Hasbro-barians at the gates | This Week in Business

This Week in Business is our weekly recap column, a collection of stats and quotes from recent stories presented with a dash of opinion (sometimes more than a dash) and intended to shed light on various trends. Check every Friday for a new entry.

This week we ran an interview with Wizards of the Coast's Dan Ayoub about parent company Hasbro's ambitions for internal game development.

STAT | $1 billion – The amount of money Hasbro has invested in building out its four internal studios, according to Ayoub.

STAT | Five years – Roughly how long it has been since Hasbro first started on this push, if we set the starting date as this 2019 interview we did about the hiring of former BioWare creative director James Ohlen.

STAT | 0 – The number of shipped projects from this internal development push to date. We've only actually seen one game, and it doesn't even have a release window yet.

That's a lot of time and money, with not much to show for it yet. Ohlen's studio Archetype showed off a sci-fi game called Exodus with a trailer announcement at The Game Awards last year. We also know the Atomic Arcade team has a Snake Eyes game in the works, but in keeping faithful to the source material, they've said nothing about it yet.

Hasbro is the latest in a long line of big companies from outside the games industry that have attempted to move in on this turf

Beyond that, the company's Invoke Studios is working on a Dungeons & Dragons game, and Skeleton Key (headed by another BioWare veteran in Christian Dailey) is "doing something spooky."

So far, so good. But Hasbro is just the latest in a very long line of big-name companies from outside the games industry that have attempted to move in on this turf. And most of those attempts didn't go to plan, including a few from Hasbro itself.

While Hasbro's acquisitions of Milton Bradley and Coleco in the 1980s gave it access to gaming brands in Vectrex and Colecovision, respectively, they had fallen out of favor by the time the toy maker came into ownership of them. So its first big move into building out a video game business of its own was something new, but still tied to a familiar name from the past.

Around 1988, Hasbro invested in a promising venture called Control-Vision, a new console in the works from Axlon, makers of the mumble-mouthed Teddy Ruxpin progenitor A.G. Bear. While A.G. Bear attained a certain level of popularity, the familiar name I was alluding to was Nolan Bushnell, the co-founder of Atari who also started up Axlon.

The Control-Vision was intended to bring the thrill of expensive LaserDisc full-motion video arcade games like Dragon's Lair to the home, using VHS tapes and some ingenious video buffering technology. Two key pieces of software for the system were going to be Night Trap and Sewer Shark, but Hasbro killed the console within months of a planned retail debut.

QUOTE | "It turned out the cost of dynamic RAM (DRAM) was more expensive than Hasbro has anticipated and there was no way the company could release the system for less than $300. Nobody at Hasbro or Axlon felt that the system could ever succeed at that price so the project was scrapped." – Leonard Herman, in his excellent book Phoenix: The Fall & Rise of Videogames, explaining Hasbro's decision to pull the plug. You can also read more about the doomed system in this Polygon feature from Jeremy Parish.

Hasbro's second attempt at making a game console would fare about as well as the first.

STAT | $59 million – Between 1992 and 1995, Hasbro spent $59 million working on a VR system codenamed Toaster that would use a new input device from the company responsible for the NES Power Glove, according to Herman's Phoenix.

This Unseen 64 feature details more of the Toaster story (as well as its other working names Xscape and Rush), and features TV ads for the system so blatantly cribbing the try-hard edgy marketing style of Sega that you would be excused for thinking it was just another unloved Genesis add-on like the 32X or Sega CD.

Hasbro killed the Toaster in 1995...

Hasbro killed the Toaster in 1995, again before launch, again because the company realized the chips would cost too much to hit the market at an affordable price point. But it knew there was still lots of money to be had in video games, so it gave up on the hardware approach and instead turned to software, starting up Hasbro Interactive as its own internal software publishing division.

Hasbro Interactive began modestly, publishing games based on its own properties (Battleship, Risk, Clue) as well as remaking Konami's Frogger.

STAT | 0 – The review score Wired gave the PlayStation version of Frogger, Hasbro Interactive's first game for the platform, as recalled by former Hasbro Interactive CEO Tom Dussenberry.

Other reviewers would be kinder, in part because it would be difficult not to be.

Critical reception aside, Frogger was a commercial success, and the classic arcade game remake idea was one Hasbro Interactive would revisit a number of times after it acquired Atari and its catalog of home console game IP for an insultingly low $5 million.

That was just part of an aggressive acquisition strategy at Hasbro Interactive, which also saw the division buy up board game maker Avalon Hill, Tetris publisher Spectrum Holobyte, Civilization developer MicroProse, and Magic: The Gathering and Pokémon Trading Card Game maker Wizards of the Coast.

Hilariously, Hasbro also acquired Tiger Electronics in 1998 for an insultingly high $335 million but kept the Tiger branding separate from Hasbro Interactive rather than sully its dedicated video game business with the Game.com and R-Zone console maker.

(Okay, the $335 million might not have been that insultingly high since the deal went down just before Tiger's line of Furby toys would become A Whole Thing.)

Hasbro enjoyed success throughout the late '90s until the Pokémon card game phenomenon cooled off a bit and sales fell short of expectations to cap off what CEO Alan Hassenfeld called "a very painful 2000," so the company unloaded Hasbro Interactive for a boost, selling the Atari, MicroProse, and Spectrum Holybyte businesses to Infogrames for $100 million (95% of which was paid in stock) while holding on to Avalon Hill and Wizards of the Coast.

(In a poetic twist/reminder that no brand ever truly dies in this industry, the company now known as Atari recently dusted off the Infogrames brand to use with properties that don't carry the same retro connotations as the Atari name, like Totally Reliable Delivery Service.)

There would be other, smaller pushes over the years. In 2013, Hasbro acquired a majority share of DragonVale developer Backflip Studios. It shut Backflip down in 2019 despite having just recently announced Ohlen's hiring and its current push for internal game development.

Hasbro's been here a few times before, and each it dropped gaming in the face of near-term problems

Hasbro said it was "unable to find a viable path forward" for the studio, and we'll note the closure did come the same week Hasbro shares took a beating because the company missed its quarterly sales forecast.

So Hasbro's been here a few times before, and each time it dropped gaming in the face of near-term problems. So what is supposed to make this time different?

From the outside, one thing I would think working in the company's favor is senior management. Hasbro CEO Chris Cocks was the president at Wizards of the Coast when the division started this internal studios push, and was bumped up to CEO of the parent company a couple years ago. Not only do we know he's already sold on the idea of Hasbro in games, he also has a background in gaming, having been the group product manager for Microsoft's Xbox business during its first few years. (He also did a stint as VP at educational gaming company LeapFrog.)

Of course, he answers to Hasbro's board of directors, but they're not exactly lacking in gaming expertise either, as the 14-person board includes former King CFO Hope Cochran, former Electronic Arts CFO Blake Jorgensen, Zynga president (and former EA Games president) Frank Gibeau, former Xbox and Oculus exec Liz Hamren, former Nexon president and CEO Owen Mahoney, and Cocks himself. With three board members stepping down soon, none of them with significant gaming experience on their resume, Hasbro will end up with a board primarily comprised of former video game executives.

Decision-makers who don't actually understand the games business have certainly scuttled their share of promising game studios in the past. That doesn't look like it should be a problem with Hasbro.

On top of that, the lean times that previously helped usher them out of games are already here. The company laid off people at both the beginning and the end of 2023, but kept all four development studios despite how far the projects are from paying off in any way.

In our interview, we asked Ayoub why this time is different and he pointed to a few things. He of course mentioned the $1 billion investment, which is the kind of thing no company is going to be eager to walk away from. He talked about the very deliberate way the company set up its studios, finding leadership and teams to do things similar to successes they have had before. And he talked about the emphasis on taking a long-term view and not rushing anything out the door.

QUOTE | "Video games is an integral part of Hasbro's strategy going into the next 100 years and we have to make sure that everything that comes out is top quality, is authentic, and is something we can build upon, because we're talking about a couple studios and a couple games right now, but we have much larger ambitions for that." – Ayoub explains why he thinks Hasbro is in it for the long haul.

It sounds like a solid plan, right? Focus on quality, don't rush stuff out the door, and don't be shy about the budget. Why didn't anyone think of this before?

Well, they have. I've done a lot of interviews with companies trying to break into games and I don't recall anyone telling me their strategy was to make something crappy, quick, and cheap. (Although some of the "minimum viable product" talk in the early days of mobile was close enough to be indistinguishable.)

Virgin Interactive, Disney Interactive Studios, Fox Interactive, Fox Next, Vivendi Universal, CBS Electronics… The companies backing these efforts didn't plan on failure. Apple didn't embark on the Pippin hoping for it to be mentioned in a single paragraph on its Wikipedia page clearly proclaiming it a failure. The same goes for Phillips with the CD-I, Panasonic with the 3DO, or Nokia with the N-gage. Somehow, Mattel's Wikipedia page doesn't even mention the Intellivision by name.

I assume there were plenty of smart people behind these efforts – although perhaps not the ones who made the N-gage require you to take the phone's battery out in order to switch games – so why didn't they work out in the long run?

Why they didn't work out in the long run

Well, lots of reasons. The natural outcome of just about anything in games is failure, especially when you're talking about a long enough timeline. Even with deep pockets, management who knows the space, and creators working in a genre they understand pretty well, success is far from guaranteed.

We got a reminder of that this week with Take-Two reportedly shutting down Private Division studios Roll7 and Intercept Games.

Roll7 had great developers making acclaimed games like OlliOlli World and Rollerdrome, but they just didn't sell enough to keep Take-Two's interest.

Kerbal Space Program 2 was a follow-up to a well-loved and enduringly popular simulation game, but it was made by a different team of developers – two different teams, if we count the project's original dev Star Theory being shut down partway through development – and the reception to the game's Early Access release wasn't fantastic.

It's not just the Roll7 and Intercept closures. In March, Private Division also cut ties with Yellow Brick Games on a project it was going to publish for the new studio.

Making good games and relying on franchises with an established audience are part of the game plan for Hasbro, but those advantages weren't enough to save Roll7 and Intercept.

Having developers doing games similar to their previous hits wasn't a sure-fire winner for Private Division, either. One of its first big games was the sci-fi first-person shooter Disintegration from V1 Interactive, founded by a former creative director on the Halo franchise.

V1 shut down Disintegration's multiplayer servers just three months after the game's launch. The studio closed entirely about half a year later.

Private Division isn't done for, at least not yet. Take-Two's non-statement about the reported closures affirmed that it will continue to update Kerbal Space Program 2 and plans to launch the cozy Hobbit title Tales of the Shire in the back half of the year. But it's not difficult to see why Take-Two might be winding down its indie excursion.

Much like Hasbro is doing with internal development, Take-Two was stepping outside of its wheelhouse with Private Division. And now, as the company has hit upon some tougher times, endeavors outside its core business are going to be attractive targets when management is looking for places to prune.

And this is why we see so many big names flirt with a gaming presence only to give up on it. They know there's good business to be done in games. If they own big entertainment brands, they know their audiences will want games based on them. They know their deep pockets and deeper understanding of their own properties are tremendous advantages they can use to build a successful business in games.

But when things don't go to plan, they also know this isn't what the company lives and dies by.

They did not burn their boats once they landed on gaming's foreign shores, so they always have the option of cutting their losses in a way that a company that has only ever been in the games business doesn't. The THQs and Midways and Acclaims of the world are forced to play out the string all the way into the bitter, bankrupt end. On occasion that even gives them the time and desperation needed to turn things around, like Activision did in the 1990s.

What does a success stories look like?

Not every big name quits, of course. We may point and laugh at some of Amazon and Google's attempts to take over the gaming world – I did that just last week as a matter of fact – but Sony and Microsoft have both enjoyed success and shown lots of resolve in sticking around here as long as they have. And whatever happens with Microsoft as a console maker, I doubt it's going to be exiting the gaming space entirely anytime soon.

And Hasbro could maybe take inspiration from the path into gaming of Warner Bros., a similarly massive corporate storehouse of brands whose audiences have plenty of Venn diagram overlap with gamers. Just like Hasbro, Warner has had to take multiple cracks at breaking into the industry. And even more like Hasbro, Warner used to own Atari, since it was after all Warner Communications that bought Atari for $28 million in 1976.

Warner sold the company to Commodore founder Jack Tramiel in 1984, but launched a renewed push into games in 2004.

One place where Warner and Hasbro differ is that WB Games' strategy relied on acquiring studios rather than building them. Over the years, it bought Monolith Productions, Rocksteady Studios, Netherrealm Studios, and Traveller's Tales. Three of those four were acquired only after Warner Bros. had worked with them as a licensing partner, with the fourth (Netherrealm) was an opportunistic pick-up for just $33 million out of the Midway bankruptcy auction, a bid that also included the defunct publisher's stable of classic arcade properties.

If Hasbro wanted to follow WB's path to success and acquire its proven partners, it could expect to pay significantly more, and that's if the ideal targets would even be available. Hasbro's Monopoly Go partner Scopely is a pretty large operation itself, and just sold for $4.9 billion last year, and that was the week before Monopoly Go launched and became a chart-topping mobile blockbuster. It's unlikely new parent Savvy Games Group would even entertain offers about a deal there.

[UPDATE]: After publication, a reader brought it to our attention that when Hasbro shut down Backflip, a chunk of that team went on to work at Scopely, where they would play key roles in the creation of, you guessed it, Monopoly Go.

We talk a lot about how rotten layoffs are on a human level, but there are some compelling business arguments to make about the longer term costs of ejecting talent from the organization as well.[/UPDATE]

As for Baldur's Gate 3 developer Larian, there doesn't seem to be much interest in being acquired.

QUOTE | "It's always the quarterly profits. The only thing that matters are the numbers, and then you fire everybody and then next year you say, 'Shit I'm out of developers' and then you start hiring people again, and then you do acquisitions, and then you put them in the same loop again, and it's just broken..." – Larian CEO Swen Vincke at the Game Developers Conference last month. During his acceptance speech for the GDCA Best Narrative award.

Yeah, if the majority shareholder and CEO of the company uses his time in the spotlight to complain about investor pressure and call on companies to "slow down on the greed," I don't know how eager he's going to be to sell to a publicly traded company like Hasbro.

If there's one thing you should take away from all this, it's definitely that Furby patent art.

But if you think there should be two worthwhile takeaways to justify 3,000 words of rambling, then the second thing is that success is not the natural state of anything in the games industry. Even when the idea is good, the management buys into it, the developers know what they're doing, and the audience is looking forward to it, things still fail and the dollars and cents don't always work out.

I'm actually not sure if the track record of big-name companies from adjacent industries coming into games is any worse than that of developers and publishers that were always native to games. But they definitely get more attention, both when they announce their ambitions to move into games and when they sheepishly sound the retreat.

And as long as tech and media megacorps remain relevant to the world at large, they'll never be permanently content watching the business of games from afar. Failure – much like success – is just a temporary condition for them.

The rest of the week in review

QUOTE | "We do not believe diversity, whether of gender, race/ethnicity or any other criteria, is a meaningful basis by which to identify and assess the qualifications of director nominees nor do we seek director nominees purely for the sake of diversity." – GameStop's board of directors, in response to a shareholder proposal that did not actually suggest appointing board members purely for the sake of diversity, but simply reporting on board members' and nominees' self-identified gender and race/ethnicity.

To give you an idea of the GameStop board's current level of diversity, the five-person board has one woman, and one person who was neither an executive nor a key investor in chairman Ryan Cohen's former start-up Chewy.

They are the same person.

STAT | According to Gamesight, 36% of all the games marketing platform's campaigns as of the end of last year involved a TikTok component. The ByteDance-owned social media platform facing a possible ban in the US drew the third-highest amount of traffic for Gamesight's campaigns, behind only Google and Facebook.

STAT | $509,268.30 – As of Friday morning, the amount of money raised by the Palestinian Relief Bundle on itch.io, with proceeds being donated to the Palestine Children's Relief Fund. The bundle runs through the weekend, and features several hundred games available for a donation of at least $8. I'm particularly fond of Wandersong, a game about how violence is a choice we actually don't have to make.

STAT | 43% - The portion of developers surveyed by the IGDA who felt that policies on general non-discrimination, equal opportunity hiring, and sexual harassment were "adequately enforced".

Maybe the IGDA was just asking because it wanted everyone to know it wasn't the only one.

QUOTE | "I'm very empathetic. I understand that when something happens, people want to see things resolved so that trust can be rebuilt. And I believe that it has been." – IGDA executive director Jakin Vela, who was not in that role when the incidents linked above took place, says in an interview with Marie Dealessandri that the group revised its ethics policy in response and hasn't been asked "by our community" to do any more than that.

QUOTE | "I do believe that there is a need for parents and gamers to have access to an idea of what these online spaces are without actually having to go in them first." – In an interview with Jeffrey Rousseau, Leo Burnett Canada executive creative director Kohl Forsberg talks about a new Toxicity in Online Gaming report the firm worked on that rated a number of popular games based on their community behavior around six aspects: racism, controlled substances, crude humor, sexual content, violence, and gender discrimination.

STAT | 1 – Fortnite was the top game in March across the US and Europe whether you're ranking them by revenue or monthly active users, according to Newzoo. That fits with Circana's US-specific engagement charts, which had it as the top game on the PlayStation and Xbox, but over on Steam (where Fortnite isn't an option), the top game was Helldivers 2.

STAT | 4% - Circana's monthly US report saw consumer spending on games grow 4% over the month of March, led by Dragon's Dogma 2 on PC/console and Monopoly Go on mobile. It's the fourth straight month of year-over-year spending growth for the industry.

STAT | Nearly triple – DDM's quarterly investment report tracked $2.2 billion in game investments made over the first quarter of the year, nearly triple the total from the first quarter of 2023.

(Here's the part where I contrast positive financial news around the industry with the horrible studio closures and layoffs, or at least the ones that weren't already covered in the main part of the column above. So if you're tired of this and get the point already, feel free to skip the next few entries.)

QUOTE | "Going further with the current outlook would have been an irresponsible decision that would have likely caused insolvency. We have therefore taken this step to ensure a proper winding down, where all employees are given proper severance, and the studio remains debt-free." – Paladin Studios calls it quits in a respectable way that won't tarnish the reputation it built over 19 years.

STAT | 33 – Mobile developer Belka Games laid off 33 staffers, or about 20% of the company as it plans to "prepare for the next stage of growth."

QUOTE | "Heartbroken, we've had to lay off our team at KeokeN because of nothing substantial materializing directly after our visit to GDC. We’ve unfortunately exhausted all our possible options for publishing, work for hire, and co-development." - Keoken CEO Koen Deetman and managing director Paul Deetman confirm layoffs at their studio in a note saying the two of them want to rebuild it and are preparing a Kickstarter campaign for its current project, Deliver Us Home.

STAT | 7 – The number of "HD games" Square Enix released in its last fiscal year: Final Fantasy: Pixel Remaster, Final Fantasy 16, Infinity Strash: Dragon Quest The Adventure of Dai, Star Ocean: The Second Story R, Dragon Quest Monsters: The Dark Prince, Foamstars, and Final Fantasy 7 Rebirth.

Expect future years to be thinner as the company this week announced its bottom line would take a ¥22.1 billion ($140 million) hit thanks to a number of cancelled projects, and has told investors it will be "more selective and focused" about its spending going forward.

QUOTE | "We're creating a new form of kind of a digital experience for folks inside of these ecosystems. We're getting them to engage in a new way and spend more time and money." – Lucra COO Michael Madding talks about the deal with arcade chain Dave & Busters to use its gambling software platform to let customers make bets with each other on their performance through the Dave & Busters app.

Putting $5 on a friendly game of Street Fighter or Skee-ball is nothing new, but it feels so much more bleak and sinister when institutions are encouraging the betting so they can take a cut of the proceeds.

QUOTE | "We will miss his jokes, love for sticky toffee pudding, barbeque expertise, celebrating Warriors championships the night of, and, of course, his profound fandom for his San Francisco Giants. Rest in paradise, my friend, and may the force be with you, always." – EA Sports global PR lead was one of many eulogizing LucasArts alum and games industry veteran Matthew Shell, who died last weekend from a heart attack.