In 2014, I attended my first Gen Con. It was fantastic -- and fortuitous.
The "largest and longest-running tabletop gaming convention in North America," Gen Con has been held in the city of Indianapolis since 2003. Even before moving there, however, Gen Con (named after Lake Geneva, WI, hometown to Dungeons & Dragons (D&D) creator Gary Gygax) was associated with the famed role-playing game. In 2014, games giant Hasbro(NASDAQ: HAS) released the fifth edition of the game, with heavy promotion at Gen Con itself, including this near life-size D&D-themed castle constructed within the Indianapolis Convention Center's biggest ballrooms.
Ten years later, Hasbro returned to Gen Con last week to celebrate the 50th anniversary of D&D, announce the newest edition of the game, and jump-start an effort to sell new rulebooks to its 54 million Dungeons & Dragons-playing customers.
The 5e PHB is new and improved for 2024. Image source: Hasbro.
A sneak peek at 2024 D&D
Regular retail sale of the rulebooks codifying the newest version of D&D doesn't begin until Sept. 17, 2024. But already the entertainment company is accepting pre-orders for the Player's Handbook (2024), the first of three planned core rulebooks for the new version of the game.
Last week, the company put up 3,000 special editions of the rulebook for sale at Gen Con. And needless to say, the books sold out quickly. (So, Wall Street analysts? You can go ahead and pencil in an extra $149,970 worth of third-quarter revenue for Hasbro.)
The biggest question for investors, though, is whether that sales momentum will continue and make a difference to Hasbro's bottom line. Just how big of a deal will this new edition of Dungeons & Dragons be for Hasbro stock, including not just the new Player's Handbook but also a new Dungeon Master's Guide (2024) and Monster Manual(2024)? Will sales of these new-edition rulebooks be enough to "move the needle" on a stock that has seen its revenues shrink for three straight years and that lost a staggering $1.5 billion just last year?
What Dungeons & Dragons means to Hasbro -- and its investors
This is no idle speculation. Hasbro as a whole has been shrinking for years, you see, and its consumer-products division today is 26% smaller than it was five years ago. But Wizards of the Coast, the Hasbro division that includes both Dungeons & Dragons and its sister franchise Magic: The Gathering, is still growing.
Indeed, S&P Global Market Intelligence data confirms that over the last five years, Wizards of the Coast sales literally doubled in size. At $1.6 billion in annual revenue last year, the D&D division made up nearly $1 out of every $3 that Hasbro took in.
It's not too much of an overstatement to say that at this point, D&D has become the growth engine of Hasbro. Continuing to grow this business will be key to Hasbro meeting analyst expectations for the company returning to profitability this year -- and doubling its earnings by 2028.
The problem is...I don't think it will happen. Or at least, I don't think the release of Dungeons & Dragons (2024) in and of itself will move the needle much for Hasbro.
Why not? Well, for one thing, buying the new rulebooks isn't strictly necessary for continuing to play D&D. Although Hasbro described the new books as containing "more player options, enhanced organization, and engaging additions to the fifth edition rules" and providing new tools to make it easier for "Dungeon Masters" to run the game, my overall impression is that the books supplement and simplify existing rules rather than replacing the existing D&D ecosystem.
But even if they did, consider what happened back in 2014 when Hasbro released its last major D&D update, Dungeons & Dragons 5th Edition.
Back then, Hasbro didn't break out Dungeons & Dragons revenues (or even Wizards of the Coast revenues) separately, reporting these results instead as part of the larger "games" division. Still, Hasbro's 10-K filings with the Security and Exchange Commission (SEC) confirm that total games revenues fell 4% in 2014 compared to 2013 despite any contribution from the new D&D release. And even one year later, in 2015, as the fifth edition gained traction with gamers, Hasbro's total games revenue grew only 1%. It wasn't until 2016 -- two years after the release of the new edition -- that games revenue finally started growing at a significant clip. And even then, Hasbro attributed growth more to Magic: The Gathering than to D&D.
Admittedly, Dungeons & Dragons is a much bigger business today than it was 10 years ago. And it has a larger fanbase and a larger pool of radiance in which to fish for potential buyers for the new rulebooks. That could mean Hasbro will get a bigger lift this time around than last time.
I just wouldn't bet on it.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Hasbro. The Motley Fool has a disclosure policy.
