Monday, October 22, 2012

Hasbro Q3 Earnings Call, Shortened TF Prime Season

Today Hasbro held their conference call to report their Q3 earnings. You can get the business details here but basically sales and profits dropped for the quarter with expectation that Christmas and the Marvel toys helping to boost the bottom line and make up the difference. As part of the call, CEO Brian Goldner revealed that The Hub is cutting their production orders for new shows. This is important for fans of The Hub cartoons and especially Transformers Prime as the current rumor is season 3 is only 13-16 episodes long. Transcript of relevant portion below.
Question: Final Question… If you could just elaborate. You touched a bit on a prepared remark that I’m interested. You said you are reducing your production spend over the past several quarters… said due to efficiencies. Can you just elaborate more on that?
Answer: "Actually what we are saying is amortization has come down because ultimate revenue expectations have gone up. It’s one big driver on that. As we look at our ultimate revenue expectations for out programming because our performance we have on the television and digital distribution performance and revenue we are now expected to get from that programming; cross merchandising and program sales the amortization comes down."

Question: You’ve been reducing your program production cash..
Answer: "Yeah, yeah the cash spend you really have to do when you have a successful TV Series… In fact Hasbro Studios TV Shows has outperformed other TV Shows on the Hub by 74% rating with 4 of the Top 10 shows on the network right now. So as you look at great performance of TV Shows, you are able to produce fewer episodes in subsequent series than you need for earlier series. You know, kids love watching episodes over and over again but you have to add an element of newness but you don’t need to spend to produce entire new series again. You can add 13 episodes or a 26 episodes to a pool of 52 already produced Episodes. So therefore you are able to… with a success TV Series… produce fewer in a year. Overall, Hasbro Studios has greenlit over 800 half-hours of programming. We also still have several hundreds of half-hour programming that we are producing for the network and also looking at whether there are successful tv series we obviously then spend less per new series because we are able to produce newer shows."
While those answers had a lot of business speak, to sum it up Hasbro sees no point in paying for many new episodes when they can just repeat the existing ones for the near same rate of return. This is sadly the same old approach used in syndication when Saturday morning and after school cartoons were the norm. It is usually a short leap to determining that no new episodes are needed and the show is "cancelled" (rarely announced) but continues to air in repeats for years after.

This is why you will notice the average cartoon series in the past (and sometimes now) have an average life of around 52 episodes usually ordered as two 26 episode blocks. Place the order and the production company would bang them out over the course of a year or two. "New" episodes would enter the airing stream as they were completed in chunks but rarely as "season premieres" or even advertised as new. This is often why the DVD releases of cartoons are done as "volumes" rather than seasons. If you wiki any older shows (70s, 80s, 90s) the season breakdown are often odd and make little sense except by breaks between premiere dates.

My hope is The Hub doesn't fall into the 52 trap but continue to evaluate their shows the same way most non-kid network do - based on popularity and revenue generated. Repeats being good enough rarely is part of the equation. Assuming "kids love watching episodes over and over again", especially today when there are an ton of alternatives is a mistake. Kids will only watch the same thing so many times before moving one and simply forget to return. As it stands, clearly Hasbro and The Hub is paying a great deal of attention to 52 so any show with more than that may just be looking at end of new life including Transformers Prime.

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