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Executives

Debbie Hancock

Brian D. Goldner - Chief Executive Officer, President, Director and Member of Executive Committee

Deborah M. Thomas - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

John A. Frascotti - Chief Marketing Officer and Executive Vice President

Samantha Lomow

Eric Nyman

Victor Lee

Wiebe Tinga

Analysts

James Hardiman - Longbow Research LLC

Eric O. Handler - MKM Partners LLC, Research Division

John Taylor

Michael Kelter - Goldman Sachs Group Inc., Research Division

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Sean P. McGowan - Needham & Company, LLC, Research Division

Stephanie S. Wissink - Piper Jaffray Companies, Research Division

Gerrick L. Johnson - BMO Capital Markets U.S.

Hasbro, Inc. (HAS) Investor Day Conference September 10, 2013 10:00 AM ET

Debbie Hancock

Good morning, everyone. I'm Debbie Hancock, Hasbro's Vice President of Investor Relations, and we're very happy to welcome all of you here to Hasbro's Investor Day here in Providence, not Nantucket. For those of you got confused, we're in Providence. And we're really happy you're all joining us. Today, we have a great group of presentations and speakers for you to listen to this morning and then this afternoon. You should have a copy of today's agenda and the bios of all the speakers that you'll see.

But before begin our presentations this morning, I want to remind you that during the formal presentations and the question-and-answer session that follow, Hasbro and Hasbro's management may make forward-looking statements concerning management's expectations, goals, objectives and similar matters. These forward-looking statements may include comments concerning the company's future products and entertainment plans, anticipated product performance, opportunities and strategies, financial goals and expectations, costs and anticipated cost savings and expectations for achieving our objectives. There are many factors that could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in these forward-looking statements, including consumer and retailer interest in and acceptance of our products and product lines; changes in marketing, entertainment and business plans and strategies; and future global economic conditions, including foreign exchange rates. Some of those factors are set forth in our Annual Report on Form 10-K and quarterly Form 10-Q, in today's meeting and in our other public disclosures. We undertake no obligation to update any forward-looking statements made today to reflect events or circumstances occurring after the date of this meeting. [Operator Instructions]

Now it's time to get started. Please welcome our CEO, Brian Goldner.

Brian D. Goldner

Thanks, Debbie, and good morning, everyone, and welcome to our new Providence offices here. We're excited to have you spend the day with us here, and we're looking to spending the day and outlining our progress as a company. We're going to share with you how we're going to profitably grow Hasbro for the long-term through innovation, rich content and immersive consumer experiences with a streamlined organization focused on the brands with the greatest long-term potential.

Now I know you're all here with one question in mind. And that is, why should you be excited about Hasbro. Well, today we're going to share with you why all of us here are excited and very optimistic about our future not only for our industry but specifically for our company, for Hasbro, and why we feel we have the tools in place to build our business for our shareholders for the long term.

Now I'm going to kick things off with a strategic overview, then Deb Thomas is going to give you a financial update; followed by John Frascotti, our Chief Marketing Officer, who'll lead us in a review of some of our brand initiatives for 2013. After lunch, we'll hear continued brand initiatives, and we're going to hear from Samantha Lomow, our Head of Girls and New Brands; Eric Nyman, our Head of Games, Preschool and Boys; and Victor Lee, the Head of Digital Marketing for Hasbro. And we'll conclude the day with a Q&A session.

Delivering Hasbro's strategic plan revolves around successfully leveraging 3 global trends. First, the emergence and growth of the global middle class, especially in emerging markets; second, the growth of brands across all consumer touch points globally; and third, the global growth of gamers and gaming. And Hasbro is uniquely positioned with our strong global brand and our organization driven to capitalize on these trends.

Now let me remind you of our Brand Blueprint. And this continues to drive all of our thinking in terms of our brands and brand building. The 2.0 speaks to our increased focus on brands with the strongest global potential and the further investments we're making and have made in Global Consumer Insights.

So okay, let's start by talking about the first trend benefiting Hasbro. We're seeing the emergence and growth of a global middle class, and the projections indicate that the child population will grow by 4% by 2020, which translates to a total of 1.8 billion kids or 70 million more than today. Given that industry growth is coming more from emerging markets, we're seeing a rise in the middle class who have more money, and we're seeing rapid urbanization. Or said another way, by 2020, the number of households with middle-class income in China and Brazil alone will be the same number of households as in the U.S. with middle-class income. So in essence, we are adding another U.S. market.

Over the last 5 years, we saw an acceleration of industry growth rates in Latin America and in Asia Pacific with more modest growth coming from Europe and a flat industry in the U.S. Now the blue is Euromonitor's historical data from '07 to '12. The orange represents Euromonitor projections. And as we told you in February, we hope these numbers can be achieved, but we're planning for more modest growth.

Given these trends, you can see why emerging market growth is far outpacing developed economies. But importantly, Hasbro is outpacing industry growth in emerging markets by more than 2x over the last 5 years. Now at more than 10% of our revenues, we expect to see double-digit growth in emerging markets continue. We've achieved positive profitability ahead of schedule in all major emerging markets except for China, and China is a longer-term focus with great opportunity. The trend in growth is continuing in 2013, and you'll hear more about that from Deb Thomas.

In emerging markets, Hasbro is beginning to be perceived as a global branded play company that also makes toys, whereas in developed economies, Hasbro is perceived as a toy and game company beginning to deliver branded play experiences. Or to paraphrase the Head of our European business, the less developed the market, the faster the blueprint works.

Against the backdrop of these brand blueprints, you can see it really taking place in Russia, whether it's our My Little Pony and Littlest Pet Shop digital games from Gameloft, our extensive licensing program, our My Little Pony retail presence with the giant billboard you see here from Detsky Mir, which is a major Russian retailer, or the strength of our immersive entertainment experiences with movie and television, television on Carousel, the Russian TV network, where our brands are truly connecting with Russians.

The second major trend from our 3 key planks is that brands are growing across consumer touch points globally, and our brand architecture prioritizes how we focus our resources globally. John Frascotti will be talking more about this shortly.

When you look at our franchise brand revenues from 2002 to 2012, you can see that we've generated strong growth with these franchise brands. The added emphasis on these brands should help us as we build our business. And we are focused on innovation, connecting with consumers and further franchise development.

Now I'd like to walk you through an example using Transformers. So let's walk through this. From 2006 to 2012, which were both non-movie years for the brand, the brand grew by nearly 2x. If you look at Transformers before the first movie in '06, you can see how just dramatically there has been an impact based on the Brand Blueprint. In 2006, 100% of our toys were core and not entertainment based. Last year, 27% were core. In 2006, we had $0 coming from digital; last year, 4%. The same is true with immersive entertainment experiences. That went from 0% to 11%. And finally, our lifestyle licensing business has grown from 1% to 6% last year. Finally, when you look at Transformers geographically, you'll see that in 2006, 73% of the business was U.S. based with limited business in the emerging markets; and in 2012, 42% of the business was U.S. based with 37% in Europe and 21% in emerging markets.

Now we are just beginning this process with My Little Pony. We increased revenues 65% from 2010 to 2012, turning around a brand that was on the decline. And our TV entertainment strategy that we implemented in 2010 is the key driver of this turnaround. Through the first half of the year, Pony revenues are up 50%.

To accelerate our growth and ensure a focus on our most important brand, we're moving to franchise management against our 3 critical brands: Transformers, My Little Pony and Littlest Pet Shop. And our other franchise brands will follow.

Our company is evolving in an environment of extreme nonlinear shifts and market turbulence. We're not choosing between these screens but developing for all of them because, as you can see, they're all growing. And we know this. TV should have a compound growth rate of about 4% in viewership over the next 5 years; movies, more than 5%; mobile, nearly 10%; and digital is growing by leaps and bounds.

Now we all know entertainment works. And by entertainment, we mean all screens: mobile, TV, digital, movies. You name it. We know entertainment keeps IT fresh and top of mind. It shows kids how to play. And it's easier for brands to break through.

If you look at all the licensed brands globally, there are 37 that generate more than $100 million at retail. 32 of those 37 licensed properties are entertainment based. 1/4 of the toy industry sales are generated for entertainment-based brands, and we know that media consumption continues to rise as kids multitask across platforms.

So let's look at the U.S. industry. On the surface, as you look at the $20 billion U.S. toy business, 25%, or $5 billion, are entertainment based; 44%, or $8.8 billion, are branded toys like Furby and Nerf; and the final 31%, or $6.2 billion, are non-branded or generic. Entertainment toys, we know, carry a much higher price point than non-entertainment toys. But if you take out non-branded toys and you take it out of the equation and you look at the available universe today, you'll see that entertainment-driven brands represent 36% of the $13.8 billion branded toy business in the United States. So keep that 36% number in mind for a moment.

So while Hasbro has clearly led the way in entertainment-backed brands, the industry is following. From 2006, which is before our first major motion picture, to 2012, entertainment-based properties have delivered a 19% growth rate for Hasbro, bringing the total entertainment-backed revenues for Hasbro and our partner brands to 38% last year. And TV was the biggest driver of this growth.

When you apply this to the performance of our categories, you can see growth by category: Preschool, Girls, Games and Boys. Our core business is in blue and our growing entertainment business is in gold. Entertainment is growing in importance in several categories but especially true when you look at the Boys business. Now when you look at industry data, you'll see that this trend is true as well not only for Hasbro but across the industry as well.

There are 5 key elements to executing Hasbro's all-screen strategy globally. We all know that great storytelling and content are essential to the success of building compelling, entertainment-backed brands. To achieve this, we are creating content for all screens globally. Our wholly owned Hasbro Studios-produced series continue to deliver impressive ratings around the world. This enables us to execute our Brand Blueprint across multiple platforms while approaching the market with real content and delivery innovation.

We have virtually full sales coverage globally across all regions, meaning everywhere we have a retail presence, we are activating our brands with content, whether that's through broadcast, digital streaming, downloading, short form or DVDs. With placement in 180 territories, our shows are seen in more countries than many of our competitors, even many of those that own networks globally, which is a real testament to the strength of our brands' franchises and the quality of our content.

Our series continue to drive ratings on the networks of our global broadcast partners. I'm pleased that the rollout of our newest series, Littlest Pet Shop, is already in a virtual ratings tie with the #1 show on The Hub, My Little Pony. In Germany, we've seen 54% audience growth for Transformers Prime. In Brazil, My Little Pony is the #1 show for girls.

One other impressive milestone that I'd like to highlight is in China, where Transformers Prime has been airing on a secondary channel, CCTV-6, on weekends. And it's averaging 57 million kids 4+ watching the show. That's about 10% of the total audience of 600 million viewers. It's a pretty big number. So as you can see from the chart, when we align content across multiple platforms with retail initiatives, it is clearly driving POS globally.

Having all screen strategy means that we have to be multi-platform in our distribution approach. And we're very proud of the fact that for 3 conservative quarters, My Little Pony has remained one of the most popular stream shows for girls on Netflix. Transformers Prime, Transformers Generation 1 and Rescue Bots are among the top stream shows in China with tens of millions of viewers per month. And our content is on many of the top digital download and streaming platforms globally.

We have taken the momentum in My Little Pony, that brand, and expanded its reach by creating My Little Pony Equestria Girls, a fully integrated and content and retail strategy, which extends the brand. In its theatrical launch on 360 screens in the U.S., My Little Pony Equestria Girls the movie, our first full-length animated film that was in theaters this summer, has generated over 21 million impressions. We've also made more than -- we made back more than our initial investment already in the Equestria Girls feature, and Deb is going to take you through the economics very shortly.

We're also having great success in China with our local series formats based on Family Game Night and Play-Doh with a series known as Pei Le Doh, and we're now rolling out more broadly in Asia and to the rest of the world.

Let's take a look at Pei Le Doh programming airing in China.

[Presentation]

Brian D. Goldner

The consumer impact of programming also helps us with marketing events for Play-Doh. Here's a photo of a major customer event we held in Shanghai featuring the entertainment, product and great retail experiences for kids.

Moving to the Hub Network, it continues to have positive momentum and has a plan to achieve pretax profitability in 2014. Driving this plan is the continued growth in ratings as the network is on track for the eighth consecutive quarter of ratings growth in key demos. Also, the percentage of kids watching TV with an adult, known as co-viewing, remains the highest among kids' networks, and this is a key metric for our advertisers. Important to us, Hasbro Studios shows remain among the highest performers on the Hub Network.

Let me begin by describing this chart. The 2 most comparable kids networks to the Hub did not begin ratings until after 8 quarters after their launches. So as you can see then, the Hub Network is now very competitive as we head toward our third anniversary. Under the leadership of Margaret Loesch and in partnership with the great team at Discovery, the Hub Network is making great, great progress and delivering quality programs from a number of studios. Margaret also has some great new programming plans for the network going forward.

In addition to our extensive television programming, we have a number of important film projects. Transformers 4 is in production, and G.I. Joe is in preproduction. We continue to aggressively develop Stretch Armstrong, and we're looking for an optimal date beyond 2014 for this film in market. We're also developing a number of other brands, including moving into production on Ouija next week. It's become an increasingly strong movie lineup for Hasbro and for our partners.

Importantly, next year, Transformers: Age of Extinction is due in theaters on June 27. The film is currently in production with Michael Bay directing. It has an all-new cast and story, and for those of you who are joining us today in person, we're delighted to be able to give you an early preview of the film. The filmmakers were very kind to allow us to share this, but we just have to ask you to please not write about what you're going to see. Just enjoy what you see. It's highly confidential. We're going to sign off from the webcast for a few moments. So again, please don't write about the specifics of what you're going to see, and we really thank you for your partnership here. And let's take a look at Transformers: Age of Extinction.

[Presentation]

Brian D. Goldner

So we find that pretty exciting, especially given the fact that, as you see, none of the robots have been put in the movie yet. So that's obviously a little bit behind-the-scenes on how our movies get made.

But continuing with entertainment-backed properties, let's talk about our partner brands, which make up another piece of the top priority bar of our brand architecture. We have tremendous partners across demographics who we're aligned with over the long term to develop great toys and great games. Over the last 5 years, our revenues with strategic partners has grown at a growth rate of 12% and operating profit at 15%. These faster-than-average growth rates speak to the entertainment backing these brands and the work being done around the world. Over this 5-year period, our strategic partnerships represented just a little bit less than 20% of our total revenue and slightly less than that in profits. Our partnership with The Walt Disney Company is extremely important to us. And we're very happy to extend our agreements. Since Disney acquired Marvel in 2009, we had shipped over $2 billion in net revenue in Marvel, Disney and Lucas-branded products. And 2012 was our biggest year yet. And I'm very happy to announce that we're expanding our strategic relationship with The Walt Disney Company to now include global rights for gaming and other play experiences based on major Disney properties, including Disney Princess and Disney Junior. The deal also includes rights, include Mr. and Mrs. Potato Head, toys that are based on Disney Princess characters.

As we look ahead, Marvel and Star Wars entertainment pipeline in the coming years is tremendous, both in films and with great brands like Spider-Man, Avengers and Star Wars and new properties like Guardians of The Galaxy and Ant Man. Thanks to our friends at Disney, you'll have the opportunity to view some of the footage for the upcoming Marvel slate of entertainment. And we want to thank Brian Siegel in advance for being here this afternoon. But again, on behalf of our partners, enjoy the footage you're going to see later. But again, we ask you not to write about specifically what you see. The Walt Disney Company is also developing great television entertainment distributed globally in support of their brands.

The third global trend we're aligning Hasbro and our brand power behind is a global growth in gamers and gaming. No longer just a board and a spinner, gaming has evolved and Hasbro and our consumer-driven innovation is well-positioned to leverage this trend. Let's start by recapping the work we've done in our gaming group over the last few years so that we could fully leverage this opportunity. In 2011, we established The Gaming Center of Excellence, bringing in new talent from outside the traditional board-gaming arena and investing more significantly in our gaming efforts. This team put together a 10-point plan, which we shared with you at that time. And they've been executing this plan since that time. In 2012, we worked closely with our retailers to dramatically lower inventory. And in the U.S., our games inventory declined by more than 30% by year-end. This gave us fresh shelf space to deliver the first of new innovations from our gaming team, including all new product and marketing campaigns. And as you know, the result was 2% growth in games revenue for 2012.

In 2013, we're looking to continue that momentum. Revenues were up 22% in the first half of the year. And we have a number of new initiatives. Additionally, we've just bolstered our digital gaming capabilities through our investment in Backflip Studios, which I'll speak to more in a few moments. Later today, you'll hear from John Frascotti and Eric Nyman as they talk in more detail about our work in the gaming space and the innovation we are creating across consumer segments and expansive demographic coverage. This is one of Hasbro's unique strengths and a competitive advantage. Now the results are very encouraging.

And while the games business is very back-end and holiday-weighted, as you know, our first-half revenues grew in each of the segments that we've shown you and that we track.

Importantly, worldwide gamers continue to grow at a rapid pace, with smartphones and tablets growing the fastest. 33% of all downloads to smartphones and tablets are games, but 66% of all the money spent on smartphones and tablets were on games. That's one of the main reasons we acquired Backflip, elevating our ability to participate in digital gaming and the convergence of digital and analog play. Backflip is a profitable mobile games company and studio based in Boulder, Colorado. They have established brands like DragonVale, Paper Toss and NinJump. And we're developing new brands. We're really excited about our opportunity and the talent that we now have on board to help us more fully participate in mobile gaming.

Let's take a look at a short piece to give you some insight on Backflip Studios.

[Presentation]

Brian D. Goldner

So Backflip rounds out with already a very strong mobile gaming presence for Hasbro brands through our partnership with EA, Gameloft and DeNA. We've developed top grossing apps for brands like Monopoly, Scrabble, Littlest Pet Shop and My Little Pony. We recently signed a new agreement with EA, which focuses on 8 core Hasbro brands and continues our successful partnership. We've also recently signed an agreement with Ubisoft for console gaming for several gaming brands. Activision continues to develop console games for Transformers, and will be the console gaming partner for Transformers in 2014. We are clearly giving the growing base of gamers the opportunity to play with our brands anytime and anywhere they want.

So now you know why Hasbro. After the investments we've made and the work we've done to refocus our organization, we have a streamlined global organization with excellent talent in place, which can deliver against all of these global trends. We have the brands to reach across consumer touch points, across platforms and multimedia. We have the strategy that fosters innovation, which differentiates Hasbro and positions us for global success. Clearly, we are creating the catalyst for sustainable and profitable growth, which leads us to our medium-term outlook, which we updated in February, and we're reiterating today. Through the execution of our branded play strategy, Hasbro's focused on delivering long-term profitable growth and enhanced total shareholder returns. In terms of revenue and developed economies, we'll grow primarily through market share gains. And Hasbro is targeting double-digit growth in emerging markets. In terms of operating profit over the next several years, we expect underlying operating profit, asset restructuring charges to grow faster than revenues. This growth will be delivered by global investments across fewer, more significant global initiatives and profitability improvements in emerging markets. We expect to generate operating cash flow in the amount of $500 million on average. And we'll use that money to invest in our business and return cash to shareholders through dividend and buyback programs.

And now, I'd like to introduce Deb Thomas, our CFO, who is going to speak in more detail about these objectives. Deb?

Deborah M. Thomas

Well, thank you, Brian, and good morning, everyone. And I'd also like to welcome you to our new Providence office. I hope you've all had the opportunity to see what a beautiful building we have here. So Brian has just taken you through our strategy and how we're aligning our efforts around where we believe we can best differentiate Hasbro and deliver long-term profitable growth in our business. What I'd like to do during our time together is to take a deeper dive into our outlook and help connect us with our strategy and address some of the questions we've been hearing from you.

So let's begin with revenues. Over the past 10 years, through the execution of our branded play strategy, we've delivered a compound annual growth rate in revenues of 4%, adding up to just under $1 billion to our top line revenue since 2003. However, over the past 5 years, this revenue growth is 1%. This 1% reflects a number of factors: a global recession, which has impacted most developed economies; a need for us to reinvent our gaming teams and gaming business; and a change in our approach to the U.S. and Canada business. While we can't solve the economy, we believe we have our gains in U.S. and Canada business moving in the right direction. And that we've also aligned our business and are focused around the areas which give us the greatest long-term opportunity to maximize Hasbro's biggest assets, our brands and our people.

Over this 5-year period, the U.S. and Canada business took a step back. While International, including our emerging markets and our Entertainment and Licensing segment have provided the fastest growth in the asset to the U.S. and Canada business. First and foremost, our focus at Hasbro is on developing great, innovative brand experiences, especially in our toys and games. This supports opportunities in our U.S. and Canada and International segments. But just as importantly, we've invested in and are prioritizing our efforts in the fastest growth areas you see, namely emerging markets and Entertainment and Licensing.

So let's begin with our focus on creating innovation in our brands. Our new leaner organization is leveraging the global opportunity in our franchise brands. Brian outlined for you the data that supports these brands are delivering greater than company average revenue growth. And we're investing in them because we believe they can be bigger, bigger in toys and games, bigger in licensing and bigger globally. Secondly, we have tremendous global partnerships with companies that are developing top-tier brand experiences and a robust entertainment pipeline. They, along with Hasbro, are also developing new brands, brands like Marvel's Guardians of The Galaxy, which we'll get a sneak peek of later today, and brands like Trolls through our new relationship with DreamWorks Animation.

We're then executing these brands across the blueprint. Through our franchise brand growth, we're demonstrating that this is the right formula for driving successful brands. Entertainment-backed brands, emerging market expansion and diving faster growth from Entertainment and Licensing are top priorities for us. So we start with entertainment. Brian shared with you the chart and data on how entertainment is growing in importance for Hasbro, as well as for the whole industry. Our investment in creating immersive entertainment around select brands has resulted in entertainment-backed revenues growing from 17% of our total mix in 2006, which is prior to the first Transformers film, to 38% in 2012. The core business of non-entertainment brands has stayed essentially flat during this time period. However, by focusing on key brands, which do not have entertainment support such as Nerf, Play-Doh and Magic: The Gathering and the consumer insights that surround those brands, within this core, they have grown.

While feature films are very important entertainment, and have grown revenues dramatically over time, television animation from Hasbro and our partners' brands is the biggest driver of growth, increasing more than 5x since 2006. We've made investments in developing award-winning programs to build our brands globally. And we're seeing these pay off. In 2013, we are on track to deliver against our commitment made when we first communicated our television strategy and our investment in the Hub Network of having an incremental $700 million of television-backed revenue from our programming. In television, we control the development priorities. And we control the timing.

The second point around the blueprint that I spoke to was the strong opportunity we continue to see in the emerging market. As you're aware, over the past several years, we've invested in establishing our presence in this market. These investments are delivering positive returns. At year-end, we shared that our emerging markets now represent 10% of Hasbro total revenues. And in the first half of 2013, emerging market revenues have continued to grow, increasing 28%. Within the emerging markets, our top priorities remain the biggest opportunity in Russia, Brazil and China. While our major investments are behind us, future investments could include offices in a number of additional countries, including Thailand, Indonesia and the Philippines, and will be more modest in amount. Our target remains delivering double-digit revenue growth in emerging markets. However, the rate of growth will most likely, in percentage terms, be lower or slower than the current levels as our businesses continue to grow.

Our partner revenues have grown at a 12% CAGR from 2007 to 2012, with growth across the U.S. and Canada, International and emerging market regions. Additionally, our investment in establishing a strong presence in the emerging markets positions us to further grow revenues with our partner brands globally with an even greater potential for growth outside of the U.S.

The third area of focus for revenues is the execution of our blueprint and the opportunity in Entertainment and Licensing. The $181 million in Entertainment and Licensing revenues we reported in 2012 were pretty evenly distributed between lifestyle licensing, digital gaming and entertainment. As I showed earlier, this segment has grown at a 16% 5-year compound annual growth rate. But more importantly, in 2007, the vast majority of the revenues were lifestyle licensing only. Our Entertainment and Licensing business is growing, but what is the upside? If you look at a typical entertainment-backed as brand, which do not start as a toy, 70% of the consumer spend at retail is on licensed goods outside of toys and games. For Hasbro, it's nearly the opposite, with approximately 65% of the consumer spend going toward toys and games and only 35% in licensed goods. While we aren't targeting the 70% to 30% split of the brands we've seen, we do believe we could achieve a 50/50 split between consumer spend at retail and toys and games and other categories.

When you translate that into our reported revenues over the medium term, we believe that Entertainment and Licensing can be 8% to 10% of Hasbro total revenues at an operating profit that's twice the rate of our toy and game margin. One step we're taking toward that end is increasing our participation in digital gaming through the acquisition of Backflip. Today, our digital gaming model has been primarily partner-based, which provides us the opportunity to work with the best partners in the industry and our brands. The revenue is royalty-based, which means it's a high-margin, but lower revenue and operating profit dollars. As we said in the past, from 2009 through 2012, Hasbro brands digitally represented $1.5 billion at retail cumulatively, but we only participated in a small piece of that. In the future, with the addition of the team, the talent and the brands at Backflip, we see a combination of partner and self-published games where we continue to work with great partners in the digital space, but also more fully participate in the revenue and profit opportunity in digital gaming.

Backflip will begin to be consolidated into our financials in the third quarter of 2013. 100% of Backflip's revenues, cost and expenses will run through our P&L prior to pretax earnings. 30% of the studio's net earnings will be represented in a new separate line, net earnings attributable to noncontrolling interest. Ultimately, our net earnings and earnings per share will include our 70% ownership in the studio.

Specific to 2013, we continue to believe the acquisition will be neutral to slightly accretive to EPS as we record a half year of revenues and expenses. However, this is likely to be slightly dilutive in the third quarter and accretive in the fourth. Additionally, it should be cash-flow positive. Backflip will be reported in our Entertainment and Licensing segment similar to our other digital gaming revenues. While I'm not going to break out specific financials, this illustration depicts proportionally what our 2012 Entertainment and Licensing revenues would have been with our anticipated 2013 revenue contribution from Backflip, which remember is only for half a year in 2013. In the near term, Backflip's revenues will continue to be derived from the existing Backflip IP. And we anticipate Hasbro-branded games in the second half of 2014 at the earliest.

So let's move from revenue to our operating profit expansion opportunity. Our 10-year compound annual growth rate is, again, very strong, increasing 11% over the period. Over the past 5 years, our operating profit has grown faster than our revenues. Although similar to revenue, the growth trend is slower than the 10-year trend. We are, however, at our highest operating profit margin level in that 10-year period. But how do we expand operating margins from here? There are 5 areas of the greatest opportunity for diving operating profit margin improvement as we go forward over the medium term. These include our increased focus on our franchise brands to build bigger, more global and more profitable brands; growth in Entertainment and Licensing, which delivers 2x the profitability of toys and game revenue, and is expected to grow by at least 2x the rate; and profitability improvement in our emerging markets, the savings being created through our cost savings initiative; and lower intangible amortization in future periods.

So let's begin with a case study on one of our franchise brands, My Little Pony. As you've heard today, My Little Pony is a brand which has benefited from entertainment and delivered several years of very strong growth. And it's really just getting started. Samantha will speak this afternoon about the work the global brand team has done on My Little Pony in an all new IP, Equestria Girls. However, from a financial standpoint, it is an interesting case study on how to cost effectively leverage entertainment.

As part of the plan for expansion of the brand, Hasbro Studios and the global brand team embarked on its first venture in film, creating a full-length movie based on an integrated content and retail strategy. And that content has been embraced by fans. Let's look at the trailer for the movie.

[Presentation]

Deborah M. Thomas

Isn't that great? The development of the film was a small investment captured within our existing program development budget. The film was distributed through home entertainment and a theatrical deal with Screenvision. These 2 distribution agreements more than covered our production investment. We then sold the film through our global television distribution network, including the Hub Network in the U.S., where it helped drive a nice increase in ratings, on international networks and through digital streaming partners. Most importantly, this launched an all-new IP for Hasbro which is driving incremental merchandise revenues. In the end, we anticipate our total return to be 16x our initial investment in 2013.

This is a model that potentially makes a lot of sense for a number of other brand initiatives. So let's take a look at the TV commercial currently running in this exciting new IP.

[Presentation]

Deborah M. Thomas

I have a hard time standing still when I hear that song. Second, within operating profit is the positive impact from our Entertainment and Licensing segment. Over the past 5 years, this segment's revenue growth trajectory is strong and driving profitable growth in our business. The segment's operating profit is on average twice the level of our toy and game margins. In 2010, we began recording amortization associated with our television programming. Since that time, we've begun to record licensing revenue from the investments in TV, and as I just outlined, film, which helped to offset this investment. While we believe this segment could be 8% to 10% of our revenues in the medium term, this translates to 20% of our operating profit over that time period.

Next, let's look at our emerging markets. In 2012, our emerging markets business delivered 9% operating profit margin in total. Other than China, all of our major markets achieved profitability ahead of our plan. In the first half of 2013, profitability continue to grow, increasing more than fourfold, albeit on a small base. Over the medium term, we anticipate emerging market margins could expand to the low teens as we leverage the revenue growth in these markets, continue to execute the blueprint, focus on our franchise and partner brands and recognize that our major investments are behind us.

Next, our cost-saving initiatives is in place to deliver $100 million in savings by 2015. For 2013, we continue to expect growth savings of $45 million to $48 million, and net savings of $13 million to $15 million. We recorded $29 million of restructuring costs in the first half of the year and anticipate the full year amount to be $30 million to $35 million. This is prior to noncash pension charges, which again, are difficult to anticipate. And how do we get to our savings? The first and most significant actions, we're mildly [ph] reducing our global workforce. To date, we have reduced our headcount including an early retirement program, approximately 10%, which resulted in savings of $45 million. We anticipate another $5 million in savings over the period, bringing our total estimated savings by 2015 associated with workforce reductions to $50 million or half of our total savings.

Our employee count over the past 10 years has stayed around the 6,000 person level for a number of years. And after a decline in 2012, we currently have a global workforce of around 5,000 people. Importantly, over this time period, we've added new skill sets to the team in key geographies and areas of the Blueprint including emerging markets, Entertainment and Licensing, filling out our franchise development capabilities and enabling us to grow our business in the future.

In total, on an annualized run-rate basis, our actions to date have generated $65 million in savings, which leaves us with an additional $35 million to achieve over the coming period. Most of these savings are slated to come from ongoing and planned process improvements and other expense reductions, including completing the global rollout of our ERP system, our SKU reduction program and further consolidating the way we spend in certain areas globally to better leverage our expense.

So the question we get asked the most about this program is how do I model it? Can I just take $100 million from operating profit and use that as my base? So the simple answer to that is no. Let me explain why. We all know that expenses don't stay constant, and in fact, some of our 2011 and 2012 expenses were at lower than normal levels. Most significantly, as we communicated at year end 2011 and 2012, our stock compensation and bonuses were less than our expected payout. Normalizing this for 2012 adds approximately $20 million to our 2013 expense base. In addition, we have some expenses such as our television programming and our investments in growing our businesses in areas like Wizards of the Coast, which increased in 2012. These expenses were not at full year run rates in 2012 but will be in 2013.

Finally, we do need to account for inflation and wage increases. However, importantly, we've reduced our headcount, we've rightsized our cost base, and we will continue to deliver a profitable growth in the future.

We also wanted to remind you of scheduled reductions, as some of our assets become fully amortized. This does not include amortization from our recent investment in Backflip. We're currently finalizing the valuation for the Backflip assets, which will add to these numbers. But as a reminder, we anticipate this acquisition to be accretive after amortization.

Now let's turn to our cash flow. Our business generates a healthy amount of cash every year, and over the past 5 years, we've generated over $2 billion in cash. Our target remains to generate $500 million of operating cash flow on average per year and over the past 12 months, our operating cash flow totaled $632 million. Over the same time, our view to the cash is varied. Our CapEx on average is typically $100 million to $120 million per year. After 2013, we've said that we anticipate it to be just slightly higher than average than the $125 million to $135 million range. The big swings in our investment driven uses of cash are around acquisitions, and while we've not done a lot of significant acquisitions, we have done a few smaller transactions such as acquiring Cranium and Trivial Pursuit in 2008, and we also formed a joint venture with Discovery in 2009, spending $300 million for what is now the Hub Network, an investment which earmarked our global television opportunity and an asset, which we believe has grown in value since 2009. And lastly, in 2013, we invested $112 million for our 70% share of Backflip Studios.

Within our financing activities over the 5-year period, we've returned $1.6 billion to shareholders in the repurchase of shares and an additional $731 million through our dividend program. We have $700 million of availability under our revolver in commercial paper program, which we used to fund the short-term cash needs in our business. The peak to trough of our working capital needs is around $600 million. And in addition to our operating cash flow, our commercial paper program provides us with access to inexcessive financing. We remain committed to maintaining our investment grade rating.

Within the current portion of our long-term debt, we have $425 million of notes issued in connection with our discovery JV for the Hub Network. These notes come due in May of 2014, and we expect to refinance most, if not all, of this amount. Stepping us to the big question, what are you going to do with your cash? Nothing has changed with our plans for our cash, we continue to prioritizes investments in growing our business over the long term as our first and most important priority. And following that, we return cash to our shareholders through our dividend and buyback programs.

Earlier this year, our board increased the dividend 11%, marking the ninth increase in 10 years. Additionally, the board increased their share buyback authorization by $500 million. We plan to continue repurchasing shares opportunistically in the open market going forward. We would expect the pace of this buyback to be closer to our 2012 buyback levels than previous levels of buybacks when we were more aggressive in repurchasing our shares. Additionally, vasty all of our cash is currently overseas. However, by year end, we do anticipate that more of our cash will be available in the U.S. Our goal is to ensure we are getting the best long-term return on our cash for our shareholders.

So in closing, Hasbro has positioned itself for future growth by investing and aligning our organization around the global execution of our Brand Blueprint. We have 5 levers, which we believe can expand our operating profit margin over time, and we continue to be focused on deploying our cash in a disciplined way to grow our business and generate long-term shareholder value.

So thank you very much, and please join me in welcoming our Chief Marketing Officer, John Frascotti.

John A. Frascotti

Good morning. I'd like to start today with our brand architecture slide. This slide -- this chart shows how we categorize our brands and how we prioritize our resources and our investments against these brands.

So let's start at the top with our franchise and partner brands. As both Brian and Deb mentioned, we are very focused on driving these brands. Now, all 7 of our franchise brands, Transformers, Nerf, Magic: The Gathering, My Little Pony, Littlest Pet Shop, Play-Doh, and Monopoly meet several criteria. We've established each of them as significant consumer franchises, with several years of successful marketing innovative product in entertainment behind them. We've expanded each of them globally across the globe, and we're now executing each of these franchise brands across our entire Brand Blueprint, in toys and games, lifestyle licensing, digital media, and of course, immersive entertainment experiences. Over the next several years, our franchise brands will become a more significant part of our overall business. Growing from above 43% of our business today to over 50% eventually, as we execute them around the world and continue to reimagine and reinvent these great brands.

Last year if you recall, we elevated Play-Doh to be a franchise brand and we focused our teams globally on growing the Play-Doh brand. We're starting to see the impact of that change. Several new introductions like PLAY-DOH PLUS which is a brand new compound, and our Play-Doh DISNEY PRINCESS line are driving Play-Doh POS increases this year. As a company, we are very bullish on the future growth potential of Play-Doh. Because of its unique play pattern, and because of the fact that we're finding that moms want to give kids more hands-on creative play opportunities at value-oriented prices.

My Little Pony is one of the fastest-growing brands in the market today. Our television show continues to enjoy great ratings around the world. We're now shown in 180 markets. Our mobile game from Gameloft is approaching 15 million downloads, and our over 200 licensees globally have taken full advantage of the popularity of the My Little Pony brand. And as Deb just showed you, our latest new introduction, Equestria Girls is off to a fantastic start. So this brand is hitting on all cylinders.

Our 2 gaming franchise brands, Monopoly and Magic: The Gathering, are both having a strong year this year. Our Monopoly Token Vote Campaign, which we ran earlier this year, was successfully -- was successful globally, and it generated phenomenal social media coverage. As you recall we voted out the Iron and In the Cat, and that token vote and the campaign around it has driven POS increases for the Monopoly brand across the brand this year, including our newest game, Monopoly Empire, which is off to a very good start. And when you look, the amount of conversation that's going on about Monopoly in social media is strong evidence of the continued relevance and growing popularity of this great brand, Monopoly.

And now let's talk about Magic: The Gathering. We're now into our fifth consecutive year of highly profitable growth with Magic. In fact, we've achieved over 35% annual growth for the past 3 years, and we now have about 12 million active Magic players globally. Now what's driving this growth are great play experiences like our recent Grand Prix event in Las Vegas where we drew a record number of serious Magic players. And importantly, we're continuing to grow our Magic digital business as well. We recently released Duels of the Planeswalker 2014 on every digital platform, importantly for the first time on Android, and it's doing very well. And if you recall Duels of the Planeswalkers is our new player-acquisition vehicle. So this bodes very well for the future growth of Magic players. And lastly, we continue to develop compelling serialized entertainment. Last year, our big large was returned to Ravnica, very successful for us. And our next big theme is called Ceros [ph] . It's based loosely on Roman and Greek mythology. We gave fans a sneak peek at this at Comic-Con this summer and the response was over my overwhelmingly positive. So Magic is continuing to gain momentum in the global marketplace.

Now clearly focusing on our franchise brands is the right strategy for us. As Brian mentioned, we're currently shifting from toy and game brand management to true franchise management. And with this change, our franchise brand teams will spend more time and energy developing our brands and executing our brands around our entire blueprint, not just in toy and game. And so we're training and recruiting talent that has the expertise and the breadth and vision to unlock the full potential of our franchise brands across our entire Brand Blueprint.

Now in addition to our franchise brands are key partner brands from The Walt Disney Company becoming a more significant part of our business. As you know, we recently extended our agreement with Disney, and so now both our Marvel and Star Wars rights run through 2020. And so as we look ahead, we're going to continue to partner with The Walt Disney Company to take full advantage of this incredible pipeline of new Star Wars and Marvel entertainment coming over the next several years, great films and television shows. And later this afternoon, as Brian mentioned, Brian Siegel from The Walt Disney company will be showing you some of the great new Marvel entertainment.

Thirdly, we're also continuing to develop our franchise brands as several of these like KRE-O and Furby have the potential over time to eventually become franchise brands. We're now in our second full year with KRE-O, and we're confident that our newest brand and introductions for KRE-O, CityVille, which launched last month, Dungeons & Dragons, which comes in January, and New Transformers, are all very compelling consumer propositions. CityVille features a new proprietary technology that we developed called Sonic Motion, and what Sonic Motion does is bring a child CityVille creations to life with all types of movements. Let's take a look at our new CityVille KRE-O television commercial.

[Presentation]

John A. Frascotti

Now at KRE-O, we're also taking a brand with an incredible heritage behind it, Dungeons & Dragons, and we're delivering all-new building and battling play experiences that combine fast module building and performance weapons for battling. We've also developed a series of new animated shorts that will introduce today's kids to the rich lore and heritage of Dungeons & Dragons and all the great characters in the Dungeons & Dragons brand. And finally, we have some great new KRE-O Transformers products that will accompany the new Transformers movie coming next summer.

Now another one of our challenged brand, PLAYSKOOL HEROES, delivers boys IP in a mom-approved way, and has been a growing segment for us this year. Powered by our television show Transformers Rescue Bots, which is now broadcasted in 93 markets around the world and several of Marvel's animated TV shows like Ultimate Spider-Man, we're very optimistic that this segment, PLAYSKOOL HEROES, will achieve continued growth in the future.

And of course, Furby. Furby has been and continues to be a major success story for us. We've had over 4 million downloads of the Furby app to date. And if you recall we just launched it at the end of last year. And in fact, NPD is now predicting that Furby will be the #1 toy in Europe this holiday season. Just a few weeks ago, we launched our newest Furby app called Furby Boom, and downloads are already exceeding our expectations. The Furby Boom physical product will be in full distribution later this month, and early reviews for this product have been excellent.

Now in addition to our franchise partner and challenger brands, we're also carefully developing the intellectual property for a few select new brands. And we'll bring these brands to market overtime to ensure we're creating a robust pipeline of new IP. We'll see these brand stories with multi-formatted content on all screens, and then we'll develop innovative and immersive product experiences that will captivate our consumers globally.

As Brian mentioned this morning, our Brand Blueprint continues to serve as our strategic roadmap. It drives our thinking in terms of how we're going to grow our business. And you'll notice on this chart that in the center, in yellow are consumer insights. Because they are central to our strategy. About 3.5 years ago, we made a decision to significantly enhance our consumer insights resources, capabilities and expertise. To ensure that we had a strong understanding of our consumers globally and how their behavior, attitudes and preferences were changing, and to ensure that consumer insights were properly informing decisions throughout our value chain. We hired some great talent, and today, we have a great world-class insights organization that conducts proprietary research with tens of thousands of consumers around the world. And while we routinely utilize traditional tools that other Fortune 500 companies use like volumetric forecasting and media optimization, we've also developed several proprietary research methods that give us a competitive advantage, such as our fun labs across the globe, which give us direct contact with consumers on everything from product design and packaging to new entertainment experiences in a comfortable environment that encourages natural play, and our private, first-of-its-kind family hotspot. This is a Hasbro-created online community that gives us direct 24/7 access online to kids and their families.

One of our most recent proprietary studies called the modern boy provided us with a realtime understanding of what drives today's boys and how their expectations for play experiences are changing. What we saw when we did this research was that boys now want to control their characters in the story through customization. And they also want to move fluidly between brands, mixing and mashing brands and also move easily between physical and digital play format. So we've developed several innovations based on these consumer insights. One example is TELEPODS. TELEPODS is an all-new breakthrough mobile gaming and toy platform that we launched at Comic-Con a few months ago, and it was informed by our modern boy research. TELEPODS technology enables kids to play in 2 ways. In the physical space with their TELEPODS figures and on their tablets and smartphones through full and unprecedented integration into top tier mobile apps like ANGRY BIRDS Star Wars. And unlike competitive products, because TELEPODS is mobile, and it's a mobile platform, kids can play anywhere, anytime untethered to their consoles. We've received very positive coverage for this with over 60 million media impressions in the last several months. In addition, Rovio, our partner, is aggressively promoting TELEPODS on their network of over 200 million users.

Another one of our newest introductions, Transformers Construct-Bots, also was informed by our modern boy research and consumer insight. Construct-Bots gives boys control and customization -- sorry, through customization and competition. So with Construct-Bots, kids can build, arm, and transform their Ultimate Transformers in hundreds of different ways. And also our Construct-Bots app gives kids the ability to customize their Bots, share their creations and play mini battling games. So it delivers that fluidity between physical play and digital play that boys have come to expect.

And finally, our research told us that boys want larger superhero figures to play with and parents obviously, want value. So our Titan Hero Series, 12-inch figures selling for $9.99 has been very successful. In anticipating the success, we've already made plans to expand this segment next year. And when you look at the competitive product side-by-side, I think it's very obvious, why this consumer proposition has been such a big hit for us.

Switching to Girls. In the last 10 years, we've grown our Girls business from about $250 million to close to $800 million last year. And Samantha Lomow, our leader for that business will be sharing with you later today how we plan to continue that growth.

Now similar to our modern boy research, we've also undertaken comprehensive Girls research to ensure that our Girls strategy is being informed by the most current consumer insights. Our gross research told us that today's girls are endless explorers. And they're engaged in a continuous reinvention cycle, in which they try on new identities by engaging with brands and deciding what's best for them. And like boys, fluidity also is a universal truth amongst girls. They want highly varied play experiences, and they want to be able to move between platforms. Nerf Rebelle, which we launched last month, and is clearly striking a chord with Girls everywhere was informed by these insights. At the core of the brand is girl empowerment and self-expression, and we're supporting the launch of Nerf Rebelle with our nerfrebelle.com gaming site and our gaming app, which gives Girls the ability to easily move between platforms.

For our gaming business, we've identified 6 key consumer insights that are transforming the gaming industry overall and also transforming how people play games. Eric Nyman will be taking you through each of these insights this afternoon and the new products that we developed to specifically address each of these insights.

Now let's talk about our marketing across all of our brands. We're continuing to change the way we market our brands and our product experiences with a much, much stronger emphasis on digital marketing. Digital marketing is rapidly evolving as we speak. A year ago, Vine didn't exist. Everyone was focused on Pinterest. A few months ago, Instagram didn't even have a video. So clearly these platforms and strategies are rapidly evolving, and we're keeping pace with them by constantly analyzing consumer data and really understanding what's happening with our consumer out there and using that data to inform and develop compelling digital marketing strategies.

As we look ahead to next year, we anticipate spending between 20% and 25% of our overall marketing spend on digital marketing and media.

Because of the fact that digital is so dynamic, we're continuing to use tools like Twitter, Facebook, Vine and Instagram as platforms for culturally relevant creative execution. These executions, like Furby when the lights went out at the Super Bowl this year, and Play-Doh at the Royal Burke create realtime cultural relevance for our brands online. We're also doing things like using buzz agent and house party to create trial and personal brand experiences and brand ambassadors that leads to brand recommendations online and lead to social platform engagement for our brands. And we're also using sites like weather.com to message consumers at just the right time, for example, if it's raining out, what a great time to play Hasbro games.

And because kids expect content to be free and available anytime they want it, we're continuing to his platforms like Rovio Tunes, which now has close to 0.5 billion global video views today, and YouTube which is the most frequent destination for kids to watch videos to create buzz for our brands before inventory appears on retail shelf. And as I mentioned, all of our digital marketing strategies are based on realtime data. We've created tools to use big data to dynamically feed our digital media strategies, and we've created a top-notch analytics operation and practice, so that every day we're using these metrics to create digital marketing programs with the highest possible return. Victor Lee, our Head of Digital Marketing is here today to share some of these digital strategies with you.

So thank you for your attention this morning. I wanted to quickly summarize. We're focused on growing our franchise brands by executing our Brand Blueprint globally and investing in an organization that can execute the strategy with excellence. We're fully executing against this wonderful pipeline of new entertainment coming from Marvel and Star Wars over the next several years, and we're also continuing to invest in select challenger brands like KRE-O, like PLAYSKOOL HEROES, like Furby that have incredible potential. We're developing several new brands for the future with IP -- new IP. And we're using our investment in world-class consumer insights, which we've made over the past several years to inform our new innovations and our new strategies in boys, in girls and in gaming. And finally, we're executing a marketing strategy with a much stronger emphasis on digital marketing, anticipating spending between 20% and 25% of our overall spend on digital next year.

So with that, I'd like to invite you to lunch. We're going to have lunch outside. We're going to resume the presentations at 12:45 this afternoon. At that time, Samantha Lomow; Eric Nyman; Brian Siegel from The Walt Disney Company; and Victor Lee, are going to dig in with more details on all these great programs. So thank you for your attention this morning, and we'll now adjourn for lunch.

[Break]

John A. Frascotti

Okay. Good afternoon, everyone. Thank you for rejoining us. So for this afternoon's program, we're going to start out with Samantha Lomow, who heads up our Girls business. She's going to take you through our programs for Girls. And then Eric Nyman will take you through Boys and Gaming and Preschool. And Brian Siegel is here with -- from Marvel to share with you some great -- of the entertainment initiatives coming from Marvel. And then we'll have an opportunity for question and answers after that. And as you planned your afternoon, you should -- we'll finish up around 3:00. So you can depart after that. So you have some gifts on the table in front of you.

And with that, I'd like to introduce the head of our Girls business, Samantha Lomow.

Samantha Lomow

Good afternoon. It's very exciting to be here today to provide you all with the highlights from our Girls portfolio. Now while we're typically known for our Boys businesses, our Girls business is an area of the company that's seen great momentum. Back in 2002, our Girls portfolio was $240 million. Last year, we reported $792 million with a 12.7% CAGR over the period. As a reminder, our Girls portfolio consists of franchise brands, My Little Pony and Littlest Pet Shop; challenger brands, FurReal Friends, Baby Alive and Furby; and Nerf Rebelle, which is part of the Nerf franchise. You'll hear more about Nerf Rebelle during Eric's Nerf presentation.

So let's talk about our consumer, girls. As John mentioned earlier, from our research, we know that girls are engaged in a continuously invention cycle and want varied experiences that allow them to try on different identities by engaging with their favorite brands. If you have girls at home as I do, you'll appreciate the fact that not all girls play alike, but all girls today want fluidity in their play. On the surface, this fluidity means allowing girls the ability to explore their favorite brands across all mediums and expressions. Today, I'm going to highlight some of the new mediums and expressions across our Girls portfolio that are helping to grow our Girls business by keeping girls engaged in our brands.

So let's start with My Little Pony. We have incredible momentum. This year, it's on track to be our best year since the relaunch of the pony business in 2010. And it's because we've executed the brand's blueprint, with outstanding entertainment from Hasbro Studios, exceptional execution at retail around the world, a great selection of products from licensees, compelling digital gaming from our partner Gameloft, and innovative marketing. The My Little Pony brand is resonating with a broad demographic of fans around the world. It's a global brand, and half of our business is driven outside the U.S. Fans aged 2 to 52 are really embracing their inner pony in a truly aspirational way.

I want to share a few examples of just how pervasive this brand has become. First, our comic book partner, IDW, is about to hit its 1 millionth comic copies sold, making comic book history, even outselling traditional heritage boy-targeted comic book titles and effectively bringing girls back to the comic book business. At Build-A-Bear, where we launched My Little Pony in the first week of April, it's been a top-performing program. And recently, Build-A-Bear announced that TWILIGHT SPARKLE and SPIKE will become a new this fall. And over our 200 licensees around the world in 17 categories across all tiers of retail are taking full advantage of the brand's popularity. And we continue to expand our pony footprint with new partners, adding new brand expressions for our core consumer to keep up with varied experiences we know girls want.

We continue to deliver break-frame marketing and PR programs, such as the My Little Pony themed window display at the fashionable Selfridges department stores in the U.K. this spring. And at Colette, one of the most credible fashion boutiques in the world, and My Little Pony will be there with a signature line of clothing in Paris this September.

And since the heart of our brand is all about friendship, we continue to spread the word and ponify fans one friend at a time. Our ponification stations, where fans get ponified with colored hair, nails and even My Little Pony cutie marks have become prominent in events at places like our pop-up shops, comic cons, L.A. Film Festival and even at trade events like toy fair and licensing show.

As part of our fourth season, TWILIGHT SPARKLE becomes a princess and grows wings. Let's take a look at a spot from our fall TV campaign and our product line that ties directly into the Crystal Princess Celebrations Fantasy.

[Presentation]

Samantha Lomow

Another great example of how we are continuing to express the brand in new ways and infuse it with fluidity, allowing girls to experience their favorite brand in a whole new way is with the launch of Equestria Girls. This summer, we took our core cast, Pinkie Pie, Rainbow Dash, Applejack, Rarity and Fluttershy to a parallel universe where they all exist as teenage girls.

We expanded the world in a way that stayed true to our brand essence and story. Our characters and values of friendship are so strong that fans of all ages have embraced the Equestria Girls. We launched this summer with a limited theatrical release at the L.A. Film Festival and had great support by celebrities and their kids, all pony fans in their own rights. The movie, distributed by Screenvision in the U.S., exceeded expectations with packed houses and numerous sellouts by exhibitors in major markets, leading partners to add even more showings of the 70-minute film.

And early reads of our DVD sales distributed by Shout! Factory are very strong. As of last week, Equestria Girls movie was #2 in kids, and #20 overall on iTunes movies, ahead of several major releases this year.

You heard from John how digital has become a more significant part of our marketing. We're also investing in digital media to deliver a Equestria Girls to our audience where they are online.

For our launch campaign, we have developed a long form music video, an anthem song and even a signature Equestria Girls dance, the EG stomp. The music video was directed by John Scott, director on the series Glee. Let's take a look at the music video from our campaign.

[Presentation]

Samantha Lomow

And our doll sales are off to a great start. We look forward to a strong holiday season. We've also provided you with some product to take home, and even some My Little Pony accessories, so you can join the movement, too.

Following on the heels of the My Little Pony franchise success, we are reigniting the Littlest Pet Shop franchise, similarly leading with entertainment. We're already seeing tremendous results in many markets like the Hub, where the show is tied for the #1 slot with My Little Pony. This year, the series will be broadcast in 130 territories, and our distribution is growing. The show is resonating with girls. They are loving our pet personalities, and Blythe is seen as highly aspirational. We're building a whole new brand blueprint for Littlest Pet Shop that will bring innovation and, of course, incorporate the notion of fluidity. So more to come in 2014, so stay tuned on Littlest Pet Shop.

As a reminder, on Furby, we launched in international markets, with localized versions supported in 12 new languages. It's already #1 in many markets. This is a quick snapshot to show you how we've expanded the Furby footprint around the world with incredible reach, innovative marketing and great execution.

And just hitting shelves now in English markets, is Furby Boom, offering a whole new interplay fluidly between analog and digital. Furby Boom has all-new personality, remembers other Furbies and Furby Boom will hatch virtual Furblings on your mobile device. Once hatched, kids can play games with their Furblings and earn Furbucks.

Now the app provides a great recruitment tool. You can have fun with Furby without the app or fun with the app without Furby, but it's a whole lot more fun when you have both together. And there are no in-app purchases, so parents don't have to worry about spending money after they purchase Furby Boom.

Let's take a look at our game trailer that's currently running online, and you can see how Furby Boom takes digital physical play to a whole new level with innovation and fluidity.

[Presentation]

Samantha Lomow

So Furby Boom is hitting retail now and digital Furblings are already on iOS and android devices, providing a whole new medium of play to keep girls engaged. And with Furby, you just never know what might be coming next.

Now, I'd like to turn over to my colleague, Eric Nyman.

Eric Nyman

Good afternoon. My name is Eric Nyman. I lead the Boys, Preschool and Gaming portfolio here at Hasbro.

Let's start my portion of the presentation today discussing the Boys portfolio. Over the last 10 years, our Hasbro Boys portfolio has increased by over $500 million annually. Starting with our franchise brands, we've reinvented and reignited Transformers. We've experienced phenomenal growth in Nerf. With Disney, we've strengthened our partner brands with Star Wars and Marvel.

Looking forward, we believe that we're still in the early innings of our growth potential and we're well poised for the future. Today, I'm going to share a few examples of this with you.

Let's start with a detailed look at Transformers, one of our premier franchise brands, and how we'll continue to develop this brand and grow revenue over the next several years. We've developed a 4-point plan that we've already begun to execute. This plan utilizes extensive consumer insights to deliver effective product and marketing. It requires significant innovation across all categories, including voice action, construction, preschool, gaming, and digitally integrated products. We also plan to deliver new content every single year. And we'll immerse our consumers 365 days a year with entertainment on all screens.

Transformers is a brand with a very broad appeal. We're developing differentiated product experiences for our different consumer groups, with product and marketing most relevant to each group. We recruit our young fans with Rescue Bots and engage them with age-appropriate entertainment and safe, age-relevant products. We engage our 4- to 10-year-old boys with new action entertainment and creative play and battle toys like Construct-Bots and our KRE-O kreons and play sets.

And we retain our passionate and very loyal consumers with Transformers Generation. So our boy never leaves the franchise, but instead graduates into becoming a collector.

This year, in 2013, we launched our Transformers Beast Hunters entertainment. With all new enemies, there are all-new battles and all-new ways to play. In 2014, our great entertainment story continues, as we deliver a bold new Transformers story with the release of Transformers 4, 65 Million Years in the Making. For the very first time in cinemas, as you saw in some of the footage this morning, our great Autobot heroes team up with and defeat new villains and save the earth.

To ensure we engage our new consumers, each year we're giving consumers new play experiences. This fall, our big innovation platform is Construct-Bots. For the first time ever, consumers can build their ultimate Transformer and then transform them from robot to vehicle mode in a few simple steps.

Our focus on innovation, however, extends across our blueprint in the digital gaming and licensing. We've established strong partnerships with leading digital gaming publishers across all major platforms, with several new console and online games already launched and several more to come in 2014. And we have over 300-plus global licensing partners on the Transformers brand, such as New Era, ellesse and Nike to name a few, to deliver leading-edge, new products for our consumers. And in 2014, we have even more in store.

A key success factor for us continues to be delivering our brand entertainment and engaging our consumers across all screens. A great example of this is our Transformers campaign for this fall. Our Beast Hunters TV program from spring '13 through spring of '14 is broadcast on TV in over 170 countries, and it will be streamed on Netflix and distributed on DVD.

We have a new TV campaign featuring a fresh CGI approach, driving the product into our new mobile app. This app drives product purchase and kid engagement, and it's available across all platforms. And we're also featuring fun, lighthearted digital shorts within the app, and on Transformers.com and on our Transformers YouTube channel. Let's take a look at our Construct-Bots TV commercial to highlight our approach.

[Presentation]

Eric Nyman

With our 4-point plan in place, we'll continue to deliver the keys for Transformers' success in 2014 and beyond. Again, we'll leverage research to inform our engagement with continued consumer insights. Our entertainment will continue to deliver newness across all screens, with a global day and date launch of all-new movie and TV programming. Our products will drive excitement against the new themes and new characters, with innovation for boys and extending into construction, preschool, gaming and digital products. And across all screens, we'll deliver this new content product and marketing.

In addition to our franchise brand Transformers, our Boys brands from The Walt Disney Company, Marvel and Star Wars will continue to be a very significant part of our business. In 2013, we've already seen some great momentum, with some key initiatives performing very strongly for us heading into fall, including our Marvel Titan Hero Series, which you heard about from John this morning, our Iron Man 3 product line, and our Star Wars Black Series collector segment, to name a few.

As an example, John did mention earlier our larger-sized action figure scale, timed with this month's Iron Man 3 home entertainment release. We'll continue to focus on delivering great Iron Man toys to fans of this franchise, including the new 16-inch tall Sonic Blasting Iron Man, with glow-in-the-dark armor and motorized missile firing gauntlet. We anticipate that this will be a must-have Iron Man toy for the holiday season.

And in Star Wars, we just launched our new Star Wars Black action figures -- Black Series action figures. For the first time ever, we are offering 6-inch figures, with a very high level of detail and character authenticity at an amazing price. Collectors are already counting on this new figure scale, and early sales show us that Star Wars fans love this new segment.

In Star Wars, we couldn't be more thrilled about the new entertainment on the horizon from Disney. Our next planning cycle, which we call 7 quarters of the force, starting in quarter 3 of 2014, we'll feature the new Rebels animated TV series. We are very excited about this launch, as we experienced success behind Clone Wars, the last TV entertainment launched by Lucasfilm. Rebels will be followed by a new Star Wars movie in 2015, which will be a huge event for fans and kids of all ages. Together, this is an unprecedented level of great entertainment support from Lucasfilm.

Beyond that, Disney is also committed to more movies beyond 2015 to ensure that the force will be with us far into the future.

As we look forward to 2014 and beyond in Marvel, the future is just as bright. Coming from Marvel, we see an incredibly strong line of merchandisable movie entertainment for the next couple of years. And in addition to all the films, there's a strong pipeline of TV entertainment coming as well.

With that, I'd like to introduce Brian Siegel. Brian directs Marvel -- the Marvel franchise team at Disney and has some really great content to show. We're very excited to share this content with you. And while it is confidential, therefore, we would ask you to not write about this material. And lastly, while we trust you very much, we do have security guards with infrared cameras watching. So please put your phones away. Thank you, and here's Brian Siegel.

[Presentation]

Eric Nyman

Thank you very much, Brian. Some fabulous entertainment in store. That Disney footage looks absolutely fantastic.

So the next part of the presentation is somewhat unscripted. It's Nerf and we're going to talk about Nerf, is one of everyone's favorite brands and one of our big success stories here at Hasbro. In the last 10 years, we've grown Nerf from just over $50 million to over $400 million in net revenue as a brand. And we believe, the best is yet to come. But instead of only talking about it, I do want you to experience it. So for the next 30 seconds and while I do trust you, I'm going to put on some protective eyewear. Please pick up in front of you some of our best Nerf Elite -- hold on, wait for it, and our best Nerf Rebelle products to test your blasting acumens. Here's the rules, it's 30 seconds. You lose one point for hitting me. You get 1 point for hitting one of our targets. The most points in 30 seconds gets one of our prizes. Begin. Terrible marksmanship. The time never goes fast enough. 5 seconds. All right, timeout. Very well done. Good job. Thank you, Wayne [ph] from the back row.

All right. Who got more than 10 points? Anyone, raise of hands?

Unknown Attendee

Negative 20.

Eric Nyman

Negative 20. Anybody more than 5? There are dual prizes for any of you who would like to claim them at the end just see me for the best marksmanship. I hope you enjoyed that.

Now let's talk a little bit about the Nerf consumer, folks in this room notwithstanding. Today, our core Nerf consumers are very active 7- to 12-year-old boys and girls. That's our core consumer. But there are kids young and old who obviously love the Nerf brand and have grown up with the excitement that it brings. The Nerf consumer is motivated by having fun with his or her friends in a social environment. The Nerf consumer loves competition and action in all things. And thus, Nerf is a perfect way for them to experience the ultimate in action and truly empower them to achieve things that are incredible.

The 200 -- the 2013 Nerf range is one of our most innovative lines to date. This fall, Nerf will introduce our most furthest firing blaster ever, the Nerf Centurion. I'm going to invite the head of the Nerf brand, Michael Ritchie, to demonstrate. Using a newly developed mega dart, this blaster can shoot up to 100 feet. So folks in the far reaches of the corners, you're not protected. Thank you for the demonstration, Michael.

Nerf will also add to its Elite line, with their first ever fully motorized elite blaster. I'll invite Eric Huban, our Director of Product Development to share this with you. This shoots 18 darts in 6 seconds. Very well done. Thank you, Eric.

Next, is SUPER SOAKER. We're not going to demonstrate SUPER SOAKER. Folks in the front row are safe. SUPER SOAKER is the clear leader in the water blasting market with about 35% market share. When you compare that to our over 70% market share in Nerf blasters, there's a great potential for us to further grow SUPER SOAKER as part of the Nerf portfolio.

We also have N-Sports, which is up over 100% in the U.S. driven by the relaunch of our icon Sports range combined with the introduction of innovative technology like Firevision that enables kids to keep playing even when the sun goes down. This fall, our N-Sports line also debuts a product named Cyber Hoop, merging the worlds of physical and digital play together.

And we continue to expand our licensing portfolio. With exciting and brand relevant extensions like our Nerf Dog line in stores now at Walmart, which brings Nerf performance innovation to the expanding pet category.

Another key to Nerf success has been fan-generated content. To continue to inspire our fans to make, create and post videos of themselves making Nerf, we are launching an all-new campaign called Nerf Perfect, in partnership with Internet sensation, Dude Perfect. This campaign inspires kids to achieve incredible stunts using Nerf and post them online to inspire great digital engagement. Let's take a look.

[Presentation]

Eric Nyman

Nerf Perfect. As I mentioned before, Nerf is not just for boys. To further engage girls, this fall, we are launching Nerf Rebelle in over 15 different markets. Nerf Rebelle is an innovative new brand that was truly built on insights. We begin by identifying the white space, retail landscape, pop culture, and current Nerf consumers. And once we identified, there was an unmet need for active play fueled by girl power. We began talking to girls directly to understand what they wanted from the Nerf brand.

Based on these girl insights, we developed a line of bow blasters that have equal performance to Nerf but with a feminine touch to achieve our femme fierce brand essence. We also included digital play, as we know it's critical to girls and are launching a collectibility strategy through our decorated darts.

One key item in line this fall is our Guardian Crossbow. I'm going to invite Kathy, [ph] who leads our Nerf Rebelle brand to demonstrate. A true femme fierce bow blaster. Thank you, Kathy. [ph] Very nice.

Now, let's take a look at our launch commercial for Nerf Rebelle.

[Presentation]

Eric Nyman

So great product is our foundation and excellent marketing will ensure girls everywhere put Nerf Rebelle on their holiday list this fall.

Our launch plan has 3 key tent poles: to create interest before inventory, all of our pre-launch buzz; to leverage pop-culture; and deliver aspirational, yet relatable messaging. These efforts are already paying off with fantastic reviews online, setting us up for success as we head into the next few months.

Next, I'll highlight our Preschool business. Preschool is an important and growing area for Hasbro. Our Preschool portfolio is comprised of our Play-Doh franchise brand, our Sesame Street partner brand and our PLAYSKOOL and PLAYSKOOL HEROES challenger brands.

Let's take a look at our newest franchise brand first, Play-Doh. Play-Doh is a rite of passage for kids around the world. It's among trusted brands that promotes fun, creative, imaginative play for boys and girls the world over. In fact, it's been the global appeal of the brand that has helped us to drive significant growth over the last several years.

In addition to a stronger global presence, there have also been 3 keys to Play-Doh's success. The first is something we call the toy box strategy. Identifying insights from other proven play patterns, like construction vehicles, and finding creative applications for Play-Doh that drives a unique way to play.

So for example, our DIGGIN' RIGS collections lets kids bring sandbox construction vehicle play inside using a Play-Doh compound to act as a building material.

We also partnered with Disney to expand our toy box to girls with fashion and doll play in the Play-Doh world. This launched last fall and has helped us to bring in new consumers. New product innovation like PLAY-DOH PLUS that just launched this year is another key growth pillar for Play-Doh as it helps give kids new ways to make their favorite Play-Doh creations. And thirdly, creative, immersive marketing that it brings to life the fun of Play-Doh with our Doh Doh characters continues to help propel growth in the Play-Doh brand. Here's our commercial from this past spring that features both the PLAY-DOH PLUS compound, as well as our ever-popular Doh Dohs.

[Presentation]

Eric Nyman

I met a few of you at lunch. You told me that you used to eat Play-Doh. I won't pick on anyone. But remember, fun to play with, not to eat. Key to the Play-Doh brand.

Next is Sesame Street. Sesame Street is a strategic partner for our Preschool business. We added Sesame Street to the Hasbro Preschool portfolio in 2011. For over 43 years, Sesame Street has been a trusted brand for moms and families around the world. This year, we are very excited about the prospects of our prime-time item, Big Hugs Elmo. The industry agrees, this is our best Elmo yet. The Sesame Street team is getting for some exciting Big Hugs Elmo launch events and marketing starting this September to support this great product story.

This week for example, Big Hugs Elmo will take over Times Square with larger-than-life digital billboards airing throughout the day. Also this week, Elmo and his Sesame friends will appear on Good Morning America. And in addition, Big Hugs Elmo TV kicks off this week.

Let's check out the new TV spot for Big Hugs Elmo.

[Presentation]

Eric Nyman

There should be some ahs or something. That's a good one. As mentioned, our challenger brands in Preschool include PLAYSKOOL HEROES. We introduced PLAYSKOOL HEROES in fall of 2011 to create a line that brought the fun action play from the boys aisle to a younger audience through Preschool appropriate themes and product features. PLAYSKOOL HEROES is truly big boy brands for little boy hands, and it has been a key driver in the growth of Preschool action figures and play sets for Hasbro.

PLAYSKOOL HEROES is now continuing its success into its third year. The growth is driven by 3 factors. The first is strong entertainment. Transformers Rescue Bots has seen great success on the Hub and in other markets around the world. Additionally, the show is consistently one of the top ranked shows on platforms like Netflix and iTunes.

Secondly, innovative product. We stay true to our brand promise and make products, as I said, for a little boy hands. Like the new Optimus Prime Rescue Trailer that we're launching this fall.

And thirdly, strong merchandising in store. In Latin America and elsewhere, our strong merchandising is helping to propel this brand's growth. Latin America will be tripling the business this year, in fact. It is now our second largest region for PLAYSKOOL HEROES. This strategy is fulfilling the vision of establishing PLAYSKOOL HEROES as a global brand.

Now let's turn to page -- to Hasbro Gaming. As you know, in spring 2011, we made some significant changes in our gaming business. We are now just over 2 years in, and our teams are very proud to report in Q2 our third consecutive quarter of growth. We also feel like we're in a strong position for the future as we innovate with new gaming experiences and deepen our partnerships within industry leaders like Rovio and now Disney, announced by Brian earlier this morning.

Hasbro has focused on driving consumer insights to grow the gaming business, we have mind consumer insights across 5 key gaming groups. Each group has unique consumer insight as to why and how they love the game. And each group, also has key brands that resonate for them in the gaming space.

Building on the consumer insights we have, we have 6 key game-changing insights to drive our gaming business forward in 2013 and beyond. For each of these insights, we will discuss the finding and then how Hasbro is uniquely positioned to address this in the gaming space.

Our first insight is that gaming continues to become more consumable. Our research highlights that sub $10 gaming will continue to grow. To address this need, this fall we are launching a full range of gaming experiences that provide great value for our consumers for some of our most treasured brands, all under $15 at retail. These products are already out of retail and early reads on POS are strong. Our second insight is that we know girls like to game, too. Our research showed us that 51% of digital gamers are girls, but under 10% of the gaming aisle is targeted to girls. This fall, we have some fantastic product launches to meet that need, like Twister Dance 2, Bejeweled, and based on our new expanded relationship with Disney coming in 2014, our first collection of Disney Princess games for girls. To give you a feel for that energy in girls gaming, let's take a look at the new Twister Dance Rave TV campaign featuring Britney Spears.

[Presentation]

Eric Nyman

Thanks, Britney. Our third insight is our adult's desire for friction free gaming. Top barriers for face-to-face gaming today is that games take too long to learn, too much time to set up and often too long to play. Adult gamers want friction-free gaming with 0 learning curve. As such, we've created a new team focused purely on this insight. Our first launch in this space and partnering with the website, Funny or Die, for an all new Funny or Die game which just launched only a couple of weeks ago. Also, coming this fall will be games like POINTING FINGERS, an all new game that lets you point out your friends with a giant foam finger and Draw Something Party, a highly innovative new take on the popular app. This is a rapidly growing category and we want to gain a leadership position in it with our adult fiction-free games. Let's take a peek at contents that we'll base our TV campaign on for Draw Something Party next.

[Presentation]

Eric Nyman

As you can see, everyone loves the game, the friction-free. Our fourth insight is the importance of retail. Through global merchandising studies, we have learned that consumers want the gaming aisle to be easier to shop. We have leveraged these insights into a gaming merchandising toolkit that has began to rollout in Latin America and in other emerging markets beginning in quarter 3 of 2012. Early results of this retail reinvention in our emerging markets for gaming are very strong. As an example, in the first 2 quarters, post our retail reinvention in Chile, Hasbro Gaming saw a 50% lift in POS. In the first 2 quarters post our retail reinvention in Columbia, Hasbro Gaming saw a 35% POS lift. We'll continue to roll out this retail reinvention around the world in 2013 and 2014, with the goal of making the aisle both easier to shop and more engaging for our consumers.

Insight number 5 focuses on personalization. Beginning in January of 2013, we gave consumers, like you, the opportunity to vote -- vote in a new token and vote out your least favorite token in Monopoly. Our research showed this incredible emotional connection that Monopoly players had to their tokens and this was shown throughout our campaign. The token vote campaign garnered over 2 billion impressions and drove classic Monopoly sales thus far this year to great success. As Brian mentioned already in the upfront, Monopoly first half 2013 revenue growth was plus 17%. Let's take a look at the new Monopoly TV campaign we launched last week for this fall which introduces the new cat token voted in by many of you.

[Presentation]

Eric Nyman

One of our biggest insights, as I move to point #6, is the opportunity to bring digital and physical gaming together. This fall, we launched TELEPODS, a new gaming platform for the mobile generation, which very simply allows you to physically battle with your physical toys and then almost instantaneously, take a physical toy and scan it right into the new Rovio game coming this fall like Star Wars Angry Birds launching on 9/19.

As John mentioned earlier, we have experienced very strong early pre-launch success for TELEPODS. The press has spoken as well. We've had phenomenal feedback to this TELEPODS proposition gearing up to a 9/19 launch later next week, and so as the kids. This was tested by Hasbro internally and it was one of our best-in-class concept results tested. Number one in things like purchase intent, liking and uniqueness amongst our consumers. Let's take a quick look at the new TELEPODS commercial that's starting to air this week.

[Presentation]

Eric Nyman

So again, very simply with TELEPOD, you saw on the commercial, you have your physical world and then you take your teleport -- TELEPOD base, you either use your iPhone or your iPad and you can scan in your physical toys and they immediately allow you, for the first time ever, working with Rovio, to change the Angry Birds game experience. It's really a phenomenal platform launch for us and we're very, very excited about what it's going to mean for Hasbro.

So that's it for me. We feel confident that our game changing insights will continue to drive growth in gaming and further connect with consumers over the next several years. And now, I'd like to introduce Victor Lee, who will discuss Hasbro Digital Marketing. Thank you.

Victor Lee

Thank you, Eric. So you have the distinction of having me last outside Q&A. So, hopefully, I live up to the expectation, hopefully the lunch that you had was well, and I'm going to try to be as entertaining as possible, but I will not allow you to shoot me with a blaster. For security reasons, you've heard a lot of stuff today, there's going to be a lot of stuff that we're going to show. I will not have Mark Wahlberg. I will not have Spider-Man. I will not have Captain America. So feel free to use your cellphones, your iPads or your computers at all times. I actually encourage it as a digital person.

So before I begin, as Eric and Sam just talked about the brands and the products, it makes the shop so much fun and exciting. When you have an insight like cats, cats in the Internet, everybody knows that. Everybody loves watching cats on the Internet. There's those little kittens, or the live cats or what you see up there or when you have the luxury of a Transformers movie, when you have Spider-Man, when you have The Avengers and when you have a new segment, Equestria Girls, where you're trained to dance, it makes the job fun. It makes my job fun. So as we go into everything and we talk about what is digital, you've heard the word digital mentioned a lot today, whether it's expressions, whether it's mobile, whether it's a website, whether it's our gameplay innovation. Digital is a big word. And I am the first to tell you today, if you haven't heard before, I'm debunking the myth, it's not a trend. It's going to stay here for a little bit more. This Internet thing is not going away. And we encourage them. We have to understand and lean in and everything we do. So as I jump into it, one of the things I want to mention and bring back, which John spoke about this morning, we do plan to spend upwards to 20%, 25% of our marketing in the digital space. And if you look across any industry, you will see that's good, that's aggressive. That's actually marketplace leader. And we're going to focus on 3 of those long-term strategies as Doug spoke about, just to reiterate, one, we're going to use -- utilize data. The word big data is used everywhere. We have a lot of data. We have a lot of information. How do we use that data to tell the story? Number two, socially relevant. You've seen a lot of content today, you can imagine all this content now as you see it, you might watch it on the web. You might watch it on your phone. Somebody might tell you about it. You might like it, share it, speak about it, comment about it. You will do a lot of things with it. So how do you make that socially relevant? How do you make that a story for your brand? And that's part of what we do here. And lastly, how do you use these platforms? We talk about some platforms of how big YouTube is. We talk about platforms of Facebook, Tumblr, Instagram, Twitter, all of these platforms. Those are the only ones that we talk about. There are more than 25 social media platforms running in the world today. And every company is using one form or another. How do we understand where our consumers are going and what we need to do with that? So we'll use this information, we use though strategies as a guide. As a guide that allows Hasbro, my team, to partner closely and work really collaboratively with Eric and Sam as they're building the greatest products that I've ever seen. Work closely with our regions as they're going into market and they're talking to their retailers, as well as the sales organization. Our retailers are looking for this innovation. They're asking us how are we going into the market. So with that, let me just start with the websites.

As we start with the websites, one of the things you see here right behind me, it's behavior. This is a tool we use that's from Adobe. I can tell you on any given second, any second, where people are coming in and what they're doing. This a heat map. So I know as you're coming in, you will like that video, you don't like the video. You skipped over the video. You left my site. You continued through the site. You spent 10 minutes, 5 minutes, 3 minutes, 2 minutes, you went to a retailer. Those are areas, that data coming in where I could say, let's change the site now. We're at the speed of digital. It's a button push. It's a little coding in the background that allows us to change our site, flex it, based on what you, the consumer, want, love, interact with. So we use tools like heat maps. We use other types of studies, proprietary studies. As you heard this morning about our research studies. We use studies like clickstream. If you haven't heard of clickstream, it's actually -- it's fundamentally pretty easy. How many clicks did it take for you to get to a purchase? If it's 10 clicks, it's probably 5 clicks too many. If it's 3 clicks, I need everybody to do that. We understand those stories, those pathways. Did it come through search? Did it come through a media property? Did they just type our URL in? Were they referred by social? Did they use a phone? I could tell you if it's iOS or Android. I can tell you if it's tablet. We can see the rises and fall of where they come in. It's a little creepy wherein I know all this information about you guys, but it helps us as better marketers. We also have other tools past the purchase. When you bought something, we start at the end. What did it take for you to buy that? What did we do? If TV run and I see spikes, in all the digital channels, I know the effectiveness of TV. I understood what that ad did for us. And then lastly, there's something called high-value behavior. The most popular things that happen on our website that ultimately leads to a conversion of a sale. If it happens on the fourth page, and that's our #1 behavior, why don't we move it to the first page if it's contributing stage to the number one behavior? Things like that allows us to get true data, real-time information so we could start building the right types, building the right programs, building the right strategies and understanding on a real-time basis. Gives me a shorter path, better content, audio segmentation and we get the most valuable consumers, the ones that buy. So our goals for the brand site, which as we build, no site is built the same, I think you'll realize that and then I challenge you guys to take a look at our website. No site is built the same because no toy should be the same. No expression should be the same. No content should be the same. Nothing should match. The days of "let's build it once and spread it out throughout -- to all these channels" are gone. It's not a matching luggage anymore. So everything is flexed based on what the consumers need. So what we want to pull away from digital are norms. And you're going to hear this a lot while I'm up here. Norms and averages because nobody wants to be normal, nobody wants to be average, and we should not accept marketing to be that way. So digital, as I'll say it again and again and again, it's still relatively new. If you look at digital like a baseball game, digital is in the national anthem of a 9 inning game. It's still brand-new. Everything we learned yesterday has just changed. Nobody has set the bar yet and then nobody should set the bar. So when you hear me talk about averages, I'm not trying to achieve the average. Hasbro's not trying to achieve the average. We are setting the bar. Because every single day, we get more information so that we can surpass and be better than what people are saying as the industry norm. So for instance, one of the things, bounce rates. Bounce rate is defined as people, like, enter your site did nothing and left. Industry average tells us that 6 out of 10 people will stay on your site. So if that's successful then we are slightly more than half the people coming to your site that you're marketing a lot to are staying. Because there's a lot of waste there. That's one of the goals we set. One of the other goals we set is engagement. Are they staying? What are they doing? What are they looking at? What are they asking for? What are they raising their hands about? What are they searching for on your site? Because if they're searching for something on your site, clearly, you don't have a problem enough that they can find it. We understand all of that information. So as we look into how we've done and what we were looking at, our KPIs, are those high values. I can tell you for a fact right now, year-to-date, year-over-year, product interactions are up 4 times. What does product interaction means? We're in the business of selling products. We sell a lot of products. We're in the business of entertainment experience, story telling, character driven experiences. And our products lead in this expression of do they want it. So when 4 times more people this year and last year are looking at our toys, I'm pushing them through the vital area of are you ready buy it, do you want it, are you going to ask your parent for it, are you going to ask somebody for it. And then their conversions to retail. And you'll see the conversion numbers right here. We're up in the conversion 9 times. So what does that mean? How many people leave our house, our site and go to our retailers to look for the product more. That is the end game, that's the finish line. So that's the web strategy that we have here. As we look into social strategy, here's a couple of tidbits on social. Social should never be viewed as a nice to have anymore. It's fun, I get it. Everybody loves posting on Facebook. Some of you guys might be doing at right now. Some of you guys might be tweeting right now. It is fun. It's a good way of expressing your daily habits, a good way of expressing what your opinion. But social should never be looked at as nice to have. And here's 2 reasons why: one, if you take a look at the top 2 social networks out there. Facebook. They have 1 billion users. 1 billion users. That's bigger than most media companies. They should be considered as a media property. We looked at them as such. YouTube. I hear about YouTube all the time. Everybody does this. Have you seen this? No, I haven't. Go on YouTube. Pull your phone out and you show it on YouTube. And then you start seeing all of these elements that happen. Here's an interesting stat on YouTube. Every second, there's 72 minutes of videos being uploaded to YouTube. Play that across 10 full days, that's more than a centuries of video posted upon YouTube. It's not shrinking. So we stand out. How do we adopt? How do we use this? How do we understand this information? How do we use social? Because YouTube is a valuable partner to us, here is what we do. We don't measure it by the basic principles of life. Having a lot of likes doesn't mean a thing. Having a lot of likes means somehow somebody just said I'm interested and I clicked onto it. And I think you all guys understand on this if you're on Facebook. You probably like a ton of brands, but you actually go back to that page that you [indiscernible]. But when we put content out that engages you, that makes you laugh, that makes you think, that's thought-provoking, it makes you like it, it makes you comment about it, it makes you share it, that's the key. When there's a virality rate, how interesting is that content that makes you want to push it out. How interesting is that content that makes you want to tell somebody about it. That's what we measure against. So an interesting side story of a did you know. Did you know that the top viewed media program in history was the 2010 World Cup as an aggregate, not one match. So for the course of the couple of weeks, the World Cup, as an aggregate, was viewed globally by 700 million people. That's over the course of a couple of weeks. That's a lot of people. Did you know, the daily average user of Facebook, Twitter and Instagram combined daily, is 800 million? It's a media property. And we have to understand how to use those media properties. It's a way that consumers get to talk to you and we are in a consumer-driven world right now. They don't like something you do, they're going to tell you about it. And when they tell you about it, their thousand friends will hear about it. And we have to understand that. So one of our goals is to establish this currency. John mentioned this before, currency through relevancy. How relevant are we in your lives. How can we speak about things that make it possible for you to say, "I get that. I understand that, that is about me. That is part about what I do. It's funny." We see that in 2 examples here. One is the Play-Doh example we talked about earlier, the [indiscernible]. We trust news organizations. With CBS this morning, I actually said we spooked them on. We beat a lot of the major other brands in getting to market first. And it was our highest engaged Play-Doh post to date. The second one is Furby example as you see up there, this was earlier this year, which is interesting if you look at it. The simplicity of the creative, if you can read this, type your name in backwards in the comments. So one of the -- according to Facebook, it's one of the commented single post ever on Facebook. It has actually 6,000 comments shy, it has about 208,000 comments, 6,000 shy of when Obama officially announced his 4 more years after he was reelected. So that's some really powerful distinction there. We love it if Obama would say something. He was almost beat by Furby. But that's where social relevancy comes in. And that's what we're basing everything on. So, so far, we've seen 5x more engagement, and engagement remember, engagement in virality. We do not measure on likes. And we saw that again in the third example, the Monopoly token votes where 183 countries out of 195 in the world, participated in the vote. That's a massive use of one platform in social as well as PR to drive that message.

So next, let me talk about digital media and digital media is always an interesting topic to talk about. The reason why digital media is interesting topic to talk about is there are millions of websites and you guys get it, you see it. You see a banner ad, you sometimes crossover. Well, how we approach digital media is, again, going back into the averages. Show of hands and hopefully nobody puts their hands up and yell I understand the context. Who woke up this morning and said today, I want to be average. Nobody. Who does that? But when you get a media program that says, your average click-to-rate on a banner ad should be 0.16%. So you guys are numbers guys. I'm kind of a numbers guy. But 0.16%, I'm not sure that's successful in anything in life. Not even body fat is successful there. That's dangerous. So why are we hearing that the average, industry-wise, is 0.16% is good? We shouldn't strive for that and why does it happen? Because people buy places, they buy boxes. So what we try to do is -- our goal is to build a better performance. How do you build a better performance? It starts with creative, it starts with audience, retargeting, geo-targeting, following, understanding cluster groups, audiences, that's science. Science drives those numbers. So, so far, we have see the 3x higher return. Then we got that, that saying is average and we continue to push that. Remember what I said earlier on the slides? We don't want to reach the bar, we don't even want a vision of bar. We want to set our terms, in terms of what success is. And that's what we're doing. In the past, in advertising, in general, there was a set it, forget it model. You'd run an ad, put it on nash [ph]. Everybody watches it and then watch [indiscernible]. There are thousands of messages that are happening to people every single day that you're exposed to. How do we stand out. It's not about set it, forget it anymore. Digital allows us to be smarter, using the media allows us to be smarter, understanding the consumer behavior allows us to be smarter. So the next thing we'll talk about, mobile. Mobile is interesting. Here's why it's interesting. I am not the first or last person to stand up here to tell you, "This is the year of mobile." In fact, everybody's been saying it for the last 10 years, that this is the year of mobile. And mobile, and how we look at it, comes in 3 areas. There's a utility focus to it. Am I giving shoppers when they're outside or wherever they're engaged in their phones, the right tools and utility to find the product, to research the product, to find out where they can buy the product. Am I giving kids the opportunity to use mobile to play, to engage, to watch, to laugh, to have fun? And then lastly, am I using mobile to convert over to a retail. So that's the sales element. It's not one channel in mobile that does that. So we have our mobile websites which the utility. We have app that drive the entertainment and then we have our media buying on retail pages that drive the sale. That's how we looked at it as we set the goals. So it's based on those needs the consumer needs. So far we've seen our mobile traffic up, more than 3 times higher than last year. And then, as example, as we heard a lot about the Transformers Construct-bot app, is that it's hit top of the charts in not only the U.S., multiple categories, multiple countries. Truly global, truly engaging. Eric talked about how it combines the product, the entertainment and continuously add the play pad into that.

So lastly, just to close it out, just to sum it all in there, there are 3 things that we want to look about so as we continue to build the brand blueprint, to continue to drive our brand-new play strategy, we have to understand 3 key areas that we call the entire strategy down into. One is the consumer behavior. We need to know what, when, where and why. What are they interested in, when are they interested in it, why are they interested in it and what are the means that they use to get it. Because with the data and information we have, we know exactly when they're pulling their phone out, when they're going online and when they're shopping. The Internet doesn't close. Last I checked, there are no store hours for the Internet. People are shopping at all hours of the day, all ours of the night. They're researching at that time. They're consuming at all hours. So we have to understand and adapt into that. Second is understanding the mix. As I mentioned earlier, there are thousands of messages that we're hit into. How do we get the right message to the right person that either spreads out or we convert them. And if we don't convert them, I can tell you immediately why we didn't. If we did, I could tell you immediately why we did and then do a lot more of it and stop doing all the other stuff. That's the luxury we have in the data. And the last part about it, all built by data strategies. So I'm against a lot of these marketing words in the digital marketing world, so you won't hear me say this a lot. But as people dwell with the term big data, big data, we've always had this information. We just have more of it now with the influx of the hardware and software that we have. According to IBM, and they recently put the study out about big data, [indiscernible]. They said everyday, we, in the world, create 2.5 quintillion bytes of data. You guys are number people, I don't even know how many zeros or commas there are and I'm pretty sure there's not too much calculators that have that much space. But that's a lot of data. What does that 2.5 quintillion really means? Well, so much that 90% of the data in the world today was created in the last 2 years. That's not stopping. It's great for me, it's great for businesses because you understand more. From every scan that happens, every motion detector, every time you turn your phone on, off, or reset or whatever it is, there's feeding somebody to allow us to be smarter so we can market better. And IBM continues to use the term of data should be seen in 4 categories and this is how we looked at it where it's about the volume of data coming in. It's the velocity of the data, it's the variety. And the veracity of which companies are adopting, adapting and using that data in the right form, using that data to instruct them to build the right marketing strategies.

So as a wrap-up, that's how we're looking at digital. That's how we look at digital marketing in long-term as John mentioned before as those 3 key points. And this is just a little example of what we do on a daily basis to drive those brands that Eric and Sam talked about, to drive those entertainment properties, to brand and play in our entire Blueprint and tie it all up in a nice marketing program and package, so that we can target and achieve the right results that we're looking for.

So I'm going to hand it over Brian to close it up, and thank you very much.

Brian D. Goldner

Thank you very much, Victor. Thanks very much, Victor. We're going to take about 15 to 20 seconds here. We're going to bring some chairs up. And I'd like to invite and thank Eric and Samantha for their contributions this afternoon. John Frascotti, and also invite Deb Thomas. And we're going to go to a Q&A session. I'd ask you to wait for the microphone as we have Q&A if you would identify who you are for the audience that's listening on the webcast. Then if you would direct your questions mostly to me, and then I'll try to help figure out who might best to answer some of your questions. Now we want to hear from all the members of management, I think it's a great day, a great afternoon for you to get to meet so many members of our management who are helping us to drive our business.

So you guys want to come on up, and then we'll begin. Move over here.We'll begin. Do we have the microphone? We're good? Ready? All right. And Victor, thank you, again, for your presentation. Great. Here we go. Deb, you could stand there.

Question-and-Answer Session

Debbie Hancock

Yes.

Brian D. Goldner

Yes, Eric. Come on, sit down. That's good. Okay, first question.

Debbie Hancock

It's good we have our [indiscernible].

Brian D. Goldner

Other questions? Nothing. Okay, please. Come on us up here.

James Hardiman - Longbow Research LLC

This is James Hardiman, Longbow Research. The question is with regards to Backflip. You seem to be pretty content with a EA handling majority of your digital games. I would think that, that your economics are dramatically better. You bring those inhouse, and it seems like you now have the ability to do that with Backflip. At the same time, you extended the relationship with EA, so what are we guys seeing here? It seems like that's a pretty big opportunity for you, guys. What does EA bring to the table that maybe somewhere down the line Backflip would not be able to do?

Brian D. Goldner

Sure. Thanks. So first the EA deal really deals with 8 games. So it's really 8 of our games we continue with Electronic Arts. That's where they want to focus. That's where we want to focus with them. So it leaves open a raft at our games, as well as the opportunity to do several of the Backflip games that they've already developed and brands that they've developed that takes out other spaces and of course, to develop new games with Backflip. So you're right, new economics look great with the Backflip deal, but also, we have a long-term relationship. EA has been very successful with our core games. That fits with their strategy and with ours. I think over time, what you'll see is us continuing to develop games around several of our brands and then selectively adding new brands and new play pattern where we'll connect the digital and the analog. Please, down the front.

Eric O. Handler - MKM Partners LLC, Research Division

Eric Handler, MKM Partners. Two questions. First with Rebel, is that going to be where it's going to be? Where can you find it? Is it going to be in the Girl's section, in the new area for you guys or is it going to be with the other Nerf products? And then, is this accretive space to you or just replacing some other Nerf products?

Brian D. Goldner

Okay. Let me first say, it is very accretive to us and it's so around the world as it launches. I don't know, if John or Eric, you guys want to comment on what you're seeing around the world?

John A. Frascotti

Yes. Go ahead, Eric.

Eric Nyman

I mean, around the world, the majority of Nerf Rebel is being positioned in the Girls' aisle. So it's not in the -- there is no actual Nerf aisle, but it's not something -- our strategy is not be adjacent to Nerf. It's to go where the girl is. Like I said, we launched a few weeks back, and we're up to a nice start with Nerf Rebel. You can find it in the Girls' aisle.

Brian D. Goldner

Okay. Questions? Please. Over here, JT.

John Taylor

I got a couple of questions. First, can I take this on the airplane?

Brian D. Goldner

I think you can if you pack it in your luggage. That was the answer to that.

John Taylor

Okay, good. So you said somewhere in the course of your prepared remarks that your periods several years of investing in strategic alternative or strategic inputs around the world. It's kind of lining down a little bit, you're pretty much set. So I wonder if you could talk about the financial implication of that on the major line items on the P&L, where are we going to see that show up most? That's the first question. And then the second is, you're going to 12-inch action figures. It sounds like you're putting more value in the box kind of thing. This is in contrast to what has been a long period of inflation in action figure prices, so what's going on with pricing more in a general sense and specifically as it relates to [indiscernible]?

Brian D. Goldner

Let me take on the action figure question first, and it also has to do with -- gets to a related subject, will have to do with input cost. So what we saw as consumer insight, particularly from our Latin American team, was that need to have a larger action figure to get more of that opening price point for that consumer. It also happened to Mary quite nicely with some of the consumers here in the United States and other developed economies that we're looking for more of that value. So if you get to design a product from the ground up and you get to look at future input cost, you can make a great product that enables you and the retailer to make a good margin and still be of value for the consumer. So it isn't that we've abandoned the smaller-sized action figures, in fact we'll continue to innovate in that category as well across a number of different brands. But what it does have to do with is the fact that allows us to innovate from the ground up, not fry to just take a product that's developed or engineered for a higher price and just take it at a more promotional price. I think that, that's been one of the great innovations is to go out and shoot to the engine of the train of where this category is going, to where boys are going with their play patterns and what we're seeing in emerging markets to develop product along those lines. So I think that, that's very important. I'll ask Deb to comment for a moment -- in a moment on the P&L impact. But clearly, one of the things we settled along about emerging markets was that if we invested over the last several years and we told you back in February we would invest about -- we have invested about $400 million expense to our P&L over the last several years to develop these emerging market businesses to put people on the ground, hundreds of new people that we've added to the company and yet we haven't taken the top right number of employees and change that much, and then invest in licensing personnel and entertainment personnel that we would be able to amortize more of our efforts to take more of our brand efforts and spread that across more geography. You combine that with our focus on fewer skews, you take out some of the cost and those tertiary skews, it enables you to have more operating profit per skew and to take out the cost that's associated. And that has a lot to do with what Victor was talking about as how you digitally market and the marketing campaigns that we used based on the great consumer insights by country. It enables us to do the right skews for the right region, recognizing that our universal truth within several of our brands that you can get under the skin of the consumer and really understand what will hunt globally. And then in doing that, you're able to save those associated costs with that last 10% of the skews or 20% of the skews that we know really won't make a lot of difference to the health and vitality of that brand. And we'll build the brand affinity globally and of course, spread again, spread the R&D, spread the marketing cost. Deb, you want to talk about impact of the P&L?

Deborah M. Thomas

As far as the other items on the P&L, we try to highlight that today when we show that reconciliation in our cost sight of savings slide. While we've added new big offices in Brazil and Russia and China, those costs and those additional investments that you see that continuous run rate in the P&L from here and the other additional investment we make would be very small. So for example, if we're going to open an office in the country like Thailand, we would need as much infrastructure as we would in these other countries. So you won't see the escalation, but you've got that continuous run that rate we try to highlight today.

Brian D. Goldner

Michael, kindly wait for the microphone.

Michael Kelter - Goldman Sachs Group Inc., Research Division

I wanted to ask -- you didn't spent much time on Star Wars today. You touched on it a little bit, but it's probably the biggest sales driver you've got coming up in the next few years. If we go back 10 years ago in a movie you earned around $500 million, you've had about 20% inflation since then, gets you to $600 million and the international distribution for movies and for toys is better could get you to $700 million or $800 million, which sounds like a really big number. And so I was hoping you could just kind of give us what other things we should be thinking about as we try to take an educated guess as to how that might flow through your P&L?

Brian D. Goldner

I think one of the things that's been great about changes, the acquisition by Disney of Lucasfilm and the plans there, we can really see in the history we've had, albeit short history in the Marvel brand. We've seen since 2009 since Disney acquired Marvel just how that helped us to accelerate and make 2012 our biggest year with Disney collectively the fact that we're able to accelerate and that they're able to bring their scope and scale that they have with Disney to that Marvel business that is historically been more North American-focused because of the course of the comic book fans that have tended to be more of North American-focused more than global. Star Wars is similar, and that we've had a lot of developed economies that really have known Star Wars. And we think that Star Wars really is ubiquitous brand that can be taken out globally to be even more powerful. And certainly, we are going to see a schedule of movies and television, both trilogy movies, as well as things we've read about, all read about in the variety or public places, about the other movies that Disney is contemplating and that's very exciting for us. So well, I haven't answered your question specifically on whether or not $700 million is a big number or $500 million or any number per se. I will tell you that we clearly feel very strongly that the partnership as being a brand owner, the partnership between Disney and Hasbro on these boys action properties is a very powerful combination, and we're very excited about the Marvel play of entertainment, as well as the upcoming Star Wars fleet. It's going to be very fun.

Michael Kelter - Goldman Sachs Group Inc., Research Division

On a completely different note, I actually have a question, Deb, for you is that the $100 million of cost savings that the way you present today was about $50 million net, can you be a little more specific as to where that flows through the P&L, SG&A versus COGS versus somewhere else, have a better idea as to what to expect?

Deborah M. Thomas

All right. I think what we said initially is Toy Fair when we first presented the slides, if you look at where we took the charges proportionally, that's where you'll see the cost savings. So much of the changes we've made we haven't closed our new office that we built in Russia. So we've expanded that. So if you think about a lot of those administrative costs heading SG&A, all these costs will not come out of SG&A. But if look proportionally at where the charges hit fully took them, that's a good way to model where they'll be coming out.

Michael Kelter - Goldman Sachs Group Inc., Research Division

And if you don't mind me, I'm going ask one financial question, Deb, for you is you have another slide showing that amortization is going to roll off, pretty meaningfully from $50 million down to $35 million. That's new information at least to me. But you also had a little disclaimer that it wasn't including Backflip. So could you give us some ideas as to what you expect for Backflip? Will you see the amortization roll off and once Backflip gets in, that won't actually move numbers?

Deborah M. Thomas

Well, we have two things impacting that. And just to clarify that slide, because I didn't get the question at launch, that amortization rolloff we're talking about is the intangible amortization from the acquisitions that was done in the past. So as those acquisitions have been with us and you see some of the results of the innovation that's brought to the company and some of the assets in the people here today came from those acquisitions, we still have the benefits for those of acquisitions and assets where the amortization is rolling off. Backflip was still doing the valuation. I don't have the number yet. If I did, I would have disclosed it today. But that will add to amortization. But the point we were trying to make there is Backflip will be accretive to us after that amortization. So you will have this rolloff of the pre-existing intangible asset amortization, but we'll have some new amortization coming in. And we do publish that slide or that chart up for the next 5 years in our 10-K, but we'll disclose that Backflip information as soon as it's finished.

Brian D. Goldner

Tim?

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Brian, you commented in your very opening remarks about how the mix of your revenue was roughly 80% of things that you own and then 20% of things that you in license from Disney and everyone else, that your operating profits were a little bit less. How do you see that revenue mix changing over the next 3 to 5 years? And then please comment on this part, you would anticipate that the operating profit maybe would come up closer to revenues, given the increased in-licensing. Just any color along that, and I have a couple of other questions.

Brian D. Goldner

Sure. With Deb's outline in some of our schedules was the fact that our operating profit margin -- our entertainment and licensing business is about twice the rate of the company. As we've said, if you look at rough numbers today, roughly 5% of revenues of the company, maybe 4% are in entertainment and licensing today. And we've talked about idea that in the medium-term getting towards 10% of revenues, clearly twice the operating profit margin, clearly beneficial and that's where we own and operate our own brand where we have the licensing rights, the entertainment rights and the digital gaming rights. So that's really focused primarily on our owned and operated brand. We would expect that the revenues from our license relationships to remain roughly at about that 20% level as we go forward. And I think we've seen that historically, so I just used history as a benchmark as we've grown our business. And yet it does tend to be slightly under in terms of operating profit, under the company average, but we've improved that over time. And we improved that because again, we're working in a more global environment. We're able to take just as we do it with our own brands, our partner brands and spread our R&D marketing innovation efforts across personnel and across those markets to get more operating returns out each of those businesses.

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

And as it relates to how you're doing your digital media and marketing, and then 2-part questions here. Do you disclose in your 10-K tier who your top 3 customers are and then say you have top 5 that represent x of global sales? How do you see given the changes and how you're going and working with retailers and going to market, how do see that mix changing and I guess maybe more importantly who's moving up into the top 5 or top 10 globally? And then secondly, more of a geographic mix. You talked about Russia, Brazil, China being the top 3, as you rank those as a percent of sales, how do you see that changing within those rankings you disclosed in the 10-K?

Brian D. Goldner

Yes. So clearly, and I'll ask John and maybe Victor could talk a little bit about how we work with our retailers. And I think it's really an important element of the business is how we're working with retailers to support them, not only in bricks but online. And the way that we actually connect those 2 marketing efforts I think is pretty important as we are able to help foster both the in-store experience, as well as the online experience and that really gets to your first part of the question. We are completely agnostic about where our retailers grow their business. We believe that consumers are increasingly working online and choosing online, selecting online. We're building all these digital assets to enable them to have a virtual, literal experience in an online environment. And so we've set a lot of time and effort through what John and what Victor have done so that a consumer can know how to play with a product, see the commercial, see the context, do all those things that help them foster that ability for the consumer to buy at a distance. Now whether they pick it up in store, whether they buy it purely online, it doesn't much matter to us. So again, we're agnostic about the way that consumer purchases, but maybe you guys want to talk a little bit about how we're working with retailers globally.

John A. Frascotti

Yes, so Tim, I think one of the things that's just totally clear is that people are spending more time online purchasing product but also researching product and the importance of recommendations, especially from moms. And so our research has really told us over the last several years, you can sort of chart it how people are spending more time online and how online is influencing their decision. No surprises there. What we recognize frankly several years ago is that we were not as advanced as we needed to be in terms of our branding experiences online. So we launched the program we call DAD, which was Digital Access Delivery. And we made a significant investment internally to make sure that we were supplying our retailers globally with the right type of assets to ensure that consumers experience our brands in a very positive way online, whether it was how-to videos, demonstrations of the product, reviews of the product, visually-rich asset because we know how important that is. So and secondly, and Victor's played a leading role in this and I'll hand it over to him. We have helped those retailers maybe outside of the U.S. for whom digital is a little newer for in becoming an emerging part of their business and the big sort of omni-channel retailing coming around the world to make sure that we're providing thought leadership there as well in partnership with our retailers.

Victor Lee

The question you asked was great because we said that was with the retailers a lot throughout the year. And your question is something that's been brought up a lot of times and I brought it up. What we understand you're going to go back into the data what we do understand in the answer, which product there's a segment whether it's a price point, whether it's new, whether it's old, whether there's entertainment because where drives the behavior that more likely to buy online versus off-line and then how do we compliment that. Because if we give them a great online research experience with a heavy off-line sale, we understand what the message needs to be to push to the off-line. If they tell us this is a heavy online purchase, then we have to completely close that experience online, so in the retail can capture on that point level. Every retailer's different. Every product's different. Every segment is different. And we do that with the big retailers as John mentioned before as a talk about globally, absolutely. There are certain markets that don't have that luxury of having the big retailers that dominate or have a couple of them. We work with some of the retailers there as well as with our regions to help educate, to help provide some leading thought that we already have experienced, to help create those. So we are certainly seeing the growth of pure online retailing in our own business, as well as retailers who are dedicating more of their time and effort to online retailing and some connection to that brick experience, to the in-store experience.

Deborah M. Thomas

And geographically, is that part of your question geographically we are seeing our international customers becoming a bigger part of our business as we have seen particularly companies that have global presence like in addition to Wal-Mart and Toys "R" Us who we talked about today.

Unknown Executive

I think the Europe has a great competition going because given the growth rates we're seeing in places like Russia, the key question would be what's the biggest market in Europe at some point in the near future? And so I think the team's had a healthy sense of competition as it going to establish the Continental European markets where we have really grown up as a company. Or is it going to be some of these new more Eastern European markets where we're getting great growth rate in places like Russia but also in Poland and in the Czech Republic, where we're getting great growth rates in Brazil, but Colombia, Chile are also growing dramatically. In Asia, certainly China, tremendous growth rate, albeit off a smaller base, but really strong growth rates in Korea and in Southeast Asia as well. So I think that some healthy competition around the world and country management and regional management for which ones of these countries against which brands will be growing the most rapidly.

Brian D. Goldner

Sean?

Sean P. McGowan - Needham & Company, LLC, Research Division

I'm Sean McGowan from Needham. I have a couple of questions. One for Deb, one for Sam -- Samantha, and then whoever is appropriate for the third one. Deb, you mentioned earlier, or Deborah, that you mentioned earlier and you expect a greater portion of the cash at the end of the year to be in the U.S. Can you talk about how that happens and whether or not we should be looking up for any significant tax consideration? For Samantha, it may sound silly but I think it's interesting good question, there's some reason why none of the main characters in Pony are male, must've been some thoughts here as to whether or now that would help sales a lot of other girl's properties have female and male characters some of the newer properties that are out there, so just some thoughts behind that. And then whoever would just like to update us on the film lineup? Just where it stands today, whether there's been a change lately.

Brian D. Goldner

So Deb you want to?

Deborah M. Thomas

So I'll do the first one, but Samantha's is more interesting. We've spent the last year telling people that we've been cost effectively looking at ways to bring some of our cash back to the U.S. and we have been indeed working on that. We've got some plans in place and as I mentioned earlier, we expect to have a greater proportion of our cash in the U.S. at year end, compared to today. That will not have an impact on our tax line. We currently continue to expect our tax line to be in that 26% to 27% range, I think it's the guidance that we gave earlier this year. And if we update that, we'll update that in our third quarter call.

Brian D. Goldner

As we've met with you over the last year or so, we have really talked about if we're going to use cash, we're going to invest in the business. Return cash to shareholders over the last 5 years, we've returned the 150% of net earnings to shareholders and dividend and buyback and we're committed to that kind of a program, albeit with cost-effective return of cash. Sam you want to talk about characters? .

Samantha Lomow

Yes, I love it. It's a great question. So we've relaunched the business since 2010 and the entertainment has been a great catalyst for growth, and part of that has really been building out the layers of the IP with hundreds of characters in lure that has really been embraced by the fans. And in that, you find all sorts of characters. There are plenty of male of ponies in the lure. If you're interested you can read Elements of Harmony. It's a book that has all other different characters listed out and it goes up episode by episode. It's actually a great fan read. And even last year, just kind of reinforced our male pony heritage, we've had a big royal wedding celebration and offered that both male and female ponies as part of that storyline and also in product and did really well for us. So they're not part of the Core 6 main characters, but they are throughout all of our stories and throughout the fantasy overall. So I think that's probably the best.

Sean P. McGowan - Needham & Company, LLC, Research Division

Okay. Yes, film lineup. So what we do today given there were just so much that we were talking about, as we focused on the properties where we either have a clear day-in-day. We know where it's going to be in theaters or property that's eminent in terms of deciding on what the date might be like Stretch Armstrong. And then I mentioned that we're going to production of Leisure, albeit as we all know, is a smaller budget film, an opportunity to kind of get into the site guys of that consumer. That's very different than toy-buying consumer for the Leisure brand. We continue to work on brands like MICRONAUTS, and we're developing that in a number of ways. Steve David so I know is here and his team that has most studios. We're looking at both the film side, as well as animated products. We are looking at the models that we've created for, Equestria Girls, which we think is a very strong possibility for some of our other girls brand whether it's Littlest Pet Shop or what have you. We continue to develop Monopoly. We're continuing to develop Candy Land and some other brands and continue to read scripts and ideas for those. We just don't have any current dates. So rather than spend time saying what I just said, which is not that interesting until you have the date, the fact that there's a lot going on behind the scenes that we continue to develop our Hasbro brands where we feel they could be relevant. Now the important point here is that we don't feel that every brand deserves a motion picture whatever size, budget. But we do feel that every brand is getting reinvented regularly and you sort of see that difference in the Blueprint. The Littlest Pet Shop Blueprint is even different than My Little Pony is different than certainly Nerf or different than Transformers. And so what you will see is based on the real understanding of the inside and more of that work that we're doing around the world, you're going to see us develop content. But we do believe some form of content whether it's user-generated, online, offline, digital, mobile, TVs or movies. We feel, you name it, we feel are all going to be critically important to keep fit business category and kind of experience very relevant to global consumers --

Unknown Analyst

Do you have the dates?

Brian D. Goldner

Sure. I'm sorry. So the question was about where we know the dates. So Transformers is June 27 of 2014. G.I. Joe, I don't believe we've announced the date but we're in preproduction on G.I. Joe. We're working on the next story idea for the movie. On Stretch Armstrong, what we said is 2014 is frankly, so strong for us that we are looking for a date beyond 2014. For that movie, we've been in development on a script and we feel very positive about the progress we've made there. MONOPOLY and Candy Land, we haven't really named the date and we have prior to either.

Unknown Analyst

Partner Brands too?

Brian D. Goldner

Oh, Partner Brands. Okay. So Eric, do you want to take on '14, do you want to talk about that?

Eric Nyman

Sure '14, I think it was announced by Brian, as I said earlier. so in April you have Captain America, The Winter Soldier. In May, you have Spiderman -- The Amazing Spider-Man 2. And then in August, you have Guardians of the Galaxy. We've also announced some forward-looking things in 2015. Brian I'm not sure, would you want me to announce or I'm just going to stick with what you gave me, which are they talked about again The Avengers or The Avengers 2 coming out in the springtime of 2015. And then no date yet, but Star Wars major motion picture sometime in 2015.

Brian D. Goldner

Right and then obviously, a raft in television Brian had outlined a number of different animated TV series. There at least 3 that are airing either now or through 2014. Three of those series including the Hulk show and The Avengers Show and The Spider-Man Show. And that would continue into '15 and for next year, we know for fall, we have the new Star Wars animation coming. Okay. Over here.

Stephanie S. Wissink - Piper Jaffray Companies, Research Division

Steph Wissink with Piper Jaffray. We've talked a lot about big blockbuster properties over the next couple of years. I'm just curious with the digital strategy and the Blueprint. How does that change the monetization of the curve of revenue as you see it forming? Does it stretch out the tales, is it the concentrated, how do you that digital opportunity around the big the Buster content?

Brian D. Goldner

So there are 2 parts to that and I think what you've seen is that we've been able to grow our business and we've been able to grow a lot of our core businesses and then there on top of that, particularly in boys as we've shown more overdeveloped relative to the other categories in terms of that blockbuster, a big-budget entertainment. So what we would expect is and we've seen is that, as Samantha outlined this, the girls' business have grown from mid-$200 million to nearly $800 million by 2012, so we've gotten a good growth rate there. And in preschool and we've seen now a turnaround, we believe a continued growth over time in our games business. And then on top of that, I kind of it's a little bit like EKG, you're going to have a bit of spikiness around some of the bigger entertainment in the boys arena, but the good news for that is there's a rap in the boys properties that are coming be it from us or be it from partners so the number of new boys driven entertainment brands, kind of the blockbuster movies as you call them, are coming more of them and over a longer period of time. So yes, you do get some of that up and down. But I think overall that trajectory is upwards, and overall, we feel that we've never been entering an era with more entertainment, if you just look at whether it's a Star Wars plan, with a Marvel plan, with our own plans. I don't think we've ever stood in front of you in the fall and then able to look at the visibility for duplicates timid initiatives own creation or with our partners as we can today.

Unknown Executive

The only thing I would add to that is a lot of our digital opportunities are in addition to some of the big boys entertainment properties. So if you look at My Little Pony where we have a very successful digital mobile game with our partners Gameloft, it's really a great separate opportunity depending on how you get define entertainment that in some ways is an entertainment opportunity. If you look at Monopoly, a great heritage brand, monopoly has been our top 10 app in the iStore, in the iTunes Store -- excuse me, for several years. In fact, Apple talked about some of the best titles ever, and Monopoly is one of those. So a lot of these digital opportunities, because of the day-to-day engagement of the brand aren't necessarily dependent on those big blockbusters, excess sort of separately to those.

Brian D. Goldner

I think that's an important pledge, try to make it earlier. We're going to use the word entertainment go-forward. We don't see that as a negative, but we do want to make sure that together that we are all defining this in a much broader context than we ever have before. That entertainment is really kind of everything. It's all of those different multiple touch points. It's the multimedia sensation that we can create everywhere. It's the way the consumer can move fluidly. Sam has talked a lot about that fluidity of movement where consumers can move from form factors of analog to digital and back again. You're just going to see us again, operating and developing in that kind of ubiquitous way and surrounding the consumer, which again, goes back to why we've said earlier this year, we wanted to change the nature of the company to be more about brand building and less of that SKU making because really, we're spending significant money in R&D and inside development we're going to spend in those innovations. Several people would ask about the innovation philosophy. It's actually stronger and more driven than ever, but you do have to invent around brands, around all these different touch points and really successfully tap into and communicate with and build brand affinity for consumers who are moving across all its platforms. Other questions? Yes, please.

Unknown Analyst

With all the entertainment for 2014.

Brian D. Goldner

Sorry, if you don't mind, I know who you are, but if you don't mind for the audience.

Unknown Analyst

From capital. With all the determined coming from 2014, how, if at all, differently are you planning for inventory of purposes on the 60% of the business that is non-entertainment driven?

Brian D. Goldner

Yes, well as you can see we have a lot of initiatives in our non-entertainment band that are really working for us. Whether it's in Nerf or in our Games business whether it's our Furby brand or on several other brands that we have. So we don't really look at this 0 sum game. I don't think that we're taking our determined to say given this and what you're really saying is where are these brands, how are they moving forward or how they put the innovation, where we are seen the traction, where we are seeing the momentum, and then you're going out and having done so much more work, as John outlined for you, so much more global consumer insight. What we really are understanding now how these brands resonate with consumers by country. And so therefore, we're really driving our brands and being able to come up with, I think, much better forecasting around our brands based on how those plans are resonating by country because in each area or country certain brands are stronger than other brands. The Baby Doll business tends to be stronger in Latin America than it does in other places around the world. The #1 brand in Turkey for us is Playdoh. Because again, that philosophy around creativity and developmental milestones that the Turkish parent has for their children. So what they're doing really is again, building each of these brand, each band around its own blueprint, having understood that brand and then really developing and saying okay, so let's roll out the bottom up clearly second look at the top found approach what does that look like for us but it's really a bottoms up approach brandleader-by-bandleader and country-by-country. Other questions? Please. Yes. James. Get the microphone.

James Hardiman - Longbow Research LLC

James Hardiman again, at Longbow Research. To the extent that any product that competes through the time and spending of children and certainly young boys competes with Hasbro. Can you tell us anything about any insight that you guys have with regards to the next-generation of video games that are going to be launched in the holiday, certainly a lot of money are going to be spent on that, not just at holiday over the next year. Any data you guys have picked up with regards to that and maybe we look back 7 years ago, does that have any impact on spending among children certainly sort of 10-year-old boys?

Brian D. Goldner

I'll comment a bit on that. And then maybe Eric and John, you guys want to talk a little bit about this. I think what you see in the early transition stages of a new console that is Xbox 1 or PlayStation 4. And historically, clearly, when they first launched those brand, and those console games are particularly focusing on that older age segment. It tends to be certainly at first and over the first several years if you look at the games that's really being developed at E3, and how did E3, it's a good indication of where the publishers are focused in terms of their efforts, and clearly it's much more aggressive older skewing games where their multiplayer experience is not the same that in 3, 4, 5 years you won't penetrate younger audiences, but again, a thing as we're developing in casual Games and space on console and all these other consumer touch points around gaming, we're not really left behind in that case. But I would say that early days typically, early days were about that hard-core gamer are they going to adopt those platform and those console to begin with. If they do, which brands or games are going to get most penetrated and then what does that behavior mean within the household once the young dad brings the Xbox 1 into the House? How many years does it take for the 6-year-old to really tidy up that product and what is the game that ultimately play, if you guys want to add?

John A. Frascotti

I would add to that if you look at the price distribution of our products and the fact that the large majority of our products are under $30, $40, compared to console purchases, that's one factor at play where clearly that dollar purchase by the family going after the March war expensive console thus, newer. It's different quality to be from most of the purchases on our products. Secondly, there's a lot of our brand's that we think actually function in a unique way whether it's Play-Doh and the creativity and actually office activity there, or Nerf and Nerf Rebel that have other activity and we've seen nice progress in our Nerf Sports line as well. So there are certain things and while we certainly believe in that fluidity between digital and analog and the inclination of both boys and girls don't want to move between digital and analog, there's also a continuing ongoing need for office screen play. In fact, the more connected the kids become in some interesting way, is the more there is a need for an offscreen activities too, especially for value-oriented prices. So we believe one of the reasons we've seen such nice's growth in our Play-Doh business globally is because of the bulk of development which is that Ryan talked about the value-oriented prices for that. And we feel it really played in a totally different arena than the several hundred dollar brand new consoles and associated software.

Brian D. Goldner

Okay, please. Gerrick.

Gerrick L. Johnson - BMO Capital Markets U.S.

Gerrick Johnson, BMO. You don't show core Playskool as a franchise brand. Where does that fall in hierarchy and what are some plans to grow that business? I'm talking to core, not the heroes, the core PLAYSKOOL. And second, on China, what's preventing that business right now from being profitable?

Brian D. Goldner

Yes, it's really -- on China, the reason it's not profitable because we're choosing to invest in the longer term and clearly, we want inculcate our brands in that market. We want to spend time in developing that market, getting consumer insights in that market and the market is growing quite rapidly. It's growing for us, it's growing for the industry. So we feel very heartened by the growth rates that we're seeing. We're also penetrating that market in partnership with a lot of content developers. You saw Pei Le Doh. You've heard about our Family Game Night format going into China and you're going to hear more about contents that's being developed for that market over time. It's really our choice that we feel that to get to the right run rate for that brand given that country, given the size of the opportunity we took a decision to just push out the profitability discussion for a couple of years. Clearly, we've achieved profitability ahead of our schedule and several other countries we know how to go, get profitable businesses but we want to build a giant business for the long term in China. And so we're willing to invest a bit longer to go get that. I think that, that's kind of important, do you want to comment on that, Eric?

Eric Nyman

Yes. In terms of PLAYSKOOL, PLAYSKOOL is a challenger brand in our brand architecture and that includes both PLAYSKOOL and PLAYSKOOL HEROES. And within that as well is Potato Head and obviously, a partner brand with Sesame Street is under the PLAYSKOOL brand. And globally for us, PLAYSKOOL is a very important brand and very important part of our business. We chose several years ago to take a slightly different approach to it, to manage it in a way that drives towards core key product that drive profitability for the brand. So we've been very selective in our SKU mix for PLAYSKOOL. In many markets around the world especially in certain Latin America markets, in certain European markets, PLAYSKOOL is a very important and it's very important in here as well. But what we've done is be more selective in growing the business. We've obviously focused a lot of efforts on Sesame Street and on PLAYSKOOL HEROES. And we're seeing some nice expansion with Potato Head, as we start to expand that and of course, some of our traditionally core PLAYSKOOL products, Step Start, Walk and Ride Elephant, Busy Ball Proper continue to be perennial a good sellers for us.

Brian D. Goldner

Sean, go ahead. We only have time for about one more question.

Sean P. McGowan - Needham & Company, LLC, Research Division

I'm not sure if this is for -- Sean McGowan from Needham. A question about Disney's Infinity platform, it's ubiquitously absent from the characters that they launched with are some of the properties that you're involved with. In addition, you have a number of other properties that might seem to lend themselves to that platform, so can you talk about what discussions you've had with this now better partner, Disney, about working with that Infinity platform?

Brian D. Goldner

Yes. I think that we are working on gaming platform right now with Disney in telepods. Obviously, Star Wars, ANGRY BIRDS, Star Wars is really, again, part of that relationship on that brand. We like the mobile gaming space. We think that Infinity is another great platform, but what we're really seeing among young people is them moving between different platforms and trying out and doing lots of different things around gaming and around play. Certainly, at some point could some of the Marvel brands or the Star Wars brand end up on the Infinity platform, they might, but those aren't really conversations that were going to share right now.

Sean P. McGowan - Needham & Company, LLC, Research Division

[indiscernible]

Brian D. Goldner

Okay. I think we cut off your microphone to that part.

John Taylor

John Taylor Arcadia. Let me take another crack at that $700 million question.

Brian D. Goldner

Okay. Which one?

John Taylor

Star Wars numbers. So when Star Wars was released last time, its market was pretty much limited to Western-developed countries. Let's just take that as a proposition. Now you're much more globally distributed, offices all over the world, contrast that to Transformers, right. Transformers, the early movie, you build out that global distribution during the course of Transformers. And those movies were shot in a lot of places around the world expressly to expand the audience. So if you look at the Transformers business, there's a proxy, what percentage is being done in markets that you had no direct distribution before and maybe we could use that as a way to get at what percentage either?

Brian D. Goldner

Yes. So if you go back, Transformers first 3 movies. First movie, circa $500 million; second movie, circa $600 million; third movie, circa $500 million. Each of which was about 10% entertainment and licensing revenue. So out of that, those numbers. And again, what we set for Transformers is there was a need of a major reinvention, and we're doing that with the story and both the human characters, as well as the Autobots and the Decepticons. That's certainly moving on from that original trilogy that we had done. And that's the intention of the filmmakers, and that's our intentions. So you're going to see a lot of new play button. Transformers is about evenly split 50-50 between Domestic business and International business. It is -- Transformers is one of our largest brands. It's not our largest brand in a place like China, and it's continuing to grow. So I think as we go out and look, clearly we've seen the growth in our Marvel business. That's what I was saying earlier that clearly, Marvel has benefited from Disney ownership and that partnership between the Marvel folks and the Disney folks has clearly helped to accelerate the global footprint of the Marvel brand. And so we would imagine that would be true as well for Star Wars. We're in that early planning stage on the Star Wars business. I don't know if you guys want to comment further, but Eric other further conversation with the team. But clearly, we feel that both the size of the entertainment opportunities, as well as the fact that we have invested in these markets around the world, we believe there's a great opportunity for more ubiquity around Star Wars and around Marvel as we go forward. But again, sizing that opportunity, I think that I'll try to give you some numbers on Transformers and give you some thought around that. I don't know if there's anything else, Eric.

Wiebe Tinga

The only thing I would add is we have a black series right now that we've just released the Star Wars, which is targeted to our collectors. And it's been performing well and what that points out to us to is something we always knew, which is that the collector base for Star Wars is very strong, continuing to this day. And that creates an interesting sort of intergenerational dynamic. We have a lot of parents and grandparents out there who are great Star Wars fans, eager to share that with their children.

Brian D. Goldner

And we've seen that on Transformers, JT. If you go to China, what I would interested in earlier 2000s is getting off the plane the first time, working in Transformers and looking at and bringing entertainment back and ultimately the movie back with how many 30-somethings and grownup with the brand Transformers in China because the animation had been in the air in the '80s. So rekindling that interest among older guys who are now both interested as fans, as well as parents, and the fact that this is a new generation of kids that are really going to sort of experience Star Wars for the first time for themselves, it's a great opportunity.

I think with that, we're going to close out. I thank you for your time and commitment today for being here with us in Providence, and have a good safe ride home.

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