Hasbro's CEO lets AI Peppa Pig help design toys

24:05We have to pause here for a quick break. We'll be right back.

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24:26Chris Cocks:You are Gary the Snake. And your last name? The Snake. Dream Team. In new habitats. Zootopia has a secret reptile population. You can watch the record-breaking phenomenon at home. You're clearly working at it. Zootopia 2. Now available on Disney Plus Rated PG. Hi, I'm Brene Brown. And I'm Adam Grant. And we're here to invite you to the Curiosity Shop. A podcast that's a place for listening, wondering, thinking, feeling, and questioning. It's going to be fun. We rarely agree. But we almost never disagree, and we're always learning. That's true. You can subscribe to the Curiosity Shop on YouTube or follow in your favorite podcast app to automatically receive new episodes every Thursday.

25:17Welcome back. I'm talking with Hasbro CEO Chris Cox about how all the IP licensing Hasbro does turns into actual toys and products. I actually want to take one step back and ask the decoder questions to set some of that up. You know, from the outside, just in talking about Hasbro as we have been, it seems like, you know, the IP is at the center, whether it's you're going to go get the license from Netflix for K-pop Demon Hunters, or you have your own, like Magic and Monopoly. There's other stuff. It feels like the IP licensing, having that is really at the center of the company. And then you've obviously restructured.

25:51So just talk about how Hasbro is structured now and how the IP licensing flows through the structure you have now.

25:59Chris Cocks:I'd say at the center is, call it the customer insight or the market insight. That's how we structure everything. That's how we craft our strategy. And basically the customer insight that is animating the company and animating our strategy is this acronym that we call GEM Squared. Gamified, entertainment-driven, multi-purchase, multi-generational. That's what we think the power core is of play and the future of play. That's where things are growing. That's where people have purchase power and they have passion. And so everything we do and everything we invest in is gearing towards that gem squared insight.

26:46Chris Cocks:And so we've organized around it. We've built our strategies around it. And I think you're going to see more and more our products kind of geared towards that and our partnerships geared toward that. So like I said, gamified, entertainment-driven, multi-purchase, multi-generational. We then apply it to a play company that we think our superpower is inspiring a lifetime of play. And then we kind of flow it through the businesses that we have. And, you know, we organize our businesses across three primary lanes. There's games, which is really anchored by Wizards of the Coast and then Hasbro Games, which is our beloved board game portfolio with Monopoly and Glue and the Game of Life.

27:28Chris Cocks:then there's licensing and entertainment which is hey how do we take our brands and execute it more broadly across categories that we're not experts in or we don't have powerful distribution in so we do that with entertainment companies with like location-based entertainment which is a fancy word for like theme parks and quick service restaurants and you know things like play centers that you go to in like a ball or something and then publishing and then other toy and kind of soft good categories. And then the last area we execute is probably the area that most people, if you met someone from Hasbro at a cocktail party and they said, I work at Hasbro, it's toys.

28:08Chris Cocks:So like kind of the toy and game aisle. So we execute that gem squared insight and that inspiring a lifetime of play mission through those three categories. And then we break down kind of like how we kind of address that gem squared insight across like about five or six building blocks across the company. So how do we become relevant in digital games? How do we scale through partners? How do we age up? How do we make play available anywhere in more occasions? So how do we win more occasions where you could pick a candy bar or you could pick a toy? How do we convince you to pick a toy? and then last but not least how do we expand kind of like the demographics of who we serve and the playographics of who we serve so like you know hasbro to date over indexes with kind of play patterns and collectible patterns more associated classically with boys so we want to win more with people who who identify as girls and then likewise you know hasbro is very strong in markets like the u.s and france and the uk and for wizards of the coast in japan but really we're only servicing a market of call it a billion and a half people on a planet that has 8.5 billion so then how do we execute kind of gem square based products to the other 7 billion people that we aren't building for and that we aren't distributing for that kind of manifests into a bunch of different product categories that we drive how we think about where we want to invest in versus where we want to leverage partners for what partners do we want to in license with that we think really powers that kind of particularly gamified and entertainment driven kind of insight?

29:46Chris Cocks:And where do we think we can best service? How does that work with the IP? So let's say Monopoly. You're like, we make the Monopoly board game. That's one division. But we want to make a Monopoly movie. And we want to make a Monopoly video game. Who gets to make those decisions across the structure? So we have a person called a global play lead. and they'll sit in a different part of those three verticals that we execute from, depending on what we think kind of the power center is of the brand. So the Monopoly Global Play Leader sits inside of toys. They execute our board game kind of product strategy, but they work with our entertainment team to kind of forge like a movie and reality TV show kind of slate like we have today.

30:28Chris Cocks:they'll work with our licensing team to figure out like soft goods and t-shirts and other toys that might be related to monopoly and then they'll work with our digital team to drive you know monopoly-based games and i think you know there's probably two dozen monopoly-based video games and casino games that you can play with the biggest being monopoly go which is the biggest mobile game in the world and so then they think about how do i bring what are the franchise moments associated with Monopoly? How do I kind of take my retail distribution and make a bigger kind of marketing moment for more of our licensing partners?

31:03Chris Cocks:And as the other verticals kind of launch things, like, you know, if Monopoly go to something big, how can I parlay that into everything else? If a movie comes out with like our partners at Lionsgate, how do I parlay that into everything else? And so you basically build a multi-year rhythm associated with it. Can I just ask you, what is the Monopoly play lead like? Do they wear the hat and the monocle? Like, what is that? What is that person like? No, he's his name's Brian Baker. He's he's he's very boring, very much like me. He likes Monopoly. I don't know if he and his family cheat quite as much as my family do.

31:39Chris Cocks:But when they play, because cheating is our favorite part of the game. Yeah. But yeah, he's he's a big board gamer. Former Nike. We replicate that across. So Peppa Pig would be more of an entertainment driven platform where, you know, the global play leads kind of live over inside of entertainment and licensing and toy kind of helps help support them. Magic the Gathering and D &D are anchored in Wizards of the Coast and kind of what we do with the hobby channel. But like increasingly, we're doing more video games. We're doing more entertainment across those. So the three verticals kind of operate independent, but then they also are highly collaborative with each other, utilizing the brands.

32:18So it's a pretty hybrid structure, right? It sounds like these play leads, they sit in the division that is most naturally associated with whatever property, and they get to use all the functions of the other divisions. There's some resource constraints there. You can see how there would be some division of who gets to do what at what time, depending on the capabilities of all these divisions, how many resources you have overall. Who breaks those ties?

32:41Chris Cocks:Usually it's me. So, you know, we have to do prioritization. We have, you know, not every brand is kind of built equally. So we have a hierarchy for our brands called grow, optimize and reinvent. So our growth brands are the ones where we see the highest three year kind of continuous growth potential. We see the highest kind of like operating profit margin potential. And we see them operating in markets that are pretty buoyant. You know, they tend to be more blue ocean and less red ocean. And so those growth properties tend to get first pick on available capital and available talent. Optimized brands tend to be in less high growth categories.

33:28Chris Cocks:You know, we tend to see them as kind of like kind of steady eddies, maybe low growth. they still do a decent operating profit for us. And so then they get kind of next tranche. And then reinvent brands are, you know, like we talked about at the beginning of the discussion on toys. Toys are kind of a fast fashion, like cyclical business. You know, what's popular this year is likely not going to be popular three or four years from now. And so the reinvent brands tend to be the ones that are in that kind of late stage cycle where They're either REST investing or we're thinking about what the next phase of them is so that they can be a future growth brand.

34:06Chris Cocks:And so they get mostly kind of like conceptual product development and market research support, but not a lot of go-to-market or inventory support. Where do new ideas come from in the system? This is the thing I worry about most in our current information environment, that existing IP has so much value associated with it because you don't have to try to get attention for it. and new things, you're just sort of waiting for the next weird influencer to show up with an idea that goes viral. You know what I mean? Like, did you have a meeting where like, we have to make a 6-7 toy? Like, I don't know where the new ideas come from.

34:42No, we didn't have a meeting on that,

34:43Chris Cocks:but we did carefully avoid saying 6-7 around little kids in any playtest labs. I think we purposely capped our rating scale at 1 to 5 and no longer 1 to 10. I mean, to be perfectly candid, I think it's a structural weakness of most large companies is thinking about new category development. You know, you tend to get focused on your existing business and very obvious adjacencies. And then you tend to lose sight of, hey, this new thing that's kind of coming up the pike. And I think we've been as guilty of it as anyone. The way that we're countering it is in two ways. The first way is our licensing business isn't just a very high profit, high growth business for us.

35:36Chris Cocks:We also use it as a learning lab. So we tend to be very liberal in how we license out many of our brands, especially in markets or regions where we don't have a lot of go-to-market capacity. So like China. and we're able to learn from the local partners about what's hot and what works in a fantastic collectible and innovation market like China and Southeast Asia. And so we actually learn about new categories kind of popping up there. The great thing about that is it's a real win-win for the partner. They basically get a clear market where we're not really competing with them. We get a learning lab and then we can apply the lessons from that learning lab, like the winners from it to our distribution and our marketing and licensing muscle outside of that core market.

36:22Chris Cocks:So that's actually been pretty powerful for us. You know, like an example of one that we learned a lot from was My Little Pony. My Little Pony, three years ago, like maybe we made five or ten million dollars on it. Like, you know, in 2024, I think our partner in China, Caillou, I think they did more like $400 million of trading cards in My Little Pony. And they've parlayed that into a whole line of kind of teen-oriented collectibles. And it's kind of reinvented how we conceive of the brand and what the potential is of the brand. And we're starting to execute against that outside of that core market, both with Caillou and ourselves.

37:03Chris Cocks:So that's been pretty valuable for us. And then the second area that we've done it in is what we call CEO initiatives. So it's like we take high-performing people out of our business units, out of kind of like a traditional global play lead role, and we give them like an assignment for six to nine months and say like, hey, go run after this. And we keep their job kind of on the side and they can go back to it at any time. And we recognize that probably nine out of 10 times, those things aren't going to yield fruit, but it's a fun stretch assignment for a high performer, high potential person. And, you know, sometimes it yields something fun.

37:46Chris Cocks:So, you know, that's a relatively recent thing that we've been doing over the last two years. You're probably going to see the first fruits of those probably within the next six months. We'll do our first announce of those. And I think you'll think it's pretty cool. Let me ask you the other kind of questions. And I want to get to tariffs. I want to get to video games. There's a lot of stuff left on my list here. You've kind of answered this already in a way. How do you make decisions? What's your framework? Well, I think first and foremost, it's kind of starting with the customer and starting with that insight.

38:17Chris Cocks:So, you know, that gem squared acronym, it's memorable and it's very accurate. Like it replaces kind of kidults, which is a term I hate. It's like trying to describe someone else rather than being actually descriptive about what they want. So you start off with the customer, and then I think you're going to go through our strategy. We call our strategy playing to win, and we try to inject and remind the idea of play in everything we do. Hey, does this hit the insight? Hey, when we execute against this, does it hit one of our strategic goals that we think kind of adds value and adds capability to our superpower of inspiring a lifetime of play?

38:57Chris Cocks:And then you kind of think through the dollars and cents of it. Like, okay, does it make money? Does it have a return? Are we investing sensibly given the opportunity? Like, you know, if we think it's kind of like a flash in the pan, kind of a cool idea, but not going to be durable, you take one investment profile on it. But if you think, hey, this might be a new power kind of play pattern and a new category, then I think you go in with the expectation of, hey, I don't need to make money on this for the first couple years. What I need to do is establish capability in it and establish presence in it.

39:31Chris Cocks:And then kind of the market will take care of itself. So that's generally the paradigm I go through. I think that makes sense in the context of creativity and making stuff. There's a set of decisions you've had to make recently that just seem on the ground, in the weeds, about how to manufacture things in the world that we live in today, especially around tariffs. So tariffs are obviously uncertain. They're coming and they're going. You've had a lot of layoffs, some which you've attributed to tariffs. There was a pretty big round in 23 and smaller rounds in 24 and then in 25. What do you think the tariff situation is now?

40:07How are you making decisions around that now as you make toys?

40:10Chris Cocks:Most of the headcount reductions we've had to do had nothing to do with tariffs. It had to do with we kind of lost sight of our core business and we had to kind of correct it. So we got over our skis and unfortunately there was a there's human impact to it. And it's probably the worst decisions you have to make. But sometimes you have to make them. As regards to tariffs, I think what we took the perspective on is they were going to change and they were going to be unpredictable. And so in a world that is unpredictable and subject to pretty sudden changes, we need to have more options and more resilience.

40:52Chris Cocks:The tough thing about that is, is it just costs more money because rather than tooling a line once, you have to tool it now for three different times for three different factories in three different countries. But I think the smart thing about it is it allows us to kind of shift with the changing policy environment and not allow us to be overly exposed to one region or one manufacturer or one set of policies. So it has added costs to the business. They're manageable, albeit unwelcome, just to be honest. But I'm glad we did it because I don't think that that unpredictability is going away anytime soon.

41:36Chris Cocks:And, you know, it's nice to have options. Are you going to sue for tariff refunds? I saw today like thousands of companies are suing for tariff refunds. We did submit a brief to, I think, the, I'm not sure which court, but one or two courts. So, yeah. And if you actually get refunds, do you pass them back to consumers or just keep it? I mean, the funny thing about that is, is we didn't really pass along many of the costs to our consumers. We took a couple targeted price increases at the end of last year, but it was only on a couple SKUs in our line. So I don't think there will be a lot of rebates to consumers.

42:15Chris Cocks:And then it's kind of difficult to calculate how you'd even do that. So, you know, our perspective was we're a pretty diversified company. We have a pretty sophisticated supply chain. So we're able to absorb the initial impacts of it. Some form of tariffs are going to stick around. So the price increases we did make, they didn't cover the previous tariffs. Depending on what the tariffs settle out at, they probably will roughly cover those. So I'm not sure there's going to be a lot to give. The goal of the tariff policy, as stated by the administration, is to move manufacturing back to the United States.

42:49You were just talking earlier about how easy it is to go to China and just become a toy manufacturer because that capacity is there. Have you moved any manufacturing back to the United States? Is it worth it to do so?

42:58Chris Cocks:I think we do something like 35%, maybe upwards of 40 % of our manufacturing in the U.S. We're a different kind of toy company. Like a lot of our toys are board games. A lot of our stuff is trading cards. And then we do a lot of licensing. So that tends to be more near-short production. We did retain more domestic production here, particularly for board games, than we otherwise planned to. I think the tough thing about toys is it's a super low-margin business, especially in manufacturing. and it's a very labor intensive business. And the SKUs change a lot every year. I think close to 60 % of our toy SKUs are new every year.

43:41Chris Cocks:So it's tough to automate just because stuff changes. I think that's a tough business to nearshore to the US. Like the way you nearshore is usually through automation. I think for there to be meaningful nearshoring for something like toys, you would need a step change technology Like you'd have to really be able to figure out 3D printing on a mass scale, which was the equivalent quality and cost of mass produced plastic mold injection. Yeah. No, I was looking on the website just before we started. I went on Hasbro.com. There's a Green Bay Packers transformer, which is laser targeted at me. It's$27.99 on the website.

44:26I'm assuming you're not making that here. How much would it cost to make something like that here in the United States?

44:30Chris Cocks:It's probably in the neighborhood of 50 % to 60 % more to make a toy in the U.S. than it is in Southeast Asia. And that's a factor of labor. And so you're saying you would need massive automation to equalize that labor cost to do here? Yeah, you'd need real automation, real standardization, or some kind of massive process innovation, like a whole new way to kind of make things. and then it would just kind of negate like a labor advantage like because it wouldn't really create a lot of net new jobs because so many of those jobs would just be automated we have to take another quick break we'll be back in just a minute

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47:07Welcome back. I'm talking with Hasbro CEO Chris Cox about automation and AI. So let me ask you about the other piece of automation. So the last time we were here, 2023, you talked a lot about a system called Blueprint 2.0, which was a hundred million dollar investment into a brand insights platform, like a data platform that would help you figure out what to make and how much to make. We've already talked a bunch about AI. I'm reliably told that you can now just buy Cloud Code for like 20 bucks and just like build a hundred million dollar brand insight platforms. Is that working out? Did that investment pay off the way you wanted it two, three years ago?

47:43And how are you seeing it now in an age of AI software development?

47:46Chris Cocks:That$100 million was kind of all into outsized data sourcing and new data analysts and custom market research and all that kind of good stuff. And I would say it's worked out pretty well. Certainly businesses like Magic the Gathering, which I think since we talked is maybe 80 % or 90 % bigger, it's really worked out. Like it's really helped us be able to understand what the customers want, how to segment products, what people to partner with that would appeal to that customer base. I think it's helped us in making better toys that are more targeted and really turning around kind of like a pretty negative point of sale trend that I inherited when I first started where we were, you know, in 2022, we were probably indexing 15 to 18%.

48:40Chris Cocks:points behind the market in terms of our growth versus the market growth. And today, I think we're at or ahead of the market. So it's been good on all those aspects. I think in terms of the future about how we engineer things and how we build platforms, I just had a conversation with our CIO the other day where he was taking me through like, hey, this is how we're AI automating the company and how we're building in new workflows. And the number one question I had for him was, hey, how are we doing inside of IT? Like, how are we building more capability inside of our own coding organization and inside of our own kind of engineering organization?

49:22Chris Cocks:He had to kind of take that back and think through that a little bit. My personal point of view about what AI is going to do to at least, I can't talk about the economy as a whole, but what it's going to do to how we employ people and how we deploy people. I think it's going to be a labor savings tool, but I think it's going to be ultimately savings that you redeploy into the product and you redeploy in the partners. So there might be some changes about the nature of who we employ or what we pay for, but the total amount of people that we pay and the total amount of labor that we deploy, I don't see going down.

50:00Chris Cocks:My hope is that redeployment drives growth and that goes up. I definitely think it will affect stuff that we've already outsourced because stuff that we've already outsourced tends to be kind of that grindy, kind of quote unquote low value operational or process level work. Stuff like touching a bunch of orders and making sure that they're filled out correctly, like nothing that's super glamorous. And so we already outsource that outside of the US. So I think those will be kind of the first work streams that get AI automated. I think everything else is more kind of enrichment and kind of feeds people, gives people hours back in the week that they can go and hopefully exceed what they did the prior year.

50:45One of the iron laws of Decoder for however many years I've been doing this now is once you start investing in software, your investment only ever increases. Yeah. So once you hire a software engineer to make you a software platform like Blueprint, you're only going to hire more software engineers and spend more on the software.

51:01Chris Cocks:The rule at Microsoft was don't worry about what it costs to make, worry what it costs to maintain. Right. And it just feels like every decoder conversation for years now, I could just rely on that. Maybe AI changes that, right? Where maybe you're not making an infinite investment in software over time because you can hold it steady with automation. Does it feel like that's real to you? Well, I think what we're seeing in the early stages of AI is, you know, if you take that million man hours savings that we're estimating, which is kind of a rough and tough number, but I think directionally right and probably on the low end, that basically translates to a low single digit to mid single digit productivity gain for every employee.

51:41Chris Cocks:And that's just at the early stages. At that level, you're basically just covering inflation for how benefits increase and salaries increase for your base. So I don't think it's going to massively decrease like any of our given functions. Once again, you're in this hyper-competitive industry where expectations raise every year and you want to delight your consumers in a new way and get them to buy something, which logically, if you were an economist, you'd say this is an illogical purchase. It's a passion-based purchase. So you've got to delight them and go bigger. That's not a recipe for cutting back on your development or cutting back on your customer support.

52:26That's a recipe on figuring out how you get more efficient so you can do more with the same. All right. Noted. Chris does not think the sasspocalypse is here. We'll have you back in a few years. We'll see if that's true. Let's talk about video games.

52:40Chris Cocks:I really hope I'm more correct on that than I went to with NFTs. I want to wrap up here by talking about video games and then the culture and IP broadly. I feel like the way fandoms respond to IPs over time is changing. I really want to get your take on it. let's just start with video games broadly. Do you know how to fix the video game industry? Because it doesn't seem like they know. I think what's happening with the video game industry is you have, it's growing, but it's not growing like double digits. It's growing kind of like mid-single digits and it probably will continue to. They're starting to suffer from more substitution, which is probably just, if you look at it in hindsight, it's just a different way of delivering video games.

53:24Chris Cocks:but you have like this massive cost inflation for delivering kind of the amount of content. Like if you want to develop a AAA video game, it's a thousand man yards of effort minimum. With an audience that's growing, you know, growing, but not growing leaps and bounds with more kind of substitution or new categories with inflation, which is going significantly faster than what your market is growing or what your pricing power can support. I think you have to think about things differently. I think you have to think about like, hey, when you make a game, you know, are you are you always going to go to San Francisco or Austin, Texas to, you know, recruit that team?

54:05Chris Cocks:Or are you going to go to, you know, these fantastic areas of talent in Southeast Asia or China or Eastern Europe and pair them with the team who really understands the marketing question? I think a lot of gamers don't like AI in games today, but I think eventually someone's going to figure out how to use AI in a way that's high quality and is fun and makes games better. So I also think you have to think through that. I really think it's just kind of this classic kind of equation of, hey, your input costs are X, your output is Y. How do you make sure the ratio between X and Y is acceptable for the risks that you take?

54:48Chris Cocks:Because, you know, any given video game has like a 20, 30 % chance of being successful. So you've got to be able to cover a whole bunch of unsuccessful bets inside of whatever you invest. So I'm curious about this in your own slate of games. You got a big bet this year on Exodus. It's supposed to be a big cornerstone IP. It's a huge investment. You also just had Baldur's Gate 3. It was, I think, made in the system you're describing, right? That studio was in Belgium. Yeah, they had resources in Eastern Europe and Europe and Canada. They had them all over the world. But you're not working with that studio anymore, and you've got a big bet on a new IP.

55:25That feels like a different set of risk. Like you've balanced that risk maybe differently than what you're describing. How'd you make those decisions?

55:32Chris Cocks:When we think about digital games, we think about, okay, what does the audience want? What brands do we have and capabilities do we have that we feel is relevant to those needs? And then what's the best way to kind of build that capacity? We decided that, you know, we had really relevant brand and IP and kind of design sensibility and communities to hardcore role-playing games and action adventure games. And then inside of, and card games, of course, from Magic. And so we decided, hey, those kind of make sense for us to execute, but it's going to take time for us to execute it. So as we kind of build that capacity, how do we, we have a lot of brands that are relevant.

56:20Chris Cocks:How do we partner with some of the best in the business to go execute on our behalf while we kind of build our capacity and build our learning to be able to do that? And I think Baldur's Gate 3 and what we did with Larian was a fantastic example of that, probably best in class example of that. And then on an ongoing basis, since we're going to focus on more hardcore gamers and these kind of more traditional PC and console audience genres like role-playing games and action-adventure, that covers maybe 700, 800 million gamers, but there's probably 3.5 billion in the world. What can we do to kind of appeal to those other 2.8 gamers around the world?

57:00Chris Cocks:And that's really where our licensing team comes in. So we've got the biggest digital licensing business in the world by probably, I think, a significant margin. We've got this fantastic board game portfolio. We've got some great kind of hardcore games like Magic and D &D that we license out with some of the best in the business, Scopely being one of them in mobile. And that's pretty lucrative and pretty high growth for us and helps to kind of pay the bills. That allows us to have a long runway to be able to invest in our own studios, in our own publishing capacity. And it also de-risks those efforts.

57:35Chris Cocks:So it's not like we're making a bet the company bet on any individual game. You know, if a game does well, it's great for us. But if a game underperforms or we need to delay it so that we can make sure it's good, we've got this fantastic licensing business that can help kind of cover it for us. So I think we've been pretty smart with it. I'm curious about Exodus in particular, right? This is a big investment. It's one of the big games you're talking about. But the studio head left in December right after the last trailer launched. Does this all feel stable to you? Does this industry feel stable to you?

58:09Because from our perspective, from the audience's perspective, everything just feels up for grabs all the time in gaming right now.

58:15Chris Cocks:I think you get in games because it's a passion play and you can do amazing things with the technology and the art. I don't think you get into games because it's a stable career and predictable day in and day out. It's kind of like the ultimate confluence of art and technology, and it changes all the time. You know, the team on Exodus has been working on it since 2019. Our goal is to ship it in the first half of next year. I think it looks pretty good based on what I've played of it. I'm pretty bullish on it. And then, you know, we'll be pairing that with another game called Warlock later in the year from a team up in Montreal.

58:56Chris Cocks:all. So, you know, I think we won't just have Exodus, we'll have Warlock and we'll have like this fantastic stable of digital games. And so, you know, like I said, any individual game has probably less than a 50 % chance of being in the money, but when you hit, it hits well. And our perspective, this is one of those businesses, like I referenced earlier, we don't think digital games is just a flash in the pan market. We're going to be patient, we're going to invest. And if we lose money in the short term, we're going to build up our community, build up our capacity, and build up our ability to be able to execute with excellence.

59:34Chris Cocks:And I think over time, it's going to be a difference maker for us and something that we're happy we invested in. Talk about being in the money in video games. I feel like I've spent a lot of time trying to understand the economics of video games, and I still kind of don't. I'm not sure. Based on the industry, maybe no one does. Do you have to be on Game Pass to get distribution? Is it, is all the money DLC? Is it, are we just going to do prediction markets in video games now? Like, how do these things make money over time in a way that's sustainable? I think there's a ton of different ways to make money in video games, and it's kind of publisher dependent and brand dependent.

1:00:05Chris Cocks:The three ways that we do it. First off, we have Magic the Gathering Arena, which is a fantastic extension of one of the biggest card games in the world. People love it. It's highly sticky. It's been around since 2018. It's a good, nice business for us. We do it with digital licensing, working with some of the best people in the world. That's super high margin, very high scale for us, helps us really propagate and drive reach for our brands. And then we're selectively investing in publishing where we want to build that relationship with consumers. And we're doing that with a more traditional business model.

1:00:42Chris Cocks:We're not doing a whole bunch of complex battle pass or free-to-play economics. We're doing it more like, hey, here's the price for a game. You get 40, 50 hours of content. You have a lot of fun. And then hopefully you want to go buy the sequel. And we think that works with our brands. And based on the economics that we have and the studios that we have, like I said, the first couple games are going to cover a bunch of startup costs. And so those might not be as profitable as we want. But we think over time, as we start to optimize those studios, figure out how we leverage great talent spots like Eastern Europe and markets like Montreal, where we have one of our biggest offices, we think we can get profitable at that over time and delight a lot of people in the process.

1:01:35I want to wrap up by just talking about the relationship between these franchises, these brands, all this IP, and fandoms. I have this joke in our newsroom right now that copyright law doesn't exist anymore. It's just a framework for business negotiations. But then you go out on the internet and it's just everything's all for grabs all day long. And you can open Instagram and you can see literally any cartoon character punching any other cartoon character in the face. And it's just like, I don't even know what's going on here anymore. There's a part of that that maybe is bad for business, whatever.

1:02:02There's a part of that that's great for individuals because you get to participate more. And there's a part where the creators have totally lost control of their creations. Where do you stand on this? Do you feel like the fandoms have an appropriate amount of authority over your IP? Do you think you need to take some more back? Do you think OpenAI has just stolen it all from you? Where are you situated in all this?

1:02:22Chris Cocks:I think the fandoms have a lot of authority over our brands and what we make. Anyone who makes a great game that endures or a great IP that endures has to listen to their fans. And they have to be able to figure out the signal through the noise. But that's always been the case. You know, my view on AI and user-generated content is as owners of multiple brands, you can't ignore it. You can't stick your head in the sand. And just, it's not a game you're going to win if you just play defense. You got to figure out a way to engage the fans. You got to figure out a way to engage the platform and hopefully empower people to use your brands and use your content responsibly.

1:03:06Chris Cocks:And, you know, hopefully figure out a way that you can make an ecosystem where everyone wins. From the voice talent and the writers and the creators behind the properties to the fans who just want to have some fun with their friends and share cool things with each other. Is it going to be disruptive? Yeah. Have people figured out the business model yet? No. But, you know, people were writing about the demise of the music industry back in 2000 with the rise of Napster. And I think last I heard, the music industry is more profitable than ever because they figured out a way through it. Yeah, but I would say middle class artists are not more profitable than ever.

1:03:41Right. I mean, that's what I'm curious about. Like who the music industry might make more money than ever, but it's Spotify and a bunch of big labels and musicians themselves are making maybe less money than ever. When I look at, you know, you open Instagram and there's the Monopoly man doing the electrobreakers dance with Donald Trump. I'm like, I think the only person making money here is Mark Zuckerberg. Do you think the platform should have to pay you when your IP gets used in that way?

1:04:06Chris Cocks:What I think they should do and what I think will happen, I think is probably two different things. So I think you have to accept what's going on and figure out a way to work with it rather than trying to work against it. Because with AI and user-generated content, the genie's out of the bottle and it's not going back in. You either accept that and you figure out how you work with it, or you don't accept that. And I think it's probably going to be a negative for you, an even bigger negative for you if it's going to be a negative. I'm also very curious about fandoms and IPs and how they live and die and how they persist and how they find new audiences.

1:04:41Actually, Harry Potter is an example of this. You have a big deal upcoming with Harry Potter. That fandom, I can't tell if it's reaching younger people. right? Or if it's just the particular audience of Harry Potter from its height, getting older and having more money to spend. And I can't tell there's new fan creations happening that would sustain Harry Potter in a way that you might need that to sustain IP now.

1:05:03Chris Cocks:Yeah. I mean, I think going back to that acronym, GemSquared, gamified, entertainment-driven, multi-purchase, multi-generational, I think Harry Potter is like a power brand that exemplifies all four of those aspects. I can't share kind of like the research data we have, but certainly it's a very powerful multi-generational brand. It's almost like a rite of passage for a lot of kids to read the stories or watch the movies. With my kids, we spent three years for each of them reading the stories at bedtime. And it was probably one of the nicest memories I have with them. I go to theme parks. I probably go to like three or four theme parks every year.

1:05:39Chris Cocks:I'm a huge theme park fan and I don't do it professionally. I do it because I'm a big nerd. When you go to the Harry Potter world inside of Universal Studios, A, they're some of the best theme parks ever imagined, and B, it's all ages. It's little kids holding stuffed owls, hedgehog owls, to adults who have the Harry Potter glasses and showing their school colors. Go Slytherin, I suppose, in my case. I just think it's something that is really powerful. And to that prior question about AI and user-generated content. You know, when you have a brand that has an authentic connection with people and has a powerful kind of like core of lore and an authenticity associated with that, I think fans respect that.

1:06:29Chris Cocks:You know, they might make other stuff. You know, I saw a pretty cool Dinobots movie from probably made with C-Dance 2.0 over the weekend. It was pretty neat, but people know what the authentic Michael Bay movies are. People know what the authentic toys are. I think when you have that and you have that power center like a Marvel does, like a Star Wars does, like a Harry Potter does, yeah, you need to protect it. You need to make sure people are using it responsibly. But I think you also need to have confidence in it that it will help drive you through these kind of sea changes. And that's certainly kind of what I think.

1:07:03Let me ask you about that. This is why I'm asking about Harry Potter specifically. I know what a Michael Bay movie is because Michael Bay made those movies. He's the author of those movies. and I think Michael Bay's entire worldview is explosions. You know, like I know what his politics are and it's like stuff should blow up more. J.K. Rowling has very loud politics that are turning off a lot of younger consumers, right? Her transphobia is turning off a lot of younger consumers. This is why I'm talking about fandoms coming to an end. I can see in the feedback we get about when we write about Harry Potter, younger people saying, why would I support this fandom?

1:07:38Why would I support this IP? And maybe she should just shut up and it would be fine and it would become the power center that it is. But you've got creatives on your team, right? The last time you were on the show, you talked about being stewards of inclusion. How do you make this decision when the creator of the property is sort of actively reducing the fandom and in fact hurting a lot of people in that fandom?

1:07:57Chris Cocks:Yeah, I mean, for me, it's separating the art from the artist and going to kind of what the core fans want. And, you know, I'm not going to get into the politics around it other than to say we very strongly support diversity and inclusion inside of Hasbro. We're very proud of it. And we're very proud of the diversity of viewpoints and backgrounds that we have in our employee base. And so, you know, I think Harry Potter is a wonderful franchise. I think it's done a great job of bringing joy to the world. And I'm enjoying, I'm looking forward to being part of that. Yeah. Just like I am with all the other brands we support.

1:08:33How do you think broadly about, again, when I say new IP, all the people who make new IP are also out on the platforms, right? Every new creator is an influencer, and they have a huge library of things they've said and done in the past. Is that something that you think of as a danger? Is that something that you're on the lookout for? Or is it your laser focus on the commercial potential of the franchise?

1:08:53Chris Cocks:I definitely think you have to be cognizant of it, and I think you have to make a business decision. You have to balance kind of, again, I tend to focus more on the art than the artist, but obviously you have to think about both. Chris, what's next for Aspera? What should we be looking out for? You're going to see some cool aged up properties or toys and collectibles from maybe brands that you wouldn't expect. We have a new Play-Doh line called Blooms, which kind of takes the whole kind of flower mystique and applies it to Play-Doh geared towards adults. It's pretty cool. I think it was probably one of the best in show at Toy Fair last week at New York Toy Fair.

1:09:31Chris Cocks:I think you're going to see some of those exciting new innovation initiatives that I talked about that we've been kind of incubating for the last couple of years. And then obviously, my hope is that you're going to see some really kick ass video games come from us that are going to blow you away. Well, you're going to have to come back sooner than three years. Thank you so much for being on Decoder. Yeah, really. Thanks so much for having me. I'd like to thank Chris for taking the time to speak with me and thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode or really anything else at all, drop us a line.

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