Lego tumbles, but don’t worry, it can be rebuilt

Lego has announced that it will be laying off 14,000 employees citing that Lego's past decade of growth had led to an unwieldy operation.

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Courtesy Lego images

WASHINGTON, August 6, 2017 – Not all is awesome in Legoland.  Anyone that has kids older than age ten, has spent plenty of time picking up, or painfully stepping on, the small plastic cubes that have enjoyed steady growth over the last ten years.

Lego’s were first released more than eighty years ago on August 10, 1932. Over the years the building toy has aligned with some of pop cultures greatest franchises – Batman, Harry Potter, Pirates of the Caribbean, Fast and Furious, Star Wars and more.

With full disclosure, there are shelves of dusty Lego Tie Fighters, X-Wings, the Millenium Falcon and more iconic ships from Star Wars in my home, despite the lack of a small child in the family.

Once built, always built.

Dusty Legos needing a new home

Lego has announced that it will be laying off 14,000 employees citing that Lego’s past decade of growth had led to an unwieldy operation. Chairman of Lego, Jorgen Vig Knudstorp, says it will take two years, following the cuts which equal o around 8 percent of the company’s total work force, for business to return to growth.

“A bit of bureaucracy has sneaked into what was quite an entrepreneurial organization,” he said. “It has crept in on us and we want to root it out.”

The following was posted to the social media site for business, LinkedIn.

Lego, “long immune to the struggles weighing on other toy companies,” will cut 1,400 jobs and announced its first drop in sales in 13 years, amid rising popularity in video games and sites like YouTube. The toymaker embraced digital early, which helped it bounce back from the brink of bankruptcy in the early 2000s, but may be a victim of its own success: Lego’s corporate structure was built to handle double-digit sales growth, creating unnecessary layers of management and a complex business model that has made Lego slower to respond to changing trends.

Lego, based out of Billund, Denmark, has grown into a global empire over its over 75 years but it is struggling, like many non-electronic or computer based games, to find new revenue streams. The group has found success in film with its partnership with Warner Bros. Entertainment.

The 2014 “The Lego Movie”  collected $469.2 million from a film that cost $60 million to make, but this year’s follow-up, “The Lego Batman Movie,” was less successful, earning $311.8 million.  “The Lego Ninjago Movie,” which will be released this month, will the companies third collaboration.

Lego reported a 3 percent decline in net profit for the first six months of the year compared with the same period in 2016. Revenue fell 5 percent to 14.9 billion Danish krone, from 15.7 billion Danish krone.

The LEGO Group today announced Niels B. Christiansen, 51 and most recently CEO of a global industrial technology company, Danfoss, as CEO of the LEGO Group effective October 1, 2017.

One challenge for the building toy will be to compete with mobile devices by connecting the on-screen action, both movies and gaming, correlate to the toys.

 “At the end of the day, they still have to try and keep themselves within the popular licenses,” Matthew Hudak, senior toys and games analyst at Euromonitor International, a market researcher said in interviews. “All companies are competing with smartphones. So it’s about partnering with the right ones.”

The group has pointed to growth in countries like China not being enough to balance the decline in sales from more established markets, like Europe. Lego has relied on faster growth in China, expanding its office in Shanghai to 200 employees this year, up from 80 in 2014.

Mr. Hudak also pointed out that the company has done well marketing its products as educational tools, particularly to middle-class parents in China who are turning to Lego’s latest robotics kit, Lego Boost, that teaches coding to children ages 7 to 12.  r. Hudak said.

“Parents are starting to afford this more and they’re using toys as more developmental tools,” Mr. Hudak said.

Families are also flocking to Legoland in both the U.S. and the new 40,000-square-foot playscape in Billund, Denmark that features zones where kids and parents can dig into a block-filled pool to build whatever they can imagine, direct a stop-motion movie, or launch toy cars off a ramp

RFID wristbands allow creators to upload and view their filmed masterpieces via the Lego House app. But though the mod museum is tricked out with tech, there is a  gallery of masterworks submitted by AFOLs—that’s Adult Fans of Legos, of course—a network of more than 360,000 super-users.

Some comments on social media are referring to the high cost of some Lego building sets, that make the toy out of reach for the average family. Most Lego top out in the $200.00 plus range.

 

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