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TheLegGodt

LEGO's greatest risks in the future

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There has been an interesting topic discussing LEGO's worst failiures that almost bankrupt the company. See this thread: http://www.eurobricks.com/forum/index.php?showtopic=105193&hl=

LEGO is so strong right now that it is hard to imagine it could ever get into trouble again. But history and research teaches us that the speed with which major household names are disappearing is getting faster and faster. A major company might have lasted 65 years in the past, nowadays there are signs of companies only lasting 15 years...

Obviously, these are generic numbers and one must look at a the key characterics of a company. LEGO is no Nokia. But on the other had, 10 years ago no-one would have believed that Nokia would practically be wiped out 5 years later.

It is hard to predict disruptive forces or future business failiures and how they will impact LEGO. 2003's financial problems (miscaclulation of costs and profitability) will likely not happen again. So what are the future risks that could put our beloved hobby and company out of business?

I am very interested in your thoughts. I have 2 concerns my self just to make this discussion very specific:

1. LEGO has many different lines out right now at the same time and it seems to be just getting more and more. The classics are all still there but new ones are there too. Just look at all the new lines this year (Scooby Doo and Elves for example). They look great by the way!

2. LEGO is getting more heavily involved in movies. That to me seems a risky business that needs to appeal to a wider audience than only LEGO fans. The first attempt was successful, but the appeal of a mass audience quickly drifts to other fashions. LEGO have 3 new movies lined up the coming years, I hope they are not putting too much money in themselves. Are the movies good ideas, essential innovations just to keep driving profit? Or are they going to end up as examples of a company yet again drifting too far away from its core business?

Edited by TheLegGodt

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I think you missed a third point. Lego has a major threat from clone brands, namely the big 3: MB, Ionix, and kreo. the clones quality is climbing while the prices are remaining pretty fair for the most part. They are also coming up with sets that look REALLY good and are thinking outside the box. on the other hand, lego is having increasing Quality problems, the prices are jumping up, and it feels like they've kragled themselves into a rut.

1. LEGO has many different lines out right now at the same time and it seems to be just getting more and more. The classics are all still there but new ones are there too. Just look at all the new lines this year (Scooby Doo and Elves for example). They look great by the way!

They are spreading themselves way to thin with themes! According to the wikia, the new things for this year are "Bionicles"(that look more like HF), city swamp, classic, duplo sofia the first, elves, jurassic world, Pirates, scooby doo, AND speed champions. And that's on top of existing themes getting new stuff.

and on the D/C list? HF, hobbit, and lotr. And i heard that chima will be getting its last wave this summer and TLM is status unknown. if i'd have to make the call on TLM, i'd call it game over since most licensed themes are lucky if they get a few waves.

2. LEGO is getting more heavily involved in movies. That to me seems a risky business that needs to appeal to a wider audience than only LEGO fans. The first attempt was successful, but the appeal of a mass audience quickly drifts to other fashions. LEGO have 3 new movies lined up the coming years, I hope they are not putting too much money in themselves. Are the movies good ideas, essential innovations just to keep driving profit? Or are they going to end up as examples of a company yet again drifting too far away from its core business?

i don't see a problem with them doing movies IF they started off slowly doing it. But no, they get over confident from the "success" of TLM(success is in quotes since it's a debatable topic) after the thing was out for less then a WEEK and now they've got batman, ninjago, AND a TLM2 lined up.

Edited by SweetiePie88

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Fair points Sweetiepie. Personally I have not checked out clone brands. I am still way too slavishly loyal to Lego.

Another risk we have not mentioned yet is 3d printing. It may be a decade (or 2?) down the road before the price/quality ratio is healthy but I am very curious how Lego is thinking about is topic and how they think it will affect their business model.

Would love to sit in one of their strategy meetings.

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I totally disagree with a couple points above.

The quality of clone bricks is no where near the quality of LEGO. They are increasingly easy to pick out of bulk lots I get by feel, color, and general appearance. And they do not go together well at all. And talk about over specialization. Does Mega Blok even have non licensed lines? The only thing I see on the shelf is Call of Duty.

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I totally disagree with a couple points above.

The quality of clone bricks is no where near the quality of LEGO. They are increasingly easy to pick out of bulk lots I get by feel, color, and general appearance. And they do not go together well at all. And talk about over specialization. Does Mega Blok even have non licensed lines? The only thing I see on the shelf is Call of Duty.

Quality may not be the same but the quality is WAY better then stuff like blok tech and best lock. Plus the quality to part to price ratio is really fair while lego isn't.

As far as the licensed thing that MB does, they don't really do much outside of licensed. Plus with lego snatching up so many ideas, how is MB supposed to do anything original?

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Plus with lego snatching up so many ideas, how is MB supposed to do anything original?

AFOLs seem to do quite well on the originality aspect. Why couldn't a company do the same? :wink:

Anyhow. I think LEGO has a single selling point above all others and that is their quality. They have to maintain that, otherwise people will slowly but surely fail to see the differences between LEGO and clones.

I have no idea about how the quality of clones is evolving, but my guess would be that they will some day rise to an acceptable standard.

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Quality may not be the same but the quality is WAY better then stuff like blok tech and best lock. Plus the quality to part to price ratio is really fair while lego isn't.

As far as the licensed thing that MB does, they don't really do much outside of licensed. Plus with lego snatching up so many ideas, how is MB supposed to do anything original?

I don't see a quality to cost benefit. For plastic bricks, they are either a quality product, or they're not. Price does not, nor will it ever, affect my purchasing decisions. It did back in the day, and I bought clone bricks. They were terrible, and I gave them away. Every family will dabble with them, but turn their back quickly.

So LEGO's creativity is keeping MB from being creative? That argument almost makes my point for me. They have no creative options, nor creative ideas.

Realistically, one of the biggest threats or risk to LEGO is the emergence of a direct competitor, so it has to be part of this discussion. Rising oil prices or falling supply are other possibilities. Increased video gaming cutting into kid's budgets.

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In addition to what kibosh said about video game budgets, I have to say this: kids aren't as interested in real toys as they used to be. This past Christmas, I gave a Lego set to every kid in my class. A week later, I asked one of the kids if he liked the set, and he said he hadn't opened it yet because he'd been playing with his new iPad all week. (This kid is three years old, almost four.) In my opinion, this is terrible parenting because kids that age need to have their hands on real objects to develop their motor skills (which he is lacking). But many parents are doing this more now because it's easier than spending time with their kids and cleaning up after them.

I don't think the clone brands will match Lego's past quality standards any time soon, but the quality of Lego has gone down considerably within the past few years.

I don't know how this will affect their profits in the long term, but something that troubles me about their current strategy is that they've shifted away from being a creativity product to replicating the latest, flashiest themes on TV. There's less emphasis on people making their own stuff and more emphasis on completing collections and buying novelty toys to set on bookshelves.

Also, TLG has a tendency to make some really stupid, bizarre decisions, like changing the green baseplates to bright green. While I disagree with the 60% price increase, I understand that it won't affect their profits. But changing the color was an incredibly idiotic move. There's no benefit whatsoever to changing it. It only frustrates the people who have already have a collection of the old ones. The very moment some clone brand starts making decent baseplates, even the purists will stop buying them from TLG.

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There's less emphasis on people making their own stuff and more emphasis on completing collections and buying novelty toys to set on bookshelves.

The collectable minifigs series bother me for this reason. It's not about what Lego used to be about.

Edited by Erik Leppen

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Realistically, one of the biggest threats or risk to LEGO is the emergence of a direct competitor, so it has to be part of this discussion. Rising oil prices or falling supply are other possibilities. Increased video gaming cutting into kid's budgets.

Picture this: A new company starts producing high quality bricks with old gray and old brown. They offer a variety of baseplates in different colors, sizes, raised, and even some patterns compatible with some from old sets, like the one in Bandit's Secret Hideout (I've always wanted a straight for that). They could produce sets that are reminiscent of the 1980s and 1990s sets, but also not an obvious knockoff; they could still be innovative.

If the quality really as as good as Lego, and the only difference was the logo on the stud, I think people would go nuts over it.

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My kids spend their fair share of time on their screens, but my son has played football for 6 years. He practices 3 months out of the year, 10-12 hours per week. He plays rec soccer in the off season My daughter is a competitive cheerleader and a gymnast. She practices just as much as he does. They both have actual bicycles that they pedal. They get plenty of physical activity.

When they are on their screens, they generally learn things. My daughter taught herself how to play cats cradle with yarn. She's learning to sew. She watches YouTube to learn patterns for weaving bracelets for friends. She's almost 9. My son creates stop motion videos and learns magic tricks. He's going on 13.

Best of all, if dad is playing with his LEGOs, they will join me at some point. It really is how you raise your kids. So yes, parenting (or lack of), is a huge risk to LEGO

I think LEGO is taking the right step this year with a bunch of basic brick assortments. That's the first question I get asked by parents when they hear about my hobby. "Where do I get just bricks"? Hopefully this move continues.

And yeah, the baseplate thing is ridiculous. Expand the color palette, sure. Phase out popular colors? Why?

If the quality really as as good as Lego, and the only difference was the logo on the stud, I think people would go nuts over it.

I totally agree, but no one is even close to this yet. I'll be the first to buy cheap, high quality baseplates that color match LEGO exactly.

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The collectable minifigs series bother me for this reason. It's not about what Lego used to be about.

I feel the same way. There are usually one or two minifigures in each series that I'll buy for a specific purpose. I love the revolutionary war minifigure because they're basically an updated version of the bluecoats (and it puzzles me why they didn't use them for the new pirates theme, although I like both). But I think it's stupid that people just buy them all and put them on their shelves. That's not what Lego is all about. That's just a waste of money. Toys should be played with. If you aren't building with your Lego, what's the point? The only enjoyment one can really get out of collecting things is the process of finding and buying it. The minifigures aren't rare, so there's no fun in hunting for them (especially if you don't feel the bags yourself). So you'll feel excited when you buy it. 10 minutes later, you put it on the shelf, and you never think about it again.

I used to collect action figures. It took me far too long to realize it was a waste of money, time, and space.

My kids spend their fair share of time on their screens, but my son has played football for 6 years. He practices 3 months out of the year, 10-12 hours per week. He plays rec soccer in the off season My daughter is a competitive cheerleader and a gymnast. She practices just as much as he does. They both have actual bicycles that they pedal. They get plenty of physical activity.

When they are on their screens, they generally learn things. My daughter taught herself how to play cats cradle with yarn. She's learning to sew. She watches YouTube to learn patterns for weaving bracelets for friends. She's almost 9. My son creates stop motion videos and learns magic tricks. He's going on 13.

Best of all, if dad is playing with his LEGOs, they will join me at some point. It really is how you raise your kids. So yes, parenting (or lack of), is a huge risk to LEGO

Yeah, it really does come down to parenting. Technology is only beneficial to a well disciplined person. It's a very serious threat to anyone with a lack of motivation.

When I was a kid, I spent a lot of time on the computer because I loved programming. I spent more time in front of a screen than anyone else in my family, but I spent the entire time learning, not playing video games or constantly refreshing Facebook like my family does now.

It sounds like you're doing a great job with your kids. You're not using technology to replace physical activities or spending time with them.

And yeah, the baseplate thing is ridiculous. Expand the color palette, sure. Phase out popular colors? Why?

I would really love to have an answer to this question. They responded about the price increase, but they've remained silent on the color choices.

I totally agree, but no one is even close to this yet. I'll be the first to buy cheap, high quality baseplates that color match LEGO exactly.

I looked into cheaper baseplates when they raised the price. I was really surprised that no one else makes them. As far as I can tell, even Mega Bloks doesn't make them. If they're smart, they'll take advantage of this price increase to introduce their own baseplates and steal Lego's market share for that item.

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I used to collect action figures. It took me far too long to realize it was a waste of money, time, and space.

I would really love to have an answer to this question. They responded about the price increase, but they've remained silent on the color choices.

I looked into cheaper baseplates when they raised the price. I was really surprised that no one else makes them. As far as I can tell, even Mega Bloks doesn't make them. If they're smart, they'll take advantage of this price increase to introduce their own baseplates and steal Lego's market share for that item.

Oh man do I relate to the action figure thing. I have no desire to have them anymore. I have been slowly selling off my other hobbies and reinvesting the proceeds into LEGO.

I, too, want to hear from LEGO on the color change. It's not like the whole gray thing. They aren't color correcting. As far as I know, both greens are in production still.

It seems like a base plate would be fairly simple to recreate. This is a perfect opportunity for a 3rd party to step in. Yet another reason LEGO should really address this issue ASAP.

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I feel the same way. There are usually one or two minifigures in each series that I'll buy for a specific purpose. I love the revolutionary war minifigure because they're basically an updated version of the bluecoats (and it puzzles me why they didn't use them for the new pirates theme, although I like both). But I think it's stupid that people just buy them all and put them on their shelves. That's not what Lego is all about. That's just a waste of money. Toys should be played with. If you aren't building with your Lego, what's the point? The only enjoyment one can really get out of collecting things is the process of finding and buying it. The minifigures aren't rare, so there's no fun in hunting for them (especially if you don't feel the bags yourself). So you'll feel excited when you buy it. 10 minutes later, you put it on the shelf, and you never think about it again.

You have just described me to a certain degree. I DO collect them. In fact , I buy half or 1/3 of a whole box to avoid the feeling the bags thing. I have this fantastic room in the house that is almost like a shrine to lego where I have 16 shelves with all the CMFs neatly displayed and I bet a lot of joy glancing around the room and looking at them. I have some fantastic sets on display that provided immense fun to build follwing the instructions to the letter. And a town layout with many sets (sometimes a MOD) combined with my own MOCced scenery.

I will probably love reliving my childhood, building stuff with my hands and browsing my collection for as long as I live. And I would be very upset if TLG screws up and goes bust. And for me, that will not be because a clone brand comes along, even if they do happen to produce that baseplate in the right colour green (I would probably also buy them but not the rest). No, what would put me off is if they stopped making such wonderful sets like the Taj Mahal or the Paris Restaurant. Or if the customer service went downhill and they became shrewd and mean. I want them to stay a premium brand and make as much money as they possibly can, as long as that also leads to aftracting the best designers with the greatest ideas and providing excellent customer care.

But I do worry they will stray off course, bite off more than they can chew and lose focus. Although, whose to say that would not feed innovation just as it did in 2003...

One more thing on clone brands: in my opinion Minecraft could be seen as a clone brand (at the generic level) and I think it is a good survival strategy of LEGO to embrace it by creating a new line rather than dismissing it. I am just saying, I think the real threat to Lego from a competitive point of view has yet to reveal itself. The current competitors are just clones indeed, they are not game changers.

What if Microsoft were to combine Minecraft on Xbox with Windows 10 designer capabilities, sophisticated programmable bricks and - oh yeah - also throw in some real plastic bricks as well as a sort of commodity. The money would be in the designs, the platform and the community.

Nah, that would never happen...

Edited by TheLegGodt

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Lego has so many lines now that it matters a lot less how one lines does. But I do worry that Lego has got too big, every one loves you on the way up but when you get so big and have so much of the market share it is very hard even to stay at the level you are at never mind getting bigger. Price and quality is what Lego need to keep a firm eye on now.

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Anything in business is a risk....

Something like 60-65 % of businesses fail in the first year. It's a difficult thing opening your doors to the world.

Much of what we see today is a result of rapidly changing technology. Companies that fail to change and keep up with it get wiped out.

It also seems more common for upstart companies to develop new technology and then get bought out by much larger corporations. Having control of a said technology can give you a huge advantage over your competition. If other corporations adapt to your version of technology then the competition takes a major hit. While this has always been somewhat the case, the ever increasing pace of changing technology is allowing for the faster rise and fall of companies.

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The collectable minifigs series bother me for this reason. It's not about what Lego used to be about.

I disagree there. They are only collectables if you want them to be collectables. I still have a rather large CMF collection, but not a complete collection. I never intended to collect them as a displayable collection. I was complete because I liked the new parts and printed torsos. I am no longer complete as I sold off a lot of the earlier stuff when prices went crazy (as other people obviously did want to be complete after starting late).

However, I never once displayed them as a complete collection. I used them to inspire small 8x8 or 16x16 vignettes. That is what lego is all about, and CMF gave me that inspiration to build something themed on whatever came out of the packet.

My collection now is more army themed (aliens, historical, animal suits, ...) often with 10-20 of each and city themed (a couple of plumbers, carpenters, mechanics, coffee guys, etc). They are never displayed as a collection, but as a group of minifigs doing something in a free build.

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In addition to what kibosh said about video game budgets, I have to say this: kids aren't as interested in real toys as they used to be. This past Christmas, I gave a Lego set to every kid in my class. A week later, I asked one of the kids if he liked the set, and he said he hadn't opened it yet because he'd been playing with his new iPad all week. (This kid is three years old, almost four.) In my opinion, this is terrible parenting because kids that age need to have their hands on real objects to develop their motor skills (which he is lacking). But many parents are doing this more now because it's easier than spending time with their kids and cleaning up after them.

That is alarming Jodawill. Kids do not need to be on computer screens until later on. They need the basics first and social skills from playing with others.

Back to topic, I feel that there is a few risks that TLG is suffering from and potential risks. Certainly the greatest risk TLG faces currently is logistics and manufacturing products to meet demand. Lego has always suffered from logistical issues (literally getting products to the market) and this has not really changed. One of the reasons TLG now has a Lego office in Central London is to deal with logistical issues such as supply and demand. (I applied for several of their positions but no luck.) It is hard to gauge as a business just how popular a product could be versus how popular it actually is. I get that TLG doesn't want to make too much of a particular product if it won't really sell. Wouldn't want a blanket approach either, by making say 100,000 copies of each set. It is a balance that is hard to manage. Perhaps they need a bit more of a rethink with the manufacturing process? They have x number of machines to produce whatever line/sets until they want to reuse them for the next run. The example comes to mind of the Research Institute. They underestimated the demand and it took a good 6 weeks or so before they made more. If I knew more about the process then I could give a more in-depth assessment. This is where a Lego tour would be incredibly helpful!

Their S@H website as well has also been suffering and there is a clear need to beef up the team handling it. They have had persistent problems with the website for a few years. Whether customers are not giving them enough feedback to address the problems or is it a matter that they aren't as proficiently skilled as we would want them to be is the question.

I think the major potential problems TLG faces is what other have spoken of, numerous product lines with too much diversification, too many parts (although there is a central team that handles how many parts are out there), pricing themselves out of the market and lack of building experience in lieu of a quick sale. These are direct threats to TLG as this is precisely what happened between 1999-2004. I worry that the increase in different licensed products could undermine the 'bringing back to the core' philosophy. Keep in mind though that their increase in diversification is part of the business plan, ie. phase 3. I see more parts that are a one off in a set which is problematic however thankfully TLG designers do try to incorporate these parts more often. CMF moulds are one example.

I would like sets that offer more of a building experience. I think by the time most kids are about 10 they can handle more sophistication in building experiences without the risk of frustration. The only time I ever had an issue is if the build isn't that stable. Currently the price have increased, what I haven't figured out yet is if this is because TLG is producing more, have more associated costs such as staff etc or if it is because they can increase the price to make more money since their products are popular. I suspect maybe a bit of both. Honestly I was quite happy with TLG sticking to 'back to the core' as it allowed them to focus on what works and discard the rest. Some minor expansion is great but I wouldn't want them to fail again. One side note: they are a private family owned company and are not subjected to the whims of shareholders, so we should be thankful that they do listen to feedback from consumers.

Edited by Wodanis

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Some good points here, but I have to argue:

I don't know how this will affect their profits in the long term, but something that troubles me about their current strategy is that they've shifted away from being a creativity product to replicating the latest, flashiest themes on TV. There's less emphasis on people making their own stuff and more emphasis on completing collections and buying novelty toys to set on bookshelves.

The entire point of the LEGO Movie was to let kids and parents know all the exciting and cool things you can build with LEGO. That it was actually not a good thing to keep the collection static and seperated.

But, just the same. There are AFOLs who will purchase and collect sets simply to display, be it UCS things or regular sets of a theme/property they enjoy. Sure, a lot of AFOLs like to MOC or MOD but there are many who do not and wouldn't dream of taking a set down (or never even building it and simply parting out). It is the same for kids, some will build a set and keep it on display while others will break it down and build new things. It is something personal to everyone really. For every kid who wants to play a great big game all over the bedroom with any and all toys, there is one who will have things put out nicely and interacted with in an organised manner.

The worst threat is always parents, parents who think LEGO is too messy or that the set is only what it says on the box. (I heard one father say that and then pointed their kid to an airfix model. A quickbuild, not even a proper one!). That it has too many small parts or will only break... My sister and I go shopping sometimes and she'll have carefully lead me away before I start ranting like a madwoman at those who make the worst comments. (Mostly as she wants to have a bash too, she has many tragic cases from working in a school).

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They are spreading themselves way to thin with themes! According to the wikia, the new things for this year are "Bionicles"(that look more like HF), city swamp, classic, duplo sofia the first, elves, jurassic world, Pirates, scooby doo, AND speed champions. And that's on top of existing themes getting new stuff.

LEGO isn't really under threat from clone brands in terms of the quality of the individual pieces, but you're right that they're spreading themselves thin. That was one of the problems ten to fifteen years ago - but at least LEGO are mostly sticking to physical building-block products.

BIONICLE was a classic theme that ran for about ten years until it got discontinued a couple of years ago in favour of HF. I remember when I was younger all the kids loved BIONICLE - I never got into it myself, but that's beside the point. The line was incredibly popular and it was very disappointing when it got discontinued. LEGO reintroducing the line is not a risk; it's bound to sell well.

Pirates, while not an "evergreen theme", comes and goes over the years in different waves. That's not really a risk. But Elves, Scooby Doo and Speed Champions are risky - I tend to think Scooby Doo will go the way of Spongebob (i.e. very rarely getting updates, and not very appealing in the long run).

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I don't think you can underestimate price, when my niece has a birthday my sister sends me a list of what she wants and unlike us not everything on it is Lego my family get her things that they think are worth the price or they find on offer. My nephew loves minecraft and Lego but on seeing the new sets spent his birthday money on other toys as he wouldn't get a lot with the money he had.

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I am not too worried about clone brands either. They have a couple of standard bricks and then for each set very specific elements that do not seem to fit into an overall system like LEGO does. That and the quality argument. Not too mention quality of designs. As long as LEGO keeps introducing elements that always fit into their system that is fine.

What would steer me away from LEGO is if they started producing sets with very specific and large bits. If they go that way, I would see LEGO as nothing less than a plastic toy that happens to need a bit of assembly first. LEGO must always stay true to its true source building blocks, that for me is exactly the point and art of LEGO. To use existing elements in new and exciting ways. Personally, I am a collector so the art is in the creativity of the design and in the way I choose to combine sets to form a display. As other people state, each to their own, we all have different ways of 'playing' with our LEGO but I think we are all connected through our love of the creativity and the art the LEGO system offers.

More lines could be beneficial for maximising the reach to the tastes of the public but I am concerned that shops will start pushing back, they have other toys to sell as well! I like the fun factor of different licences (can't wait to have Doctor Who and Scooby Doo walking around my town!) but I also see the risk of failed lines (after paying high licence costs). I hope LEGO knows what they are doing and have really learned from 2000-2003. So far it looks like they do.

No-one seems to be picking up on my 3d printing argument. Innovation is not only products, it can also come from new distribution forms. I think 3d printing will one day replace the need to buy actual sets in shops. But it will take a long time before quality gets even close to the manufactured quality of LEGO. Maybe 2 decades? You could say the actual process of manufacturing will add no more value. That day WILL come, and then LEGO needs to become an IP company for designs of elements and sets. But others can do that too. And they can be digitally copied/pirated. How is LEGO gonna make their money in 2 decades time?

Or will they blend (nano) technology into each brick, creating SMART BRICKS. But then much more subtle (less noticeable to the naked eye) than the current POWER FUNCTIONS. And also, built into every element they have. I am talking again may a decade or 2 down the line.

One more question 'for the gut': who thinks LEGO will still be produced and actively played with by Children in 20 years time? (When your kids start having kids of their own)

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One more question 'for the gut': who thinks LEGO will still be produced and actively played with by Children in 20 years time? (When your kids start having kids of their own)

I think this goes back to parenting. My kids love the their LEGOs, but part of that love, is building with me. I sincerely hope they will build with their children when the time comes. And oh the collection my grandkids will have access to....

I think kids of today, who have a positive LEGO experience growing up, will absolutely end up with little LEGO fans of their own.

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