Discover more from Monday Morning Economist
Does the board game Monopoly have a monopoly on board games?
The National Retail Foundation estimated that holiday spending would be the same this year as it was in the years leading up to the pandemic. The biggest change from previous years was that nearly half of all shoppers planned to start shopping before November to avoid potential headaches from shipping delays. While an easier solution would have been to just give cash instead of physical gifts, most people don’t feel comfortable doing that. Based on an Intuit survey, most Americans admit to a preference for cash as a gift but won’t give cash as a gift.
The main holiday gifts that people buy largely come from one of three categories: clothing, toys, and gift cards. About three-quarters of shoppers will purchase a gift from at least one of these categories. The clothing and accessories category is the largest category overall by dollar value, but that may be driven by the price of the products rather than the quantity being purchased. The data below reports the changing spending patterns across various categories this holiday season based on a Deloitte study:
When it comes to the toys and hobbies category, board games are often prominently featured in stores. Sales of board games have been particularly strong over the past 2 years because of pandemic-induced lockdowns. In the United Kingdom, sales of board games and puzzles increased by 240% during the first official week of the lockdown. The top board game purchased at that time? Monopoly Classic. Hasbro, the company that owns Monopoly, reported in their end-of-year earnings for 2020 that its gaming profits were up 15% compared to the year before. Every other segment earned the company less money in 2020 than in 2019.
Most people generally know the goal of Monopoly: control property, maximize profit, and drive competitors to bankruptcy. The behavior of real-life monopolists is quite like that of board game monopolists. Monopoly, the game, evolved from an anti-capitalist game created in 1903. The original game, known as The Landlord’s Game, was intended to demonstrate the negative impacts of concentrated wealth. The problem? It turned out that people really enjoy playing a game where they accumulated a lot of wealth and crushed their opponents. The same is true across the many varieties of the classic game.
The evolution from The Landlord’s Game to Monopoly is an interesting one in and of itself, but Parker Brothers ended up buying the patent to The Landlord’s Game in 1935 and sold about 1 million copies of the game every year for the next 30 years. Hasbro entered the board game market in the 1980s and eventually bought Parker Brothers in 1991.
Monopoly would go on to be inducted as part of the inaugural class of the National Toy Hall of Fame in 1998 and is considered the most popular board game in the world by Guinness World Records even if most people don’t even know the rules of the game:
The purchase of Parker Brothers was just the start of Hasbro’s buying spree, which doesn’t look all that different from how you would play a typical game of Monopoly. At some point in time (or even still today), Hasbro would own Twister, The Game of Life, Battleship, Candyland, Scrabble, Risk, Clue, Magic: The Gathering, Dungeons & Dragons, and Quija. Some industry experts estimate that Hasbro owned close to 85% of the U.S. board game market by the end of the 1990s. That is a large share of the market, but some people might look at that number and consider it something a bit different: a monopoly.
The sales data for board games are much tougher to calculate than in many other markets, but Chris Clarke has tried to summarize that market in a captivating Tik Tok. Most major game companies have a diversified portfolio that includes a variety of other toys and board games. Each individual board game makes up only a piece of their overall operating revenue, but Monopoly does make up a significant share of Hasbro’s portfolio. Determining whether Hasbro has a monopoly is much easier because the definitions are easier to articulate than the data is to calculate. How markets are defined helps economists and regulators determine whether Hasbro is in fact a monopoly.
For Hasbro to have a pure monopoly, it needs to control 100% of the market. Where it gets interesting is thinking about how markets are defined. We can start at the highest level and consider the toy, doll, and game manufacturing industry in the United States (that’s NAICS code #339930 if you’re curious). There’s no question about it, Hasbro does not have a monopoly on the entire toy, doll, and game industry. There are just too many competitors in this market, including major competition from companies like LEGO, Mattel, Tonka, and Cartamundi.
We can get a bit more specific in the toy market and consider the board game market. The narrower a market is defined, the more power Hasbro will start to possess. Here, again, we run into an issue of competition. Even though analysts believed Hasbro owned close to 85% of the market at one point in time, that still isn’t 100% of the market. In the board game market, it looks like Hasbro still doesn’t have a monopoly and their market power has been decreasing since the 1990s. One example is the French company, Asmodee. They have become a more prominent board game manufacturer with European-style games like Settlers of Catan and Ticket to Ride. There has also been increased pressure from niche board game makers thanks to platforms like Kickstarter. The “games” category is considered the most funded category on the entire site with over $1 billion pledged by project backers:
So, does Hasbro have a monopoly on anything? Yes! Hasbro owned a very specific form of a monopoly (Patent #2,026,082) on the board game Monopoly. Even though that patent has since expired, the company owns a few other government-created sources of monopoly power. The sources of monopoly power are intended to protect intellectual property and incentive companies to invest profits in new products. The barriers to entry come in the of patents, trademarks, and copyright agreements, each with its own limitations and expiration dates.
While Hasbro’s patent was active, no other company could produce Monopoly or derivatives of the game. While the patent for the board game is expired, Hasbro still has copyright and trademark protection on the game’s graphics, cards, and pieces. This prevents other companies from using the iconic references to earn profits unless they pay Hasbro first. Earlier this year, Hasbro was at the center of a European fight over trademarks and their purpose.
So, while Hasbro doesn’t have a monopoly on board games, it doesn’t mean they don’t act in similar fashions to monopolies in other markets. The competition aspect of other major competitors, like Asmodee, and other independent board game makers helps keep pricing power in check. On the quantity side, Hasbro seems focused on using its profits to create new variants of the game itself rather than creating brand new games. Hasbro has also gotten in trouble for other behavior often associated with monopolies: price fixing with their distributors.
Do you have an alternate version of the classic Monopoly game? If so, leave a comment and let me know which version you have!
The total bank in a standard Monopoly game is $20,580 [Insider]
Monopoly has appeared in 103 countries and 37 foreign languages [National Toy Hall of Fame]
Hasbro earned $1.76 billion in revenue from their gaming division in 2020 [Hasbro]
The global board game market is expected to grow by $5.81 billion from 2020 to 2024 [BusinessWire]
The most expensive Monopoly set was created in 1988 and cost $2 million [Guinness World Records]