Prediction: New Dungeons & Dragons Edition won’t help Hasbro much

In 2014, I attended my first Gen Con. It was fantastic — and serendipitous.

“North America’s largest and longest-running board game convention,” Gen Con has been held in the city of Indianapolis since 2003. However, even before moving there, Gen Con (named after Lake Geneva, WI , the hometown of Dungeons & Dragons). (D&D) creator Gary Gygax) was associated with the famous role-playing game. In 2014, the gaming giant Hasbro (A 0.39%) released the fifth edition of the game with heavy promotion right at Gen Con, including this life-size D&D-themed castle built in the grand ballrooms of the Indianapolis Convention Center.

Ten years later, Hasbro returned to Gen Con last week to celebrate D&D’s 50th anniversary, announce the newest edition of the game, and kick off an effort to sell new rules to the 54 millions of customers playing Dungeons & Dragons.

The 5e PHB is new and improved for 2024. Image Source: Hasbro.

A sneak peek at 2024 D&D

Regular retail sales of the rules that encode the newest version of D&D don’t begin until September 17, 2024. But already the entertainment company is accepting pre-orders for Player’s Handbook (2024)the first of three core rules planned for the new version of the game.

Last week, the company put 3,000 special editions of the rulebook on sale at Gen Con. And needless to say, the books sold out quickly. (So, Wall Street analysts? You can go ahead and add an additional $149,970 in third-quarter revenue for Hasbro.)

The biggest question for investors, however, is whether this sales momentum will continue and make a difference to Hasbro’s bottom line. How big this new edition of Dungeons & Dragons will be for Hasbro stock, including not just the new one The Player’s Handbook but also a new one Dungeon Master’s Guide (2024) and Monster Manual (2024)? Will sales from these new rules releases be enough to “move the needle” on a stock that has seen earnings decline for three straight years and lost $1.5 billion last year alone?

What Dungeons & Dragons means to Hasbro — and its investors

This is not idle speculation. Overall, Hasbro has been shrinking for years, you see, and its consumer products division is 26% smaller today 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, data from S&P Global Market Intelligence confirms that over the past five years, sales of Wizards of the Coast have literally doubled. At $1.6 billion in annual revenue last year, the D&D division accounted for nearly $1 of every $3 Hasbro took in.

It’s not too much of an exaggeration to say that D&D has become Hasbro’s growth engine at this point. Continued growth in that business will be key for Hasbro to meet analysts’ expectations for the company to return to profitability this year — and double earnings by 2028.

The problem is… I don’t think it’s going to happen. Or at least, I don’t think the release of Dungeons & Dragons (2024) itself will move the needle much for Hasbro.

Why not? Well, first of all, buying the new rules isn’t strictly necessary to keep playing D&D. Although Hasbro described the new cards as having “more player options, improved organization, and exciting additions to the Fifth Edition rules” and offering new tools to make the game of “Dungeon Masters” easier to run, my overall impression is that the cards complement and simplify the existing rules rather than replace the existing D&D ecosystem.

But even if they did, consider what happened in 2014 when Hasbro released it last D&D, Dungeons & Dragons 5 major update^th Edition.

Back then, Hasbro didn’t break out Dungeons & Dragons revenue (or even Wizards of the Coast revenue) separately, reporting those results instead as part of the larger “games” division. However, Hasbro’s 10-K filings with the Security and Exchange Commission (SEC) confirm that total gaming revenue fell 4% in 2014 compared to 2013, despite any contribution from the new D&D launch. And even a year later, in 2015, as the fifth installment gained traction with gamers, Hasbro’s total gaming revenue was up just 1%. It wasn’t until 2016 — two years after the release of the new edition — that game revenue finally started to grow to a significant level. And even then, Hasbro attributed the growth more to Magic: The Gathering than D&D.

Of course, Dungeons & Dragons is a much bigger deal today than it was 10 years ago. And it has a bigger fan base and a bigger pool of brilliance in which to fish for potential buyers for the new rules. That TO means Hasbro will get a bigger raise this time than last time.

I just wouldn’t bet on it.