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Key Takeaways
- Hasbro purchased eOne in 2019 for approximately $4 billion.
- The goal was to create its own programming based on its intellectual property, much like Disney.
- Hasbro realized it was more cost-effective to outsource the content creation as opposed to owning a media company, so it’s now selling eOne.
Hasbro was intrigued with the idea of creating programming based on the toys it develops and purchased the media company eOne in 2019. Fast forward to today, and the toymaker has announced its plans to sell off eOne in a stunning reversal.
Here is why Hasbro purchased eOne in the first place and what it hopes to achieve by selling off the asset.
What is eOne?
Entertainment One, more commonly known as eOne, is a media company that produces content for television, film, and family brands. It creates content in the comedy, drama, factual, and unscripted categories.
The company is capable of scripting, development, and production.
Beyond that, it features development studies in the U.S., Canada, South America, the U.K., Australia, and China.
eOne has been involved in the creation and production of many notable titles. Its family brands division owns Peppa Pig, My Little Pony, Power Rangers, Ricky Zoom, PJ Masks, and Transformers, along with other popular children’s animation brands.
Why did Hasbro buy eOne?
In December 2019, then-president Brian Goldner decided to purchase Canadian-based eOne for approximately $4 billion. At the time, eOne owned Peppa Pig and other intellectual properties geared toward young viewers.
The act of buying eOne gave Hasbro the ability to own as well as control the production of its own programming and link it to the production of physical merchandise.
Goldner felt that Hasbro needed to be in a better position to offer content to streaming services. Buying eOne gave Hasbro access to a new range of children’s entertainment intellectual properties it didn’t previously own.
The purchase of eOne included the eOne Music division that owned the music catalogs of Death Row Records, Dualtone Records, and titles from the Lumineers, RZA, Chuck Berry, and more.
However, Hasbro later sold the music division for $385 million to entities owned and controlled by Blackstone.
Why sell eOne?
Hasbro quickly regretted the purchase of eOne, discovering that it most likely overpaid. A proxy battle with activist investor Alta Fox didn’t help the situation, as Alta Fox was trying to get Hasbro to sell off its games division.
The passing of CEO Brian Goldner in October 2021 also played a role in the current CEO’s decision to explore the sale of eOne.
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Analysts felt that eOne’s media offerings were not a total fit for Hasbro and that selling eOne would help the toymaker focus on improving its current intellectual property and product lines.
One investor, Fred DiSanto, stated in a letter to Hasbro’s leadership that the company “does not need to own eOne in order to bring Dungeons & Dragons to the big screen,” essentially stating that Hasbro could have easily contracted the work to a studio like eOne for less money instead of paying an exorbitant price to own a media production company.
It could be true that, at some point, it would be less expensive to own the studio outright. However, this point would only be reached if the company could scale its production business. A company like Disney has hundreds of properties to create content for, where Hasbro has limited options.
Hasbro’s plans moving forward
On October 17, 2022, Hasbro announced its plans to sell eOne but retain the rights to Peppa Pig and possibly others. It intends to retain its family content division but enter into production deals with established studios and production companies to create content for its various intellectual properties.
This move was applauded by Wall Street because it allowed the toy maker to focus more closely on its current offerings and trim them down to a manageable size.
However, on October 14, 2022, Bank of America’s analysts stated that Hasbro was “destroying the long-term value of its Magic: The Gathering property by selling too many collectible cards.”
This statement resulted in a sell-off by investors and caused a steep decline in Hasbro’s stock value. The decision to dilute the Magic card game with excess cards only disrupted the sales of card packs and devalued existing cards.
It remains to be seen if Hasbro’s management team will pull back from this decision or apply similar strategies to its other intellectual properties in an attempt to generate short-term profits while risking their stability.
Ultimately, it’s too soon to tell what Hasbro’s next move will be, as Hasbro is facing a weak holiday season and relying on discounts to move merchandise, as are major retailers in general.
Overall, Hasbro plans to have three brands worth $1 billion by 2027 and expand its licensing business in the near future. It expects an annual growth rate in the mid-single digits and revenue of $8.5 billion by 2027.
Bottom Line
Selling eOne makes sense for Hasbro since it will be more cost-effective to outsource production. The real question that remains is how much money Hasbro will recoup in the sale of eOne.
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