Under the growth of revenue growth, Lego’s business and profits are facing problems.
Editor’s note: This article is from WeChat public account “Sanwen Entertainment” (ID:hi3wyu) author: Dkphhh.
China is the fastest growing market for LEGO in recent years.
Recently, Lego released financial data for the half year of FY 2019 as of June 30, with revenue year-on-year.
4% increase
to
15.52 billion yuan
.
However,
Operating profit from the same period last year
43.9 billion yuan
Down to
36.8 billion yuan
,
16% reduction
.
Net profit declines
12%
,From
31.9 billion yuan
Down to
2.8 billion yuan
.
Operating cash flow from the same period last year
43.6 billion yuan
Down to
3.2 billion yuan
.
Under the growth of revenue, Lego’s business and profits are facing problems.
Lego’s crisis: Children don’t like traditional toys?
Lego seems to have not recovered from the big earthquake in the toy industry.
“In view of the revolutionary transformation that is reshaping the global toy industry, we are very satisfied with this performance. In order to reverse this trend, we must continue to increase sales and market share in the largest market.” Nigel B Christiansen, CEO of the LEGO Group, said.
Niels B Christiansen’s “revolutionary transformation”
Yes
Toy R Us is bankrupt
.
In March 2018, Toys R Us announced the liquidation of its assets in the United States and shut down its operations in the United States. Affected by this, the performance of large toy companies such as Lego, Hasbro, and Mattel has declined to varying degrees.
Among them, Hasbro’s net income for the full year of 2018 declined
12%
Lego’s revenue for the full year of 2018 has increased from 2017, but it has not recovered to the level of 2016.
There is actually a child reflected in this shock The change in the way of entertainment.
The main consumer groups of toy companies such as Lego, Hasbro, and Mattel are children, but with the popularity of mobile Internet devices such as smartphones, traditional toys have been difficult to attract the attention of most children.
A data released by market research firm Statista in May this year showed that penetration rates of devices such as mobile phones and tablets in the UK have increased with age. Smartphone in a 10-year-old child
The penetration rate is close to 50%
.
British children are 15 years old,
Basic has a smartphone
.
And minors spend a lot of time on their phones. According to the Daily Telegraph, children under the age of 14 spend up to two hours a day on their smartphones.
3hours 18 minutes
Basic consumption per week
23 hours
.
Before the Toys R Us collapsed, the market research organization NPD investigated the sales of different toy categories and found that the sales of game/decryption toys represented by Magic were the highest, and the assembly toys represented by Lego. (Building Sets) sales decline is the most serious.
This also reflects to some extent the taste of toy consumers has changed. Game/decryption toys are more interactive, while assembly toys take longer to spend. This shows that today’s consumers are beginning to pursue the interactivity of toys and become impatient.
In the face of such a crisis, other toy companies have introduced new toys that adapt to the trend. For example, Hasbro has increased the development of Magic and Monopoly, and Mattel’s “Mayai Games” brand is also launched. An interactive toy that is more suitable for gatherings, Fanko, who is doing the tide, also bought a board game company this year, trying to enter this market. On the other hand, they are also actively transforming and launching content products for games and their own IP.
In the past two years, LEGO has also been actively transforming in this direction, but the results are not good.
Lego transforms to play games and build IP, but it doesn’t go well
Lego is different from other toy companies. They created the category of “Lego blocks” and only “Lego blocks.” This makes Lego not have the experience of other toys such as board games, and it is difficult to achieve breakthroughs in the category.
But it is precisely because they have long been focused on the building block toy market, so that Lego has become synonymous with such products, the image of the building blocks villain has been deeply rooted in the hearts of the people, which has become their advantage in creating their own IP.
However, from the annual report published by Lego in 2018, they don’t earn much from IP licensing, only
5.3 billion yuan
And the toy sales revenue of the year reached
37.67 billion yuan
Almost IP-licensed income
72 times
.
Lego’s exploration of operational IP has actually started very early.
In the last century, Lego tried to enter the video game market. In 1995, Lego launched a console game called Lego Fun to Build. In 1996, LEGO formed the game distribution department “Lego Media”. However, this department was later frustrated, and was acquired by Warner in 2007 after a number of shutdowns.
At this point, Warner Bros. Interactive Entertainment has become the main licensor and producer of LEGO video games.
After the mobile game became mainstream in the industry, Lego and More than 90 mobile games launched by Warner and other producers, but unfortunately the performance of these games and the mainstream of the industryThe level is still far away.
According to the data provided by Sensor Tower, the best performing game “Lego: Star Wars” is also available in the Apple App Store in August.
$50,000 USD
.
And these games are basically “stocked”. From the updated data recorded by Sensor Tower, most of the recent game updates were a year ago.
Movies are the way Warner is better at. Warner’s two “Lego Movies” for Lego, the first released in 2014, budget
60 million USD
Finally achieved
$469 million
The box office, as an animated film, is not bad.
But the second part released this year is almost a disaster,
$99 million
The budget finally only harvested
191.3 million US dollars
Box office, estimated by box office rules,
Warner has a high probability of losing money
.
Lego Movie”
Although the progress in making IP and making IP is not going well, Lego has not stopped exploring the digital aspect. After all, this is the future.
In an interview with the Financial Times last year, Nigel B Christiansen, CEO of the LEGO Group, said, “We still think that LEGO bricks are our core, but digital technology gives us an opportunity to enhance the toy experience.”
Lego Hidden SideTM
Lego’s new Lego Hidden SideTM combines AR technology with a dedicated app.Point the camera at the assembled LEGO toy and the dynamic display of the toy can be displayed on the phone display.
However, from the perspective of Amazon’s product reviews, Hidden SideTM’s current sales should not be as high as the top products such as LEGO®. The media’s evaluation of this new product is not high, FastCompany believes that it “contains many old routines of inferior mobile games.”
Lego wants to invest in emerging markets, China is the focus
If digitalization is the future of LEGO, then the traditional toy market is the current LEGO.
Legco’s operating profit and net profit both fell in the first half of the year, a very important reason is that LEGO has increased its investment in the market.
According to the official press release, Lego plans to open a new store this year.
150 homes
It is expected that by the end of this year, the number of LEGO stores worldwide will exceed
590 homes
.
Lego is so anxious to open a store without a reason. In the past, toy companies did not have many self-operated stores, and they relied heavily on offline retail stores such as Toys R Us and Wal-Mart to help them sell their products.
The collapse of Toys R Us means that LEGO has lost an important offline channel, so they can only rely on self-built stores to make up for lost markets. But self-built stores also mean that they have to bear high warehousing and labor costs.
More new stores in China
80 homes
By the end of this year, the total number of stores is expected to reach
140+
Cover
35 major cities
. In contrast, the current number of LEGO stores in the United States is only
91 homes
This is enough to prove that Lego attaches importance to China.
As for the 70 new stores outside the Chinese market, the LEGO official did not disclose where the specific opening will be. It only said that a flagship store will be opened in Amsterdam in December this year. In addition, they also revealed that they will open an office in Mumbai, India, in 2020 to open up the Indian city.field.
Lego is not without reason for paying attention to the Chinese market. In the first half of the year, sales growth in the European and American markets was not large. Lego’s revenue drivers were mainly from emerging markets such as China, where sales growth in the Chinese market was strong, reaching double digits.
It is worth mentioning that in 2017 and 2018, LEGO achieved double-digit growth in China.
In November 2016, the Lego factory in Jiaxing, China, was officially unveiled. The 165,000-square-meter factory is expected to produce the total production of Lego products in Asia.
70%-80%
It is regarded as the most important LEGO production plant in Asia.
At the beginning of last year, Lego and Tencent reached a partnership. The two sides will cooperate in various aspects such as games, social and content. Last month, LEGO authorized Tencent’s “Lego Unlimited” open test. This is also Lego’s first game product to enter the official Chinese market.
LEGO can be popular in the Chinese market, and it is inseparable from the educational attributes of LEGO itself. Lego itself has two business lines, Lego Toys and Lego Education. LEGO Toys focuses on the toy retail market, and LEGO Education focuses on the education market. These Lego blocks, which are used as “teaching aids”, are not sold to children but sold to schools and various training courses.
In Denmark and the United States, the popularity of Lego toys has driven the education market. But in the Chinese market, this logic is just the opposite. It is the rise of various Lego classes in China that has driven the sale of Lego toys.
At present, more educational institutions have opened “Lego Classes” in China.
4000 homes
However, only the education institutions that have been authorized by LEGO in mainland China are Xiqiao Education, Fuyang Education, Netease, etc.
8 homes
,
The rest of the “Lego Class” did not have the official LEGO authorization
.
It’s worth mentioningSimeon Education and Fuyang Education, which are authorized by LEGO, are also responsible for selling LEGO teaching aids in China. It seems that their biggest customers may be these fake Lego classes.
Lego’s educational products and toys are different, and courses and teaching methods often need to be localized. According to reports, when the “Lego class” was just started in China, the LEGO official did not do localization work, and the training of teachers was not in place. Only the existence of these fake “Lego classes” could be acquiesced. However, as LEGO officials pay more and more attention to the Chinese market, “counterfeiting” is a matter of time. Note:The above is converted to RMB bySeptember 9 “1 Danish Krone = 1.05″