6 ms·

> they don't want to be in the legacy media licensing business. Isn't that business basically free money? The way I see it, no capital investment is needed.

> they don't want to be in the legacy media licensing business. Isn't that business basically free money? The way I see it, no capital investment is needed. You just need to keep a few accountants and lawyers around to handle occasional licensing paperwork. Am I missing something?

dageshi 3y ago
It might not be that straightforward when dealing internationally?
- gavinray 3y ago
  But doesn't that mean that at least nationally, it's essentially a money printing machine? Because this is my layman's conception of how media licensing works, at least.
fweimer 3y ago
Does it matter? Hasbro probably has growth targets. They may have concluded that price hikes for legacy content matching their growth targets were unlikely to be feasible.
Stasis5001 3y ago
It may be "free money" as you frame it. But a cash stream that provides n dollars per year forever can be valued in today's dollars, assuming a discount rate of d, at n / (1-d). So it's reasonable to prefer cash now to revenue forever, at that exchange rate, depending on your corporate interests. https://www.investopedia.com/terms/p/present-value-annuity.asp https://www.investopedia.com/terms/p/present-value-annuity.a...
- Denvercoder9 3y ago
  You have the right idea, but you got the formula wrong. That's evidenced in the source you link, but you can also reason it from first principles: a higher discount rate should make the cash stream less valuable, not more. The correct formula is n / d.
  - Stasis5001 3y ago
    Oops, that's what I get for mathing before coffee-- mixed up the formula for \sum (1+r)^n vs. \sum r^n
- rf15 3y ago
  This strikes me as a shortsighted, risky, and frankly unsustainable attitude for a company. It's no surprise they're struggling.
  - captaincrisp 3y ago
    The discount rate is doing a lot of work here. There is a discount rate such that we're not talking about shortsightedness. Getting it right is difficult. But as an example, how much would you buy an investment that pays a hundred dollars, guaranteed, next year for? Trivially, the discount rate includes at least the expected amount of inflation; it's not worth a dollar. For assets line like IP you have to factor in how risky the returns are, how much investment you'd have to make to see them (e.g. making a movie), and overall strategy (do we want to be in that line of business). All this to say - if you have IP that pays 10 million a year, you can value future returns on that IP in today's dollars. If someone offers you more than that to buy it, you should take the deal; you come out ahead.
jldugger 3y ago
It is very much not free -- they apparently raised a lot of debt to buy eOne, and they are going to have find a way to pay that off or roll it over into a much, much higher interest rate environment than 2019.
oliwarner 3y ago
Well consider the recent spate of music artists who've sold their back catalogues. They're selling that future income for a lump sum [while they can enjoy it]. Hasbro is doing the same. Swap fifty years of slow income for instant liquidity. A company with as many steels in the fire as Hasbro should be able to use that to generate a lot more money than through legacy property.

dageshi 3y ago

It might not be that straightforward when dealing internationally?

gavinray 3y ago
But doesn't that mean that at least nationally, it's essentially a money printing machine? Because this is my layman's conception of how media licensing works, at least.

fweimer 3y ago

Does it matter? Hasbro probably has growth targets. They may have concluded that price hikes for legacy content matching their growth targets were unlikely to be feasible.

Stasis5001 3y ago

It may be "free money" as you frame it. But a cash stream that provides n dollars per year forever can be valued in today's dollars, assuming a discount rate of d, at n / (1-d). So it's reasonable to prefer cash now to revenue forever, at that exchange rate, depending on your corporate interests. https://www.investopedia.com/terms/p/present-value-annuity.asp https://www.investopedia.com/terms/p/present-value-annuity.a...

Denvercoder9 3y ago
You have the right idea, but you got the formula wrong. That's evidenced in the source you link, but you can also reason it from first principles: a higher discount rate should make the cash stream less valuable, not more. The correct formula is n / d.
- Stasis5001 3y ago
  Oops, that's what I get for mathing before coffee-- mixed up the formula for \sum (1+r)^n vs. \sum r^n
rf15 3y ago
This strikes me as a shortsighted, risky, and frankly unsustainable attitude for a company. It's no surprise they're struggling.
- captaincrisp 3y ago
  The discount rate is doing a lot of work here. There is a discount rate such that we're not talking about shortsightedness. Getting it right is difficult. But as an example, how much would you buy an investment that pays a hundred dollars, guaranteed, next year for? Trivially, the discount rate includes at least the expected amount of inflation; it's not worth a dollar. For assets line like IP you have to factor in how risky the returns are, how much investment you'd have to make to see them (e.g. making a movie), and overall strategy (do we want to be in that line of business). All this to say - if you have IP that pays 10 million a year, you can value future returns on that IP in today's dollars. If someone offers you more than that to buy it, you should take the deal; you come out ahead.

jldugger 3y ago

It is very much not free -- they apparently raised a lot of debt to buy eOne, and they are going to have find a way to pay that off or roll it over into a much, much higher interest rate environment than 2019.

oliwarner 3y ago

Well consider the recent spate of music artists who've sold their back catalogues. They're selling that future income for a lump sum [while they can enjoy it]. Hasbro is doing the same. Swap fifty years of slow income for instant liquidity. A company with as many steels in the fire as Hasbro should be able to use that to generate a lot more money than through legacy property.