How a Traditional Toymaker Is Going Big on Digital Games

28:36How do you balance the originality of the experience or the initial attraction to the game with some of this like new licensing driven growth. I think what's great about this podcast, Tracy, is what you find weird. I find amazing. As a player, you know, hey, sign me up for Rick battling Iron Man set against a bunch of space Marines from Warhammer 40K. That sounds like a really fun gaming time to me. And I think that's the magic of what we've been doing with Magic for the last five years. We don't want to just be trapped in amber. We don't want the game to just be the same thing that it's been for the last 30 years.

29:23We want it to change and we want it to evolve, but we also want it to be fully backwards compatible and continuously offering flavors that bring in more and more people to the table and just make the community richer and more vibrant. Now, the downside to it is there are some people who are traditionalists. There are some people who are completionists and they don't necessarily like the changes, but that tends to be the significant minority. There's way, way, way more people who want to weigh into what, in my opinion, is one of the best games ever invented to play with IPs that they love, with cards that are instantly familiar to them.

30:10And we found what we call universes beyond, which are these tie-ins we do with other brands to be by far the most successful new player introduction that we've ever done in physical cards. Wait, sorry, can you explain that last part further? What's the new move that has been so successful? It's called Universes Beyond, which is our invitation of other brands to come into our play platform and be able to experience the magic of magic. It's not an original strategy. It's actually a very time-tested strategy. You know, you look at games like Fortnite. They do constant seasons with outside IP that really spices up the game and invites new people in.

30:56Lego has been doing it for forever. You know, they started with Star Wars and have expanded to, you know, they do Transformers now. They do Peppa Pig now. They do D &D now. It just makes the play system a richer playground for people to be able to experience. Now, we still have all the traditional elves and dragons and heroes and lore from Magic, and we always have sets for those. And we always make sure all the cards inside of Magic, and I think at this point, we're getting close to between 20 ,000 to 25 ,000 unique cards that exist in the Magic universe. All of those cards are fully compatible with each other.

31:36You can buy a pack of cards from 1993. And I wouldn't recommend cracking them open because they're very valuable if you buy them, but you could. And you could play with the pack of cards that you bought in 2023, and they would be fully compatible with each other. And I think enriching that play system with a lot of fantastic brands that have very vibrant fan communities just makes magic more magical to play.

32:06Thank you.

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34:22Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank and a member FDIC. Joe after we recorded that episode with Richard Garfield I went off to look to see if I could find my old Magic the Gathering card. Did you find them? These would have been from like 1994 or 95 and I can't find them anywhere and I'm so sad because not only do I think they are worth like a decent amount of money nowadays but I would actually like to see them again and I have this vision in my mind of exactly where they are they were in an after eight mint container and I recall seeing it somewhere like in the past 20 years but I cannot find it you'll find it I know I have old baseball cards in a record collection somewhere and I have no idea what there's you know something I'm interested in speaking of like culture is this sort of like intergenerational cultural transmission and you know when I was a kid I listened to the same music as my parents because they would put on music and I was in the room and so that's what I heard and that's what I got into And to some extent, that doesn't happen the same way with music anymore, because my kids might be on headphones or I might be on headphones.

35:30So when I'm listening to music, it's not just sort of blasting throughout the living room or wherever it is. You know, when you think about like these like games, like these like backwards compatible games, like, you know, like Magic and so forth. I'm curious, like how you see that playing out in the game space, games getting passed on, parents play with their kids. Obviously, I played Monopoly with my daughter. I think we also play like Chutes and Ladders and stuff like that. But then there is this element that they have other avenues of finding games, whether it's online or on a phone, that are not, you know, something I would have played.

36:05And I'm sort of curious about the phenomenon of like passing down games and how you think about the durability of brands in this aspect. I think it's the primary way people learn about a new game is through their parents playing around family board game night, you know, whether that's a Friday or Thursday or pick your poison. Experiencing the joy and, you know, passing on like a treasured memory from your childhood to your kids. I know my son loves D &D. He loves magic. He got that from me. The favorite game our family plays is Monopoly. You know, we try playing, well, we play it less because my wife dislikes how much we cheat, but the kids and I have a lot of fun trying to make work.

36:53Wait, do you play that if you land on free parking, you get cash in the middle? That's controversial. Where do you stand on that? Although that is often unnecessary for my kids and I because we seem to always have a magical font of cash. Our favorite version is the cheaters edition. We actually came out with a version of Monopoly, which was focused on things that you needed to cheat on, tasks you needed to do. And basically, we know the game of Monopoly is done at our house when my wife flips the board, usually around turn four or five. That's a short game.

37:31But it's fun. And my kids love Monopoly now. My son loves magic and D &D. And you do it with video games as well. Like to me, games are such powerful IP. You know, they might not create like these cultural moments that a big Hollywood movie does. Right. But they create millions upon millions of very powerful personal moments. And that's why brands like Monopoly can translate so well from a board game to a multi-billion dollar mobile game back to a board game again. because people have such intimate experience with them that has this deep personal connection, usually resulting from a very fond memory of siblings against siblings, friends with friends or parents and kids circling around a table.

38:25You mentioned cultural moments. I'm curious, like last year, I guess Mattel had that huge hit with the Barbie movie. I know you have all this IP. Are you doing anything similar in terms of sort of like big, like adult oriented movies around some of the brands that you have within the broader Hasbro world? Oh, yeah, for sure. I think at last count, Transformers is a five billion dollar plus box office franchise. I think it's in the top 10 box office franchises of all time. We have a new movie coming out in September called Transformers 1. It's the origin story of Optimus Prime and Megatron back when they were friends as young Cogliss robots on Cybertron and how the clash between them and the Autobots and Decepticons emerged.

39:15It's directed by Josh Cooley, who I think did Toy Story 3 or Toy Story 4. And it's been getting really good feedback from things like San Diego Comic-Con. Fans are excited for it and we hope families will enjoy it too. And then we have, at last count, I think we have 35 entertainment projects in development. You know, you brought up the Barbie movie. Barbie herself is the executive producer of our Monopoly movie with Lionsgate. We have a Clue movie in development. Wait, what does that mean Barbie herself is the executive producer? Yeah, Margot Robbie's production company, Lucky Chat. Okay, that makes sense.

39:53Not the doll. Okay. Though we did release a version of Barbie Monopoly last year, and it was one of the most successful Monopoly versions from last year. So there's a lot of tie ins. So, yeah, I mean, we have a ton of content coming out. You know, Transformers is probably the movie that the toy industry kind of holds up as like great synergies between selling products and creating a great story. You know, last year with Transformers Rise of the Beast, we had a 90 % uplift in point of sale over the 12 weeks of the movie. And I think we did something like 30 or 40 % POS point of sale uplift during the whole year from that movie.

40:38So, you know, Transformers movies aren't just fun. They sell a lot of toys. By the way, Tracy, I see Hasbro has the IP to Gem, which I think could be a huge hit. Wait, is this the old one from the 1980s? Yeah. People would love a gem movie. Yeah. So I'm just saying I'm giving a free idea here. I think there was an attempt. I wanted to talk about AI and there's sort of two different paths we could go down here because number one, I know you're experimenting with some AI based products. So like an AI driven Ouija board, which sounds kind of fun. And then on the other hand, Hasbro has got to be one of the biggest commissioners of like science fiction and fantasy art in the world.

41:23And I know there's a lot of discussion nowadays about how much of that is going to end up being AI generated. And I believe you had a big round of layoffs announced last year, and they're probably still ongoing. A lot of those were in the art department. So can you talk to us about the impact of AI on your business, both in terms of new products and then also, I guess, how it would affect the art of a lot of your games? Yeah, sure. Actually, just to correct it up front, we are going through a series of layoffs as part of restructuring our toy and commercial organizations, but that's not affecting Wizards of the Coast.

42:02They had some modest impacts, but that was actually mostly kind of in back office related roles. we really prize design talent, art talent, and generally creativity. It's what fuels our brands. We prize it both internally in terms of the employees we have and the great talent that we're able to attract to the company. And we really prize it in terms of, you know, really the AAA top shelf artists that we work with, both to help us drive concept art and new product development, as well as all the art commissioning we do for the thousands of new magic cards. and D &D books and imagery that we do every year.

42:41You know, I would say for AI, AI is a big topic. Like we could probably do like three or four podcasts on that and its impacts on any given industry. I suppose I'll start with the headline, Color Me an AI Optimist in terms of coming from the industry of play. It's an incredibly playful, very high impact set of technologies that really can light up the average player, the average fan's creativity, really creates and enables amazing user-generated content. And as someone who builds games that really rely on storytelling, that relies on an end user's creativity and people collaborating around a table, I think there's really exciting possibilities for it.

43:31You know, that said, we're in a lot of undiscovered country as it relates to AI, and we have to deploy it very, very responsibly and at a measured pace because we got to make sure that creatives are paid for their work. You know, we're a company that values creativity, and therefore we value creatives. So we're thinking through how do we do this in a way that's ethical, that's responsible, that gives voice actors, gives actors, gives artists, gives writers their fair shake inside of it. And, you know, I think it's going to take us a little bit of time and the industry as a whole to figure it out.

44:12But I'm pleased with how we're going about it. I'm sure there'll be instances where, you know, we have to police things carefully. You know, you'll see AI pop up in art now and then. That's not something that we're doing by design. It's something that just happens when you work with hundreds of different artists who have different kind of motivations and different kind of thoughts on things. Generally speaking, in our finished products, everything will be human created and human finished. However, when we think about AI enabled tools that kind of bring fun to life. and it enables users to be able to create things, sure, I think we will use our art, we will use our IP, and we will try to use that to create ethically trained art and ethically trained AI tools that kind of bring imaginations to life.

45:08You know, if I just look at like my own D &D groups and I play in three different D &D groups, I can't tell you a single person around the table who doesn't use AI in some way, shape or form to help either craft their character, help inspire an adventure, bring imagery and audio to life. And so, you know, if that's just my little kind of ballpark of 20 or 30 players that I play with on the regular, I'm sure that's happening across the vast tens of millions of people who play the game. And so when your users are telling you that they're using a tool and that they're valuing it, I think you have to take notice and you have to figure out how to harness it.

45:51Oh, this reminds me, actually, I remember hearing about the open gaming license controversy for Dungeons and Dragons, and there was a lot of debate and a lot of outrage initially about some of the changes you were proposing. But since we're on the topic of, you know, user generated content and Dungeons and Dragons is famous for the amount of participation that gamers actually have in that. Talk to us about how that controversy, like what were the lessons learned from that and how did it all end? Because I think it's been resolved somewhat at this point. Yeah, I mean, that was about a year and a half ago and that was a serious case of foot and mouth disease from our perspective.

46:32We did it wrong and we apologized and I think we quickly made amends. I think where we were coming from on that whole thing and the open game license for people who don't know, It was something that was established about 20-ish years ago that basically opens up the rule set and some of the core content for Dungeons & Dragons to create a lingua franca rule set and set of content for people to be able to play tabletop role-playing games. So what we were trying to do is we were trying to evolve it because a document that was created in 2002 didn't foresee the rise of video games. It didn't foresee the rise of AI tools.

47:14It didn't foresee even things like content streaming. So our goal there was to try to protect an end user's ability to be able to make content and have fun and a creator's ability to create content and be able to make a living off of it while preventing kind of like a quick serve restaurant from using the D &D brand to sell tacos or a big video game company to be able to create a video game using the IP in a way that wasn't fair to us as the kind of quote unquote brand owners, or maybe do something that we didn't necessarily like with the brand or had content that was inappropriate, which happens in when you have tens of millions of users making content.

48:02I think we found a fair and equitable solution to it. If anything, we embraced open source even more. We also are opening up our own distribution platforms like D &D Beyond to create marketplaces where more and more creators and more and more users can be able to share their content and hopefully make a nice living off of their content. I think you're going to see more and more from that from us in terms of how we expand that marketplace opportunity and how we think about new ways that they can create content. For instance, on something we're calling a virtual tabletop, which is an Unreal Engine 5 powered kind of like sandbox where you can build full 3D models of like miniatures and buildings and special effects.

48:51And, you know, I think that'll be a wonderful opportunity for people and really leverage kind of the legacy of the OGL in a positive and new way. Oh, that sounds really fun. What are your favorite games to play? Give us some recommendations. And they don't all have to be from the Hasbro universe. But, you know, having spoken to you, it sounds like a lot of them are. Fortunately, many, many, many of them are. Well, certainly if you're into role-playing games and you haven't played Baldur's Gate 3, that's a seminal role-playing game. It won, I think it swept all of the major Game of the Year awards.

49:26It swept all of the major Role Playing Game of the Year awards. And it's just a fabulous game from our partners at Larian. I think they hit a home run on that. I obviously think Monopoly Go is a lot of fun, and there's several hundred million people who agree with me. So I think if you're looking for something to tick some time away on your subway commute, that one's a lot of fun as well. I'm kind of a hardcore, crunchy gamer. I think you can tell based on my answers and a little bit nerdy, but actually my favorite game is Scrabble. So I really enjoy playing that. And I suppose if I was going to pick a competitor's game, what's a fun game that I play with my family from a competitor?

50:06So I will pick two. If you're a little nerdy and want a fun kind of D &D light experience, Munchkin is probably one of my family's favorite games. That has a very Monopoly-esque kind of vibe to it, where you're in coopetition trying to be the first tiny creature to complete a dungeon and power yourselves up. And then, of course, ultimately, the other players who've been helping you stabs you in the back at the end to prevent you from being first. And then another family favorite, this one I think is from Asmodee out of Europe, is Ticket to Ride. That's just a really fun kind of travel-themed game where you become kind of a railroad tycoon.

50:46So that's a fun one, too. Oh, both of these sound amazing. Sorry, I'm looking them up as you speak. That sounds great. OK, Chris Cox, the CEO of Hasbro. Thank you so much for coming on All Thoughts. Hey, thank you so much for having me.

51:11Joe, I thought that was a fun conversation. I just like talking about games, really. Tracy, are you ever going to invite me to one of your game meetups up in Connecticut? I don't know. Should I? I would love you to come play board games, Joe. Really? Yeah. Okay, I'll come out. What game are we going to play? Oh, you know, this isn't really a board game per se, but I would love to play Avalon with you. I think you'd be good at it. Okay. This is the one where you basically lie to your friends and annoy everyone that you know. I'm done with that. So in all seriousness, it is interesting to think about game.

51:46You know, people are always talking about, oh, we want like real world connection. If it's like a third spaces and all this stuff. It is interesting to think like games are a little bit unique in that respect in which there is this sort of like in person, put down the phone community event. Like there's, you know, people play games on their phone and people play them on their computers. But there is something like powerful about a board game from a sort of social perspective. Oh, absolutely. And I have to say board game cafes of which there seem to be there are more of those in New York than there used to be.

52:20Those are fantastic like spaces just to socialize. I love going to those. The other thing that I thought was really interesting was the discussion about AI generated art and the sort of balancing act there. Also kind of funny to discuss that in the context of the Dungeons and Dragons licensing controversy. Also, I thought it was interesting and I was a little bit had my mind blown that when Chris was talking about his own gaming community and coming up with the stories that every single one of them is using AI for that purpose. Yeah. Which I, you know, you figure, OK, some people when they're like developing a story are going to use it.

52:58But the fact that it's like 100 percent of his community is doing that is pretty powerful. Well, and also, like, how do businesses even start to take that into account? And Chris mentioned this, but the idea that, like, OK, you're working with hundreds, if not thousands of different artists. Some of them might be using AI. You know, you can ask them maybe to sign a disclosure or something like that. But it seems like you're never going to be able to, like, police it entirely because people are using it as a tool. By the way, can I just say, like, I feel if the CEO of Hasbro plays Monopoly on cheat mode, where he's like adding a little extra house to a property surreptitiously or taking$100 from the bank or doing the free parking stuff, I feel like that's licensed for all of us to cheat.

53:44Or to buy the actual Monopoly cheaters edition, which sounds kind of fun. Yeah, but it's more fun if you're not supposed to cheat and you actually do it, right? But I was actually kind of flabbergasted. And I thought he would be a very strict, you know, by the book type when it came to gameplay. Maybe this is the way to play it, to just make it as chaotic as possible. I mean, it sounds like that's what Monopoly Go is doing. And it sounds like that's really a big part of the fun for people. Gosh, there's a Chance edition of Monopoly as well. Sorry, I'm just flicking through all the different Monopoly editions again.

54:15The Monopoly Chance game is the high stakes card flipping version of the Monopoly game. And it only takes 20 minutes to play. That would be nice because I would play more Monopoly with my daughter. If it didn't take like two hours. Yeah, that's the thing. It's a pretty big time investment in Game of Monopoly. I need to tell you about the time I was in Guatemala and I got caught up in a game of Risk that went on, I kid you not, for 12 hours all night. I'm looking forward to hearing this story. I was trying to extricate myself for hours by losing and it didn't work. And for various reasons, I couldn't just walk away from the table.

54:50Anyway, story for another day. Shall we leave it there? Let's leave it there. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Jill Weisenthal. You can follow me at The Stalwart. Follow our producers, Carmen Rodriguez at CarmenArmin, Dashiell Bennett at Dashbot, and Kale Brooks at Kale Brooks. Thank you to our producer, Moses Andam. For more Odd Lots content, go to Bloomberg.com slash OddLots, where we have transcripts, a blog, and a newsletter. And you can chat about all of these topics with fellow listeners 24-7 in the Discord, discord.gg slash oddlots.

55:23I am certain there are many games players in there. For sure. And if you enjoy Oddlots, if you like it when we do these gaming episodes, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is connect your Bloomberg account with Apple Podcasts. In order to do that, just go on Apple Podcasts, find the Bloomberg channel, and follow the instructions there. Thanks for listening.

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