WEBVTT - Hasbro CEO Chris Cocks Talks Oil Costs, Video Games

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Hasbro shares are slipping despite strong earnings and maintained outlook.

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<v Speaker 2>The company doubling down on gaming and digital franchises while

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<v Speaker 2>navigating tariff pressures and softer consumer spending across the toy industry.

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<v Speaker 2>The CEO, Chris Cox, joins us now and Chris, it's

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<v Speaker 2>great to have you on the program. Great to talk

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<v Speaker 2>Hasbro Again. I wonder if there's a risk that many

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<v Speaker 2>investors don't really understand your business model and the products

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<v Speaker 2>in which you see the most growth, since they're concerned

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<v Speaker 2>about more concerned about maybe the petroleum intensive toys with

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<v Speaker 2>which they associate normally Hasbro and the industry.

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<v Speaker 1>Yeah, well, i'd certainly say we have some exposure to petroleum,

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<v Speaker 1>but it's relatively light. The majority of our businesses games,

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<v Speaker 1>which are made of paper and frank frankly domestically so,

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<v Speaker 1>and then licensing and digital, which.

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<v Speaker 3>Is just bits and btes.

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<v Speaker 1>So you know, that's the vast majority of our business

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<v Speaker 1>and the vast majority of where our growth has been

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<v Speaker 1>coming from. And you know, you can never make promises

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<v Speaker 1>and guarantees about the future, but when you look at

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<v Speaker 1>a business like Magic It's grown on average sixteen percent

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<v Speaker 1>per year for the last ten years, and just clocked

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<v Speaker 1>in over twenty percent in our first quarter, so we're

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<v Speaker 1>starting off the year pretty good. Yeah.

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<v Speaker 2>Twenty six percent was the growth at Wizards, which, because

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<v Speaker 2>I'm familiar with the business, I have been at your

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<v Speaker 2>headquarters wizards headquarters in Seattle as well as your headquarters

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<v Speaker 2>here on the East Coast, I understand how much that

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<v Speaker 2>accounts for. I think more than half of quarterly revenue

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<v Speaker 2>and growing at a strong clip. Have investors just misunderstood

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<v Speaker 2>the story of Hasbro.

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<v Speaker 3>I'm not sure. I don't think you're just looking for us.

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<v Speaker 2>I'm looking at the nine percent or now seven and

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<v Speaker 2>a half percent drop and wondering why the selloff. You know,

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<v Speaker 2>we're worried about inflation, we're worried about the consumer, but

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<v Speaker 2>it seems like those who are buying your IP continue

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<v Speaker 2>to do so well.

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<v Speaker 1>I mean, I would look at a down day like

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<v Speaker 1>today as a buying opportunity. Frankly, you know, I think

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<v Speaker 1>we have a lot of strong structural advantages. You know,

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<v Speaker 1>when you think about Hasbro, you need to think about

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<v Speaker 1>it being a collector's gaming and IP company, and those

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<v Speaker 1>are all growth businesses. You know, we frame our opportunity

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<v Speaker 1>in terms of audience and category in an acronym called

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<v Speaker 1>gem squared, and so those are categories that are gaming driven,

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<v Speaker 1>entertainment driven, multi purchase, and multi generational. In twenty twenty

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<v Speaker 1>five categories that we define as gem squared, we're up

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<v Speaker 1>twenty two percent versus the rest of the toy industry

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<v Speaker 1>was down three percent. And of most of our capital,

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<v Speaker 1>most of our brands, most of our growth is invested

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<v Speaker 1>behind those gem squared insights and those gem squared brands.

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<v Speaker 1>You saw it in Q one, where you know, we

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<v Speaker 1>grew thirteen percent. You see it in our guidance where

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<v Speaker 1>we're projecting, you know, kind of a mid single digit

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<v Speaker 1>growth rate for the company, and you see it in

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<v Speaker 1>the bottom line where our profits have never been stronger,

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<v Speaker 1>and our profit growth and our profit margins are some

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<v Speaker 1>of the best in the industry.

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<v Speaker 4>Chris, I think, if I may, at least, it seems

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<v Speaker 4>like the analyst communities reaction is kind of what you're

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<v Speaker 4>talking about, this idea that your growth has been so

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<v Speaker 4>strong thirteen percent in the first quarter. I mean, look

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<v Speaker 4>at last year, the success and growth of Magic the gathering.

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<v Speaker 4>Why is there like a slight step down to the

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<v Speaker 4>single digits. What sort of changes as the year goes

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<v Speaker 4>on that you don't get that like, you know low

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<v Speaker 4>teens growth and success.

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<v Speaker 3>That you've seen. Well, I think we're a diversified business.

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<v Speaker 1>I think, you know, we always start the year with

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<v Speaker 1>a tempered outlook.

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<v Speaker 3>About what we think the business can do.

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<v Speaker 1>And you know, we like to we like we like

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<v Speaker 1>to under promise and over deliver, which is something that

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<v Speaker 1>I think we've done now for nine maybe ten quarters

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<v Speaker 1>and consistent, consistently. I think that's good for investors. I

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<v Speaker 1>think that's good for our internal teams, and I think

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<v Speaker 1>that's good for our fans.

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<v Speaker 2>We have, I guess a bit of a fanboy and

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<v Speaker 2>our producer, Will Shaker in the control room, he's writing,

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<v Speaker 2>tell me about the movies, guys. So you have a

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<v Speaker 2>big theatrical slate coming right, Star Wars, another edition there,

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<v Speaker 2>Toy Story. I think it's the fifth one, Spider Man Avengers.

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<v Speaker 2>What do you expect from that in terms of toy sales?

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<v Speaker 2>Which are you know the obviously the resin the petroleum

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<v Speaker 2>based products are getting hit with cost pressures, but I

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<v Speaker 2>would imagine you'll have some pricing power as well here, Yeah, yeah.

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<v Speaker 1>And we do you know our we think one hundred

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<v Speaker 1>dollars barrel oil has about a thirty million dollar cost

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<v Speaker 1>head wind for us, But I think you have to

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<v Speaker 1>look at that in the context of a business that

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<v Speaker 1>generates one point four to one point four or five

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<v Speaker 1>billion dollars in ebit up per year. So it's a

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<v Speaker 1>relatively manageable set of cost pressures for us that we

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<v Speaker 1>can offset inside of a large and diversified set of operations.

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<v Speaker 3>And I think you're right. Our entertainment slate is second

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<v Speaker 3>to none.

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<v Speaker 1>We've got the Mandalorian and Grogu opening this weekend, the

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<v Speaker 1>first big new Star Wars movie, I think in seven years,

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<v Speaker 1>you know. So far, toy sales for that have been

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<v Speaker 1>selling it at a robust clip in including one of

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<v Speaker 1>the coolest toys we've ever made, the Ultimate Grogu, which

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<v Speaker 1>is a five hundred and ninety nine dollars super high

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<v Speaker 1>end animatronic collectible. Then we have a toy Story five,

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<v Speaker 1>which is always great for our official company mascot mister

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<v Speaker 1>Potato Head and his family.

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<v Speaker 3>Those sales always go through the roof on that.

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<v Speaker 1>Then we have Spider Man brand New Day, which first

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<v Speaker 1>Spider Man movie in a couple of years, and you know,

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<v Speaker 1>based on early previews that we've seen, it looks fantastic.

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<v Speaker 3>And then we're going to cap the year off.

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<v Speaker 1>With the Invengers Doomsday, which is like bringing back all

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<v Speaker 1>the original cast and really propelling that story forward. So

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<v Speaker 1>I think from an entertainment perspective, certainly in the short

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<v Speaker 1>term we look fantastic, and I think the story only

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<v Speaker 1>gets better in the midterm. You know, next year we

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<v Speaker 1>have the Star Wars fiftieth anniversary, we have Star Wars Starfighter,

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<v Speaker 1>we have more Marvel Superheroes films, and then Hasro's entertainment

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<v Speaker 1>slate is just starting to cook. You know, we're going

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<v Speaker 1>to have you know, I think we have something like

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<v Speaker 1>sixty projects in the hopper, and next year we'll have

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<v Speaker 1>the debut of our new Magic animated series, which I

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<v Speaker 1>think will help propel Hasbro's biggest and most profitable brand

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<v Speaker 1>to all new levels.

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<v Speaker 2>You should have, by the way, some kind of golden

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<v Speaker 2>ticket game where the winner gets to see your headquarters,

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<v Speaker 2>the Wizards headquarters on the West Coast, and they get

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<v Speaker 2>to own it.

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<v Speaker 3>And run it.

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<v Speaker 2>It's an amazing it's an amazing place. I was really

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<v Speaker 2>excited to get to spend some time there. I want

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<v Speaker 2>to just ask you finally about Monopoly because it's an

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<v Speaker 2>age old property obviously, and you've done well online and

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<v Speaker 2>digitally with Monopoly Go. But Will says there's potentially a

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<v Speaker 2>live action feature film coming out. Can you tell us

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<v Speaker 2>about that?

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<v Speaker 3>Oh?

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<v Speaker 1>Yeah, there's a live action feature film which we're partnering

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<v Speaker 1>with Lionsgate and Margaret Robbie's Lucky Chat production that's been

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<v Speaker 1>in development now for a year or so, so that

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<v Speaker 1>should be pretty exciting. And certainly Margo is a fantastic talent,

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<v Speaker 1>both creatively and as an actress. And then you know,

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<v Speaker 1>Monopoly Go continues to cook with gas. You know, that's

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<v Speaker 1>the biggest mobile game in history. It continues to deliver.

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<v Speaker 1>Like to put in context what Monopoly Go does for us,

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<v Speaker 1>it's basically the equivalent of two blockbuster movies worth of

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<v Speaker 1>licensing revenue per year to us. And that's an annuity

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<v Speaker 1>that's not just a one and done. That's going to

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<v Speaker 1>be an annuity that's going to stick with us for

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<v Speaker 1>a very long time. And I think it just shows

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<v Speaker 1>some of the innate advantages inside of Hasbro. We're very diversified.

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<v Speaker 1>We have toys, we have games, we have collectibles. We

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<v Speaker 1>have a huge digital game business in licensing, a growing

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<v Speaker 1>one in first party publishing, and then we have this

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<v Speaker 1>great licensing business overall that you know, spans over one

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<v Speaker 1>thousand partnerships, over five thousand collaborations, and you know, is

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<v Speaker 1>like combined when you think about digital plus our physical licensing,

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<v Speaker 1>it creates a merchandising of sixteen to eighteen billion dollars

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<v Speaker 1>of Hasbro branded merchandise per year in addition to the

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<v Speaker 1>you know, the fourish billion dollars that Hasbro generates per year.

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<v Speaker 4>You know, I would say, like, I don't know if

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<v Speaker 4>a Monopoly movie is for me, But what I said,

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<v Speaker 4>a Dungeons and Dragons movie wasn't for me, and I

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<v Speaker 4>loved it and it was great, So maybe that says something. Chris,

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<v Speaker 4>always a pleasure to have you on. Hasboro's CEO. Chris

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<v Speaker 4>Cox