What Saved the LEGO Company and Led to It’s Current Success?
LEGO struggled from 1998 to 2004, nearing bankruptcy, but licensing and media tie-ins helped revitalize the company and the LEGO brand name.
Below we look at how LEGO bounced back from the brink of bankruptcy, reaching a new generation through a string of successful licensing deals and media tie-ins (i.e. video games, TV shows, and movies), and proving the old adage, “everything is awesome when you’re part of a team”.
A LEGO Brickumentary Official Trailer #1 (2015) – LEGO Documentary HD.
FACT: The LEGO Star Wars toy line in 1999 marked the birth of “the new LEGO”. Despite this, the company continued to struggle until mid-2000. This didn’t stop them from making an impressive 58 video games from 1997 – 2015. Licensing deals with brands like Star Wars, especially for video games, played a large part in the company’s current success.
A Quick History of the Rise and Fall and Rise of LEGO
LEGO, which started in 1932 was an up-and-coming company between the 30’s – 60’s. Throughout the 60’s LEGO found success with LEGO wheels, Duplo (big kid safe Lego blocks), and even opened a Legoland Park.
The LEGO® Story of the Kirk Kristiansen family from the official channel on youtube. Check this out for insight into the LEGO early years.
LEGO’s Rise and Fall
From the 70’s – early 90’s LEGO grew at an impressive rate. According to Wired, there was a 15 years stretch during this time where the company doubled in size every five years. Revenues grew from $142 million (£92 million) in 1978 to more than $1.2 billion (£770 million) in 1993, with profits growing even faster.
Despite earlier successes, by the mid-90’s LEGO was losing steam. Innovative products like Mindstorm got the accolades (but not necessarily sales) while other innovations like including Jack Stone and it’s TV show led to net losses for the company. LEGO’s profits had declined since 1992, and in 1998, it posted its first ever loss, at £23 million. In the same year, the company laid off 1,000 employees.
The Jack Stone TV show from, mid-1990. In retrospect, it’s not off base from the LEGO Movie of 2014. At the time, it was a flop contributed to LEGO’s near bankruptcy.
LEGO Nears Bankruptcy Despite Mindstorm, Star Wars, and Accolades
From late 1990 to early 2000, LEGO almost recaptured their glory with licensing deals, which led to LEGO Star Wars, LEGO Harry Potter toys, and video games. However, sales declined quickly and the brand tie-ins alone weren’t enough to keep the company in the black. By 2004, LEGO posted a loss of £174 million.
The Turn Around: What Exactly Revitalized LEGO?
Just as LEGO’s story was about to end the company made a few key changes. There is no one specific change that turns LEGO around, but all of these factors contribute:
- LEGO returned to their most successful lines including their old Duplo blocks, LEGO Star Wars, and LEGO’s own Bionicle toy line and TV show, which had begun in 2001.
- LEGO moved away from producing complicated toys that were overly focused on adults (although they continue Mindstorm). They hired a new team of developers to help them with the transition.
- In mid-2000 LEGO also changed to a non-family run business for the first time hiring a CEO who was not in the Kirk Kristiansen family.
- In 2005, LEGO begins having “TT games” produce all video games based on licensed properties. This marks the beginning of “good” LEGO games. While there are other video games based on these brands, LEGO pushed games out very quickly. This means more games on the market that are based on loved brands and are kid friendly. Is this the true turning point? It’s very likely.
- Going into 2005 technology had improved. New video systems and better CGI allowed LEGO to produce better quality tech based content.
- As noted by a commenter (see comments below), another part of LEGO’s turnaround was the reducing ancillary products and the number of different types of bricks produced, thus reducing the cost to run the operation and increase profit margins. This is covered in a documentary called “Inside LEGO”.
The LEGO Star Wars commercials 1999 – 2015. In watching this, we can watch LEGO go from its lowest point to its highest. Star Wars played an important role in bringing LEGO back from the brink of bankruptcy.
FACT: It can’t be understated that the new Star Wars Trilogy (starting with Star Wars Episode I: The Phantom Menace) is released in 1999 and the trilogy continues until 2005. Licensing deals with Lucas Films, Harry Potter, Marvel, and DC (and the associated video games and other media) have played no small role in LEGO’s resurgence.
And in the End, Everything is Awesome
By 2009 about 60 percent of LEGO’s American sales were estimated to be linked to licenses, twice that of 2004. By 2014 with the release of the LEGO movie marked a solid 10 years of upward momentum for the company and reinforced the importance of licensing, media tie-ins, and teamwork for the toy company.
The history of LEGO video games, this runs parallel to LEGO’s revitalization.
FACT: LEGO’s history and name revolve around teamwork. “LEGO”, is an abbreviation of the Danish phrase leg godt, meaning “play well.” Later the Lego Group discovered that “LEGO” can be loosely interpreted as “I put together” or “I assemble” in Latin.