The company LEGO has been around since 1932 so naturally it’s had its fair share of ups and downs through the years. However, the LEGO Group’s biggest failure was the time they almost went bankrupt. Yes, you read that correctly, BANKRUPT. Now if you’re wondering how everyone’s favourite toy manufacturer got in that position, don’t worry because I’m about to explain it to you.
Nowadays LEGO is one of the biggest toy companies in the world being worth a whopping $8.6B but most of this success has been recent. To figure out how the LEGO Company almost went bankrupt, we need to go back to the beginning of the company. The LEGO company didn’t actually start out by making plastic bricks, the first toys they made were wooden ones like the famous wooden duck! At first it was a very small business run by Ole Kirk Christiansen and it didn’t do very well. But then during World War 2 everything changed because his factory burned down.
Luckily, he didn’t give up and he built a new factory bigger and better then the first one. During this time, they started selling small plastic bricks. These weren’t exactly the same as the bricks we have today as they didn’t have the tubes in the bottom that keeps them together tightly, instead they were hollow easily came apart. Because of this, they didn’t sell too well and no one really bought them. About eight years later they changed the bricks to have the tubes in the bottom and that’s when things really took off.
LEGO almost goes bankrupt
In the following half century, the business kept on growing year after year until LEGO became a household name. It looked like nothing could stop them until 2003 and 2004 which are some of the worst years (in terms of profits) in the company’s history. There are many reasons that could have caused this decline but I’ll say the two main points. Firstly, they started producing a lot more variety in the bricks which would have cost a lot to do because of all the new moulds they would have had to made for these new bricks. The other reason is that they opened three new theme parks from 1996-2002 in England, the US and Germany. They eventually lost focus on what made LEGO, LEGO.
Because of this in 2003 they were in $800 million in debt and made a loss of $225 in 2004. With no way out, LEGO had to rethink their strategy.
LEGO bounces back
The most significant change in the company is that they had their first ever CEO who is not a descendant of the Kirk Kristiansen family. His name was Jorgen Vig Knudstorp and he managed to turn the dumpster fire of a company into the multi-billion-dollar company that we know it to be today. The first thing that Jorgen changed was significantly reducing the amount of parts that they made to 6000, which is still a lot but not as many as they used to. Next, he sold all four LEGOLAND theme parks to Merlin, who own many theme parks like Thorpe Park, Chessington World of Adventures and Alton Towers. And finally, he shut down the computer games part of the company as it was not very profitable (although we all know that this changed later on).
The genius strategy that LEGO uses to stay at the top
Since that scary time in the company’s history LEGO have implemented many things to make sure that they stay at the top of the toy market. One of the first things people think about when the word ‘LEGO’ comes up, other than building blocks of course, is expensive. The reason this is good for the company is because it makes the sets have great profit margins. Therefore, they won’t make a loss and won’t go into debt. Also, because of a multitude of reasons like their fun-looking designs, amazing quality control and strategic adverts, people will buy them no matter what the price tag is.
Another thing that they have been doing rapidly is buying IP’s (intellectual properties) like Star Wars 1999-present, Marvel 2012-present, Harry Potter 2001-2011 and then again 2018-present and most recently they have gained Nintendo with the release of the LEGO NES and the new Mario sets. Also, with LEGO Ideas (formally known as CUUSOO) a whole lot more fan ideas have been made into sets.
Talking about the fans, the next reason why LEGO won’t go bankrupt again is that they always engage with fans. For example, they are constantly responding to fans comments on their Instagram posts. Another way that LEGO interacts with fans is through set polls. They have only done this twice from my understanding, with the most recent one being from January of this year and the vote being between three Star Wars sets which were the Republic Gunship, the Nebulon B Frigate and the TIE Bomber. In the end the Republic Gunship won and it is probably going to release in 2021 or 2022.
This isn’t the only place where fans can vote for what new sets that they want to see though, LEGO have created a website called LEGO Ideas (which I briefly covered earlier). On this website fans can submit their own MOCs (My Own Creation). Once approved, they get put on the website and fans can vote for it. If it gets to 10,000 votes it gets put into the review stage where it joins all the other projects with 10,000 supporters in the review stage. If it gets chosen it will then get made into a real LEGO set that you can actually buy!
A few of the sets that have been chosen are The DeLorean Time Machine, the Ghostbusters Ecto-1, The Big Bang Theory, WALL-E, Doctor Who, The Beatles Yellow Submarine, Adventure Time, Ship in a Bottle, Tron Legacy, The Flintstones and many more. Because of LEGO Ideas we now have the opportunity to have a lot more sets based on movies and TV shows.
Finally, I think I think the ultimate example of LEGO listening to the fans is the 501st battle pack. An idea from MandRproductions, the 501st battle pack took 2 years to become an actual set. Fans were commenting on every post that LEGO made saying “WE WANT A 501st BATTLE PACK!!!”.
Because of this movement, in April of this year it was revealed that a 501st battle pack was coming out in August. It wasn’t perfect though; it wasn’t technically a battle pack as it was priced at £24.99 but at that price it included 2 vehicles and 6 minifigs. It also brought along a new clone design with a new, more accurate clone head. The realistic clone design that we’ve had for the last few years was also replaced with a new one which is a mix between the realistic and animated styles. Although this wasn’t the exact thing that we wanted, it’s still great that LEGO listened to us.
LEGO had a rocky beginning, built something great and had it knocked down but they’ve learned from their mistakes and have built an empire that will never topple again. And that, is the brief story of how LEGO almost went bankrupt.
All images from Brickset