Investing in companies that make board games can be a roll of the dice.
Take Hasbro (NASDAQ:HAS). With its 1984 acquisition of Milton Bradley, the Rhode Island-based company became one of the world’s largest publishers of board games, including classic titles like The Game of Life, Twister and Yahtzee.
The company further solidified its board game dominance with the 1991 purchase of Parker Brothers, bringing Monopoly, the best-selling board game of all time, under its banner. In 1999, Hasbro bought Dungeons and Dragons role-playing game publisher Wizards of the Coast in a $325 million deal.
By 2000, Hasbro was the largest producer of board games in the world. There was only one problem. Although it had bought Milton Bradley at a time when video game popularity crashed and board games seemed like a safe bet, the video game industry staged a comeback at the start of the new millennium, with the release of Sony‘s (NYSE:SNE) PlayStation 2 and the growing popularity of Nintendo‘s (PINK:NTDOY) Game Boy portable system.
Then, just when it seemed that video games would leave classic board games in their dust, post 9/11 U.S. families sought out time together and board game sales were up an incredible 65% in 2003. Since then, Hasbro’s board games have faced challenges from foreign competition (with the growing popularity of games like Settlers of Catan) and the rapid rise in casual gaming on mobile devices like Apple‘s (NASDAQ:AAPL) iPad.
Fighting the digital tide
Licensing pop culture properties to customize an older game like Monopoly through collector’s editions—Star Wars Monopoly, Batman Monopoly, and The Simpsons Monopoly are among the hundreds of versions that have been released—has helped to broaden the appeal of classic titles in response to the threat posed by the foreign board games. Partnering with Electronic Arts (NASDAQ:EA) to release iPad-compatible versions of key games in 2007 at least helped to keep Hasbro board games in view of iPad-toting casual gamers. And last week Hasbro announced a partnership with social gaming company Zynga (NASDAQ:ZNGA) to create products based on Zynga’s most popular titles, including FarmVille, Mafia Wars, and Words with Friends.
Hasbro released its 2011 financials on Feb. 6 and, while the company reported net revenue up 7%, to $4.29 billion, and an eleventh straight year of growth in earnings per share (2011 EPS of $2.82 per diluted share compared to $2.74 in 2010), there was a soft spot. There were gains overall, but the company reported that its Games & Puzzles category revenues declined by 10% in 2011.
Another iPad alliance
The latest move from Hasbro has once again been a nod to the iPad, but this time, rather than port more of its games to the App Store, Hasbro is incorporating Apple’s iOS devices as part of the gameplay in hybrids of classic board games known as “zAPPed” versions. This lineup of games uses an iPad or iPhone (running a companion app) to replace some of the mechanical elements of the board game. In Monopoly, for example, the iPad assumes the bank functionality, getting rid of the paper money; in The Game of Life, the iPad acts as an animated spinner while playing film clips.
Any parent who grabs a copy of a zAPPed game off the shelf without looking and doesn’t own an iOS mobile device is not going to be happy with the purchase, although an image of an iPad is featured prominently on the box. Presumably an Android version of the companion app could be released if the demand emerges.
Hasbro is currently trading at $36.71, down from its 2010 high of $49.65, but up considerably from the $10.85 it traded for back in 2002. If zAPPed hybrids are able to reverse last year’s dip in board game sales, there’s plenty of room for the stock to move back up again.
As of this writing, Brad Moon did not own a position in any of the aforementioned stocks.