Hasbro 2012 Annual Report Download - page 21

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 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, 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 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 will decline and
our business performance will be damaged.
Additionally, our business is increasingly global and depends on interest in and acceptance of our
entertainment and consumer product offerings 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 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 entertainment offerings
available to them.
Children 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 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. We face competitors who
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