It’s that time again, the most exciting time of the year! No, I’m not talking about Khans or draft or really, anything directly related to Magic.

Instead, it’s earnings report time! If you don’t get the sarcasm, it’s because this time of year lots of annual reports come out, and financial journalists have to write dull articles reporting on the results on all of them. It’s a pretty hated time of the year for them.

Fortunately, I only have one annual report I care about! Unlike some of the other finance minds in Magic, I don’t play the actual stock market other than to simply park all my funds into a well-managed Mutual Fund and let compounding interest do the rest. So, since I only care about Wizards’ annual report, I actually look forward to writing these rather than dreading it.

If you’re wondering why we even care about Wizards of the Coast’s annual report, it’s because of what I’ve termed the “secret” reason for growth in the price of cards. For the last several years people have pointed at new cards and new formats and exciting developments, and they’ve cheered as the cards went up without understanding this basic truth of the matter:

Player growth has been on an insane upward trajectory for the last five years.

That’s been one of the biggest catalysts of growth in that time period, much more so than some universal truth of “Magic cards always go up.” It feels that way because the game has done nothing but grow for the past seven or eight years, and that’s more than enough to create that narrative.

In that context it makes a lot more sense why the annual reports matter. This is where we get our only glimpse into how Magic is doing as a brand. It’s not perfect, but it’s more than we get just from looking at things from the outside, so I think it’s well worth exploring.

Digging In

So, how did we do this time around? I’ll start with the most important piece of news.

"Franchise Brands are up 36 percent year-over-year. All seven brands grew double-digits year-over-year."

That’s the most important thing there is, and it exists in the Earnings Presentation Hasbro presented to investors. While the year-to-year comparison looks at the third quarter of 2013 compared to the third quarter of 2014 and takes into account revenue rather that players, this is huge news. Year-to-year growth of at least 10 percent is huge, and that’s great news moving forward.

Next up:

“Segment operating profit in the U.S. and Canada increased 16% in the quarter, reflecting the higher revenue levels, favorable mix and improved expense leverage in the quarter despite being partially offset by a challenging environment in Canada. We also continued to invest in our business including support of key initiatives such as MAGIC: THE GATHERING.”

Great news again. Again we see not just revenue increasing, but profits as well. We also have “continued investments” in Magic. I’m not sure exactly what that means,  but I imagine it’s Organized Play investments as well stuff like the Duels of the Planeswalkers expansion and the like.

“MAGIC: THE GATHERING also grew globally, increasing in both the U.S. and Canada segment and International segment. The response to the July release of the Magic 2015 Core Set and September release of Khans of Tarkir positions the brand well into 2015. We believe there is tremendous future potential for MAGIC: THE GATHERING as it continues to grow around the world. We are investing in the brand, both in digital and analog play, through technology and storytelling.”

Just some fancy language here to say that “stuff is selling!” I find the inclusion of M15 in that a little odd since the high price of the set clearly shows it hasn’t been opened all that much, but it still seems Magic as a whole is chugging along well, and that includes M15.

Another really important note here is the future growth they believe there is in the digital market. That means that, regardless of what see of from the outward perception of Magic Online, there is some money continually being put into it. Hopefully that will (someday) result in a more stable client.

Then came the Q&A session, and while I don’t know who Sean McGowan of Needham and Company is, he’s a hero for asking specific questions about Magic, including how well the newest releases have done. Here’s the answer to that question from the president and CEO of Hasbro.

BRIAN: “Yes, Tarkir has been a great release. The fans have really enjoyed it thus far. Still early days, because you know it’s just been released. We talked about earlier in the year the fact that the releases really do matter. This is a storytelling brand first and foremost and engagement with characters is critical. So this is on track with our expectations and Magic continues to demonstrate both short and long-term great potential and we continue to invest in the brand both on the analog and digital side as we see great opportunities not only for this year, but for many years to come in Magic and growing it as a true global brand, as one of our major franchise brands.”

SEAN: And are you seeing an increase in the percentage of the total revenue that’s coming from digital?

BRIAN: "Yes, we continue to see digital continue to grow over time and we’d expect over time that it would continue to grow.”

Another interesting tidbit from the Q&A is this:

BRIAN: “So year-to-date Magic is up mid-single digits. In the quarter it was up double digits. So it’s the momentum is building but Magic year-to-date through the third quarter was up.”

Takeaways

That’s actually a decent bit to work with. I would love to link you to the full transcript, but it’s not available without paying for it, so that doesn’t do anyone much good.

But the news is good. Magic may not be growing at the 20% clip it was for a year or two, but as long as we’re positive in terms of revenue we’ve got a growing game. While we don’t know exactly what that single digits is, it’s upward growth and the faith that Hasbro seems to have in the brand is certainly appealing.

The note about Magic Online is also interesting. I know people say it has nothing going for it, but we see it’s still growing in terms of percentage of revenue for the game, and that means it’s not going anywhere, nor is it buckling under the weight of competitors like Hearthstone. All good things for the future of the brand, and of your investments.

We have a few more months until the final report comes in, and I hope that in that one we get a little more concrete info, given that it will be an end-of-year presentation.

Until then, all the news from Hasbro seems to be positive. Slowing growth, yes, but still positive growth and none of the warning signs like declining revenue we saw last quarter.

Full steam ahead!

Thanks for reading,

Corbin Hosler

@Chosler88

Speaking of moving forward, the next stop for me is Worlds weekend in Nice, France in December. I’ve been added to the coverage team for the event, and I’m really excited for the opportunity. If any of you are lucky enough to be there, I’ll see you there!