experiences for its brands, the Company has
an internal wholly-owned production studio, Hasbro Studios, which is responsible for the creation and
development of storytelling based on Hasbro’s brands, across mediums including television, film and digital
shorts. The television programming is currently aired in markets throughout the world. Domestically, Hasbro
Studios programming is distributed primarily to Hub Television Network, LLC, formally known as Hub Network
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