Hasbro's CEO lets AI Peppa Pig help design toys

Summary

Podcast Summary

Decoder with Nilay Patel – Hasbro’s CEO Lets AI Peppa Pig Help Design Toys

Date: March 9, 2026
Host: Nilay Patel (The Verge)
Guest: Chris Cox (CEO, Hasbro)

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Episode Overview

This episode of Decoder dives deep into the shifting landscape of the global toy and games industry with Chris Cox, CEO of Hasbro. Nilay Patel and Cox explore how Hasbro is navigating dramatic market changes, the rise and fall of digital trends (like NFTs), the transformative role of AI—from design to operations—and the challenges and opportunities facing Hasbro in IP licensing, fandom, manufacturing, and the volatile world of video games. The conversation is candid, forward-looking, and rich with examples from iconic Hasbro brands and partnerships with major entertainment franchises.

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Key Discussion Points & Insights

1. Reflections and Lessons from the Past Three Years

• NFTs and Digital Collectibles:

  • NFT hype is “largely came to nothing” [04:58]. Cox reflects candidly on how the collectibles trend never found a durable digital form, laughing off earlier anxiousness about NFTs.
  • Quote:
    • “I’d say largely that form of technology came to nothing. Collectibles have taken off. I’m sure there’s going to be a digital collectible. I just not quite sure we found the right version of it yet.” — Chris Cox [04:58]

• Crypto’s Reputation:

  • Crypto mainly used for crime now, Cox avoided it thanks to regulations in his state [05:24–05:39].

2. The Shifting Toy Market: From Kids to ‘Kidults’

• Demographic Pressure on Kids’ Toys:
  • Fewer kids plus earlier transition to digital experiences are shrinking the traditional base.
• Rise of Adult Collectors (‘Kidults’):
  • Adults now drive more of the toy industry’s growth, with more money to spend on collectibles and sophisticated playthings.
  • Quote:
    • “It’s lucky for us and fortunate for us that a 26 year old has more spending power than a 6 year old... if you’re a company with the expertise in that... I think it’s pretty good for you.” — Cox [08:09]
• Competition and the Changing Landscape:
  • The barrier to entry is low (cheap to become a toy OEM in China), but lasting brands and staying power are harder than ever [10:53].

3. How Toy Brands Break Out: K Pop Demon Hunters and Fast-Paced Licensing

• Surprise IP Hits:
  • “K Pop Demon Hunters,” a Netflix property, took the industry by storm, catching Hasbro and others off-guard [13:34].
• How Hasbro Reacts to Viral Phenomena:
  • Rapidly prototyped pitches using in-house AI design tools, enabling Hasbro to move from concept to high-fidelity prototypes in weeks instead of months [14:59–16:48].
  • Quote:
    • “Now, with the advent of AI enabled design tools, we can go in and do what used to take us two or three months in basically two or three weeks, sometimes two or three days...” — Cox [15:36]

4. AI’s Deep Integration at Hasbro: From Product Design to Operations

• AI Co-Designers:

  • Hasbro’s AI systems allow beloved characters (like Peppa Pig and Optimus Prime) to “co-design” toys, providing in-character feedback and creative ideas [18:12].
  • Quote:
    • “We have Peppa Pig co-designs Peppa Pig products with us; Optimus Prime co-designs Transformers products...” — Cox [18:12]

• Managing the ‘Slop vs. Quality’ Tension:

  • AI enables massive idea generation, paired with expert human curation for quality control [19:18–19:49].

• AI Productivity and Process Automation:

  • AI slashed “a million plus man hours” across functions—order processing, email, meeting notes, etc.—freeing employees for more creative work [19:49–23:45].

• Protecting Creative Culture:

  • AI is positioned as a tool to empower designers, not threaten jobs [24:32].
  • Quote:
    • "If... Joe or Sally Six Pack feels like they’re suddenly... an avant garde creative with these powerful tools, take a legitimate avant garde creative and give them these tools and they just level it up way more.” — Cox [24:32]

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Key AI & Automation Segment Timestamps

• [13:48] – K Pop Demon Hunters surprise & rapid prototyping
• [15:36] – How AI accelerated development cycles
• [18:12] – ‘AI co-designers’ like Peppa Pig & Optimus Prime
• [19:49] – Quality vs. slop with AI content
• [23:45] – AI’s impact on Hasbro’s workforce & culture

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5. Hasbro’s Structure, Strategy, and Managing IP

• Strategic Pillar: "GEM²" [31:20]

  • Gamified, Entertainment-driven, Multi-purpose, Multi-purchase, Multi-generational.

• Organizational Flow:

  • Three primary areas: Games (e.g., Wizards of the Coast), Licensing & Entertainment, Toys.
  • ‘Global play leads’ shepherd a brand across divisions, e.g., Monopoly’s lead coordinates toys, games, licensing, entertainment [35:22].
  • Prioritization: Brands are triaged as ‘Grow,’ ‘Optimize,’ or ‘Reinvent’ based on their lifecycle and potential [38:02].

• New Ideas and Learning from Abroad:

  • Hasbro treats some licensing markets (like China) as ‘labs’ to see what local partners invent, then adapts and imports those lessons [40:03].
  • CEO “stretch assignments” enable innovation—high performers pursue wild ideas for 6–9 months with institutional support [40:03].

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6. Manufacturing, Tariffs & Supply Chain Resilience

• Tariffs & Layoffs:
  • Most workforce reductions not tariff-related; came from a need to refocus Hasbro’s business [45:31].
• Building Resilience:
  • “Options over optimization”—multiple factories in multiple countries impact cost but reduce risk [45:31].
• Domestic Production:
  • Hasbro makes ~35%-40% of products in the U.S., especially board games and cards, but high labor costs prevent further nearshoring [48:19–50:06].
  • Quote:
    • “It’s probably in the neighborhood of 50–60% more to make a toy in the US than it is than it is in Southeast Asia.” — Cox [49:51]

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7. Data, AI, and Hasbro’s Blueprint Platform

• Blueprint 2.0:
  • $100M investment in data/market analysis “worked out pretty well,” especially in driving growth for Magic the Gathering [55:48–58:46].
• Will AI reduce infinite software spend?
  • Cox sees AI savings offsetting cost growth, but “expectations rise every year” in this industry; thus, savings likely reinvested in product and growth, not in cost-cutting [59:22–60:34].
  • Quote:
    • “That’s not a recipe for cutting back... That’s a recipe on figuring out how you get more efficient so you can do more with the same.” — Cox [60:34]

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8. Video Games: Strategy, Risk, and Industry Upheaval

• Industry Dynamics:
  • Stagnation in growth, rising costs, increasing risk with AAA games [61:03].
• Hasbro’s Multi-Pronged Approach:
  • Mix of core game investment (own studios), mass licensing (e.g., on mobile), and stickiness (Magic the Gathering Arena) [63:35–69:37].
• Accepting Risk:
  • Invests in original IP (like Exodus), backs it with licensing business to de-risk big bets [66:17].
  • Quote:
    • “Any individual game has probably less than a 50% chance of being in the money. But when you hit, it hits well... We’re going to be patient, we’re going to invest.” — Cox [66:17]

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9. IP, Fandom, and Creator/Platform Power

• Copyright as Business Negotiation:
  • The internet freely remixes everything; platforms, not IP holders, capture most value [69:37–70:24].
• Hasbro’s Position:
  • Engagement > Policing: Fandoms have real authority, and the company must find ways to collaborate rather than fight [70:24–72:35].
  • Quote:
    • “You can’t stick your head in the sand... you gotta figure out a way to engage the fans... and hopefully empower people to use your brands... The genie’s out of the bottle and it's not going back in.” — Cox [70:24, 72:08]
• The Harry Potter Dilemma:
  • Challenges around toxic fandom and controversial IP ‘authors’ (e.g., Rowling).
  • Hasbro separates “art from the artist,” but commits publicly to diversity and inclusion [75:59].
  • Quote:
    • “For me, it’s separating the art from the artist and going to what the core fans want. ...We very strongly support diversity and inclusion inside of Hasbro.” — Cox [75:59]

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10. What’s Next for Hasbro

• Upcoming Innovations:
  • New “aged up” brands targeting adult collectors, including Play Doh Blooms (adult-oriented Play Doh).
  • Incubated CEO initiatives bearing first fruit soon.
  • New major video game launches, including Exodus and Warlock. [77:09]
• Quote:
  • “You’re going to see some cool aged up properties or toys and collectibles from maybe brands you wouldn’t expect... and some really kickass video games come from us.” — Cox [77:11]

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Memorable Quotes & Moments (with Timestamps)

• “If we talked about [NFTs] at all, we talked about it too much.” – Cox [04:41]
• “Crypto is mostly for crimes... digital gold and crimes. And that's what we do here.” – Patel [05:10]
• “It’s lucky for us... that a 26-year-old has more spending power than a 6-year-old.” – Cox [08:09]
• “...With AI... what used to take two or three months [to prototype] now takes two or three weeks. Sometimes two or three days.” – Cox [15:36]
• “We have Peppa Pig co-design Peppa Pig products with us; Optimus Prime co-designs Transformers products with us...” – Cox [18:12]
• “You can’t stick your head in the sand... You gotta figure out a way to engage the fans.” – Cox [70:24]
• “For me, it’s separating the art from the artist and going to kind of what the core fans want. ...We very strongly support diversity and inclusion inside of Hasbro.” – Cox [75:59]

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Useful Timestamps Guide

| Timestamp | Segment | |-----------|---------| | 04:58 | NFT/crypto reflection | | 08:09 | Rise of adult (“kidult”) collectors | | 10:53 | Competing in modern toy landscape | | 13:34 | K Pop Demon Hunters and licensing surprise | | 15:36 | AI prototyping transformation | | 18:12 | “AI co-designer” use cases | | 19:49 | Slop vs. quality: AI in design | | 23:45 | AI-driven productivity and labor shift | | 31:20 | GEM² core strategy explanation | | 40:03 | How Hasbro gets new ideas (license & CEO initiatives) | | 45:31 | Tariffs, layoffs, and manufacturing resilience | | 48:19 | U.S. vs. offshore manufacturing costs | | 55:48 | Has Hasbro’s Blueprint data investment paid off? | | 59:22 | Will AI stop the “infinite” software spend? | | 61:03 | Video game industry diagnosis | | 66:17 | The odds and stakes on new IP (Exodus, Warlock) | | 70:24 | IP, remix culture, and fan authority | | 75:59 | The Harry Potter/J.K. Rowling dilemma | | 77:11 | What’s next for Hasbro: upcoming launches and innovations |

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Conclusion

Nilay Patel’s conversation with Chris Cox offers a rare and detailed look inside one of the world’s most influential entertainment and play companies as it faces accelerating change. Major takeaways include Hasbro’s pragmatic embrace of AI throughout the business, strategic focus on multi-generational 'play,' candid reflections on mistakes (NFTs!), and nuanced takes on the power struggles between corporations, creators, fandoms, and platforms. The episode is rich with real-world examples and open about unresolved tensions in IP, automation, and culture—making it a must-listen for anyone interested in business, tech, and pop culture’s future.

Transcript

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[Nilay Patel]

Hello and welcome to Decoder. I'm Nilai Patel, editor in chief of the Verge, and Decoder is my show about big ideas and other problems. Today I'm talking with Chris Cox, the CEO of Hasbro. You know, Hasbro, the toys and games company, makes some of the most iconic products in the world, from Transformers and My Little Pony to Monopoly in Magic, the Gathering, and of course Dungeons and Dragons. Chris was last on Decoder three years ago. He was a newer CEO then, just a year into the role, and we spent quite a bit of time talking about his plan to collect more data, spin off parts of Hasbro, and really think about the future of collectibles, which at that time meant NFTs. Look, a lot's happened in three years. NFTs just weren't one of them. You'll hear Chris laugh about how wrong he was throughout this conversation. You know what did happen though? Well, a global supply chain and manufacturing nightmare precipitated by tariffs, the AI explosion, and of course the Endless chaos of the video game industry. And then there's the relentless continuation of a trend that defines the modern toy industry. More and more toys and games being made for adults who have a bunch of money instead of kids who don't. Chris and I talked about that quite a bit, and I think his point of view here is at once totally logical and also completely surprising. Chris and I also talked a lot about Hasbro investing so heavily into video games in a time of relative uncertainty in the industry. For example, you'll hear Chris mentioned several times how important Monopoly Go, the mobile game is for Hasbro. And while Magic the Gathering and Dungeons and Dragons are already huge load bearing brands, Hasbro is also trying to expand into video games. And while Magic the Gathering and Dungeons and Dragons are already huge brands, Hasbro's trying to expand with original video games like Exodus, which is slated to be released next year. That's another huge set of challenges in an era where video game studios are shutting down more or less weekly and the distribution market is controlled by a small handful of players like Sony, Microsoft and Steam. And being a company that's so reliant on big IP with big fandoms, well, that puts Hasbro right at the center of a bunch of thorny cultural issues as well, because fans have really strong feelings about the stories they love and the creators they maybe don't love so much. For example, Hasbro just signed a big deal to distribute Harry Potter merchandise for the next several years. So Chris and I spent some time talking about whether the Harry Potter fandom is growing, whether it can grow as fast as he wants it to. In the face of J AK Rowling's politics, you can tell there's a lot going on in this one. Toys are a complicated business. I think you're really gonna like it. A quick reminder before we start, you can listen to this episode or any episode of Decoder completely ad free by subscribing to the Verge. Just go to theverge.com subscribe okay. Chris Cox, CEO of Hasbro. Here we go. Chris Cox, you are the CEO of Hasbro Welco. Welcome back to Decoder.

[Chris Cox]

No, hi. Thanks for having me.

[Nilay Patel]

I'm excited to talk to you. It's been about three years since our last conversation. I was looking at that episode. Boy, we talked about NFTs a lot three years ago.

[Chris Cox]

If we talked about it at all. We talked about it too much.

[Nilay Patel]

Well, yeah, it was interesting what you were worried about then. You had just changed the license terms for Magic the Gathering. You were chasing Creative Commons and you're trying to protect against NFTs. And that feels like it all essentially came to nothing. Would you say it came to nothing?

[Chris Cox]

Yeah, yeah, I'd say largely that form of the technology came to nothing. Collectibles have taken off. I'm sure there's going to be a digital collectible. I just not quite sure we found the right version of it yet.

[Nilay Patel]

I get that feeling. And I also just feel like we now know crypto is mostly for crimes. Like that has become. It's like amazing how even like in the crypto industry is like. Yeah, we're, we're mostly for crimes. Like it's digital gold and crimes. And that's what we do here.

[Chris Cox]

The Attorney General of Washington state like seven, eight years ago successfully blocked me from ever investing in crypto and I never picked it up. So there you go. Me and everyone in Washington and everyone in Hawaii basically didn't pick up the habit.

[Nilay Patel]

There you go. So that was one aspect of our previous conversation. I think we can set that aside. I think we've dispatched with that. The other thing that was really interesting about that conversation is you were just one year into the job, just about one year, and you were in the middle of reorganization of the company and you were about to sell E1, which you have now done. You talked a lot. We talked. It was actually one of my favorite episodes of the time because you talked a lot about reorganizing, restructuring a hundred year old company. Since then, you've completed that restructure. I want to talk to you about how that's going and there's any more changes to come. You've also moved the company from Rhode island to Boston. I'm curious about that decision. Let's just start at a very high level. You're not the new CEO anymore, you're just the CEO. What is Hasbro to you today?

[Chris Cox]

Well, I think it's the same as what it was three years ago and what it's always been. When it's at its best, it's a company about play. I think probably the biggest thing we've articulated in the three years since you and I talked is this concept of what our superpower is. And it's kind of borrowing from one of my favorite business authors, Jim Collins. He talks about the hedgehog concept and it's what's the thing that you are best in the world at or could be best in the world at? And I think Hasbro's superpower, what we're best in the world at, is inspiring a lifetime of Play. We do it across more categories and more brands and more things than just about any company in the world. And what we're super good at is building a relationship anchored in play and pretend and imagination with 2, 3, 4 year olds up to teenagers and then kind of never letting go. We just keep giving them something that they want to collect, that they want to game with their friends, that they want to play with for an entire lifetime. I'm kind of customer one on that superpower. I've been playing with our stuff since I was 2 years old, and I continue to play with it today.

[Nilay Patel]

I ask you about that trend in particular. I think it, it's obvious to people who pay attention to toys. It's maybe less obvious from the outside, but the idea that toys are now a thing that adults buy and collect and play with and adults have a lot of money so the toys can get more expensive, that's pretty new in this industry. It's not so new that it's like a surprise, but it's new in terms of how a company like Hasbro would conceive of itself. What's the balance there? Because I think there's a lot of criticism that while making this stuff for adults is really lucrative and you might lose sight on the kids who are the, you know, the primary audience for the toys.

[Chris Cox]

I think kids are always the first handshake audience, the, you know, the people that you want to build a relationship with as young as possible and kind of grow with them. But I think, you know, just looking at like the basics and the fundamentals of the addressable market, there's less kids today being born today than there was 10, 20 years ago. And there's more substitutions than ever. So you've got a smaller base of children, especially in Western markets that we tend to distribute in, like the us, Europe, a lot of Asian countries. And those kids start to shift decisively into video games and mobile phones and digital experiences at younger and younger ages. So as an industry, you can either say, okay, I'm going to accept that my traditional market is declining, or you can say, okay, what else could I do? And I think adults are kind of the natural space and it's not artificial. I think going back to baby boomers, but certainly Gen X, millennials, Gen Z, we like to collect stuff, we like to play. It's how we socialize. When you talk to a group of millennials or you talk to a group of gen zers, you know, if you ask them, name your top 10 kind of brands, especially entertainment brands, you know, fully five or six of them, the majority of them are going to be either from video games or games in general. So it makes sense that we would want to cater to that audience. I think it's lucky for us and fortunate for us that a 26 year old has more spending power than a 6 year old. And you know, they tend to want more sophisticated play things and collectibles. And so, you know, if you're a company that has the expertise in that and has the brands for that, like a Hasbro, I think it's pretty good for you.

[Nilay Patel]

I'm curious about that shift broadly. One I think just the demographics you outlined are, are true and it's really interesting. You know, I have a seven month old and it's just interesting to see what toy brands exist now that didn't exist for our seven year old. Right. So even in that space of time, just seven years, you see some brands have just left this market behind and there's some new brands that exist now. And then, you know, there's things like Cocomelon, which when my 7 year old was a baby was pretty nascent and is now this juggernaut. And I'm curious if you see the dynamics there changing. You talked about digital experiences. Do you see more like Hasbro? Classically when I was a kid in the 80s, it would advertise toys during Saturday morning cartoons.

[Chris Cox]

Yeah.

[Nilay Patel]

And this is where you would like find the customer. And now it's like a bunch of weird YouTube slop. Is that like, you know, I mean, like, is that the space where the new toy brands are going to come from and you're just not willing to play there quite as much or is the dynamic of the industry changing more more aggressively than that?

[Chris Cox]

Well, I think there's a bunch of things happening in kind of traditional toy space. It's never been easier to become a toy company. There's a city in China just a couple hours drive north of Shanghai, or, sorry of Hong Kong, called Chantal. You can go there and walk through 10 Costco's worth of a showroom of toys that, you know, a thousand different manufacturers are coming with you and you have, you know, if you have a decent sized checkbook, you can go and go and walk through and say I'm going to pick that one and that one and that one and buy a bunch of toys and suddenly you are a toy OEM and then you have a massive amount of distribution options ahead of you, especially with the rise of E commerce. But on the flip side, it's never Been harder to be a traditional toy company. There's more competition than ever. Like we talked about before. There's more substitution, especially from digital, than ever. And you've got a narrowing set of customers to be able to appeal to. The great thing about that is there's going to be more choice for a kid and there's going to be a higher cycle time. The bad thing from a business perspective is it's really hard to establish a moat. The kids cycle through and they learn about things in unpredictable ways. A lot of kids are exposed to social media even though they're not supposed to at earlier and earlier ages. They watch YouTube, they watch all these kinds of influencers. And the whole notion of like Saturday morning cartoons or even just watching cartoons after school on a linear network is totally flipped upside down. You know, I think as a toy company you have a choice. You can either kind of double down on that market and try finding you know, these big entertainment moments that really punch through, or you can try finding kind of like a different market to be able to appeal to and build like a more durable moat in those spaces. And I'd say we have been doing both. We certainly license with a bunch of huge kind of mega brands. You know, we just announced Harry Potter, we do K Pop Demon Hunters, we announced Voltron and Street Fighter. You know, The Walt Disney Company we've been in business with since 1954 with Marvel and Star Wars. So we do a lot that appeals to kids. And then we have some of our own house brands like My Little Pony and Peppa Pig and Transformers. But increasingly I think we're choosing to, you know, invest our capital and some of our best talent in kind of that older audience where you can build a play system where you can establish more kind of strategic brand moats and distribution moats and the comp. And it's a little harder for new competitors to edge in. And the brand loyalty tends to last a bit longer than the attention span of a typical 4 year old.

[Nilay Patel]

Can I ask you about K Pop Demon Hunters? For a variety of reasons. One, I'm personally curious too. My daughter will kill me if I don't ask you about K Pop Demon Hunters. It's the IP that runs our house. Is it true that K Pop Demon Hunters was a surprise to the industry and you weren't ready for Christmas this year?

[Chris Cox]

Oh yeah, Netflix. Netflix did their credit shop that around quite a bit and no one bit. And I remember it was the weekend it came out and you know, I'm an old business person so I was like flipping through LinkedIn and someone was posting about K Pop Demon Hunters is like not only my daughter's favorite show, but it's my favorite, my favorite new movie of the year. And I was like, K Pop Demon Hunters, that sounds like a cool title. So I up picked, picked it up on my Netflix queue and started watching it. And a half hour in, I, I texted our head of toys, Tim Kilpin, and I was, I won't include the explicative I included in the, in the text message. But I was like, what the heck? Like, why didn't we pick this up? Who has this? And he's like, no one has it. And we called Netflix, I think, on Sunday night and said, hey, we want in. Then on Monday and Tuesday, every other toy company on the planet did the same. But yeah, yeah, the industry was surprised by it.

[Nilay Patel]

Take me inside that negotiation. Right. You saw it, nobody wanted it. Suddenly it's super hot. You obviously understood watching it with a little bit of LinkedIn validation. Yeah. That it was going to be the hottest thing. What's that negotiation with Netflix like?

[Chris Cox]

Well, I mean, you know, by that time Netflix knows they have a. Yeah, I think they have a pretty sophisticated piece of data that says everyone's watching this and it's the number one movie on the planet, basically. And not only are people watching it, like people are re watching it and the songs are starting to chart on Spotify. So like we basically come in and be like, okay, hey, we give them our pitch and we're like, hey, we think this isn't a typical children's movie. We think this is multi generational. We specialize in products that appeal to all ages. We have multiple categories that we can execute that in. And you know, I think, I think within two weeks of us having that initial conversation with them, which probably happened on like a, the Monday or the Tuesday, we were in, pitching them, showing them full featured products. Two years ago that would have been impossible. But now, you know, with the advent of AI enabled design tools, we can go in and do what used to take us two or three months in basically two or three weeks, sometimes two or three days, and come in with very high fidelity pitches and very high fidelity product lines. And not only just show it digitally, but when you couple that with like 4K level of 3D printing with full color, we can actually come in with models that used to take us like six to eight weeks because you'd have to go to Hong Kong or Shenzhen and be able to source it from there. And so we had really good conversations with them. The rest of the industry also wanted to pitch them. They maybe took a little more time than us, but eventually it kind of materialized that Mattel and Hasbro and LEGO kind of came out on top and we kind of split the license.

[Nilay Patel]

When you say you used AI tools to make fully featured models, to show them, how does that process work now? Is it your designers went away and came back with ideas. Did you personally prompt ChatGPT to make you roomy toys?

[Chris Cox]

I don't do that for our products. I do that all the time for kind of like just personal passion projects. And Dungeons and Dragons is kind of my jam. And I DM like probably three or four groups. And there are so much AI based animation and images and text and sound effects and voice cloning on my PC. It would floor you. But like, you know, basically our design teams are all enabled with like a suite of the latest tools from basically every major company. And then we've trained a bunch of models ourselves with rip and so from doing that we can have pretty sophisticated renderings pretty fast of products and ideas. And you know, when we have a little bit more time, we actually can even program in a character and the character from the IP can actually be a co designer with us and help us with ideas and help us with like that's out authentic. That's not authentic. And that's actually been pretty wonderful in how we've been creating things.

[Nilay Patel]

Wait, so you, you code in like the personality of a character from Vernier franchises?

[Chris Cox]

Yeah. So, you know, like we can, we have Peppa Pig co designs Peppa Pig products with us. Optimus prime co designs Transformers products with us. Optimus prime and Megatron are two of the DJs that we have on the, on our main hall of our office building, kind of where people can ask them to play songs. And you know, Optimus is always very serious and tells you the soulful reason about the song. And Megatron basically makes fun of you for not picking Thrasher Rock. And it's just a fun way to kind of bring the creative process to life. And you know, at the end of the day, at the end of the day it's really kind of, it's a bit garbage in, garbage out. It's really a human that's kind of making the decisions and a humor human that's inspiring like the good ideas and a human that's selecting them and then taking them to the next level. But man, like the amount of content we can create and the amount and the speed in which we can create just transforms how good we are at being able to bring an idea to life and pitch things that back and

[Nilay Patel]

forth between the taste of your designers and the people who manage your brands and the ability to generate slop at massive amounts of scale. That is. It feels like the tension for every entertainment company right now. I'm wondering how you see it. I know, I know Hasbro's talked about, you've talked on earnings calls about how your past experimenting with AI, right? It's just integrated into your workflows and people can use it however they want inside the company. But that tension between slop and quality, slop and productivity, it's not going away in this industry. It feels like it's only rising. How are you thinking about it?

[Chris Cox]

Thinking about it a lot and in a lot of different ways. Just to be at the 50,000 foot level, you know, at the concepting phase, I suppose it depends on the context, you know, from a creative context, you know, I think you have to think about it very carefully. There are some brands that the audience, the creators just don't want it. So we don't even have it in our pipelines for our video games or for the Gathering or D and D for things like toys, where we're basing it on kind of existing IP or like a long legacy of ideas. We are able to use it and use it pretty effectively. And in that concept phase, especially when you're kind of like figuring out different ideas for toys and clever kind of derivatives of play patterns, it's pretty magical. You know, you might generate a thousand ideas and, you know, 999 of them aren't that good, but one of them might be magical and it's basically free to be able to create it. And what we find is, is that it's a lot more than 999 out of a thousand are pretty good. Especially when you pair it with a really good set of designers and a good team that's kind of brainstorming with the system. And then once you get to a decent idea at a decent fidelity or a couple different ideas, you can kind of take them and use the AI to simulate focus groups and simulate kind of playtest labs, and then do that along with real humans doing playtest labs as well, and get a better idea and a second opinion on how good the ideas are. And basically it just kind of turbocharges this whole process where, you know, in the past, maybe we could take one or two things to kind of that full prototype phase. Now we can take 10 or 20 things to that full prototype phase. And I just think we have a richer selection and better idea about what ultimately the audience wants at the end. And then, you know, I think from a just basic productivity perspective, we're deploying it across the company. We've employed it as a general productivity tool for everyone in the company. And I think, you know, so we're seeing people are using that probably on average 20, 30, maybe 40 times a week. It's helping to save time and crafting emails and in doing action steps from meetings and just kind of with idea generation and researching, it's probably saving the average person in the company maybe an hour or two from a productivity perspective. And then in pockets, we're able to employ it on a much deeper basis as basic agents. You know, probably one example that's probably the most, the farthest along is we process a huge number of like, purchase orders every year to buy toys from mom and pop toy stores to huge mega giants like Walmart or Target. And our IT systems just traditionally haven't been super effective at being able to standardize those orders. We're able to use AI agents to basically take hundreds of thousands of man hours out of the system where we don't have to touch orders. They can be standardized, processed in our system, and IT nets out in a material savings for us. A lot of that work was outsourced already, so that's not necessarily saving our employees a lot of time, but it is kind of saving the bottom line a bit of time. So, you know, when we did, you know, a couple different gut checks on what we think the impact of AI was going to be this year, we saw it in the neighborhood of into a million plus man hours of savings that we can redeploy. And, you know, a lot of that work wasn't the fun work. Like, no one likes to write the action steps from a meeting. No one likes to kind of touch an order from a toy store in Peoria. And instead we can kind of invest it back into, I think, what ultimately counts, which is delivering for our customers and kind of dreaming up new ideas and new ways to play.

[Nilay Patel]

I hear a lot from creatives who listen to the show, who read the Verge in other ways, and, you know, the fear in the audience is that being a creative has been a pretty hallowed, a pretty special role, especially at a company like Hasbro. And AI makes everyone feel like they can have taste, right? You can prompt Gemini and you can, you can just get a nano banana image of whatever, and you're like, Now I'm creative too. And the audience can participate in that with your brands and your IP as well. And there's something there that has a lot of people very skittish. You can see it actually in games you mentioned, gamers don't want AI anywhere near their games. Like even the audience in some categories really doesn't want this to happen. How are you managing that inside a company like Hasbro? How are you keeping your designers and your creatives protected or empowered instead of fearful?

[Chris Cox]

Well, it's really giving them the tools and putting them on the vanguard of it. And you know, if, if Joe or Sally Six Pack feels like they're suddenly like an, an avant garde creative with these powerful tools, take a legitimate avant garde creative and give them these tools and they just level it up way more. And I think what we found is, you know, when our creatives had a chance to use it and then they're able to collaborate with other creatives who are using it and see all the playful ways that they can bring ideas to life. It hasn't been a difficult chore to get us to get people to adopt. And you know, at the end of the day it's all about delivering a better idea. You know, I. Who knows what's going to happen with an explosive technology like this. So like, I don't want to make too many long term prognostications. I'll be as wrong about this as I was about NFTs. But like, from our perspective, I don't see it costing creatives jobs. I see it only making the quality of the creative we have better. And that's how we've been deploying it today and that's how I think we'll continue to deploy it. It's a tool that kind of levels us up and makes what we make better.

[Nilay Patel]

We have to pause here for a quick break. We'll be right back.

[Host/Announcer]

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[Nilay Patel]

Welcome back. I'm talking with Hasbro CEO Chris Cox about how all the IP licensing Hasbro does turns into actual toys and products, but actually want to take one step back and ask the decoder questions to set some of that up. You know, from the outside, when just in talking about Hasbro as we have been, it seems like, you know, the IP is at the center. Whether it's you're going to go get the license from Netflix or K Pop Demon Hunters or you have your own like Magic and Monopoly, there's other stuff. It feels like the IP licensing, having that is really at the center of the company and then you've obviously restructured. So just talk about how Hasbro is structured now and how the IP licensing like flows through the structure you have now.

[Chris Cox]

I'd say at the center is call it the customer insight or the market insight. That's how we structure everything, that's how we craft our strategy and basically the customer insight that is animating the company and animating our strategy is this acronym that we call GEM Squared Gamified Entertainment driven Multi purpose, multi purchase, multi generational. Like that's what we think kind of the power core is of play and the future of play. That's where things are growing. That's where you know, people have purchase power and they have passion. And so everything we do and everything we invest in is gearing towards that Gem Squared insight. And so we've organized around it, we've built our strategies around it. And I think you're going to see more and more our products kind of geared towards that and our partnerships geared toward that. So like I said, gamified entertainment driven, multi purchase, multi generational. We then apply it to a play company that we think our superpower is inspiring a lifetime of play. And then we kind of flow it through the businesses that we have. And you Know, we organize our businesses across three primary lanes. There's games, which is really anchored by Wizards of the coast, and then Hasbro Games, which is our, you know, beloved board game portfolio with Monopoly and Clue and the Game of Life. Then there's licensing and entertainment, which is, hey, how do we take our brands and execute it more broadly across categories that we're not experts in or we don't have powerful distribution in. And so we do that with entertainment companies with like location based entertainment, which is a fancy word for like theme parks and quick service restaurants and you know, things like play centers that you'd go to in like a mall or something, and then publishing and then other toy and kind of soft good categories. And then the last area we execute is probably the area that most people, if you met someone from Hasbro at a cocktail party and they said, I work at Hasbro, it's toys. So like kind of the toy and game aisle. So we execute that gem squared insight and that inspiring a lifetime of play mission through those three categories. And then we break down kind of like how we kind of address that gem squared insight across like about five or six building blocks across the company. So how do we become relevant in digital games? How do we scale through partners? How do we age up? How do we make play available anywhere in more occasions? So how do we win more occasions where you could pick a candy bar, you could pick a toy, how do we convince you to pick a toy? And then last but not least, how do we expand kind of like the demographics of who we serve and the playographics of who we serve. So like, you know, Hasbro to date over indexes with kind of play patterns and collectible patterns more associated classically with boys. So we want to win more with people who, who identify as girls. And then likewise, you know, Hasbro is very strong in markets like the US and France and the UK and for Wizards of the coast in Japan. But really we're only servicing a market of, call it a billion and a half people on a planet that has 8.5 billion. So then how do we execute kind of gem square based products to the other 7 billion people that we aren't building for and that we aren't distributing for that kind of manifests into a bunch of different product categories that we drive. How we think about where we want to invest in versus where we want to leverage partners for what partners do we want to in license with that we think really powers that kind of particularly gamified and entertainment driven kind of insight and where do we think we can best service?

[Nilay Patel]

How does that work with the ip? So let's say Monopoly. You're like, we make the Monopoly board game, that's one division. But we want to make a Monopoly movie and we want to make a Monopoly video game game. Who gets to make those decisions across the structure?

[Chris Cox]

So we have a person called a global play lead and they'll sit in a different part of those, those three verticals that we execute from depending on what we think kind of the power center is of the brand. So the Monopoly global play leader sits inside of toys. They execute our board game kind of product strategy, but they work with our entertainment team to kind of forge like a, a movie and reality TV show kind of slate like we have today. They'll work with our licensing team to figure out like soft goods and T shirts and other toys that might be related to Monopoly. And then they'll work with our digital team to drive Monopoly based games. And I think there's probably two dozen Monopoly based video games and casino games that you can play with the biggest being Monopoly Go, which is the biggest mobile game in the world. And so then they think about how do I bring, what are the franchise moments associated with Monopoly, how do I kind of take my retail distribution and make a bigger kind of marketing moment for more of our licensing partners. And as the other verticals kind of launch things like, you know, if Monopoly go to something big, how can I parlay that into everything else? If a movie comes out with like our partners at Lionsgate, how do I parlay that into everything else? And so you basically build a multi year rhythm associated with it.

[Nilay Patel]

Can I just ask you, what is the Monopoly play lead? Like do they wear the hat and the monocle? Like what is that person like?

[Chris Cox]

No, he's, his name's Brian Baker. He's, he's, he's very boring. Very much like me. He likes Monopoly. I don't know if he and his family cheat quite as much as my family do, but when they play. Because cheating's our favorite part of the game. Yeah, but yeah, he's, he's a big board gamer. Former Nike. We replicate that across. So Peppa Pig would be more of an entertainment driven platform where you know, the global play leads kind of live over inside of entertainment and licensing and toy kind of helps help support them. Magic the Gathering and D and D are anchored in Wizards of the coast and kind of what we do with the hobby channel. But like increasingly we're doing more video games, we're doing more entertainment across those. So the three verticals kind of operate independent, but then they also are highly collaborative with, with each other utilizing the brands.

[Nilay Patel]

So this is a pretty hybrid structure, right? It sounds like these play leads, they sit in the, the division that is most naturally associated with whatever property and they get to use all the functions of the other divisions. There's some resource constraints there. You can see how there would be some division of who gets to do what at what time, depending on the capabilities of all these divisions, how many resources you have overall, who breaks those

[Chris Cox]

ties, Usually it's me. So you know, we have to do prioritization. We have, you know, not every brand is kind of built equally. So we have a hierarchy for our brands called grow, optimize and reinvent. So our growth brands are the ones where we see the highest three year kind of continuous growth potential. We see the highest kind of like operating profit margin potential. And we see them operating in markets that are pretty buoyant. They tend to be more blue ocean and less red ocean. And so those growth properties tend to get that first pick on available capital and available talent. Optimized brands tend to be in less high growth categories. You know, we tend to see them as kind of like kind of steady eddies, maybe low growth. They still do a decent operating profit for us. And so then they get kind of next tranche and then reinvent brands are, you know, like, like we talked about at the beginning of the, the discussion on toys. Toys are kind of a fast faction, like cyclical business. You know, what's popular this year is likely not going to be popular three or four years from now. And so the reinvent brands tend to be the ones that are in that kind of late stage cycle where they're either rest investing or we're thinking about what the next phase of them is so that they can be a future growth brand. And so they get mostly kind of like conceptual product development and market research support, but not a lot of go to market or inventory support.

[Nilay Patel]

What do new ideas come from in the system? This is the thing I worry about most in our current like information environment. That existing IP has so much value associated with it because you don't have to try to get attention for it and new things. You just, you're just sort of waiting for the next weird influencer to show up with an idea that goes viral. You know what I mean? Like did you have a meeting where like we have to make a 6, 7 toy? Like I don't know where the new ideas come.

[Chris Cox]

We didn't have a meeting on that. But we did carefully avoid saying 6, 7 around little kids in any play test labs. I think we purposely capped our rating scale at 1 to 5 and no longer 10. I mean, to be perfectly candid, I think it's a structural weakness of most large companies is thinking about new category development. You know, you, you tend to get focused on your existing business and very obvious adjacencies and then tend to lose sight of, hey, this new thing that's kind of coming up the path, coming up the pike. And I think we've been as guilty of it as anyone. The way that we're countering it is in two ways. The first way is our licensing business isn't just a very high profit, high growth business for us. We also use it as a learning lab. So we tend to be very liberal in how we license out many of our brands, especially in markets or regions where we don't have a lot of go to market capacity. So like China. And we're able to learn from the local partners about what's hot and what works in a fantastic collectible and innovation market like China and Southeast Asia. And so we actually learn about new categories kind of popping up there. The great thing about that is it's a real win win for the partners. They basically get a clear market where we're not really competing with them. We get a learning lab and then we can apply the lessons from that learning lab, like the winners from it to our distribution and our marketing and licensing muscle outside of that core market. So that's actually been pretty powerful for us. An example of one that we learned a lot from was My Little Pony. My little pony three years ago. Like maybe we made five or ten million dollars on it. Like you know, in 2024. I think our partner in China, Caillou, I think they did more like $400 million of trading cards and My Little Pony and they've parlayed that into a whole line of kind of teen oriented collectibles. And it's kind of reinvented how we conceive of the brand and what the potential is of the brand. And we're starting to execute against that, that outside of that core market, both with Caillou and ourselves. So that's been pretty valuable for us. And then the second area that we've done it in is what we call CEO initiatives. So it's like we take high performing people out of our business units, out of kind of like a traditional global play lead role and we give them like an assignment for six to nine months and say like, hey, they go run after this and we keep their job kind of on the side and they can go back to it at any time. And we recognize that probably nine out of ten times those things aren't going to yield fruit. But it's a fun stretch assignment for a high performer, high potential person. And, you know, sometimes with it yields something fun. So, you know, I. That's a relatively recent thing that we've been doing over the last two years. You're probably going to see the first fruits of those probably within the next six months. We'll do our first announce of those. And I think you'll think it's pretty cool.

[Nilay Patel]

Let me ask you the other kind of questions. And when I get to tariffs, I want to get to video games. There's a lot of stuff left on my list here. You've kind of answered this already in a way. How do you make decisions? What's your framework?

[Chris Cox]

Well, I think first and foremost it's kind of starting with the customer and starting with that insight. So you know that, that GEM Squared acronym, it's memorable and it's very accurate. Like, it replaces kind of kidd alts, which is a term I hate. It's like trying to describe someone else rather than being actually descriptive about what they want. So you start off with the customer, and then I think you got to go through our strategy. We call our strategy playing to win. We try to inject and remind the idea of play. And everything we do, hey, does this hit the insight? Hey, when we execute against this, does it hit one of our strategic goals that we think kind of adds value and adds capability to our superpower of inspiring a lifetime of play? And then you kind of think through the dollars and cents of it, like, okay, does it make money? Does it have a return? Are we investing sensibly given the opportunity? Like, you know, if we think it's kind of like a, a flash in the pan, kind of a cool idea, but not going to be durable. You, you take one investment profile on it. It. But if you think, hey, this might be a new power kind of play pattern and a new category, then I think you go in with the expectation of, hey, I don't need to make money on this for the first couple years. What I need to do is establish capability in it and establish presence in it, and then kind of the market will take care of itself. So that's generally, that's generally the paradigm I go through.

[Nilay Patel]

I think that makes sense in the context of creativity and making stuff There's a set of decisions you've had to make recently that just seem on the ground, in the weeds, about how to manufacture things in the world that we live in today, especially around tariffs. So tariffs are obviously uncertain. They're coming and they're going. You've had a lot of layoffs in which you've attributed to tariffs. There was a pretty big round in 23 and smaller rounds in 24, and then in 25. What do you think the tariff situation is now? How are you making decisions around that now as you make toys?

[Chris Cox]

Most of the headcount reductions we've had to do had nothing to do with tariffs. It had to do with. We kind of lost sight of our core business, and we had to kind of correct it. So we got over our skis, and unfortunately, there was. There's human impact to it, and it's probably the worst decisions you have to make, but sometimes you have to make them as regards to tariffs. I think what we took the perspective on is they were going to change and they were going to be unpredictable. And so in a world that is unpredictable and subject to pretty sudden changes, we need to have more options and more resilience. The tough thing about that is it just costs more money because rather than tooling a line once, you have to tool it now for three different times for three different factories in three different countries. But I think the smart thing about it is it allows us to kind of shift with the changing policy environment and not allow us to be overly exposed to one region or one manufacturer or one set of policies. So it has added costs to the business. They're manageable, albeit unwelcome, just to be honest. But I'm glad we did it, because I don't think that that. That unpredictability is going away anytime soon. And, you know, it's nice to have options.

[Nilay Patel]

Are you gonna sue for tariff refunds? I saw today, like, thousands of companies are suing for tariff refunds.

[Chris Cox]

We did submit a brief to, I think the. I'm not sure which court, but one or two courts, so.

[Nilay Patel]

Yeah. And if you actually get refunds, do you pass them back to consumers or you just keep it?

[Chris Cox]

I mean, the funny thing about that is, is we. We didn't really pass along many of the costs to our consumers. We took a couple targeted price increases at the end of last year, but it was only on a couple SKUs in our line. So I don't think there will be a lot of rebates to consumers. And then it's kind of difficult to calculate how you'd even do that. So you know, our perspective was we're a pretty diversified company, we have a pretty sophisticated supply chain so we're able to absorb, absorb the initial impacts of it. Some form of tariffs are going to stick around. So the price increases we did make, they didn't cover the previous tariffs. You know, depending on what the tariffs settle out at, they probably will roughly cover those. So I'm not sure there's going to be a lot to give.

[Nilay Patel]

The goal of the tariff policy as stated by the administration is to move manufacturing back to the United States. You were just talking earlier about how easy it is to go to China and just become a toy manufacturer because that capacity is there. Have you moved any manufacturing back to the United States? Is it worth it to do so?

[Chris Cox]

I think we do something like 35%, maybe upwards of 40% of our manufacturing in the U.S. we're a different kind of toy company. Like a lot of our toys are board games. A lot of our stuff is trading cards and then we do a lot of licensing. So that tends to be more nearshore production. We did retain more domestic production here, particularly for board games than we otherwise planned to. I think the tough thing about toys is it's a super low margin business, especially in manufacturing and it's a very labor intensive business. And the SKUs change a lot every year. I think close to 60% of our toy SKUs are new every year. So it's tough to automate just because stuff changes. I think that's a tough business to nearshore to the US like the way you nearshore is usually through automation. I think for there to be meaningful near shoring for something like toys, you would need, you would need a step change technology. Like you'd have to really be able to figure out 3D printing on a mass scale which was the equivalent quality and cost of mass produced plastic mold injection.

[Nilay Patel]

Yeah, no, I was looking on the website just before we started. I wanted Hasbro.com there's a green Bay packers transformer which is laser targeted at me. It's 27, it's 27.99 on the website. I'm assuming you're not making that here. How much would it cost to make something like that here in the United States?

[Chris Cox]

It's probably in the neighborhood of 50 to 60% more to make a toy in the US than it is than it is in Southeast Asia. And that's a factor of labor.

[Nilay Patel]

And so you're saying you would need massive automation to equalize that labor cost to do it here.

[Chris Cox]

Yeah, you need real automation, real standardization or some kind of kind of massive process innovation, like a whole new way to kind of make things. And then it would just kind of negate like a labor advantage. Like because it wouldn't really create a lot of net new jobs because so many of those jobs would just be automated.

[Nilay Patel]

We have to take another quick break. We'll be back in just a minute.

[Host/Announcer]

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[Nilay Patel]

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[Nilay Patel]

Welcome back. I'm talking with Hasbro CEO Chris Cox about automation and AI. So let me ask you about the other piece of automation. So the last time you're here 2023, you talked a lot about a system called Blueprint 2.0, which was a hundred million dollar investment into a brand insights platform like a data platform that would help you fig out what to make and how much to make. We've already talked a bunch about AI. I'm reliably told that you can now just buy Claude code for like 20 bucks and just like build, build hundred million dollar brand insight platforms. Is that working out? Is did that investment pay off the way you wanted it to three years ago and how are you seeing it now? In an age of AI software development,

[Chris Cox]

that 100 million was kind of all into like outsource, outsized data sourcing and new data analysts and, and market research, custom market research and all that kind of good stuff. And I would say, I would say it's worked out pretty well. Like you know, certainly businesses like Magic the Gathering, which I think since we Talked is maybe 80 or 90% bigger, it's really worked out like it's really helped us be able to understand what the customers want, how to segment products, what people to partner with that would appeal to that customer base. I think it's helped us in making better toys that are more targeted and really turning around kind of like a pretty negative point of sale trend that I inherited. When I first started where we were in 2022, we were probably indexing 15 to 18 points behind the market in terms of our growth versus the market growth. And today I think we're at or ahead of the market. So it's been good on all those aspects. You know, I think in terms of the future about how we engineer things and how we build platforms. I just had a conversation with our, our CIO the other day where he was taking me through, like, hey, this is how we're AI automating the company and how we're building in new workflows. And the number one question I had for him was, hey, how are we doing inside of it? See, like how are we building more capability inside of our own coding organization and inside of our own kind of engineering organization. He had to kind of take that back and think through that a little bit. My personal point of view about what AI is going to do to at least I can't talk about the economy as a whole, but what it's going to do to how we employ people and how we deploy people. I think it's going to be a labor savings tool, but I think it's going to be be ultimately savings that you redeploy into the product and you redeploy in the partners. So there might be some changes about the nature of who we employ or what we pay for, but the total amount of people that we pay and the total amount of labor that we deploy I don't see going down. My hope is that redeployment drives growth and that goes up. Yeah, I definitely think it will affect like stuff that we've already outsourced because stuff that we've already outsourced tends to be kind of that grindy kind of quote unquote low value operational or process level work stuff like touching a bunch of orders and making sure that they're filled out correctly. Like nothing that's super glamorous. And so we already outsource that outside of the US So I think those will be kind of the first work streams that get AI automated. I think everything else is more kind of enrichment and kind of feeds people, gives people hours back in the week that they can go and hopefully exceed what they did the prior year.

[Nilay Patel]

One of the sort of iron laws of decoder for the however many years I've been doing this now is once you start investing in software, your investment only ever increases.

[Chris Cox]

Right.

[Nilay Patel]

So once you hire a software engineer to make you a software platform like Blueprint, you're only going to hire more software engineers and spend more on the software.

[Chris Cox]

The rule at Microsoft was don't worry about what it costs to make, worry what it costs to maintain.

[Nilay Patel]

Right. And this, it just feels like every decoder conversation for years now I could just rely on that. Maybe AI changes that, right? Where maybe you're not making an infinite investment in software over time because you can hold it steady with automation. Does it feel like that's real to you?

[Chris Cox]

Well, I think what we're seeing in the early stages of AI is you know, if you take that, that million man hours of savings that we're estimating, which is, is kind of a rough and tough number, but I think directionally right. And probably on the low end that basically translates to a low single digit to mid single digigit productivity gain for every employee. And that's just at the early stages at that level, you know, you're basically just covering inflation for kind of how benefits increase and salaries increase for your base. So I, I, I don't think it's going to massively decrease like any of our given functions. Once again, like you're in this hyper competitive industry where expectations raise every year and you want to delight your consumers in a new way and get them to buy something. Which logically if you were an economist you'd say this is an illogical purchase. Like it's a passion based purchase so you got to delight them and go bigger. That's not a recipe for cutting back on your development or cutting back on your customer support. That's A recipe on figuring out how you get more efficient so you can do more with the same.

[Nilay Patel]

All right, noted. Chris does not think the SAS apocalypse is here. We'll have you back in a few years. We'll see if that's true. Let's talk about video games and I

[Chris Cox]

really hope I'm more correct on that than I was with NFTs.

[Nilay Patel]

I want to wrap up here by talking about video games and then the culture and IP broadly, because I feel like the way fandoms respond to IPs over time is changing and I really want to get your take on it. Let's just start with video games broadly. Do you know how to fix the video game industry? Because it doesn't seem like they know.

[Chris Cox]

I think what's that. What's happening with the video game industry is you have. It's growing, but it's, you know, not growing like double digits. It's growing kind of like, you know, mid single digits and it probably will continue to. They're starting to suffer from more substitution, which is probably just a. If you look at it in hindsight, it's just a different way of delivering video games. But you have this massive cost inflation for delivering kind of the amount of content. If you want to develop a AAA video game, it's a thousand man years of effort minimum, with an audience that's growing, you know, growing but not growing leaps and bounds with more kind of substitution or new categories, with inflation which is going significantly faster than what your market is growing or what your pricing power can support. I think you have to think about things differently. I think you have to think about like, hey, when you make a game, you know, are you, are you always going to go to San Francisco or Austin, Texas to, you know, recruit that team? Or are you going to go to, you know, these fantastic areas of talent in, in Southeast Asia or China or Eastern Europe and pair them with the team who really understands the marketing question. I think a lot of gamers don't like AI in games today, but I think eventually someone's going to figure out how to use AI in a way that's high quality and is fun and makes games better. So I also think you have to think through that. I really think it's just kind of this classic kind of equation of, hey, your input costs are X, your, your output is Y. How do you make sure the ratio between X and Y is acceptable for the risks that you take? Because, you know, any given video game has like a 20, 30% chance of being successful. So you got to be able to cover a whole bunch of unsuccessful bets inside of whatever you invest.

[Nilay Patel]

So I'm curious about this. In your own slate of games, you got a big bet this year on Exodus. It's supposed to be a big cornerstone ip. It's a huge investment. You also just had Baldur's Gate 3 was, I think, made in the system you're describing. Right. That studio was in Belgium.

[Chris Cox]

Yeah. They had resources in Eastern Europe and Europe and Canada. They had them all over the world.

[Nilay Patel]

But you're not working with that studio anymore and you've got a big bet on a new IP that feels like a, you know, it feels like a different set of risk. Like you, you've balanced that risk maybe differently than what you're describing. How'd you make those decisions?

[Chris Cox]

When we think about digital games, we think about, okay, what does the audience want? What brands do we have and capabilities do we have that we feel is relevant to those needs? And then what's the best way to kind of build that capacity? We decided that we had really relevant brand and IP and kind of design sensibility in communities to hardcore role playing games and action adventure games and then inside of and card games, of course, from Magic. And so we decided, hey, those kind of make sense for us to execute, but it's going to take time for us to execute it. So as we kind of build that capacity, how do we, we have a lot of brands that are relevant. How do we partner with some of the best in the business to go execute on our behalf while we kind of build our capacity and build our learning to be able to do that? And I think Baldur's Gate 3 and what we did with Larian was a fantastic example of, probably best in class example of that. And then on an ongoing basis, since, you know, we're going to focus on more hardcore gamers and these kind of more traditional PC and console audience genres like role playing games and action adventure. You know, that covers maybe 7,800 million gamers, but there's probably 3.5 billion in the world. What can we do to kind of appeal to those other 2.8 made gamers around the world? And that's really where our licensing team comes in. So we've got the biggest digital licensing business in the world by probably, I think a significant margin. Got this fantastic board game portfolio. We've got some great kind of hardcore games like Magic and D and D that we license out with some of the best in the business, Scopely being one of them in mobile. And that's pretty lucrative and pretty high growth for us and helps to kind of pay the bills. That allows us to have a long Runway to be able to invest in our own studios and our own publishing capacity. And it also de risks those efforts. So it's not like we're making a bet. The company bet on any individual game. If a game does well, it's great for us. But if a game underperforms or we need to delay it so that we can make sure it's good, we've got this fantastic licensing business that can help kind of COVID it for us. So I think we've been pretty smart with it.

[Nilay Patel]

I'm curious about Exodus in particular, right. This is a big investment. It's one of the big games you're talking about. The studio head left in December right after the last trailer launched. Does this all feel stable to you? This industry feels stable to you? Because from our perspective, from the audience's perspective, everything just feels up for grabs all the time. In gaming right now, I think you

[Chris Cox]

get in games because it's a passion play and you can do amazing things like with the technology and the art. I don't think you get into games because it's a stable career and predictable day in and day out. It's kind of like the ultimate confluence of art and technology and it changes all the time. You know, the team on Exodus has been working on it since 2019. Our goal is to ship it in the first half of next year. I think it looks pretty good based on what I've played of it. I'm pretty bullish on it. And then we'll be pairing that with another game called Warlock later in the year from a team up in Montreal. So I think we won't just have Exodus, we'll have Warlock and we'll have this fantastic stable of digital games. And so. So like I said, any individual game has probably less than a 50% chance of being in the money. But when you hit, it hits well. And our perspective, this is one of those businesses like I referenced earlier, we don't think digital games is just a flash in the pan market. We're going to be patient, we're going to invest and if we lose money in the short term, we're going to build up our community, build up our capacity and build up our ability to be able to execute with excellence. And I think over time it's going to be a difference maker for us and something that we're happy we invested in.

[Nilay Patel]

Talk about being in the money in video games, I feel Like, I've spent a lot of time trying to understand the economics of video games and I still kind of don't. I'm not sure based on the industry, maybe no one does. Do you have to be on game pass to get distribution? Is all the money dlc? Are we just going to do prediction markets in video games Net, like, like, how do these things make money over time in a way that's sustainable?

[Chris Cox]

I think there's a ton of different ways to make money in video games and it's kind of publisher dependent and brand dependent. The three ways that we do it. First off, we have Magic the Gathering arena, which is a fantastic extension of one of the biggest card games in the world. People love it. It's highly sticky. It's been around since 2018. It's good, nice business for us. We do it with digital licensing, working with some of the best people in the world. That's super high margin, very high SC for us helps us really propagate and drive reach for our brands. And then we're selectively investing in publishing where we want to build that relationship with consumers. And we're doing that with a more traditional business model. We're not, we're not doing a whole bunch of complex battle pass or free to play economics. We're doing it more like, hey, here's price for a game. You get 40, 50 hours of content, you have a lot of fun, and then hopefully you want to go buy the See sequel. And we think that works with our brands. And based on the economics that we have and the studios that we have, like I said, their first couple games are going to cover a bunch of startup costs. And so those might not be as profitable as we want. But we think over time, as we start to optimize those studios, figure out how we leverage great talent spots like Eastern Europe and markets like Montreal where we have one of our biggest offices, we think we can get profitable at that over time and delight a lot of people in the process.

[Nilay Patel]

I want to wrap up by, by just talking about the relationship between these franchises, these brands, all this IP and fandoms. I have this joke in our newsroom right now that copyright law doesn't exist anymore. It's just a framework for business negotiations. But then you go out on the Internet and it's just everything's all for grabs all day long. And you can open Instagram and you can see literally any cartoon character punching any other cartoon character in the face. And it's just like, I don't even know what's going on here anymore. There's a part of that that, know, maybe it's bad for business, whatever. There's a part of that that's great for individuals because you get to participate more. And there's a part where the creators have totally lost control of their creations. Where do you stand on this? Like, do you feel like the fandoms have an appropriate amount of authority over your ip? Do you think you need to take some more back? Do you think OpenAI has just stolen it all from you? Like, where are you situated in all this?

[Chris Cox]

I think the fandoms have a lot of authority over our brands and what we make. Like, you know, any. Anyone who makes a great game that endures or a great IP that endures has to listen to their fans. They have to be able to figure out the signal through the noise. But that's always been the case. My view on AI and user generated content is as owners of multiple brands, you can't ignore it. You can't stick your head in the sand and just, it's not a game you're going to win if you just play defense. You got to figure out a way to engage the fans. You got to figure out a way to engage the platform and hopefully empower people to use your brands and use your content responsibly. And hopefully figure out a way that you can make an ecosystem where everyone wins, from the voice talent and the writers and the creators behind the properties, to the fans who just want to have some fun with their friends and share cool things with each other. Is it going to be disruptive? Yeah. Have people figured out the business model yet? No know, but, you know, people were writing about the demise of the music industry back in 2000 with the rise of Napster. And I think last I heard, the music industry is more profitable than ever because they figured out a way through it.

[Nilay Patel]

Yeah. But I would say middle class artists are not more profitable than ever. Right. I mean, that's what I'm curious about. Like who the music industry might make more money than ever, but it's Spotify and a bunch of big labels and musicians themselves are making maybe less money than ever. When I look at, you know, you open Instagram and there's the Monopoly man doing the Electrobreakers dance with Donald Trump. I'm like, I think the only person making money here is Mark Zuckerberg. Do you think the platform should have to pay you when your IP gets used in that way?

[Chris Cox]

What I think they should do and what I think will happen, I think is probably two different things. So I think you have to accept what's going on and figure out a way to work with it rather than trying to work against it. Because with AI and user generated content, the genie's out of the bottle and it's not going back in. You either accept it that and you figure out how you work with it or you don't accept that. And I think it's probably going to be a negative for you, an even bigger negative for you. If it's going to be a negative.

[Nilay Patel]

I'm also very curious about fandoms and ips and how they live and die and how they persist and how they find new audiences. Actually, Harry Potter is a good example of this. You have a big deal upcoming with Harry Potter. That fandom, I can't tell if it's reaching younger people. Right. Or if it's just the particular audience of Harry Potter from its height getting older to having more money to spend. And I can't tell there's new fan creations happening that would sustain Harry Potter in a way that you might need that to sustain IP now.

[Chris Cox]

Yeah, I mean, I think going back to that acronym, GEM squared, gamified, entertainment driven, multi purchase, multi generational. I think Harry Potter is like a power brand that exemplifies all four of those aspects. I can't share kind of like the research data we have, but certainly it's a very powerful multigenerational brand. It's almost like a rite of passage for a lot of kids to read the stories or watch the movies. With my kids, we spent three years for each of them reading the stories at bedtime and it was probably one of the nicest memories I have with them. I go to theme parks. I probably go to like three or four theme parks every year. I'm a huge theme park fan and I don't do it professionally. I do it because I'm a big nerd. When you go to the Harry Potter worlds inside of Universal Studios, A there's some of the best, best theme parks ever imagined. And B, like it's all ages. It's little kids holding stuffed owls, hedgewig owls to adults who have the Harry Potter glasses and like showing their school colors, go Slytherin. I suppose in my case I just think it's something that is really powerful. And you know, to that prior question about AI and user generated content, you know, when you have a brand that has an authentic connection with people, people and has a powerful kind of like core of lore and an authenticity associated with that, I think fans respect that they might make other stuff. I saw a pretty cool Dinobots movie, probably made with Sea Dance 2.0 over the weekend. It was pretty neat. But people know what the authentic Michael Bay movies are. People know what the authentic toys are. I think when you have that and you have that power center like a Marvel does, like Star wars does, like a Harry Potter does. Yeah, you need to protect it. You need to make sure people are using it responsibly. But I think you also need to have confidence in it, that it will help drive you through, like, these kind of sea changes. And that's certainly kind of what I think.

[Nilay Patel]

Let me ask you about that. I think this is why I'm asking about Harry Potter specifically. I know what a Michael Bay movie is because Michael Bay made those movies. He's the author of those movies. And I think Michael Bay's entire worldview is explosions. You know, like, I know what his politics are. And it's like, stuff should blow up more. JK Rowling has very loud politics that are turning off a lot of younger consumers. Right. Her transphobia is turning off a lot of younger consumers. This is why I'm talking about fandoms coming to an end. I can see in our. The feedback we get about when we write about Harry Potter. Younger people saying, why would I support this fandom? Why would I support this ip? And maybe she should just shut up and it'll be fine. And it would become the power center that it is. But you've got creatives on your team.

[Chris Cox]

Team.

[Nilay Patel]

Right. The last time you were on the show, you talked about being stewards of inclusion. How do you make this decision when the creator of the property is sort of actively reducing the fandom and, in fact, hurting a lot of people in that fandom?

[Chris Cox]

Yeah. I mean, for me, it's separating the art from the artist and going to kind of what the core fans want. And, you know, I'm not going to get into the politics around it other than to say we very strongly support. Support diversity and inclusion inside of Hasbro. We're very proud of it, and we're very proud of the diversity of viewpoints and backgrounds that we have in our employee base. And so, you know, I think Harry Potter is a wonderful franchise. I think it's done a great job of bringing joy to the world. And I'm enjoying. I'm looking forward to being part of that.

[Nilay Patel]

Yeah.

[Chris Cox]

Just like I am with all the other brands we support.

[Nilay Patel]

How do you think broadly about, again, when I say new IP be all the people who make new AP are also out on the platforms, right. Every new creator is an influencer and they have like a huge library of things they've said and done in the past. Is that something that you think of as a danger? Is that something that you're on the lookout for or is it your laser focused on the commercial potential of the franchise?

[Chris Cox]

I definitely think you have to be cognizant of it and I think you have to make a business decision. You have to balance kind of. Again, I tend to focus more on the art than the artist, but obviously, obviously you have to think about both.

[Nilay Patel]

Chris what's next for Hasbro? What should we look out for?

[Chris Cox]

You're going to be see some cool aged up properties or toys and collectibles from maybe brands that you wouldn't expect. We have a new Play DOH line called Blooms which kind of takes the whole kind of flower mystique and applies it to Play Doh geared towards adults. It's pretty cool. I think it was probably one of the best in show at Toy Fair last week at New York Toy Fair Fair. I think you're going to see some of those exciting new innovation initiatives that I talked about that we've been kind of incubating for the last couple years and then obviously my hope is that you're going to see some really kickass video games come from us that are going to blow you away.

[Nilay Patel]

Well, you're going to have to come back sooner than three years. Thank you so much for being on Decoder.

[Chris Cox]

Yeah, no, thanks so much for having me.

[Nilay Patel]

I'd like to thank Chris for taking the time to speak with me and thank you for listening. I hope you enjoyed enjoyed it. If you like to let us know what you thought about this episode or really anything else at all, drop us a line. You can email us atdecoder the verge.com we really do read all the emails. You can also hit me up directly on threads or Blue sky. We're also on YouTube. You can watch full episodes at Decoder Pod. We also have a Tik Tok and an Instagram there at Decoder Pod as well. They're a lot of fun. If you like Dakota, please share it with your friends and subscribe wherever you get your podcasts. Dakota is a production of the Verge and part of the Box Media Podcast Network. The show is produced by Kate Cox, Nick Stat and edited Ursa by Right. Our editorial director is Kevin McShane. The Decoder Music is by Breakmaster Cylinder. We'll see you next time. Abercrombie's new spring collection has every outfit you need for the season of long weekends, full of linen shirts, sweaters and coastal shorts designed to go from your desk straight to days off. For me, the collection's must have are the baggy trousers with the casual fit and tailored look for endless versatility. Get your closet ready for spring plans. Shop Abercrombie in the app online and in stores. This episode is brought to you by Nespresso Introducing Vertuo up, the latest in a long line of innovation from Nespresso. It's innovation you can touch, sense and taste in every single cup. With a three second start, easy open lever and dedicated brew over ice cream button, it's even easier to enjoy your coffee your way. Sip for yourself. Shop Vertuo up [e-mail].