How Video Games Almost Bankrupt and Ultimately Saved Lego
Almost everyone has heard of Lego. There are more minifigures in the world than there are people. In fact, there are roughly 65 Lego pieces for every person in the world. Alongside Hasbro and Mattel, Lego is the fastest growing toy company in the world. Heck, Lego is still the world's largest producer of rubber tires (more than 300 million made every year)!
Although it is still too early in the year for raw sales numbers for 2013, 2012 saw Lego bring in north of $750 million. Things however have not always been so cheerful for the loveable brick makers from Denmark. As recently as 2004, the entire company almost filed for bankruptcy.
How did it go so wrong?
In the late '90s, Lego saw an influx in sales when it reissued their license with Star Wars to accompany the prequel trilogy that would be coming out in the following years. They also signed an agreement to produce Harry Potter sets as well. Initial sales for the sets were booming the summers the movies came out, but declined heavily in the years that no movies were released. Also, Lego had a policy of owning, rather than leasing, all of their buildings around the world, and was pushing for a global market of their products. This included clothing and furniture; essentially, a way of life.
They also had a sizeable amount of money tied into their in-house video game production. A lot of money. When they first reported losses in 2002, there were rumblings of a shakeup of Lego's core strategies. Private corporations began smelling the chum in the water and the pressure was on for Lego to prove that it could right the ship.
Rumors of Hasbro and Mattel trying to buy out Lego began surfacing and there were questions if Lego would survive. Those concerns grew exponentially when, at the end of 2003, Lego reported losses of close to $1 billion, with a "B."
How Lego Survived
Massive restructuring and a hard look inwards saw Lego return to what made them so popular in the first place. Simply putting new product on the shelf every year was no longer going to work.
Lego got rid of every non-essential part of their company and focused solely on the innovation and production of quality new products. Millions are now put into marketing and research before a new set is even produced. A big part of the change was Lego selling their video game division, opting to have outside developers create games with the proper licenses.
All of these things cut their costs enough for them slowly begin to rise out from their debt. Oddly enough, however, consistent sales by their now third-party developed video games had a huge impact on the turn-around. The game that had the most immediate impact? 2005's Lego Star Wars: The Video Game.
Although the Harry Potter games had been released years earlier, the release of Revenge of the Sith gave fans a craving for anything they could get their hands on. Lego saw continued success the following years with more Star Wars, Indiana Jones, Batman, Lord of the Rings, and Marvel Super Heroes games. All of these games sold collectively more than 50 million copies and were/are considered quality games within the industry. Also, those games tapped into a previously unused market for Lego, gamers.
With a flock of new people now coming into the stores to buy sets based off of video games they had played, Lego found new life and is still being supported by them today. By looking inward, they were able to see what they needed to change and how they could better utilize their resources. Smartly, they didn't completely bail on the gaming industry, but rather let people who knew more about it make the important decisions. And we have all benefitted because of that.
And never one to rest on their laurels, Lego has already announced plans for a Lego: The Hobbit game slated to come out later this year. Expect it to do as well as its' LotR counterparts and to have a game for all the films that are released.
What does this mean for the future?
The success Tt Games has had with all of their licensed Lego games is not shocking, but it is still funny their company, which Lego first saw as a liability, became a big reason for their reemergence in the toy market as well as a staple of it moving forward. Gamers are an eclectic and well versed group of people, and they are obviously nerds as well as collectors. Many of them (us) love to own anything we can that is associated with a game we love. The fact that in this case, the extra goodies happen to be little plastic bricks that we can then take to make whatever we want, is just an awesome bonus.
It is not too surprising that the games ended up doing as well as they did, but I think it speaks to the influence we as a community can have on wholly different industries. Not to say that we are the only reason Lego still exists today in its current form, but you can be assured that we played a significant role. As the gaming industry grows and more franchises are realizing the powerful machine that is video games, it is refreshing to see other industries, and to an extent the "common" consumer, show us the respect that I think we rightfully deserve.
So, the next time you walk past a Lego store or see a set in pieces in your closet, have pride in the fact that if you have purchased or played a Lego video game in the past 10 years; you are directly responsible for saving a multi-billion dollar company. And you haven't played any of them yet, what are you waiting for?