Can A New Dungeons & Dragons Version Insulate Hasbro From Current Toy Industry Woes? (HAS, MAT)

Mattel’s (NYSE:MAT) recalls are quite well known now.  We know that Chinese toys are being checked and tested and complained about across the board, and rightfully so.  Chinese suppliers have been exposed probably hundreds or thousands of times of cutting corners and using cheap or substandard materials all the way down to poison or contaminated goods.  So right now every toy company and consumer products company is testing their products from China.

This morning Hasbro (NYSE:HAS) announced that in light of Mattel’s woes that it too is intensifying safety checks on its own toys.  How could they be completely immune?  We didn’t exactly give Hasbro the world’s greatest marks on their announcement this morning, but there is another development that might actually help.  Hasbro has a franchise on its books that acts as a gift that keeps on giving: Wizards of the Coast, and the beloved Dungeons & Dragons (R) franchise.  This is the game that all the parents used to worry about their kids playing because of exaggerated and isolated instances of some kids losing their minds, and now all those parents read Harry Potter themselves.  It is still a puzzle as to whom the real joke is on.  But the Dungeons & Dragons franchise is about to get another formal makeover for next year.

Today Wizards of the Coast confirms that the new edition will launch in May 2008.  The new system will include illustrated rulebooks, pre-painted miniatures (test that paint boys), web-based tools, online community forums, faster game play, faster prep time, new character options, faster campaign building tools, online magazine content, and a digital game table for virtual and remote game playing.  There will be some book preview releases late this year and early next year, but the first live demos of 4th Edition will happen at the D&D EXPERIENCE(TM) gaming convention in Washington, D.C., in February 2008. The full scope of 4th Edition books, miniatures, and adventures will be available in the spring and summer of 2008.

This new 4th edition is dubbed the D&D Insider(TM).  Web estimates are far as total dollars spent on the gaming system are impossible to track because new sales often get recycled as used game sales and hand-me-downs.  Some estimates have 15 million game players over the history of the game and some estimates are north of 20 million players since its inception in the 1970’s.  Generally speaking, the game itself and the offshoots for it have been responsible for over $1 Billion in retails sales in the US alone.

Hasbro just expanded a prior share buyback plan by $500 million back in early August, and it is no secret that a crummy market is not helping stocks based on discretionary income.  Hasbro shares are down 1.5% today at $27.18, and the 52-week trading range is $19.13 to $33.49.  Apparently our interpretation of the Transformers(TM)  related sales already being baked into the cake was true and then some.

Jon C. Ogg
August 16, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.