Hasbro 2014 Annual Report Download - page 45

and, as of October 13, 2014, now the Discovery Family Channel (the “Network”). Internationally, Hasbro
Studios also distributes to various broadcasters and cable networks and globally on various digital platforms,
including Netflix and iTunes. Beginning in 2015, Hasbro Studios will begin distributing certain programming
domestically to other outlets, including Cartoon Network. The Company’s television initiatives support its
strategy of growing its brands well beyond traditional toys and games and providing entertainment experiences
for consumers of all ages in many forms or formats.
The Network is the Company’s joint venture with Discovery Communications, Inc. (“Discovery”) and is a
cable television network in the United States dedicated to high-quality children’s and family entertainment and
educational programming. Programming on the Network includes content based on Hasbro’s brands as well as
programming developed by Discovery and other third parties. Prior to September 2014, the Company and
Discovery each owned a 50% equity interest in the Network. In September 2014, Hasbro and Discovery amended
their relationship with respect to the Network, reducing Hasbro’s equity interest from 50% to 40%.
Hasbro’s strategic blueprint and brand architecture focuses on extending its brands through digital media
and gaming. In support of this strategy, in 2013, the Company acquired a 70% majority ownership in Backflip
Studios, LLC (“Backflip”), a mobile game developer based in Boulder, Colorado. Backflip’s product offerings
include games for tablets and mobile devices including DRAGONVALE, NINJUMP and PAPER TOSS. New
game brands released during 2014 include DWARVEN DEN, PLUNDERNAUTS, SPELLFALL and
SEABEARD. Backflip also introduced two game brands under Hasbro brands, specifically NERFHOOPS and
TWISTER TAP. In 2015 and beyond, Backflip intends to continue focusing on its existing game titles,
particularly DRAGONVALE, and to launch new games, including those based on Hasbro brands. To further
extend its brands into digital media and gaming, the Company also out-licenses its properties to a number of
partners who develop and offer digital games and other gaming experiences based on those brands. One example
of these digital gaming relationships is the Company’s agreement with Electronic Arts Inc. (“EA”) under which
EA has the rights to develop several of Hasbro’s best-selling gaming brands for mobile platforms globally.
Similarly, the Company has an agreement with Activision under which Activision offers digital games based on
the TRANSFORMERS brand, as well as with other third-party digital gaming companies, including DeNA and
GameLoft.
Lastly, Hasbro seeks to express its brands through its lifestyle licensing business. Under its lifestyle
licensing programs, the Company enters into relationships with a broad spectrum of apparel, publishing, food,
bedding and other lifestyle products companies for the global marketing and distribution of licensed products
based on the Company’s brands. These relationships further broaden and amplify the consumer’s ability to
experience the Company’s brands.
As Hasbro seeks to grow its business in entertainment, licensing and digital gaming, the Company will
continue to evaluate strategic alliances, acquisitions and investments like Hasbro Studios and Backflip, which
may complement its current product offerings, allow it entry into an area which is adjacent to or complementary
to the toy and game business, or allow it to further develop awareness of its brands and expand the ability of
consumers to experience its brands in different forms and formats.
During the fourth quarter of 2012 the Company announced a multi-year cost savings initiative in which it
targets annual cost reductions of $100,000 by the end of 2015. This plan included an approximate 10% workforce
reduction, facility consolidations and process improvements which reduce redundancy and increase efficiencies.
From 2012 through 2014, the Company incurred aggregate restructuring and related pension charges of $84,972
and product-related charges of $19,736 related to this plan. Through 2014, the Company recognized gross cost
savings, before restructuring costs, from these actions of approximately $90,000. These savings are prior to other
costs which have or are anticipated to increase in 2014 and in future years, such as compensation costs and other
investments in certain components of the business.
The Company’s business is highly seasonal with a significant amount of revenues occurring in the second
half of the year. In each of 2014 and 2013, the second half of the year accounted for 65% of net revenues while
the second half of 2012 accounted for 64% of net revenues.
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