Hasbro, Inc. (HAS) Earnings Call Transcript & Summary

Good afternoon. Thank you, everyone, for joining today's fireside chat with Hasbro. My name is Dave Beckel, Berenberg's U.S. leisure and media analyst, and I'm pleased today to be joined by Brian Goldner, Hasbro's Chairman and CEO; and Deb Thomas, Hasbro's CFO. So welcome, both of you. Appreciate you being here.

Thanks, Dave.

So we have about 45 minutes today for this chat. I'll start by asking questions for about 30 to 35 minutes, after which point, I'd be happy to take questions from the audience. There should be a way in this portal to ask questions directly. But if for some reason you want to e-mail me directly, that works too, I'm at [email protected]. So just out the bat, an important point that we make for those that are new to the name is that Hasbro is much more than a toy company and Hasbro has made that clear for investors -- more clear for investors this year by disclosing a new set of segments. A new segment reporting structure, which Hasbro's business is separated into 3 distinct business lines, those big consumer products, wizards and digital gaming and entertainment. So we'll be sure to touch on each of those segments, their strategy and outlook for each. But Brian, maybe just to start with you. I think a good place to start in general for this chat is to level set the audience a bit. Maybe could you start by walking us through Hasbro's strategy, talk about some of the ways that Hasbro differentiates itself competitively from other consumer products and entertainment businesses?

Sure. Well, thanks, Dave, for having us today. And hello to everybody. Hasbro has a broadest portfolio of brands really probably in this space. And so our brands span from brands that are certainly attractive for kids and families, but also brands that are for teenagers and older adult audiences that are gaming brands and also brands that really span from fans to collectors. And so we take advantage of the fact that we have this broad portfolio that spans from Transformers, that goes from the youngest kids to older adult fans and collectors to MAGIC: THE GATHERING, and Dungeons & Dragons. And so as we move forward, we really are looking at proprietary consumer insights in 3 areas: one is in our consumers, global consumers and the way they're playing and the way they're consuming both toys and games. We also look at global gamers, and the way they're looking at gameplay, particularly in the fantasy gaming genre. That's where Wizards of the Coast comes in and really has been focusing on developing the fantasy gaming brands of Dungeons & Dragons and MAGIC: THE GATHERING. And then, of course, more recently, with the acquisition of eOne, the opportunity to not only create profitable entertainment, but increasingly develop Hasbro IP, both known brands as well as vault brands over time that will be part of the makeup of our portfolio of brands that add economic value because Hasbro brands enjoy, on average, higher operating margins. And also, we can drive the enterprise value of those brands when you to create a piece of content that is profitable. You also are creating the engagement around consumer products and around consumer products licensing. The opportunity to activate new gaming opportunities is really apparent. And so our strategy is to use these 3 areas of business in an orchestrated way to create this virtual flywheel that drives this economic value, more franchise economics and also, obviously, shareholder value.

Great. That's a great overview. Really appreciate that. Maybe before we dive into your medium and long-term strategy and talk a little bit more about that flywheel, I'd like to discuss a little bit about recent trends in toy sales, which I'm sure everyone on the call would be interested to hear about. I think it's fair to say that in 2020, unprecedented year by almost every account for every company and that's particularly true of the toy industry, where toy sales grew 16% in the U.S. and double digits globally. So I think naturally, many investors are bracing themselves for difficult comps in the toy industry in 2021. So we're now 3 months or so past the anniversary of global lockdowns. How have retail toy sales held up in these recent months since the time that we've lapped global shutdowns?

Yes. I think it's important to recognize that in 2020 while POS and takeaway was very strong, our retailers were really selling down a lot of inventories that they had on hand. Particularly during that mid-March to the end of May period from last year, the comps that will be associated with the Q2 period. Now during that time in 2020, about 40% of our supply chain was negatively impacted at any point in time. So our ability to fulfill the demand, our fill rates and the ability to get product to retail was hampered a year ago, whereas this year, it's really not as hampered. In fact, it's pretty open and flowing. So while you'll see some comparisons in POS, particularly from mid-March to end of May, that may be a bit challenged. The fact is demand has remained robust throughout the year. Several product categories have remained in vogue, games and preschool, our play-dough business and our NERF business and increasingly because of the return of entertainment, our action figure business, role-play business is also popular again, whereas a year ago, it was a little more challenged because entertainment had stopped, movies had stopped, there was less streaming content that was new. Now we're seeing new iterations of streaming content coming from the Marvel Universe and Star Wars. We're seeing new films coming into the marketplace, including 2 films from us this year, Snake Eyes, and in the fall, we have My Little Pony as an animated feature on Netflix. So you're going to see more entertainment coming back into the market, more opportunity to continue to sell innovation. And so the demand has remained strong. And now our ability to fulfill that demand is improved as a result of the marketplace and the global marketplace reopening.

That's good to hear. Yes, it sounds like consumer trends, generally speaking, very strong right now for a variety of reasons. And something I'm hearing pretty consistently across all the sectors I cover and some that I don't is that there's sort of a new normal level of consumer activity that we're experiencing. So I'm curious, is there, in your mind, a new normal for toys? That is, do you think toy sales can continue to grow sustainably off of last year's somewhat elevated base?

Sure. If you look at the third-party NPD data and their recent statements, they believe toy sales will be more robust than they had originally estimated, and we're seeing that. The fact is that we've done a lot of research and really wanted to understand in the gaming business, for example, what was really going on and what's going on today? Well, the fact is there are a lot of fans of gaming, but there are now millions of new families that had rediscovered gaming that want to continue that behavior, the kids playing together, the families playing together, finding that time to play together has become an essential element of being a family together. The NERF business, with all the new innovation that we're bringing across the board there in multiple iterations, including the new hyper product, which is the round projectiles. So we're adding a lot of new innovation to the line across almost every price point, and we're seeing kids and families respond because that's an activity that can be done around the house, in the neighborhood, outside, getting kids together in a way that's very safe and consistent with what families and parents really want. PLAY-DOH and the creative milestones that, that brand enables kids to accomplish was popular and it continues to be incredibly popular. And then as I mentioned, the action category, now that entertainment is really front and center, The Mandalorian has continued to perform quite well. Star Wars is performing well. The Marvel Universe, exciting new properties coming like The Falcon and the Winter Soldier that's on Disney+, soon Loki is coming. And then, of course, a slate of movies coming to theaters, we're seeing the princess business respond to the fact that now for the first time on Disney+, you can watch all the princess movies that the kids have always wanted to get their hands on and now they can find them all in one place. So I think that the environment for content and storytelling is quite strong. The amount of consumption of that content is stronger than ever. The engagement in play and gaming is stronger than ever, and we're seeing that both from a kids standpoint as well as from our adult players and brands like D&D and MAGIC: THE GATHERING.

Yes. You guys obviously have a lot of stuff going on driven by content. Now at your Investor Day in February, the sort of the guidance or indicated trajectory for your consumer product segment you gave was sort of mid- to high-single-digit growth. Can you maybe contextualize that guidance for us and speak to maybe some of the primary upside and downside risks? I think a lot of investors sort of naturally envision the toy consumer product sort of market as a GDP plus/minus-ish type grower. But it sounds like you're indicating an expectation of sustainably higher growth than that over the medium term.

Yes again, you got to recall that a year ago, while retailers were selling a lot of product, a lot of that product was coming from their backrooms and store rooms. It was coming off the shelves, but it wasn't necessarily the new innovative product that we're bringing to market now, and our ability to supply that new innovative product is certainly enhanced versus a year ago. And as we go forward, the fact is, as we bring new innovation to the marketplace, we're seeing the consumer respond to that innovation. And I think that, that's something that we're seeing globally. Also as markets reopen, the European market is reopening, and so we are seeing that real growth in that business, people really engaged and being able to go back into stores. So it's the combination of online and omnichannel, but now people returning and store traffic beginning to pick up. Some of the more traditional patterns of purchases that come from people going in stores being more prominent now than there was in the past. And the fact that people, again, like these categories and our retailers,are really seeing that the families and kids are coming to stores or going online or omnichannel shopping with toys and games in mind. So all that's reinforcing element as we think about the business. Now of course, the reason we give mid- to high-single-digits as a guide and the fact that the industry is growing robustly, we said we thought we could grow ahead of the industry given our portfolio and our capabilities. The only offsetting factors to that is there's still a small proportion of European retail that's closed, there still small interruptions that happen as a result of trying to produce product out of India. Obviously, COVID has really had a more recent major impact there. So we just had an abundance of caution, wanting to say, there are some small factors that could influence the way we sell consumer products and supply them. But the fact is the team has done an incredible job. We're seeing the demand, and they're finding a way to the marketplace for our products and our inventories. And the retailers had sold down their inventory, and we are seeing the demand for new innovative products, for products associated with entertainment. Inventory was sort of at the low watermark at the end of last year, and we're going to see retailers wanting to have the hot products, the products associated with good innovation and consumer demand in their stores and earlier promotional windows that people have probably heard about what retailers are going to do. So we think those promotional windows start earlier and go consistently for a product category in an industry that has shown that kind of growth.

That's great. And one of the ways consumers are increasingly finding your product is online. Speaking of new normals, that's probably one we can all agree is one that will stick around for a while, the rise in e-commerce. Can you talk a little bit about how the broader shift in e-commerce since the beginning of the pandemic has affected your operations? And also be really interested to hear if your expectation -- I guess you've indicated in the past that you do expect e-commerce activity to persist at current levels, if not maybe increase. So just love to hear your color around that dynamic.

Sure. I'd love to have -- maybe Deb, you should jump in and step in here and talk a bit about that and then I'll add color wherever necessary.

Sure. Well, I couldn't agree with you more, Dave, that I think that with the patterns we've seen, even us personally are not going to change. What we've seen is that, while e-comm has grown as a part of our business, the retailers that have been very successful are -- it's not just pure-play e-comm, and what we might think of as trade e-comm, but really the omnichannel retailers. And they have an opportunity that, in some ways, the pure-play retailers don't have. So we're seeing the growth in companies like Walmart and walmart.com, Target, target.com globally, we have toy retailers globally that have invested in e-comm capability. And another part of the growth that we're seeing there is the ability for the consumer to order online, to have that e-comm experience that actually go and pick up the goods at the store and do curbside takeaway. So that's something we've seen that's really helped the business. That's also allowing retailers to utilize their inventory better. So while we have changed some of our warehousing to be able to deal with flex shipping and pure-play e-comm retailer perhaps wanting us to ship the good to the consumer when the good came in, so out of our warehouse into their warehouse out the door, the opportunity for some of these omnichannel retailers, I think, has grown over time. And we're seeing a lot of success in the ones who are doing it well. That's something, I believe, is here to stay. From a financial standpoint for us, we're agnostic as to whether it's an e-comm sale or a brick-and-mortar sale. To us, the net profitability is the same. The lines are a bit different. The geography and the P&L is a little bit different, but the net operating profit from it is the same.

Excellent. Brian, did you want to chime in? Or...

Look, Dave, Deb has really said it. But I think what's important, just I'll talk from a company capability standpoint, we, over time, have always been committed to storytelling and to a content to commerce engine. We're one of the leaders in the space and the fact that we are a company that can create content, that we can link that content directly to SEO, or search engine optimization, teams of data scientists that can maximize the algorithm in an online space, find the search results for our product, use the great reviews for our product to our advantage because great reviews are sort of self perpetuating as you look at online retailing and sales. It allows us to be a leader and remain a leader and yet grow over time. And we do believe that e-comm can be roughly 50% of our business, maybe by 2025. And we have the capabilities and continue to scale those capabilities to ensure that wherever the consumer wants supplying the product, we can provide it.

Yes, it's interesting. You both bring up great points around what sort of technologically and logistically required to fully integrate with these large and growing omnichannel retailers. And then some of the expertise like search engine optimization that would clearly drive some of that traffic. So a bigger picture question for Brian or both of you maybe is, do you think that the shift in e-commerce helps or hurts larger toy and consumer product companies? That is, does it create barriers to entry for smaller players or actually maybe lower them? I'd be curious to hear your thoughts on the changing competitive dynamic associated with that.

Yes. Look, I don't know if I can comment it for every smaller company out there because I think there's a lot of entrepreneurial companies that exist and entrepreneurs that certainly find their way to the market, and that's great. I think that's great for all businesses to always bring new innovation and creativity. But this is a great environment for Hasbro. The dynamics really lend themselves to our ability to drive promotional windows for a growing array in the portfolio of brands, the fact that there are so many different play patterns that we cover, so many different demographics that we cover is an advantage for us. The fact that we do have the digital capabilities, the ability to virtually give someone an experience. There used to be that old expression that the consumer had to touch the box in order to really know that they wanted the product. Well, we've given them that virtual high-touch experience in an immersive digital manner where they can see the video that's associated with the product and kids or families enjoying the product. We can give them the whole rule set online virtually. You can even give them a virtual instruction manual if the product requires assembly. So they can also be connected directly to the storytelling if, it's a My Little Pony, they can see the snippets of the content that explain the characters or show a piece of the storytelling that connect directly to the experience of buying the product. And in fact, the teams are using Instagram and other social platforms where the content comes first and then just by swiping your thumb over a piece of content, you're taken directly to the opportunity to buy, for example, a NERF blaster based on a video that you may have seen on Instagram and you go directly to the opportunity with 1 swipe to buy a product from your favorite omni or online retailer. That's all the capabilities that we're building over time with a broad portfolio that includes fully adult-oriented products and brands like MAGIC: THE GATHERING and Dungeons & Dragons, which are right for this environment. And with the dynamics in-game playing being such a tailwind, again, Hasbro's portfolio focusing on gaming across multiple face-to-face analog and digital fronts is an advantage for our company.

Sounds great. That's very helpful. So why don't we now move on to another segment, wizards and digital gaming, one of the newly disclosed segments. And I think I can speak for all investors and analysts by saying thank you for doing that. This segment comprises about -- or comprised, I should say, about 16% of your revenue in 2020, but nearly half of your EBITDA. So for the uninitiated, can you provide us an overview of this segment, the 2 key franchises within it? And maybe talk about some of the pipeline you have in-store for us as consumers?

Yes. I'll talk briefly, but I'm going to give Deb an opportunity to outline long-term investment portfolio of what we're doing. Look, we set out to double the size of Wizards of the Coast from 2018 through 2023, and we're well on track to do that. And then we have our Wizards 2.0 that we're already in planning. So this isn't the end of the growth expectation or vision for this company. It's just the current plan, and we believe wizards can continue to grow as they continue to mine this fantasy gaming genre that's unique and differentiated in the gaming space. People who are committed to this as a lifestyle and a whole gaming, if you will, social network, and MAGIC: THE GATHERING and Dungeons & Dragons of the notable brands, and they are very complementary. Dungeons & Dragons play pattern is one of collaboration and venturing together in the gaming format. MAGIC: THE GATHERING is very much head-to-head play like for those who don't know the gameplay itself, I mean, you're playing against another player. You're dealing out cards, and you're tapping lands and spells to try to defeat your opponent as a world-class wizard. So these are very different play patterns. And yet, we feel we can build both of these in both the analog and digital space. And I'll let Deb sort of outline our plans for investment in the long term.

Right. So absolutely. As Brian said, we've been investing in this business and in this brand. And in fact, over the last 5 years, we've spent over $200 million just in developing the digital gaming side of it. And that includes bringing the teams on to be able to do the development, developing the gameplay, getting -- just really getting the right talent around us for that. On that $200 million, you've seen most of it flow through the P&L. It was about $70 million to $80 million on our balance sheet at the end of 2020. About half of that will get amortized this year based on our expected release of game schedules, but we see -- our new games rather. But we see that the opportunity at Wizards of the Coast, both in MAGIC: THE GATHERING and in Dungeons & Dragons really is warranted -- warrants the investment that it carries with it. It's had the payback. You've seen a lot of it go through the P&L already. That has given us higher operating profit multiples, which we think that are margins rather. But we think that this year's margin will be a little closer to '19 than '20. '20 was really exceptional. And then the closer to '19 is really because of that depreciation. That's going to go through the P&L this year with the digital gaming. But overall, it's a highly profitable business, and we believe in investing in that for a long-term growth at that high profitability level.

Great. Why don't we double click, if we can, on some of these great franchises. Magic has been a notable success for Hasbro for a long time, but particularly in the last 5 years, with your digital product arena now rolled out across basically all platforms, I'm just curious, in your view, what is the growth algorithm for Magic look like from here? Will growth primarily come from the addition of more players? Or will you look to actually increase your share of wallet? That's a question I often get from investors, are you going to add like loop boxes or trinkets or things that are the purview of sort of the digital economy into the gameplay, perhaps?

Yes. So what we're really seeing is growth in both analog and in digital. And you're right, Magic arena moving from PC to mobile at the end of March has been a major step-up for the brand. We've seen millions of downloads of the game on mobile. We're seeing real engagement with game players at nearly 9 hours a week playing the game. It's actually not only a vehicle for gameplay, it's really a vehicle for marketing because it's inspiring people to connect digitally, but also new game players coming into the analog business. As Hobby Shops and other gaming stores reopened after the pandemic is subsiding, it's actually a tailwind for us because all of this was created in an environment where most of the Hobby Shops around the world were closed. And so people were playing Magic virtually, even the card game. So now they're able to get back together again. And everywhere around the world, we're seeing that game being played face-to-face, it is leading to even greater sales of the game. I think there's multiple ways that game grows over time. One is the number of releases the team is putting out, the types of releases and storytelling they're putting out. They're adding new digital, as you say, trinkets or new -- wonderful new digital opportunities for gameplay, and you're seeing new iterations coming out as they continue to hone that game. It's a really nice element to the game because it's launched simultaneously with the analog game. So you're able to play a certain card set, both analog and digital at the same time. So there are windows of storytelling that happen throughout the year, and the game players particularly like that because they can move fluidly between analog and digital gameplay. And so, look, I think that Magic is still in the early innings of what we're able to create. The other part about it, Dave, is there are certain countries around the world where Magic is very ingrained, and other places where Magic is a place where our Magic is a game where people are aware of, and there are some core players. But the opportunity to expand the gameplay globally is really substantial. Same for Dungeons & Dragons, where certain countries around the world represent the bulk of the D&D players or current players. And yet there is an aided awareness that's known for D&D. What we can do is raise the unaided awareness and the salience of these brands as we bring content to both of these brands over time.

Yes. A bit of a specific question on mobile arena from our investors listening. The question is basically sort of getting at trying to get a sense for the success of this product thus far. And I'll just paraphrase a bit. Are you seeing it as an acquisition funnel? Or is it primarily used as sort of an adjunct means of enjoying the overall experience, which now includes PC, in-person and on-the-go?

Yes. So we're really seeing a couple of things. One is it's reactivating latent and lapsed fans because more often than not, the one compelling thing we do see is that when young people who have been playing the game and live in proximity to their friends and can get together face-to-face, that play a lot of the game. And then as they grow up and they start to have families and adult pressure start to be part of their lifestyle, they grow apart and they don't play as often with people. So number one, Arena has given them the opportunity to reconnect those latent and lapsed fans and play the game again. Second, it's inspiring gamers who are really not connected to analog gameplay, but are very committed to digital gameplay to play the game for the first time to discover the game. And then third, what it's doing is, it's then creating this virtuous circle where, if you're more inspired as a latent and lapsed fan now playing or you're a new fan to the game and you realize there's this whole opportunity to get together face-to-face, you start to seek that out and realize that the year before the pandemic Magic ran 1 million tournaments on average in any given year. Now some of those tournaments are as simple as Friday Night Magic tournaments of the neighborhood, Hobby Shop and there's about -- there's going on about 7,000 Hobby Shops. Well, with Wizards' help and others help through the pandemic, a lot of these Hobby Shops are reopening and very few relative to the size of that universe have had challenges financially because we've given them certain tools in order to move from an audience or from a constituency it didn't have the e-comm capabilities to one that did and was able to sell virtual cards and was able to -- or sell cards and also able to hold virtual gaming sessions. And so it's been all part of the process of getting through the pandemic. And now as this reopens, we're really seeing this as all tailwinds to the business.

Yes. And eSports was a pretty big component of the strategy pre-COVID. I don't think I've seen any announcements, but I presume you're anxious to get back -- get players back on the circuit, so to speak, to play in more of a national or even global sort of tournament basis.

Yes. Exactly. And the team continues to evolve the e-comm -- the eSports strategy, continues to improve it, continues to make it even more compelling. And so it's -- you're right. It's going to be -- continue to be an integral part of that brand.

Maybe why don't we move to Dungeons & Dragons, which, correct me if I'm wrong, feels like it has a little bit more optionality for growth. It's a smaller brand from -- at least from what I've been able to surmise from disclosures, but one that has obviously a lot of growth potential. You have film and TV projects in place. And you've alluded to, I believe, in the past, some consumer products potential. I'd love to hear, maybe at a higher level, though, do you see this brand hitting mainstream acceptance over the next 5 years, being able to draw in, presuming people go to the movie theaters, a very large audience in the way some fantasy brands have? And could this division maybe rival the size of Magic over the next 3 to 5 years?

It's interesting. If you go back in time, D&D was one of the preeminent brands in the space back in the '90s and there were dozens of video games and people really played. And the reason that the brand is so popular among certain generations of players is because they grow up on the brand. So our opportunity is to instill and install the love of the game for new generations, and we're starting to hear more and more about how young teenagers and young adults are getting into the brand because it is so collaborative. Today, we have nearly 50,000 live streams of the gameplay happening at any one period of time. It's really quite amazing. And so certainly, between the game development -- analog game development and the digital game development like Dark Alliance coming out this year, we've also added to that the fact that we have a featured film that's in production that began in early May. It's in Belfast Island producing and we'll have that for the first quarter 2023. Well, the teams are already assembling their plans for consumer products and consumer product licensing. And we're out with our retail partners beginning to show them what this brand is all about. And so I'd liken it to where we were before the first Transformers film. And so the way I think about it is, Transformers, before the first Transformers film was worth x to the company. And after the first Transformers film in 2007, in 2007, that x became 5x. And then in a non-movie year, Transformers may not be 5x, but it's 3x. But it's never gone back to being only worth x. And so if you think about the life cycle from 2007 the way to 2021, the idea that you're elevating a brand in resonance and popularity, you're engaging more people to play the brand or to play the game. The fact that D&D has historical strengths in certain countries and yet kind of broad global awareness and yet not the same level of gaming engagement, it's a real opportunity to create multiples of value around that brand, as you indicate, and we see it as well. Same is true for MAGIC: THE GATHERING and other brands within Hasbro's portfolio.

Yes. Lot of exciting things to come. And I, for one, cannot wait to see that movie. Maybe that's a good segue to entertainment, last but certainly not least, of the 3 segments that I wanted to touch on. This segment now houses all of your film and TV efforts primarily comprised of the film studio you acquired from eOne. Probably one of the most consistent questions I get from investors is along the lines of what can you do with eOne's film studio that you couldn't do before? And sort of similarly or relatedly, why is owning a film studio critical to your business model?

Sure. I'm going to let Deb kick that one off.

Sure. So we're very excited about the eOne acquisition. And you look at what we acquired with eOne, it wasn't the film studio, right? It was great expertise in the TV and film space. And when I say TV, it's episodic content, right, which people can't get enough of these days and is expected to continue. When you read these studies, be it streaming, platforms, some linear TV still as well, but -- or some TV, but we also acquired a really great preschool business. So when you think about the strategy and what fits well in with Hasbro, we got this great talent that, all of a sudden, has great brands that they're now able to leverage into content streams and the opportunity to create preschool content, which we can also leverage around our -- with our existing consumer products business and take the great brands they have today like Peppa Pig and PJ MASKS and leverage that around our global supply chain for Hasbro.

No, that's great. I appreciate that color. Just as a reminder for those listening in, we have about 10 minutes. If you do have a question, I've gotten a few already, please let me know, I'll be transitioning to audience questions before too long. The media landscape, obviously, is rapidly changing. That's the most obvious statement today. But I'd be curious to know, you've both been in this business for quite some time and seen the media landscape evolve. And the means by which children or even fans, I guess, consume content. I'm curious to hear your view on whether -- to the extent you're willing to share, having a show on Netflix today is better than having a show on a linear network, a kid's linear network like Cartoon Network, Disney channel or your own JV, historically, back when people primarily consumed linear TV?

It's interesting. I think what's happened is, overall, there's just more content consumption. And when you have a really good show based on great IP, what you're seeing is, you're getting to this tipping point where you're able to create enough simultaneous viewership that creates a groundswell for an event and eventizing around merchandising. So we certainly have seen it on Netflix with their 200 million subscribers. We saw it for Transformers and War for Cybertron when we did content that was oriented to fans and families, the response was amazing to the content, but also drove incredible merchandising success around the fan economy for Transformers. We've seen it on Disney+ with The Mandalorian. Obviously, more recently, with Falcon and the Winter Soldier and the Marvel Universe and the response we've seen to that product, we've seen it around the Disney Princess business as we're now seeing -- or the kids are getting an opportunity or families getting opportunity to see all the princess films in one place. That's been an advantage to drive the princess business and princess engagement around product. So look, what I see is that we're all following audiences and consumers. And the audience and consumers are desirous of great branded IP, great storytelling and our responsibility is to provide that. And then in return for that, it's creating this engagement. We've always known that if someone loved a brand and loved a story, they would travel with that brand across multiple platforms. And again, we're just seeing that. It's just being modernized for the fact that, yes, now stream content can occupy that space, animated content to different audiences can occupy that space. And look, we have great partnerships. PJ MASKS primarily is on Disney platforms around the world and has performed quite well. And Disney continues to be a great partner in the distribution of that content. And so there are multiple ways to get out around the world. We clearly look for unique ways to tell story. So while Peppa is on a lot of linear and terrestrial networks, it's also the #1 viewed kids' content on YouTube in that preschool space. So we have the short-form content and unique bits of content for YouTube that keeps kids engaged and gives them their fair share of -- their share of content related to that snippet viewership that they do on a YouTube platform.

Yes. No shortage of viewing options these days. Another question I often get from investors regarding this segment is, clearly, you have like the studio that's now sort of positioned to help monetize the Hasbro IP, but also a big chunk of the studio devoted to third-party projects. And I get some questions about just the overall risk/reward profile of the return on capital philosophy that you employ with that segment. Maybe, Deb, can you talk a little bit about how it is that you manage capital for third-party productions as well as those for Hasbro IP? And maybe the expectation of returns that you may be able to receive from those?

Sure. No. Absolutely. One of the things we like the most about eOne is that they -- we're in a very balanced approach to how they finance all their projects. And I mentioned earlier, they're particularly excited about getting these great brands to work with. So I think, over time, we're going to see more and more of the Hasbro-branded content going through eOne. But when they look at a project, if it doesn't provide a certain return, they're just very happy to walk away. They also will go out and offset some of the balance of that project with outside investors that come into it, say, if it's a larger budget project or if there's a particular group that has a distribution channel that's outside of their distribution channels that they want to work with. So it drives the entire business up when they do that. But everything is evaluated that way, whether it's unscripted programming, whether it's animation or whether it's live-action programming or film production as well.

Got it. And sort of along those lines, the media landscape has been consolidating. It's always been consolidating it seems like. But particularly rapidly the last couple of years and even last week or so, so I'm curious to hear your thoughts on how that might affect the independent film production or film and TV production business model of in eOne? Does it put them in a better or worse position in your mind going forward?

Well, look, I think that what they've had historically, they continue to foster, and that is a relationship with all the platforms and all the buyers of content. All the buyers of content are committed to great, high-quality IP and particularly branded IP has a very high premium value. So the combination of new original IP that they are creating or third-party IP, Hasbro IP, Hasbro vault IP over time. We have a lot of brands that haven't been in the market for years that we intend to bring back into the market. And as we bring up more Hasbro IP, it expands our operating margin because Hasbro brands enjoy, on average, higher operating margins in the overall portfolio. And that's really, as we see it, the opportunity. So the more certain platforms may buy studios, the fact is people still need endless amounts of content in this space. We know that the purchasing of content is only increasing the number of shows and opportunity is only increasing. And we also know that the consumers that are buying these subscriptions are coming there because of the high-quality content. That's why they subscribe to these services. So branded, high-quality IP is the reason that people come. Obviously, they also come for live sports. But the fact is that the high-quality scripted IP is one of the key drivers of all these platforms.

That's great. We've had a lot of questions come in. I've tried to weave them in. We only have about 2 minutes left, unfortunately. But one that I think might be a good place to end on potentially is very high level, I've gotten from a couple of investors, which is this general sort of question of where -- with the strategic -- the blueprint supercharges, you've called it now with the film studio, where do you see Hasbro in the next 5 to 10 years? Question for both of you, also as part of that, what is the opportunity ahead that you're most excited about?

Yes. Look, I think that we've been building this set of capabilities around an incredible team of people and a portfolio of brands that's unparalleled, unique and differentiated really in the marketplace. And we had to build the capabilities together here. Now we have these capabilities. And so now it's our opportunity to really operate and run the wheels off the bus and drive the flywheel. And so it's really a remarkable time. And clearly, they've been, over the last few years of exogenous factors, the unnecessary bankruptcy of Toys 'R' Us, pandemic itself but coming out of that, we're in a very good position to really pursue what's on the minds of in the desires of consumers, audiences, fans, gamers and our global retail partners. And that's the setup. So for 5 -- over the next 5 years, what do we expect? We've said we expect that we could continue to grow. In fact, this year, we've said, we thought we could get double-digit growth. We continue to believe we can grow beyond the industry because of our capabilities. Certainly, entertainment is back on track, and we certainly believe Wizards will achieve its objective of growing and doubling in size, and that's not the end of the story. That's just where we intend to be at that moment. And we're really already developing kind of Wizards 2.0 for the years to follow because, as Deb indicated, we're investing in games that will go out for the next 4 or 5 years. And they will be games that will be in the fantasy arena, but not necessarily only for D&D and for Magic, new IP that they intend to launch over time. So 5 years from now, where should we be? Revenues with growth, expanded operating margin. We've talked about how over the next year or 2 that operating cash flows get back to that $1 billion level. And to be a leading player in playing entertainment is our ambition and our expectation. I don't know, Dave, if you want to comment.

I could not have said it more perfectly, Brian.

Great. So that was a great answer. Appreciate that. And we are up on time. I want to thank both of you, Brian and Deb, for your time and your thoughts on the business, extremely helpful. I'm sure everyone agrees. And thanks all for listening. If you have further questions, feel free to pass along to me, and I can usher those to the company. Thanks again.