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

Okay. Good afternoon, everyone, Drew Crum here. Thanks for joining our event today. Our topic is Wizards of the Coast, a leading developer and publisher of tabletop and digital games featuring franchises, such as MAGIC: THE GATHERING and Dungeons & Dragons, while also serving as the key piece to Hasbro's Wizards and Digital Gaming statement. And that has been, as you know, one of the fastest-growing, most profitable components to the business. And to help us learn everything there is to know about Wizards of the Coast, let's welcome its President and CEO, Chris Cocks. Chris has been with Wizards of the Coast since 2016. Prior to that, he spent 8 years at Microsoft. And early in his career, he served in a product management role at Procter & Gamble, which also included a stint with Xbox and work on the hit franchise, Halo. And if you've read his bio, you know that Chris is an avid gamer. He grew up playing Dungeons & Dragons, so this is both his profession and his passion. And also joining us is Debbie Hancock, many of you know, Senior Vice President, Investor Relations. So our meeting is structured as a fireside chat. I'm going to moderate the Q&A with Chris. And if we have some time at the end, we can take any questions you might have. If you don't want to ask through the webinar, you can e-mail me your question. We just ask that the questions are specific to Wizards of the Coast. If you pass something through on the third quarter, I'm probably not going to ask it. So just want remind you of that. So with that, let's kick things off. Chris, welcome. It's a real pleasure.

Drew, thanks so much for having me.

Yes. So maybe we can start high level with you walking us through the business. Tell us what Wizards of the Coast is?

Well, I think your introduction did a great job kind of previewing how we think about the company as well. Wizards is one of the premier publishers of fantasy games in the world and one of the larger ones. We're makers of MAGIC: THE GATHERING, which is the biggest trading card game in the world, and the innovator of the category. We actually invented the category back in 1993. And Dungeons & Dragons, which is one of the biggest and most beloved fantasy role playing games in the world as well. What makes us unique? I think it's a combination of factors. First and foremost, I think it starts with our brands. Wizards has -- it's one of the few gaming companies that has truly multigenerational brands. MAGIC: THE GATHERING will be celebrating its 30th anniversary in 2023. Dungeons & Dragons will be celebrating its 50th anniversary in 2024. And if you just look at our Q2 and Q1 results and our 2020 results, we're on -- we've been having our best years ever. MAGIC set records last year, D&D set records last year, and the growth has continued briskly into 2021. I think what's great about that is the growth is multipronged. Another thing that's unique about Wizards is we're truly an omni-media publisher. We publish tabletop games, we publish video games, we publish mobile games. And as part of Hasbro, we're building out a consumer product strategy and a broader linear entertainment strategy with our partners, Hasbro and eOne. And then lastly, our products have unique relationships with our customers. I think a lot of game companies talk about community and value community. Well, we've been building communities now for decades that span generations. Our players are anywhere from -- on the low end, Gen Alpha, on the high-end, Baby Boomers. And like the Gen Xers, the Millennials, the Baby Boomers who started to play in like the '70s, '80s and '90s, they're passing the baton to new generations today, whether that's Gen Z or Gen Alpha. And so you see this like great model where we maintain kind of a median age range in the 20s, but we have real robustness at both sides of the demographic core, and our players stick with us for a very long time. The average life -- the average active life of a MAGIC fan, we number in years. Last time we checked, it was about a 7-year average play cycle. And then not only that, our games -- our games aren't really perishable. They're things that people really kind of identify with as a lifestyle. So I think -- you think of it more as like a sport that you started playing is a kid and that you play for the rest of your life. So while if your person might start playing one of our games at 13 and then maybe kind of fade away from it in college, they'll pick it back up again when they get into their professional life. And so they'll have multiple kind of relationships with us at different stages of their life, which makes for a fantastic loyalty and a very lucrative business opportunity.

Got it. how does Wizards make money? What is the primary mode of monetization that you utilize?

Yes. So our business is -- it varies based on the products. MAGIC: THE GATHERING is kind of a booster pack model. We sell cards, we sell them in booster packs and decks, and we do that both physically as well as digitally. D&D is very similar. We have a tabletop business where we sell box products. We have licensed merchandise that are sold through hobby retailers, online e-commerce giants like Amazon, and mass market like Walmart and Target. And then a growing digital business, which is a combination of Wizards-published products as well as licensed products through very accomplished video game makers.

Okay. And you've touched on two of the marquee brands in the portfolio, in MAGIC and Dungeons & Dragons. Maybe we can drill down a little bit further on MAGIC. It's had an extraordinary period of growth. Can you talk about what some of the key drivers have been behind its performance over the last couple of years, and where you see opportunities for growth going forward?

Yes, yes. So if you look at Wizard's track record overall and then I'll dig into MAGIC. Our 10-year average growth rate from 2010 to 2020, we averaged a little better than 13% CAGR during that time frame. And over the last 3 or 4 years, we've seen that CAGR accelerate quite significantly. I think the last time we looked at it, it was closer to 24% and 25%. And if you look at our Q1 and Q2 results, that level of growth is maintaining to actually accelerating as we're kind of -- as we were starting to come out of the pandemic. So very resilient growth, and we're seeing that on both D&D as well as MAGIC. What's driving the MAGIC business? I think it's a combination of factors. Card games are a very popular and resilient category. They've been around for a long time. There's a large audience who enjoys playing them. Tens of millions of people have played MAGIC during their lives, and tens of millions actively play today, both digitally as well as physically. As what we've been specifically driving over the last couple of years, I think you can see in what we've made available in like our Investor Day presentations and in our quarterly calls. There's really, I would say, kind of 4 legs to kind of the MAGIC stool of our business. First and foremost, traditionally, there's been the competitive player. Those are the players who go and play in mom-and-pop kind of hobby stores around the world. They play in large tournaments, both online and offline, and they've traditionally been the mainstay of the MAGIC business, and they continue to be resilient and growing today. Related to that segment, a couple of years ago, we launched MAGIC: THE GATHERING Arena. That is our new digital version of the game. And we've seen amazing growth from that, primarily with that competitive segment and on-boarding new players into the game. And that growth, we view as purely additive and actually synergistic with our overall tabletop business as well. And then 2 newer segments we've been focusing on and seeing actually a very large percentage of our growth over the last 2 to 3 years has been social players as well as collectors. And these are relatively new insights for us, and they've driven hundreds of millions of dollars of upside on a very lucrative brand and business, social players. Whereas the competitive player tends to like to play in store, they like to play in tournaments and they tend to really get into the strategic elements of the game, social players tend to be more casual fans. They tend to play MAGIC with their friends at home. And like I can say this confidently because I'm a bit of a geek, they treat the game almost like Nerd Poker. Instead of kings and queens and jacks and hearts, they're bringing dragons and wizards and knights and paladins to the table, and they all have their own custom decks. And it's just an opportunity to kind of hang out with friends, try up and new strategies and have some fun over some pizza and beers. And that's been a huge upside growth opportunity for us where we've driven a whole new product line against that segment and seen a lot of growth. And then last but not least, the collector segment is also a super lucrative opportunity for us. Like with the social players, we've seen $100 million, $200 million plus of incremental growth. Collectors have seen at least that amount of incremental growth over the last 3 or 4 years. And what collectors want is they want uniqueness. They want special cards. They tend to be very price resilient. So they're willing to pay more and have much larger average revenue per user. And so we've done new things like our Secret Lair card drops, which is a direct-to-consumer kind of limited run set of card drops for that segment. We've done a new form of a booster called a Collector Booster, which rather than being $4 or $5 at retail is more like $20 to $30 at retail and has special versions of cards and rarer arts and more unique things that people can collect. And so those 4 segments have really driven MAGIC's growth, and we see continuing to drive MAGIC's growth moving forward.

That's really helpful. And maybe continuing that part of the conversation. I think, maybe 3 weeks ago, Wizards laid out the product road map for calendar '22. Can you talk about what some of the key takeaways were for players and investors?

Yes. I would think the biggest takeaway is -- the future for MAGIC is bright. We continue to invest robustly in our own -- house-owned IP and content. We continue to drive against all of those 4 segments I talked about: the competitor, the digital player, the social player and the collector. And I think a big value unlock that we've been starting to talk about, both in that fan-based event and earlier this year in our investor event, is we're really starting to embrace this concept of MAGIC as a play system. That you can bring in both house-owned IP as well as partner with adjacent brands to the MAGIC brand to bring in new fans and new collectors into the business. And so at that event, we talk about great new sets that kind of celebrate MAGIC's past, like The Brothers' War and return to a very popular world in MAGIC's history called Kamigawa. We talked about new worlds that we're going at, like New Capenna, which has kind of a monster-based theme. And then we also started talking about some of the brand partnerships we have with the likes of Games Workshop who creates Warhammer, the Lord of the Rings, the Tolkien estate and Lord of the Rings, as well as popular gaming IP, like Street Fighter and Fortnite. And so I think as you start thinking about MAGIC as a play system, I think you can start thinking about it -- we've been driving our growth to date on kind of a play-based segmentation. Like I, my principal motivation is to collect, my principal motivation is to socialize, my principal motivation is to compete. And I think what those -- that investor event and that kind of play, that fan event kind of like started to signal is now we're adding another access to how we think about segmentation and growth, which is kind of narrative genre. And so we think about narrative genre both as, hey, what can we do with our own IP. Traditionally, we've been very high fantasy focused, but I think you're seeing a willingness for us to really push the envelope on what high fantasy is. Like the Kamigawa set we have coming out this winter is going to have kind of a science fantasy, science fiction/fantasy vibe to it. And I think there's some robust growth opportunities there for the IP. The Streets of New Capenna has more of a mobster theme and a little bit more of a steam punk kind of theme to it or a contemporary theme to it. And I think there's a lot of growth vectors there. And then partnering with other brands, I think, is an amazing opportunity to bring an adjacent fan bases. And I think the thing you have to think about with the MAGIC business is because our fan -- when our fans come in, they tend to stick around for a long time. Like I said, on average, about 7 years for an active play cycle. And then usually, a typical fan will have 2 to 3 upwards of 4 active play cycles with us during the course of their lives. And during that time, it's an incredibly lucrative relationship with our fans. Our fans have a ton of stuff to play and collect and a robust community to be able to play with, and they reward us with much higher than the typical game company's average revenue per user on a given year and over a life of a consumer. So it's very lucrative for us to think about not only play segments but narrative segments and partnering with others to bring people in and think about how we can expand the brand's ultimate narrative remit.

Chris, just a follow-up to that. We're hyper focused on the quarters. And the MAGIC: THE GATHERING business tends to ebb and flow from quarter-to-quarter, and it seems to be dependent upon the timing of card releases. Just remind us where you are in terms of compressing that development cycle? Should we anticipate a more regular cadence of card releases going forward? Or should we expect the same cadence as we look forward?

Well, I think the beauty of thinking about the business, both in terms of play segments as well as narrative segments, is you start thinking about the customers and what they want. And you recognize that you're not trying to build one product for one customer that has to buy everything. You're buying multiple products from multiple customers and kind of releasing those on a regular cadence throughout the year. And what that does for us is it gives us the opportunity to really be able to invite in new customers and be able to grow the overall base of our business, and then grow kind of our average revenue per user with customers and our engagement with customers on an incremental basis based on the segment. And I mean that's been just an amazing value unlock for us. When I joined 5.5 years ago, I think we had kind of much more of a singular view of the customer and a completionist view of the customer. And granted, there are still customers who are completionist and want to collect everything, and we absolutely love that kind of customer. But the real growth and the real driver for us has been thinking about things on a segmented basis.

Got it. I have an e-mail question here I want to get to. Let's see here. Can you give an update on Arena in China? Any sense as to when the game might go live in that market?

Well, I think I'd have to defer that question to our partners at Tencent. Arena was submitted for GAAP many months ago, I think, back in 2019. We've gotten no feedback that there are any issues. But obviously, China is going through some regulatory and policy-based changes. And I would defer to our partners at Tencent to be the experts on that.

Okay. Let's shift gears to Dungeons & Dragons. It's the other core brand for Wizards. What makes it different versus MAGIC? And just remind us how the franchise has performed over the last couple of years and what some of the drivers are for growth going forward. I know you touched on those earlier, but maybe you can elaborate.

Yes, sure. So much like MAGIC, D&D has been around for a long time. We'll be celebrating our 50th anniversary in 2024. And we think that will be a big, really special moment for the brand. Both -- we think of both MAGIC and D&D as play system-based brands where basically you can collect a lot of assets that help to enhance the game and you can intermix those assets. And player creativity is equally as important, if not more important, as kind of like the narrative options that we give them. MAGIC tends to be -- while both have very deep rule sets, MAGIC tends to be a very rules-oriented game. Like basically, every card -- set of card combinations creates a different dynamic for a deck that you have to follow. Whereas I think D&D takes a much looser stance on the rule set, and I think that's been part and parcel to its growth. Think of MAGIC as playing 3D chess and think of D&D as playing fantasy-inspired improv with your friends. And I think you get a sense of the differences between the 2 games, or the cores of the 2 games. D&D has had an amazing growth trajectory. We launched fifth edition, which is the latest edition of the game, at the end of 2014. I think we've seen growth in that time frame through Q2 of this year on the order of 8 to 10x where we were in 2013, 2014 to where we are -- where we are in 2020 to 2021 to date. And I think a lot of that growth has been driven, I would say, again, principally by 4 kind of planks. I think first and foremost, fifth edition was a great rev of the game. We lowered a lot of barriers to entry to it. We focused a lot more on narratives and we were much more fun and player forward and kind of pushed the rules into the background. Some players love the rules, some players consider rules guidelines that are more fun to break. And that's okay when you play D&D. I think the second big plank in D&D's growth is kind of that multigenerational appeal of the game. What we've seen a lot of over the last 8-year run of fifth edition is a lot of mothers and fathers introducing the game to their sons and daughters. And when you actually look at like the business of D&D and the customer bases, you see this bimodal distribution of like where the player -- who the players are. You have Gen X and kind of like early age, early or younger Baby Boomers as one moat, and then you have kind of the older Gen Alpha and Gen Z as the other big moat that kind of is driving the play. And we're seeing growth in all segments, but those are the real dominant ones. So I think that generational appeal has been very strong. I think the rise of streaming and platforms like Twitch and YouTube has been huge for Dungeon & Dragons. We have multiple partners like Critical Role, Acquisitions Incorporated, a lot of celebrities that we feature regularly on things like our annual D&D live events. You can see the cast of Star Trek: Discovery playing D&D. You can see the cast of Stranger Things playing it. You can see the cast of Game of Thrones playing it. And that kind of that kind of celebrity appeal and streaming has helped to really expand kind of like the latent potential of the brand and really expose like the fun factor of playing a game like D&D and given, I think, fantasy a different kind of twist where D&D to fantasy is kind of more like a buddy comedy is to like a cop drama. We don't take ourselves quite as seriously. People can have a lot of fun, and I think that invites a lot more people into our club house than maybe it otherwise would. And then last but not least, and I think you certainly saw an acceleration of this during the pandemic, the rise of digital has been super important to D&D fifth edition's growth. Increasingly, we see players interfacing with their phones, their PCs or their tablets, even when they're playing in person as the primary interface for play. And that is just, in our opinion, just a net positive to play. It makes play more interactive. It makes play more visually rich and creates a lot of new opportunities for how we can engage with our game creators as well as our game players. And that's something that -- we've had a partner-led strategy on that to date. And I think increasingly, you'll see us take a proprietary strategy to that, similar to what we've done with MAGIC: THE GATHERING Arena.

Chris, the company has a goal or a target of doubling the revenue for Wizards of the Coast from 2018 to 2023. You've talked about some of the initiatives for MAGIC and Dungeons & Dragons. Anything else notable in the pipeline that helps you reach that threshold that you can speak to?

Yes. Well, I think the headline that I'd share -- and this is only kind of relaying with the results that we've shared through Q2, is we're well on our way to reaching that goal. So the trends of the business have been tremendous. What we've been doing on our tabletop business with MAGIC and D&D have seen huge growth. What we've been doing on our digital tabletop business with Arena and with partners on D&D has also been very impressive for us. As we think ahead, I wouldn't say that our aspirations end on doubling the business from our baseline of 2018. I already think we are starting to think about what the next horizon is because we see very strong trends that continue to power the business and great insights and great teams that are driving it. And so as we think forward, we continue to think tabletop has amazing upside and great resilience. As we think about kind of our segmentation strategy, as we think about expanding our narrative strategy, as we think about thinking about our tabletop games as a play system and bringing in outside partners that have related fan bases that we can expose to our games, huge growth potential there. As we think about digital tabletop, I think we're just getting started with Arena. Arena, we launched the mobile version this year. We've seen tremendous user growth associated with that. We've seen really good revenue growth associated with that platform as well. And I think we see that platform driving solid upside growth in the future and at a very profitable rate for us. And then on the other side of the digital tabletop, we see amazing potential on Dungeons & Dragons. As I said, we've had a partner-based strategy on that. I think that there's a huge opportunity for us to take a more direct role in that, be more directly tied to our consumers and really drive upside potential and great fun and great experiences for our players as a result. And then last but not least, we think video games is kind of our third growth engine, and we see huge potential there. When you think about Wizards as a business, our primary channel is what's called the hobby channel. And the hobby channel is basically about 8,000 primarily privately-owned small businesses that are game stores that are located in neighborhoods. They're kind of like a third place for geeks, a place that people can hang out, kind of meet like-minded folks and have some fun playing collectible games, playing role playing games, et cetera. And that's been traditionally the foundation of our channel and a huge growth driver for us and something we continue to invest in aggressively today. When you look at the hobby channel though and you look at it globally, there's only about 60 million to 80 million people who shop in that channel pool. And MAGIC -- and brands like MAGIC and D&D tend to be the category captains in that channel in addition to like collectible powerhouses like Warhammer from Games Workshop. When you look at what's popular in those channels, strategy, role playing and action adventure kind of board game style games tend to be the dominant categories in those channels. When you look at video games, those same genres drive 10x the audience size. Whereas a hobby channel has about 60 million to 80 million active consumers, video games, in just strategy and role playing alone, have more like 600 million to 800 million active consumers. And when you look at like the strength of our brands and the history of our brands and the number of people who have played them, our brand -- just take a brand like Dungeons & Dragons. Dungeons & Dragons has an awareness and intention to play a video game that hunts in the same pack as World of Warcraft, Lord of the Rings, Assassin's Creed, The Witcher and The Elder Scrolls. And so like we see amazing upside potential to be able to translate our brands and the fan bases that we have for them in the video space. And we've been investing in that space patiently. We'll continue to be investing in that. We've been bringing on great talent and new studios to help take advantage of that space, and we see that as a great growth platform for us moving forward as well.

Chris, it's an interesting point you bring up concerning the hobby channel. I think at the front end of the pandemic, we thought that your business, MAGIC specifically, might suffer as a result of stay-at-home orders. And obviously, video games, as a category, was a stay-at-home beneficiary. As economies reopen, is that a positive for your overall business? Or is it a detriment?

We've been looking at this closely as well. Just to be candid, when the pandemic began and we were preparing kind of contingency plans in late February, March of 2020, we were greatly concerned about what the impact to the businesses would be because in-store play has been so important to us. And I'm not sure how familiar the investors on the call are with kind of like the scope of our in-store play. But just to give you kind of a flavor of it, we have something called the Wizards Play Network, and that's basically taking those 8,000 hobby stores and they're in a federation with us on a play network. And those hobby stores -- we provide those hobby stores prizes and kind of market development funds to help them drive their business and attract new players to their stores. And in return, they host a network of tournaments for us that really kind of drive the competitive engine of the game. And just to give you a sense of scale, for like in 2019, so like the last pre-pandemic year, we drove probably -- I'm going to give you an estimate range, 1.2 million to 1.5 million events through those 8,000 stores that reached about 12 million or so players who played and participated in those events. That's a major driver traditionally for the hobby channel and a traditional driver of our business, particularly the MAGIC business. And basically, once the pandemic happened, it varied region by region, but we saw that significantly dial back by a factor of 80% or 90%. Some regions, far less, some regions basically to 100% because they locked down. But what was great was what we saw during the pandemic is the competitive players who attended those events, they continued to collect and play. And our segment expectation strategy, which was not as reliant on that traditional engine for social players as well as collectors, those really took off as well as our digital business. And so -- and what we've monitored during the course of the pandemic is like different regions have opened up at different times. And what we've been fortunate enough to see is the level of openness of a region is not correlated with the growth of the business. So we've basically been able to weather the pandemic based on the strength of our product strategy and the strength of our relationship with our players. And kind of the same dynamics that were driving the business pre-pandemic have been driving the business through the pandemic. So what does the future hold post-pandemic? I'm sure that there will be some headwinds. It's only natural that as people have more entertainment options and we're competing for more of their time, and they're going -- they're commuting, they're watching movies, et cetera, that there will be some impact to the MAGIC and D&D business. But I think that's, at least, offset, if not more than offset by the fact that this in-store play engine happens. And so much of our business is face-to-face, that can only help us as people are able to get together and play MAGIC together or have fun and be goofy playing D&D together.

Excellent. And then I have an e-mail question, somewhat related to that. Are you willing to talk about the geographic mix of your player bases for MAGIC and D&D?

Yes, yes. So obviously, we look at that pretty closely. Our geographic mix is -- our home market is pretty important to us, North America, particularly the United States. Japan is our second biggest market, particularly for MAGIC. Japan is traditionally a very big collectible card game market. And we have 2 rather large games there. We have MAGIC: THE GATHERING, which is usually in the top 3, and then we have another game called DUEL MASTERS, which is just for the Japanese market, which usually is the #1 or #2 card game in the Japanese market. And then Western Europe is also an important market for us. Southeast Asia, it tends to be a smaller market for us. China has tended to be a smaller market for us, as has kind of like the non-Western European portion of EMEA. A lot of that, like we find our games tend to thrive in markets that have 2 kind of factors associated with it. The first factor is a robust and healthy middle class because we tend to be a premium game with a very healthy average revenue per users. And then the second factor that really sort of drives our growth is a well-established appreciation for fantasy. It can be Western fantasy, it can be kind of JRPG-style fantasy, Japanese-style fantasy, but that tends to be the seed, the fertilizer for growth for us.

Okay. You guys obviously have a very strong presence in tabletop. So within the interactive entertainment, there's been this ongoing transition to digital. As Wizard shifts to a digital-first orientation, how do you manage those investments?

Yes. So I think we think about it in a couple of different vectors. First and foremost, I would describe Wizards as a hybrid publisher. Digital is very important for us. We see it as both the driver of our traditional tabletop business as well as a true blue ocean for us for pure digital business. But when I say our 3 growth engines are tabletop, digital tabletop and video games, I think we have a fairly balanced view across them. When we think about investments as a company, I think we think about it on a couple of different vectors. I think first and foremost, we think about any investment as a long-term investment. We think about what the talent platform is that supports that investment and how we can make sure we can get the best talent possible to drive both great creative vision, excellent strategy and business innovation and terrific execution inside of that investment for us. I think we have some fantastic teams. We've attracted fantastic talent across those 3 kind of growth verticals. And we have a very creative friendly environment and studio-focused environment where we want to give people the opportunity to do what they're awesome at and really be able to reach tens of millions of people and be richly rewarded for it. So first off, I think is the people orientation for us. The second orientation for us is really thinking kind of long term. When we -- and when we think about adjacencies, we think about not only like what is the financial opportunity in that adjacency, but what does it take to be excellent in it. And so we have a very patient investment strategy when it comes to growing our business. And I think that's -- we were lucky in that I think among the major games publishers in the world, we have some of the most valuable brands in our genre. And we have some of the best moats that kind of protect our business and make our businesses inherently very high growth, very predictable and very high profit. And so we tend to those moats very assiduously in businesses that we're in. We extend those moats in those businesses carefully as we think about new adjacencies. And then as we think about kind of going to new executional opportunities or new capacities like in video games, we think about it very long term, and on like 5- to 10-year time horizons. And we tend to want to start small and kind of build our way up, recognizing that most overnight successes were 10 or 15 years in the making. Last but not least, when we think about our investment strategy, I think we have a concept that we call -- I don't think it's unique, we call it court sense. So what kind of unique intelligence or insight do we have on a category or a customer or a channel or a business opportunity that lends us some kind of advantage? Do we have a brand advantage? Do we have kind of a legacy kind of fan base advantage? Do we understand kind of where trends are going in a place? If we don't understand the category super well yet, do we have some kind of data feed that will allow us to be -- to bet small, be agile and learn as we go? And we've deployed that across our verticals. Like when I started about 5.5 years ago, I think Wizards is very well intentioned with data, but we had a very modest kind of business intelligence practice and we had a very modest consumer intelligence budget. We've more than 10x that. I would almost say we've 100x that investment in getting data sources, in understanding our consumers and in truly getting insight that stands beyond just kind of like social media that often surrounds a fan base or a games company, and really trying to pierce into our consumer bases. And as a tabletop gaming company, I would argue we're best-in-class. And as a digital company, I think we're at least market standard, if not punching well above our weight class in terms of our revenue -- our overall revenue. So as we think about investments, that's kind of how we think about it. And then we apply it to our different growth verticals. So we apply it to tabletop and we think about how we can grow that super lucrative business. We think about it for digital tabletop and we think about what are those if -- what does that, that adjacency has a very high Venn Diagram overlap with our tabletop business and what do those consumers want, how can we enhance their experience, how can we create new monetization opportunities with that experience. And then in video games, we think about it as how do we take smart bets, how do we hire great teams and how do we leverage the fan bases and kind of brand advantages we have, both as Wizards and as Hasbro as a whole, so that we can learn fast and build up similar franchise economics in those spaces over the next 5 to 10 years.

Okay. Good. So one of the digital initiatives that we've discussed throughout this call is Arena. How would you grade the performance of Arena to date? And how will you measure success for Arena over the intermediate to longer term, or however you want to describe that?

Sure. I would say we've done a great job with Arena. Before I joined Wizards of the Coast, we have been working on some version of digital MAGIC for probably about 4 years prior to my arrival. We -- my first year on Arena was very focused on recruiting and kind of changing over the team, tightening up the strategy and managing through some of the false starts that we had from the 2012 to 2016 era. And that effort has blossomed into a fantastic business that I think any games publisher would be thrilled to have as part of their portfolio. When you look at the return on invested capital to date versus like the legacy investment that we put in, it's good. And when you look at the prognosis for the business moving forward, it quickly becomes great. So I feel good about that. And I think -- not only has it been good for Arena, I think the Arena team has created, to my prior point, a real talent platform for us that allows us to be able to take that talent and that team and move it to a vertical like D&D. So when we think about digital tabletop for D&D, the core leadership team who helped us figure out Arena and make it the profitable high-growth platform that it is today, they are going to be the people who are thinking about that for D&D. When you think about the business intelligence investments and the consumer insight investments we made, principally for Arena and our tabletop business, we're able to take those assets and think about that for like D&D digital tabletop as well as our video game investments. And so not only do we see a good just stand-alone ROIC on Arena, we see the publisher foundations and the talent foundations we've been able to create as highly leverageable for our future bets as well.

I've got an e-mail question here from a client who wants to know if IDFA has been -- had any impact on the business? What's the business's exposure, how do you see that playing out going forward?

I'm honestly I'm embarrassed that I don't know what IDFA means.

Okay. For you guys, it's just the privacy changes Apple put through back in...

Oh, okay. I understand those. Sorry, I didn't know the acronym. Yes, sorry. Yes. So we saw some short-term hiccups in kind of like our user acquisition costs as we dealt with those changes on the Apple platform. And just to give you a sense of scale, mobile has been a tremendous success for us. If you look at our user base, it's significantly grown as a result of mobile, and Apple has been a huge contributing platform to that. It's roughly equal growth on both the Apple platform as well as the Android platform. While we had probably about 2 months of transition costs on our UA, where our UA kind of costs crept up, over the last couple of months, we've seen them normalize to a steady state. And we're able to very profitably acquire new users and see also a pretty solid organic lift on top of our paid acquisition. And when we think about our investment timeline on UA, we're thinking about payback in -- I think we're actually pretty conservative versus industry. I think we're bidding up to about 8 to 10 months of predicted value, and we're doing significantly better than that on our UA costs.

I have another e-mail question I want to make sure I get to. In-person game play, how does that look now versus pre-COVID? How has it progressed throughout this year?

Yes. So we have definitely seen our in-store play start to come back over the summer months. As the Delta variant has taken off, again, it's been kind of region by region, most regions have regressed. But again, at least -- I can only talk through Q2. We've seen excellent growth in the business through Q2. And at the end of Q2, they felt very strong and bullish on the trends moving forward. What honestly we see happening is when in-store play kind of recedes because of public policy or health concerns, we see digital as well as kind of in-home play more than make up for the slack. And I think what really drives our games is just that kind of a fundamental emotional level. Our games are an excellent resource in this highly digitized, fast-moving world to connect authentically with people. And even in kind of like a pandemic environment, the vast majority of people are podding up with family and friends. And our games give them an excellent outlet to be able to connect with their family and friends, have fun and enjoy themselves. And so I think that's been kind of the base of resilience for us that has helped us weather in-store play receding. And I think that in-person play at home and with friends is only going to continue post-pandemic. And so our bet is, is that post-pandemic once in-store play returns, it will be a net tailwind for us, all things considered.

Maybe one more for me because I know we're nearing our time limit here. Just -- can you talk about any concerns around supply chain constraints issues? I know that's something the company talked about on the last earnings call, and it's continued to be in the news. Does Wizards of the Coast have any risk or exposure to any of the supply chain complications we're seeing?

Well, we certainly aren't immune to some of the supply chain complications. I would say our logistical complications tend to be more labor related than kind of freight on boat and shipping costs related. Our manufacturing model, I think, is certainly unique in the Hasbro sphere in that our principal manufacturing locations are North Carolina, Texas, Belgium and Kyoto, Japan. So the majority of our products that we sell is locally sourced. Frankly, prior to the pandemic, Wizards of the Coast was a net exporter from the United States. So we -- and last but not least, I think trading cards tend to be a very efficient item to be able to ship, like there's a lot of value per square inch that you're able to pack in. And it's also a margin-rich product, which makes air freight not preferable but certainly possible. So our team -- our supply chain and logistics team certainly have been hopping. The overall trading card category has been doing very well, particularly MAGIC. And just looking at the MTD data, Pokémon has been having a great year as well with their 25th anniversary. So our issues are more like, hey, can we get another shift at the factory, we need more paper to keep up with demand. We have seen unit cost increase, but that has been strategic as opposed to a market condition. So when we think about like the social player segment and the collector segment, we're charging $50 for a deck or $20 to $30 retail for a collector booster. And so we view those products with more value. So our COGS have gone up but the overall profitability on those items have more than compensated for our COGS. And in the grand scheme of things, the COGS for our business, our paper and servers, and those tend to be very scalable.

Okay. I have another question from a client. And Debbie, maybe you want to answer this one or join in. How does the company think about trying to get fair value for the Wizards of the Coast business? The whole enterprise is valued like a toy company with big arbitrage potential for eOne and especially Wizards of the Coast. How do you try to draw attention and change the narrative? If you can't change the narrative, would you sell Wizards of the Coast or spin it out?

So it's a really important question. And I think we started down the path earlier this year with the segmentation of the business and giving visibility to where the value drivers within Hasbro are, and so you have very distinct visibility to the revenue and the profit of our Consumer Products business, our Wizards of the Coast and digital gaming business and our entertainment business. And it's an education and a process. I think giving Chris the opportunity to speak with everybody today is part of that. And having him, I think, really lead off at our Investor Day earlier this year was also a piece of that. But it's continuing to showcase all of the elements of the business. I think what's really important about Hasbro is that each of the pieces of our business in each of the segments are driving value in other segments. And Chris talked about it upfront. He talked about how in addition to the work that they're doing in Wizards with the TCG category and with digital gaming, they're also building out a consumer products business and an entertainment road map in the pipeline, right? So we look at things like entertainment as a catalyst for driving brands and other pieces of the business and driving both the Wizards brands. We didn't talk about it today, but the D&D feature film that they're developing for 2023 is going to be additive and going to drive entertainment revenues. It's going to support the D&D franchise, it's going to support the consumer products business. So there's interrelations between all those elements of the business. And our view is how do we unlock that value across the enterprise and how do we gain that recognition from the investment community for that as well.

Excellent. Okay. Anything else we should have asked? I know we're coming up on an hour here.

No. Hey, I just wanted to say how appreciative I am of you, Drew, for having us out here. It's always fun to be able to give a little insight on the business you've been working so hard on and the teams who are behind it. And thanks to all the investors who came to listen in and ask really good questions. Consider me at your disposal subject to Debbie saying I'm allowed to get on a Zoom call.

Excellent. Okay. Really appreciate your time, everyone, clients that participated, Chris and Debbie. Chris, really appreciate your insights, best of luck with the balance of the quarter and the year, and we look forward to catching up with you soon.

Thanks. Bye, everyone.

Thank you, everybody. Thank you, Drew.