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Should Hasbro Worry About This Movie Franchise's Worst Open Ever?

By Rich Duprey - Jul 11, 2017 at 10:21AM

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Transformers have made the toymaker a movie industry powerhouse, but the good times may be coming to an end.

Hasbro (HAS 0.24%) should be very worried about the performance of Transformers 5: The Last Knight. The weakest opening of any of the movies in the history of the franchise, it's not just about what it means for movie revenues and toy sales this year -- those have already shipped and are on store shelves in anticipation of the film's release -- but rather what it means for future installments and the havoc it could wreak on the toymaker's operations for years to come.

There are three more Transformers movies in the pipeline, including a spinoff scheduled for next year that begins shooting this month, but the ongoing poor showing at the box office could limit or kill the franchise faster than any Decepticon.

A Transformers 5 Decepticon.

Image source: Paramount Pictures.

Transforming a toymaker

The original Transformers movie was a shot in the dark for Hasbro that hit the bull's-eye. Having watched Disney's Marvel Entertainment unit successfully exploit its action figure portfolio for years, Hasbro opened its own toy box and pulled out its 1980s Transformers figurines that had been enjoying success as an animated TV show. The live-action movie versions went on to become mammoth hits, generating billions at the box office worldwide.

The problem is it looks like it's running out of steam, at least here in North America. After the fourth installment generated over $1 billion, Viacom's (NASDAQ: VIA) Paramount Pictures green-lighted three additional movies, believing they had legs that stretched longer than any Transformer. But the $69 million domestic opening -- what would be considered a big hit for other movies -- was less than even the original earned. The movie's also earned poor reviews, garnering only a 15% rating on Rotten Tomatoes, worse than even the 19% earned by the widely panned Revenge of the Fallen.

While the movies tend to do better overseas, and The Last Knight has generated almost $330 million at the international box office, or 76% of the total $431.7 million earned, it's not doing well in China, a country that tends to send most movies over the top.

According to The Hollywood Reporter, the latest Transformers flick only made $30.5 million at Chinese theaters in its second week of release, a 75% slide from the opening weekend and putting out of reach the chance to ever hit the $330 million the previous installment made there.

And that's worrisome for Hasbro. Revenues for its boys segment have increasingly become more internationally weighted so that right now sales are roughly split between domestic and international sales. If the Transformers franchise is starting to falter even overseas, that could cause Hasbro to underperform expectations. And with the first franchise spinoff due out next year, Hasbro could be heading into a troubling period.

A Transformers 5 character in a battle scene.

Image source: Paramount Pictures.

Generating buzz

Certainly, the Bumblebee character is a fan favorite, and if there's a movie that could revive the franchise it would be one about the yellow and black Autobot. But after five movies, viewers may be getting fatigued, particularly now that they're coming out every year, instead of every two years as they had been.

Hasbro takes a more active role in the movies it makes now, having transformed itself from non-financing producer to one that participates in writing, producing, and even financing the films. Its animated feature My Little Pony, due out in October, will be the toymaker's first fully financed movie.

By all accounts, Transformers 5 will be a big hit relative to the rest of the movie industry, if not to the franchise, and because the Bumblebee spinoff is said to be a lower-cost version, it will likely make back its production costs and then some. But The Last Knight is director Michael Bay's last Transformers film, putting added import on how the franchise moves forward, and there could be a limit to how many times even die-hard fans will go out to see Autobots defeat the Decepticons.

Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Hasbro and Walt Disney. The Motley Fool has a disclosure policy.

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