Is Hasbro gradually destroying the success of Magic: The Gathering? Shares in the toy giant suffered a setback on Monday after a Bank of America analyst said Hasbro would destroy the long-term value of the previously successful trading card game.
Hasbro generates a significant portion of its revenue solely through the trading card game Magic: The Gathering. Richard Garfield's classic has been on the market since 1993 and has been able to hold its own through successive further developments to this day. According to an analyst at Bank of America, this is exactly where a big problem lies: Accordingly, production Hasbro too many Magic cards. The oversupply could go away View from research analyst Jason Haas produce negative effects.
Magic Cards: Too many, too expensive
Bank of America has twice downgraded Hasbro's stock. It went from a buy rating down to underperform. Accordingly, the experts expect that the shares of the toy giant will develop worse than the industry index. Analyst Jason Haas sees the reasons for this in Hasbro's current strategy of replenishing cards in relatively short order. If Magic: The Gathering revenue falls, it's likely to have a significant impact on sales.
Hasbro generates around 15 percent of annual sales with Magic alone, Haas notes. In addition, the trading card game currently accounts for around 35 percent of the annual profit of the toy group. Especially during the corona pandemic, Hasbro had recorded enormous growth, especially with Magic: The Gathering. Sales had almost doubled in times of lockdown and lack of free time. Hasbro has pushed the almost explosive development with additional new releases, possibly too quickly.
The bank analyst assumes that Hasbro could soon have reached the end of the growth curve. In his view, Magic: The Gathering did not significantly increase the player base, but only increased the sales per capita. In other words, individual players spent more. But Magic doesn't have more players.
Effects can now be seen on some shelves. Jason Haas expects retailers to order fewer versions of Magic in the future. With the increased supply, Hasbro has destroyed prices on the secondary market, wholesalers and local shops, but collectors themselves have also lost money. The trading cards are simply worth less. Haas explains the possible spiral: ticket prices fall, toy stores lose money, collectors liquidate their collections, and retailers ultimately cut back on orders.
With a graphic, Bank of America visualizes what the analyst explains in theory. Hasbro released 39 Magic sets in 2022, up from 15 the year before the pandemic.
An extreme example, according to Jason Haas, is the Magic: The Gathering 30th Anniversary set. Hasbro charges just under 60 euros for 1.000 cards. From November 28, the slim package will be available at a hefty price, in North America they want to have delivered by the end of the year. The anniversary set is intended to depict the 30-year history of the trading card game - in a special collector's format. Among other things, a reprint of the Black Lotus should be included, at least in parts of the price. Much worse for fans: The anniversary set will contain cards from the reserved list that shouldn't actually be reprinted - at least that's what Hasbro promised. In addition to the high price of the card set, the "real" collector's cards could lose in value. Collectors are therefore sometimes dissolving their collections in a panic. The reason is simple: it's hard to predict whether certain cards will remain as valuable as they have been.
And Jason Haas sees another risk. Due to the overproduction, Hasbro could scare away long-time fans who are committed to the scene.
At least in the United States, according to Haas and based on calculations by Bank of America, some stores would make losses with the new content "The Brothers' War". Some of the draft booster boxes were sold below the break-even price, i.e. at a loss.
Other trading card games, such as Pokemon or Yu-Gi-Oh! or even titles like Flesh & Blood.
The share prices of Hasbro is stagnating after the significant drop of around five percent on Monday morning.
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