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Saturday, July 23, 2005

Navel gazing at LEGO

Fifty years ago, LEGO put some plastic bricks in a box and introduced a new system of play -- one that would ultimately garner a 10 percent share of the global toy market. Of course, that was in the days before PCs, Xboxes and licensed super-heroes. I remember those days well. It was the 1970s, and our seven-year-old son would pull out his box of LEGOs nearly every day to build something fun or weird or ingenious.

Fast forward to the 1990s. The world began to change for LEGO. Play was no longer a creative endeavor for children; it became entertainment. Sales of LEGO products started to decline. In 2004, the LEGO Group reported a $328 million annual loss, the worst in its history (as reported in the June 2005 issue of BUSINESS 2.0). What's more, they're still looking for a buyer for their Legoland theme parks. Even minor things are not quite right. For instance,click "message board" on their Web site and you'll be greeted with a disappointing "Coming Soon - New and improved, super-amazing LEGO message boards."

LEGO's problem, summed up by CEO Jørgen Vig Knudstorp, is a tighter consumer economy combined with a growing interest in consumer electronics such as MP3 players and mobile telephones. What an understatement. Christian Majgaard, a former senior manager at LEGO, claims that LEGO recognized a shift in the market, but "the eyes that see the 'spot on the radar screen' are not new."

In an article on the Zurich Financial Services Web site, Christian Majgaard went on to characterize LEGO's initial reaction (to the overall decline of the toy market) was somewhat skeptical. "Hollywood heroes are from 'sin city' so they are against our religion and PCs are not good for children because they sit still all day," he recalled. "As a result, LEGO concluded it was in the traditional market and although this market was shrinking, the company believed its products would resist the downward trend. They told themselves: 'we're doing OK.'"

So, what's the moral of this short tale? Christian Majgaard puts it best: "There is always a little bit of future out there, already happening and ready to be learned from." And, from LEGO's perspective, ready to be played with, too.

Poor LEGO. I kinda think they're better off sticking with it than going against their own religion.
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My friend Jan emailed this to me:

I didn't realize LEGO had gone downhill. I think it's oversimplifying, however, to say that it's due entirely or even mostly to electronic toys. You probably aren't familiar with Playmobil -- it became available in this country a short time after we opened the store. I'm sure its sales have gone up each year, even though they have now broken their promise to limit their sales to smaller toy stores. It's now sold in Target. It consists of a number of themes, each of which has a big set selling for $30 to $60 and lots of smaller sets or single figures ranging from $4 on up. Themes are as diverse as pirates, castles, dollhouses (Victorian), doctors' offices, service stations, dinosaurs (the dinosaurs are in snow, and my grandson Max insists that the whole set is about Shackleton at the South Pole). They come in pieces that need to be put together. Not every kid loves them, of course (likewise LEGO), but those who do love them for years. I think Devin started playing with them when he was about four, and he requested the swimming pool for his 11th birthday.

Well, I didn't mean to go on for so long -- but I think LEGO might just have been outcompeted in its own field. Other non-electronic toys do well also, e.g., Brio trains, Thomas the Tank Engine, but Playmobil, unlike those and LEGO, seems to have as much appeal for girls as it does for boys.
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