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11 Jan 2004 08:27
Is there a future for Lego’s little plastic building bricks, with children increasingly opting for interactive computer games and electronic gadgets? The answer, the Danish toy empire says, is yes.
But it will be a tough battle to remain at the top of kiddies’ wish lists, and the company is now hammering out a plan for its future after recent attempts to diversify its brandname failed.
The family-owned company said this week that it expected to post a loss for 2003—only its third loss since its creation in 1932 in the windswept town of Billund.
It forecast a pre-tax loss of 1,4-billion kroner (188-million euros, $242-million)for the year, and said sales would be down by 25% to 8,5-billion kroner as the global toy market “nearly came to standstill in 2003”.
Yet its US rivals, Mattel and Hasbro, the world’s two leading toy manufacturers, remain nonetheless profitable.
Lego’s owner and president, Kjeld Kirk Kristiansen—the 56-year-old grandson of company founder Ole Kirk Christiansen—said he was now taking matters into his own hands and had fired the company’s number two and the head of product development.
He said the company would now go back to its roots, focussing on building blocks and abandoning its forays into multimedia and film products.
“We are returning to Lego’s former concept. We’re going to focus on building bricks as our main product, concentrating on little kids’ eagerness to assemble,” he said.
“That’s why we’re pursuing much more aggressive marketing for building bricks, leaving products linked to films such as Star Wars on the back burner,” he said.
One key factor for the weak result this year was the poor sales of games based on the Star Wars and Harry Potter films in 2002.
Kristiansen acknowledged that Lego’s recent attempts to diversify had been a catastrophe.
“We tried to follow trends, to have toys that were in fashion, that are ‘in’ one year and ‘out’ the next.
But it didn’t work,” he said.
“In our efforts to follow the trend, we forgot about our traditional, basic products—the plastic building bricks—and we spent all our efforts on new toys that we launched together with films like Star Wars and Harry Potter”.
Other forays included Lego theme parks in England, the United States and Germany, a collaboration with the Formula 1 Williams car racing team to get children interested in the sport, and a clothing line bearing the Lego brand.
Facing tough competition from electronic games, Lego also jumped into the fray and began producing in 2002 videos and animated films based on its hugely successful Bionicle series, signing contracts with US companies Creative Capers Entertainment and Miramax Films.
Its film Bionicle Mask and Light, produced in DVD and VHS formats, got off to a strong start when it was launched in the United States and Canada on September 16.
Children’s toy researcher Joern Martin Steenhold said there were several reasons for Lego’s poor health.
“Lego was not able to follow up on the success it had on its new products. There was a void after the Bionicle, Harry Potter and Star War series,” he said.
“In addition, Lego was not skillful enough to exploit its ‘smart building brick’ with an electronic chip, a super product with enormous potential,” he added.
Making matters worse, Lego has been hit hard by the weak US dollar. Some 40% of its sales are in the United States.
Danish PR guru Martin Lindstroem agreed with Lego chief Kristiansen, saying he believed the company’s future lay not in multimedia products, but in the bricks.
Lego—whose name comes from the first two letters of the Danish words “Leg godt”, or “play well” in English—diversified a little too much, Lindstroem said.
But he stressed that it “still has a lot of potential, it has one of the best brandnames, recognised in 90% of the western world.”
Toy researcher Steenhold also said Lego was making the right move by targetting pre-school children.
“All research, including my own, shows that computer games and other electronic games take up only 20 to 30% of children’s play time. Boys play with traditional toys up until the age of eight or 10, and it is in the zero to seven age range that Lego has its niche,” he said. - Sapa-AFP
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