On July 8, toy maker Hasbro, Inc. (NASDAQ:HAS) announced the acquisition of a 70% stake in privately held mobile game company Backflip Studios. You may ask: Why would a toy company that owns some of the most rock solid iconic brands from G.I. Joe to Transformers want to buy a company operating in an unproven industry such as mobile gaming? That’s a good question. Let’s examine….
You’re right in the fact that mobile gaming lies in unproven frontier territory. Moreover, mobile gaming represents a luxury that people can live without paying for. Mobile gaming company Zynga Inc (NASDAQ:ZNGA) provides evidence of this fact.
Zynga Inc (NASDAQ:ZNGA) experienced a decline in revenue of 18% along with a 30% decline in monthly unique players in its most recent quarter. The company decided to bring in a new CEO, Don Mattrick from Microsoft Corporation (NASDAQ:MSFT) to try and straighten things out.
A number of people believe that mobile gaming represents the future of video gaming altogether. Video game maker Electronic Arts Inc. (NASDAQ:EA) showed losses from 2009 to 2011 and showed profit margins of less than 3% for fiscal years 2012 and 2013. However, the company showed “significant” increases in internet and mobile derived products to the tune of 24%.
Skills and marketing acquisition
Recently, Hasbro, Inc. (NASDAQ:HAS) entered into an agreement with Electronic Arts Inc. (NASDAQ:EA) to develop mobile games for popular traditional board games such as Monopoly, Scrabble, and Battleship. However, this leaves Hasbro, Inc. (NASDAQ:HAS) out in the cold when it comes to the intricacies of developing games pertaining to its other brands.
Hasbro, Inc. (NASDAQ:HAS)’s subsequent acquisition of Backflip Studios represents an effort on its part to gain skills in an area that could prove useful in moving forward with its brand blueprint. This gives the company greater control in the areas of utilizing mobile gaming to advance its branding initiatives and improving the chances of adding value to its brands. In addition, Hasbro, Inc. (NASDAQ:HAS) has inherited a new set of popular mobile gaming brands.
The financials weren’t disclosed but Hasbro, Inc. (NASDAQ:HAS) had this to say about Backflip, “Backflip Studios has become one of the fastest growing and most profitable mobile game studios with more than 300 million downloads of its popular games.” This gives indication that Backflip’s financials lay on more solid footing.