1
00:00:00,000 --> 00:00:07,440
Before we get started, a quick word from today's sponsor, me, I built MTGdeck.build,

2
00:00:07,440 --> 00:00:13,840
a free machine learning deck builder that creates format legal decks using only the cards you already

3
00:00:13,840 --> 00:00:19,840
own. It's useful for newer players trying to build their first decks, long-term players looking

4
00:00:19,840 --> 00:00:26,080
to do something with their bulk, and sellers putting together playable budget decks. It supports

5
00:00:26,080 --> 00:00:32,640
Commander, Popper, Legacy, Brawl, and several other formats. Upload your collection,

6
00:00:32,640 --> 00:00:37,600
choose a format, and let it build from what you have. No additional cards required.

7
00:00:37,600 --> 00:00:46,240
You can try it for free at MTGdeck.build. Again, MTGdeck.build.

8
00:00:46,240 --> 00:00:55,600
Welcome back to the MTG Sold podcast. Hasbara reported Q3 earnings on Tuesday.

9
00:00:56,080 --> 00:01:00,320
And last week, I told you I'd be reading three things. Number one,

10
00:01:00,320 --> 00:01:08,080
Wizard's Growth against the mid-single digit guide. Number two, inventory heading into Q4,

11
00:01:08,080 --> 00:01:17,920
and number three, whether the full-year guide moved. Wizard's Growth 31%. The full-year guide

12
00:01:17,920 --> 00:01:29,360
went from 5 to 7%, up to 7 to 9%. And Magic did 616 million. The first time it's ever passed

13
00:01:29,360 --> 00:01:37,440
$600 million in a quarter. An inventory heading into Q4 turned out to be the whole call,

14
00:01:37,440 --> 00:01:45,200
just not the way I expected. The first question came from Stephen Lashick at Goldman Sachs,

15
00:01:46,160 --> 00:01:54,400
who asked, "What outperformed?" And Chris Cox said everything. Then, without anybody asking,

16
00:01:54,400 --> 00:02:00,080
Cox added that Q4 Magic will probably be down, low to mid-single digits.

17
00:02:00,080 --> 00:02:07,760
The reason is about 40 million of Reality Fracture. Gina Goader, the finance chief,

18
00:02:07,760 --> 00:02:13,040
said in her prepared remarks that it was expected in Q4 and landed in Q3 instead.

19
00:02:14,000 --> 00:02:19,280
Reality Fracture released October 2nd, and Hasbro's quarter ended September 27th.

20
00:02:19,280 --> 00:02:26,320
Cox said that the supply chain was able to deliver a bit earlier, and the channel wanted it.

21
00:02:26,320 --> 00:02:34,960
Then, James Hartiman at Citibank walked through all the moving pieces and said basically this is

22
00:02:34,960 --> 00:02:41,360
what everyone is asking us about. And Cox said, "You totally captured it." And then this,

23
00:02:42,000 --> 00:02:49,200
we managed to gain for the fans and not for quarterly results. That should be an expectation moving

24
00:02:49,200 --> 00:02:57,680
forward. Management also said that they've been staring at the same math while prepping,

25
00:02:57,680 --> 00:03:03,200
and knew it would be one of the top questions. So that line was ready to go.

26
00:03:06,000 --> 00:03:12,960
The mechanism came out later when Garrick Johnson at Seaport asked about the lag between Hasbro

27
00:03:12,960 --> 00:03:20,000
booking revenue and a hobby shop making the sale. The answer was that almost all of Magic goes

28
00:03:20,000 --> 00:03:26,320
to your distributors and distributors take product anywhere from two to six weeks before release.

29
00:03:26,320 --> 00:03:30,880
Hasbro books the revenue when the distributor takes it.

30
00:03:31,760 --> 00:03:37,520
If you're releasing on October 2nd, the truck's leaving a week early or a week late,

31
00:03:37,520 --> 00:03:45,120
decides which quarter you're in. Goater put it as, one week can make a difference,

32
00:03:45,120 --> 00:03:47,200
a meaningful difference in the quarter.

33
00:03:47,200 --> 00:03:55,920
There's a second shift too. The first, 2027 set, Noctis, the Sunken Realm,

34
00:03:55,920 --> 00:04:01,120
launches in February. So its early shipments move out of Q4 and into Q1.

35
00:04:01,120 --> 00:04:09,280
Cawks said without both shifts, Q4 Magic would have been up around 8-10%. Instead,

36
00:04:09,280 --> 00:04:16,800
you get a big Q3, a modest decline in Q4, and in Cawks words, another big spike in Q1.

37
00:04:16,800 --> 00:04:23,120
And Cawks was clear this is the plan moving forward. And I quote, we're chasing demand,

38
00:04:23,840 --> 00:04:29,920
we're going to be opportunistic about when we supply. End quote, a down quarter,

39
00:04:29,920 --> 00:04:37,840
Cawks said, and I quote, not a demand signal, that's just the timing of when we ship. End quote.

40
00:04:37,840 --> 00:04:45,280
And I agree with that, a dip from early shipping doesn't tell you much about demand,

41
00:04:45,280 --> 00:04:50,000
but the record doesn't either, and the record is what led the coverage.

42
00:04:51,440 --> 00:04:57,040
My read is that Hasbro loaded the channel this quarter, and the call gives you the pieces.

43
00:04:57,040 --> 00:05:04,160
Magic revenue, which is what Hasbro sold to distributors was up 34%.

44
00:05:04,160 --> 00:05:11,520
When Johnson asked about retail sales, Hasbro said, "Point of sale for trading cards at the

45
00:05:11,520 --> 00:05:19,120
retailers it tracks was up high single to low double digits." Those don't line up perfectly.

46
00:05:19,120 --> 00:05:24,240
Tracked retail leans toward big box stores, and most magic sells through hobby shops,

47
00:05:24,240 --> 00:05:27,840
and they didn't say what period they were comparing against. Still,

48
00:05:27,840 --> 00:05:37,680
34% against high single digits is a wide gap. Then, the guidance. In July, Hasbro expected

49
00:05:37,680 --> 00:05:43,840
the Wizards back half to grow low single digits. Now it's high single to low double.

50
00:05:43,840 --> 00:05:48,160
That's more product out the door than they planned three months ago.

51
00:05:48,560 --> 00:05:51,440
And some of it went into new stores.

52
00:05:51,440 --> 00:05:59,600
Our pine, Coatrin at UBS, asked about distribution, and the answer was that the Wizards

53
00:05:59,600 --> 00:06:09,920
Play Network stores are up about 38% since 2024, to more than 13,000, and mass retail doors are up

54
00:06:09,920 --> 00:06:16,240
about 28%. Every new store needs opening stock before it sells a single pack.

55
00:06:16,880 --> 00:06:22,400
That's real growth for Hasbro, and it gets booked the moment a distributor takes the product,

56
00:06:22,400 --> 00:06:29,520
same as everything else. Nobody on the call asked how much magic is sitting with

57
00:06:29,520 --> 00:06:32,960
distributors and stores right now. I would have liked that question.

58
00:06:32,960 --> 00:06:39,200
TCG Player is one marketplace, so this is only a picture of one shelf.

59
00:06:39,200 --> 00:06:46,160
On September 21st, 16 sellers have the reality fracture playboosters play listed there.

60
00:06:47,120 --> 00:06:54,800
By October 19, it was 92, and the two week average sale price was down 12%.

61
00:06:54,800 --> 00:07:01,520
The channel asked for those boxes early, and some of the channel is now trying to sell them.

62
00:07:01,520 --> 00:07:10,880
Zianzu at BNP Parbus asked how Hasbro knows new players stick around.

63
00:07:12,160 --> 00:07:18,560
Cox said the best proxy is backless sales, and that backlist is growing faster than new releases.

64
00:07:18,560 --> 00:07:27,760
Cox also said a typical magic player is active for 5 to 7 years, takes a year or two off for

65
00:07:27,760 --> 00:07:34,320
life stuff, and then comes back. Honestly, that sounds exactly right to me.

66
00:07:35,920 --> 00:07:43,040
The trouble is the proxy. Backlist sales also go up every time Hasbro reprints an older set.

67
00:07:43,040 --> 00:07:51,520
Gina Godor named the top backlist sellers by distribution as foundations, final fantasy,

68
00:07:51,520 --> 00:07:58,640
and the 2023 Lord of the Rings set. And when Eric Handler at Roth asked for the split between

69
00:07:58,640 --> 00:08:06,560
new releases, backlist, and secret layer, Godor said we typically don't provide those levels of splits.

70
00:08:06,560 --> 00:08:14,640
So, the retention story might be completely true. The number offered as proof just goes up either way.

71
00:08:14,640 --> 00:08:20,880
My favorite contradiction on the call was about the Hobbit.

72
00:08:22,080 --> 00:08:29,200
Cox had told Laslick that a lean release like the Hobbit would normally sell about 50% less than a

73
00:08:29,200 --> 00:08:36,080
full one, and that the Hobbit would do about as much over its life as a Lord of the Rings with far

74
00:08:36,080 --> 00:08:46,320
fewer products. Then, Anthony Bonato at Wells Fargo, he asked about 27, and Cox said all six major

75
00:08:46,320 --> 00:08:52,560
sets next year get the full line up. Every Commander deck, every collector product, because a full

76
00:08:52,560 --> 00:09:01,600
suite can mean 50% more sales per set. That's something I think you need to factor in. So the Hobbit

77
00:09:01,600 --> 00:09:11,840
proved a lighter second work, and 2027 goes heavier on every set anyway. With 2027, Magic Growth guided

78
00:09:11,840 --> 00:09:18,640
to mid to high single digits. Those full line ups look like how Hasbro plans to get there.

79
00:09:18,640 --> 00:09:27,520
Wizards Margin is close to 50% this year, and Godor guided it to the high 30s next year,

80
00:09:27,520 --> 00:09:32,240
mostly because of the Exodus video game launching April 7th.

81
00:09:34,640 --> 00:09:42,560
The next date on the schedule is Star Trek on November 13th. Count back two to six weeks,

82
00:09:42,560 --> 00:09:52,560
and you get October 2nd through October 30th. So, by Hasbro's own shipping window, Star Trek's

83
00:09:52,560 --> 00:10:02,000
launch shipments all land in Q4. Until then, keep an eye on how many sellers are listing what

84
00:10:02,000 --> 00:10:08,160
reality fracture display. If you see the count still climbing when Star Trek arrives,

85
00:10:08,160 --> 00:10:13,360
more of what shipped in September is still making its way to the shelf.

86
00:10:13,360 --> 00:10:17,520
Thanks for listening, and I'll see you next Monday.

87
00:10:17,520 --> 00:10:28,640
Full articles, graphs, and details on mtgsold.com.

88
00:10:28,640 --> 00:10:47,360
[Music]