Today, I’m talking with Chris Cocks, CEO of Hasbro.
You know, Hasbro — the toy and game company that makes some of the most iconic products in the world, from toy lines like Transformers and My Little Pony to board and tabletop games like Monopoly, Magic: The Gathering, and Dungeons & Dragons.
Chris was last on the show three years ago, as he was first stepping into the role, and we spent quite a bit of time then talking about his plans to collect more data, spin off parts of the company, and think about the future of collectibles… which, at that time, meant NFTs. Look, a lot’s happened in three years! NFTs just weren’t one of them. You’ll hear Chris laugh about this throughout, actually.
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You know what did happen, though? A global supply chain and manufacturing nightmare precipitated by tariffs, the AI explosion, and, of course, the endless chaos of the video game industry. Oh, and there’s the relentless continuation of a trend that defines the modern toy industry: more and more toys and games are made for adults, who have a bunch of money, instead of kids, who don’t. Chris and I talked about that quite a bit, and I think his point of view is at once totally logical and also completely surprising.
Chris and I also talked a lot about Hasbro investing so heavily in games and digital media. For example, you’ll hear Chris mention several times how big the mobile game Monopoly Go is for Hasbro. And while Magic: The Gathering and Dungeons & Dragons are already huge, load-bearing brands, Hasbro is also trying to expand more into the video game space with original games, like Exodus, which is slated to release next year. That’s another huge set of challenges, in an era where video game studios are shutting down more or less weekly, and the distribution market is controlled by a small handful of players, like Sony and Microsoft.
And being an IP company also puts Hasbro right at the nexus of a bunch of thorny cultural issues, too. Fans have very strong feelings about the stories they love and the creators they maybe don’t love so much. Hasbro just signed a big deal to distribute Harry Potter merchandise for the next several years, so I had to ask about that, too.
There’s a lot going on in this one; I really think you’re going to like it.
Okay: Chris Cocks, CEO of Hasbro. Here we go.
This interview has been lightly edited for length and clarity.
Chris Cocks, you are the CEO of Hasbro. Welcome back to Decoder!
I’m excited to talk to you. It’s been about three years since our last conversation. I was looking at that episode. Boy, we talked about NFTs a lot three years ago.
If we talked about it at all, we talked about it too much.
It was interesting that you were worried about that, and you had just changed the license terms for Magic: The Gathering, you were chasing Creative Commons, and you’re trying to protect against NFTs, and that feels like it all essentially came to nothing. Would you say it came to nothing?
Yeah, I’d say, largely, that form of the technology came to nothing. Collectibles have taken off. I’m sure there’s going to be a digital collectible, I’m just not quite sure we found the right version of it yet.
I get that feeling, and I also just feel like we now know crypto is mostly for crimes. It’s amazing how even in the crypto industry, it’s like, “Yeah, we’re mostly for crimes. It’s digital gold and crimes, and that’s what we do here.”
The Attorney General of Washington State, seven or eight years ago, successfully blocked me from ever investing in crypto, and I never picked it up. So there you go. Everyone in Washington and everyone in Hawaii basically didn’t pick up the habit.
There you go. So that was one aspect of our previous conversation. I think we can set that aside. I think we’ve dispatched with that.
The other thing that was really interesting about that conversation is that you were just about one year into the job, and you were in the middle of a reorganization of the company. And you were also about to sell eOne, which you have now done. It was actually one of my favorite episodes at the time because you talked a lot about reorganizing and restructuring a hundred-year-old company. Since then, you’ve completed that restructure. I want to talk to you about how that’s going, and if there are any more changes to come. You’re also moving the company from Rhode Island to Boston. I’m curious about that decision.
Let’s just start at a very high level: You’re not the new CEO anymore, you’re just the CEO. What is Hasbro to you today?
I think it’s the same as what it was three years ago and what it’s always been when it’s at its best — it’s a company about play. I think the biggest thing we’ve articulated in the three years since you and I talked is this concept of what our superpower is, and it’s kind of borrowing from one of my favorite business authors, Jim Collins. He talks about the Hedgehog Concept, and it’s “What’s the thing that you are best in the world at or could be best in the world at?” And I think Hasbro’s superpower, what we’re best in the world at, is inspiring a lifetime of play. We do it across more categories, more brands, and more things than just about any company in the world.
And what we’re super good at is building a relationship anchored in play, and pretend, and imagination with two, three, four-year-olds up to teenagers, and then kind of never letting go. We just keep giving them something that they want to collect, that they want to game with their friends, that they want to play with for an entire lifetime. And I’m kind of the customer one on that superpower. I’ve been playing with our stuff since I was two years old, and I continue to play with it today.
Can I ask you about that trend in particular? I think it’s obvious to people who pay attention to toys — it’s maybe less obvious from the outside — but the idea that toys are now a thing that adults buy and collect and play with, and adults have a lot of money, so the toys can get more expensive. That’s pretty new in this industry.
It’s not so new that it’s like a surprise, but it’s new in terms of how a company like Hasbro would conceive of itself. What’s the balance there? Because I think there’s a lot of criticism that, while making this stuff for adults is really lucrative, you might lose sight of the kids who are the primary audience for the toys.
I think kids are always the first handshake audience, the people that you want to build a relationship with as young as possible, and kind of grow with them. But I think just looking at the basics and the fundamentals of the addressable market, there are fewer kids being born today than there were 10 or 20 years ago, and there are more substitutions than ever. So you’ve got a smaller base of children, especially in Western markets that we tend to distribute in, like the US, Europe, and a lot of Asian countries. Those kids start to shift decisively into video games, mobile phones, and digital experiences at younger and younger ages. So as an industry, you can either say, “Okay, I’m going to accept that my traditional market is declining,” or you can say, “Okay, what else could I do?” And I think adults are kind of the natural space, and it’s not artificial.
I think going back to Baby Boomers, but certainly Gen X, Millennials, Gen Z, we like to collect stuff, we like to play, it’s how we socialize. Usually, when you talk to a group of millennials, or you talk to a group of Gen Zers, if you ask them, “Name your top 10 brands, especially entertainment brands,” fully five or six of them, the majority of them, are going to be either from video games or games in general. So it makes sense that we would want to cater to that audience. I think it’s lucky for us and fortunate for us that a 26-year-old has more spending power than a 6-year-old, and they tend to want more sophisticated playthings and collectibles. And so if you’re a company that has the expertise in that and has the brands for that, like Hasbro, I think it’s pretty good for you.
I’m curious about that shift broadly. One, I think just the demographics you outlined are true, and it’s really interesting... I have a 7-month-old, and it’s just interesting to see what toy brands exist now that didn’t exist for our 7-year-old. So even in that time period, just seven years, you see some brands have just left this market behind, and there are some new brands that exist now. And then there are things like Cocomelon, which, when my 7-year-old was a baby, was pretty nascent, and is now this juggernaut. And I’m curious if you see the dynamics that are changing.
You talked about digital experiences. Do you see more... like at Hasbro, classically, when I was a kid in the 80s, you would advertise toys during Saturday morning cartoons, and this is where you would find the customer, and now, it’s like a bunch of weird YouTube slop. You know what I mean? Is that the space where the new toy brands are going to come from, and you’re just not willing to play there quite as much? Or is the dynamic of the industry changing more aggressively than that?
I think there are a bunch of things happening in the traditional toy space. A, it’s never been easier to become a toy company. You can go to a city in China, just a couple of hours’ drive north of Hong Kong, called Shantou, and walk through 10 Costcos worth of a showroom of toys that a thousand different manufacturers are coming with you. And if you have a decent-sized checkbook, you can go on a walk-through and say, “I’m going to pick that one, and that one, and that one,” and buy a bunch of toys, and suddenly, you are a toy OEM. And then you have a massive amount of distribution options ahead of you, especially with the rise of e-commerce. But on this flip side, it’s never been harder to be a traditional toy company; there’s more competition than ever.
As we talked about before, there’s more substitution, especially from digital, than ever, and you’ve got a narrowing set of customers to be able to appeal to. So the great thing about that is there’s going to be more choice for a kid, and there’s going to be a higher cycle time. The bad thing from a business perspective is that it’s really hard to establish a moat, and the kids cycle through, and they learn about things in unpredictable ways. A lot of kids are exposed to social media, even though they’re not supposed to do it at an earlier and earlier age. They watch YouTube, they watch all these kinds of influencers, and the whole notion of Saturday morning cartoons or even just watching cartoons after school on a linear network has totally flipped upside down. So I think as a toy company, you have a choice: you can either double down on that market and try finding these big entertainment moments that really punch through, or you can try finding a different market to be able to appeal to and build a more durable moat in those spaces.
And I’d say that we have been doing both. We certainly license with a bunch of huge mega brands. We just announced Harry Potter, we do KPop Demon Hunters, we announced Voltron and Street Fighter, and the Walt Disney Company, with whom we’ve been in business since 1954, with Marvel and Star Wars. So we do a lot that appeals to kids, and then we have some of our own house brands like My Little Pony, Peppa Pig, and Transformers. But increasingly, I think we’re choosing to invest our capital and some of our best talent in that older audience, where you can build a play system. You can establish more kinds of strategic brand moats and distribution moats, and it’s a little harder for new competitors to edge in. And the brand loyalty tends to last a bit longer than the attention span of a typical 4-year-old.
Can I ask you about KPop Demon Hunters? For a variety of reasons — one, I’m personally curious, and two, my daughter will kill me if I don’t ask you about KPop Demon Hunters. It’s the IP that runs our house.
Is it true that KPop Demon Hunters was a surprise to the industry, and you weren’t ready for Christmas this year?
Oh yeah. Netflix, to their credit, shopped that around quite a bit, and no one bit. And I remember it was the weekend it came out. I’m an old business person, so I was flipping through LinkedIn, and someone was posting about KPop Demon Hunters as, “Not only my daughter’s favorite show, but it’s my favorite new movie of the year.” And I was like, “KPop Demon Hunters, that sounds like a cool title.” So I picked it up on my Netflix queue and started watching it, and a half hour in, I texted our head of toys, Tim Kilpin, and I won’t include the explicative I used in the text message, but I was like, “What the heck? Why didn’t we pick this up? Who has this?” And he’s like, “No one has it.” And we called Netflix, I think, on Sunday night and said, “Hey, we want in.” Then on Monday and Tuesday, every other toy company on the planet did the same. But yeah, yeah, the industry was surprised by it.
Take me inside that negotiation. You saw it, nobody wanted it, suddenly, it’s super hot. You obviously understood, watching it, with a little bit of LinkedIn validation, importantly, that it was going to be the hottest thing. What’s that negotiation with Netflix like?
Well, by that time, Netflix knows they have a... I think they have a pretty sophisticated piece of data that says everyone’s watching this, and it’s the number one movie on the planet basically. And not only are people watching it, but people are rewatching it, and the songs are starting to chart on Spotify. So we basically come in and be like, “Okay, hey,” we give them our pitch, “Hey, we think this isn’t a typical children’s movie, we think this is multi-generational. We specialize in products that appeal to all ages. We have multiple categories that we can execute in.” And I think within two weeks of us having that initial conversation with them, which probably happened on the Monday or the Tuesday, we were pitching them, showing them full-featured products.
And two years ago, that would’ve been impossible. But now, with the advent of AI-enabled design tools, we can go in and do what used to take us two or three months in basically two or three weeks, sometimes, two or three days. We can come in with very high-fidelity pitches and very high-fidelity product lines, and not only just show it digitally, but when you couple that with 4K level of 3D printing with full color, we can actually come in with models. And that used to take us six to eight weeks because you’d have to go to Hong Kong or Shenzhen and be able to source it from there. And so we had really good conversations with them. The rest of the industry also wanted to pitch them. They may have taken a little more time than us, but eventually, it kind of materialized that Mattel, Hasbro, and Lego came out on top, and we kind of split the license.
When you say you used AI tools to make fully featured models to show them, how does that process work now? Is it that your designers went away and came back with ideas? Did you personally prompt ChatGPT to make you Rei Ami toys? How does that work?
I don’t do that for our products, but I do that all the time for just personal passion projects, and I DM... Dungeons and Dragons is kind of my jam, and I DM probably three or four groups. There is so much AI-based animation, images, text, sound effects, and voice cloning on my PC, it would floor you. But basically, our design teams are all enabled with a suite of the latest tools from basically every major company. Then we’ve trained a bunch of models ourselves with our IP. And so from doing that, we can have pretty sophisticated renderings pretty fast of products and ideas.
When we have a little bit more time, we can even program in a character, and the character from the IP can actually be a co-designer with us and help us with ideas and help us with like, “That’s authentic, that’s not authentic.” And that’s actually been pretty wonderful in how we’ve been creating things.
