TLG to Axe 1400 Jobs

[mobi]

Not very exciting sets for 2018 so far 

Anyway, based on this news, Lego is not doing good lately.

https://www.theguardian.com/business/2017/sep/05/lego-to-axe-1400-jobs

It would be very interesting to see Lego's sales figures grouped by Themes and Geography. I wonder whether this is at all disclosed (being a private company).

 

Edited September 5, 2017 by mobi

[Maaboo the Witch]

13 minutes ago, mobi said:

Not very exciting sets for 2018 so far 

Anyway, based on this news, Lego is not doing good lately.

https://www.theguardian.com/business/2017/sep/05/lego-to-axe-1400-jobs

It would be very interesting to see Lego's sales figures grouped by Themes and Geography. I wonder whether this is at all disclosed (being a private company).

 

I just read the articles surrounding that announcement. Grim news.

[J_C]

1 hour ago, mobi said:

Not very exciting sets for 2018 so far 

Anyway, based on this news, Lego is not doing good lately.

https://www.theguardian.com/business/2017/sep/05/lego-to-axe-1400-jobs

It would be very interesting to see Lego's sales figures grouped by Themes and Geography. I wonder whether this is at all disclosed (being a private company).

 

I read the article on brickset just now.

Industry 4.0 is the answer. There is no need nowadays to have anybody to put the bags in the boxes, to fold the boxes etc. Lego production is typical example of enterprise that can profit greatly from robotical production. It takes big investment but it is possible to make stuff like Lego makes virtually without human touch. 

Also, my personal opinion, Lego has shifted too much to luxury, rpices of the sets that used to be consider top-end are now mid-range, current top-end sets cost money like nobody would be asking for not such a long time ago (please do not bring per piece counting - that is true), but was there 800usd set 8y ago?

There is too much ultimate, limited, collection, licence. Lego is aiming too high, while mid-range and entry level is IMO neglected.

Dear Lego, bring back Lego to the kids and you will be fine. Buying b-day present for 200$ is big question for lots of parents. Buying 3 boxes per year for 70$ is not so difficult. Do you catch my drift?

edit: And those who can't (or do not want to) spend 200$ will get happily good set for 50$ if such a thing exist, which is better then if they do not buy anything. But I feel like current smaller sets (I do not mean Technic exclusively- but all Lego production) scream "cheapo", which is shame, those are the sets where design and cleverness of creators should be implemented the most, but (IMO) development at Lego focus mostly on the top, top, top, ultimate sets that maybe impress and build the brand, but will not clock the most revenue.

edit 2: but I might be wrong 

 

Edited September 5, 2017 by J_C

[Jim]

https://www.nytimes.com/reuters/2017/09/05/business/05reuters-lego-results.html

I will split this into a separate discussion.

[Paknaloid]

.

Edited January 4, 2018 by Paknaloid

[ElectroDiva]

This is grim news - have we reached "peak Lego"?

 

I agree with some of the earlier points about the bewildering array of sets currently on sale at ever escalating prices, but I'd hate to see the loss of the big ticket UCS/Creator Expert/Flagship/Ideas sets. These are where Lego really shines in my opinion.

 

I would much rather see them trim the number of lines they have (some of which require unique pieces). Did we really need Constraction figures, Brickheadz or Boost for example? 

Edited September 5, 2017 by ElectroDiva

[Littleworlds]

Not great news, but in some aspects not surprising. What rather surprises me is the extend.

I think it is for a good part market saturation. TLG was growing massively in recent years, but no growth can go on indefinitely. Pricing might play a role as well. Sometimes I can't really see the value of a set for the full price. Pure fantasy...

To me it also sounds like they are likely going to cut down the number of themes. Which isn't a bad thing, since with some I simply wonder why they exist in the first place. And all the merchandise-items... which leads me back to market-saturation. 

So far, while TLG has to do some homework, I don't think things are too dramatic yet. Its quite possible that its just a natural consequence of the immense growth the brand had. As long the brand-value itself remains high (and that it definitely is), I don't see a reason why they shouldn't be able to bounce back. 

 

[Trekkie99]

Any chance all the kids that jumped on the Lego band wagon during the release of the Lego Movie and all its popularity are now getting off in search of the next hip/cool thing on the toy market like they always do? Look at toys like Bakugan, Zhu Zhu Pets, and other toys that are all the rage for awhile and then forgotten and replaced. Of course Lego has its die hard fans, both kids and adults, but what if their "following the trend brick road" fans are now taking their usual coarse of action and moving on to the next trend? (Whatever that may be). 

[Trekkie99]

Maybe, this is what a lot of us have been waiting for. What if TLG will scale back a little bit, stop trying to be so much like Mattel & Hasbro, and start being a little bit more like their old self? (BTW I want to emphasize the word little because I'm not asking TLG to do a complete 180. That would be a bit extreme). 

[mobi]

It was kind of expected especially when last CEO left after a very short tenure. However, getting rid of so many people just because revenue is slightly less does not look very good on TLG.

 

 

 

[ElectroDiva]

13 minutes ago, LegoMonorailFan said:

what if their "following the trend brick road" fans are now taking their usual coarse of action and moving on to the next trend? (Whatever that may be). 

 

Nice turn of phrase - gave me a good chuckle - but I disagree with your point slightly.

 

A company the size of TLG has to innovate to drive sales growth. It's either do that or stagnate.

 

Clearly there will be some hits and misses taking that approach. Branching into movies was a clear success imo - and one they can sustain with future movies. Some of the fans they gain will of course move onto the next fad, but a lot will stay and you can replace the ones you lose with the next batch of kids who watch the next movie release (assuming it doesn't bomb).

 

I think the issue is really twofold - they are trying to do too many new things at once, and they (unrealistically) expect that the huge growth of the past few years can be sustained - i don't think it can.

 

Right sizing the company for a more sustained (lower) level of growth is the right move imo. They just need to pair that with better quality control over green lighting new products/themes.

 

Just now, mobi said:

It was kind of expected especially when last CEO left after a very short tenure. However, getting rid of so many people just because revenue is slightly less does not look very good on TLG.

 

 

 

 

From what I remember reading, I think the issue with the old CEO was that he was too old and wanted to slow down a bit (he's still there as chairman I believe). I may be wrong on that.

 

Agree on the level of job cuts though. Cutting approx. 8% of your workforce after only a 5% revenue drop is a bit excessive for a supposedly "touchy feely" image conscious company like TLG. 

 

I suppose they would argue though that it's a business at the end of the day and they have to do this now to make the company sustainable long term. 

 

 

[Digger of Bricks]

This is the third time I've seen an official TLG statement stating the company's interest in China as a future market, the last two times from former CEO Bali Padda.

From Chairman Jørgen Vig Knudstorp:

Quote

“We are working closely with our partners and we are confident that we have the long-term potential of reaching more children in our well-established markets in Europe and the United States. We also see strong growth opportunities in growing markets such as China."

I think that holds some interesting possibilities for future products and lines perhaps. 

[Aanchir]

5 hours ago, J_C said:

Also, my personal opinion, Lego has shifted too much to luxury, rpices of the sets that used to be consider top-end are now mid-range, current top-end sets cost money like nobody would be asking for not such a long time ago (please do not bring per piece counting - that is true), but was there 800usd set 8y ago?

There is too much ultimate, limited, collection, licence. Lego is aiming too high, while mid-range and entry level is IMO neglected.

Dear Lego, bring back Lego to the kids and you will be fine. Buying b-day present for 200$ is big question for lots of parents. Buying 3 boxes per year for 70$ is not so difficult. Do you catch my drift?

edit: And those who can't (or do not want to) spend 200$ will get happily good set for 50$ if such a thing exist, which is better then if they do not buy anything. But I feel like current smaller sets (I do not mean Technic exclusively- but all Lego production) scream "cheapo", which is shame, those are the sets where design and cleverness of creators should be implemented the most, but (IMO) development at Lego focus mostly on the top, top, top, ultimate sets that maybe impress and build the brand, but will not clock the most revenue.

edit 2: but I might be wrong 

 

I think we AFOLs tend to seriously overstate the importance of big AFOL-targeted exclusives, both in our celebration of them and our criticisms of them. It's true, there were not 800-dollar sets 20 years ago. However, in the overall portfolio of LEGO products, big exclusives like that are basically a blip, and the vast majority of sets are about as affordably priced as ever.

Also, while I will respect your request not to bring up price per piece, I do think inflation has to be considered. Just looking at some prices of beloved classic sets:
6285 Black Seas Barracuda cost $110 in 1989, or over $218 in today's money
6399 Airport Shuttle cost $140 in 1990, or over $263 in today's money
4558 Metroliner cost $149 in 1991, or over $269 in today's money
4563 Load and Haul Railroad cost $120 in 1991, or over $216 in today's money
6286 Skull's Eye Schooner cost $126.50 in 1993, or over $215 in today's money

Compared to these kid-targeted sets from the late 80s and early 90s, the prices for today's priciest kid-targeted sets like Destiny's Bounty or First Order Star Destroyer, and even some AFOL-targeted exclusives like the Carousel, UCS Snowspeeder, and Silent Mary, are actually pretty tame. There are more of these bigger sets than there used to be, but there are more sets at low- and mid-range price points as well.

I also feel like there are plenty of small and mid-range sets these days with quality designs. Consider 31064, 41183, 41311, 60151, 70353, 70611, 70623, and 70911. They're all fairly detailed and complex builds at a relatively modest $30 price point. I wouldn't call them "cheapo" by any stretch of the imagination.

Edited September 5, 2017 by Aanchir

[Littleworlds]

7 hours ago, LegoMonorailFan said:

Any chance all the kids that jumped on the Lego band wagon during the release of the Lego Movie and all its popularity are now getting off in search of the next hip/cool thing on the toy market like they always do? 

I think this could indeed be possible. Also Lego had a lot of exposure in the media in recent years. And at some point things just lose their novelty-status simply.

6 hours ago, mobi said:

It was kind of expected especially when last CEO left after a very short tenure. However, getting rid of so many people just because revenue is slightly less does not look very good on TLG.

I completely agree. Especially when the layoffs happen in countries where social security isn't much a thing.

6 hours ago, ElectroDiva said:

I think the issue is really twofold - they are trying to do too many new things at once, and they (unrealistically) expect that the huge growth of the past few years can be sustained - i don't think it can.

 

Right sizing the company for a more sustained (lower) level of growth is the right move imo. They just need to pair that with better quality control over green lighting new products/themes.

Absolutely. I was going through the numbers a bit today. Revenue did increase quite dramatically in the last couple of years, until 2016. I think they reached the limit in their traditional market so far and need to cut down their portfolio to a more sensible degree. Its all just seriously over-hyped.

4 hours ago, Aanchir said:

Also, while I will respect your request not to bring up price per piece, I do think inflation has to be considered. Just looking at some prices of beloved classic sets: (...)

I think we should not only look at these sets purely from the inflation-point-of-view. Today the piece-count of sets is often pushed up quite significantly with a lot of tiny decoration pieces. Our beloved cheese-wedges, for example 

At the same time manufacturing technology has significantly improved as well. Just look at what cars people had in the 80s and 90s, compared to today. More complex shapes, more complexity in general.

[rodiziorobs]

Maybe this is just me, but I think that laying off nearly 1/12 of the people who depend on you for their livelihood because this year's pile of new money is 1/20 smaller than last years is an excessive response. Granted, I don't have all the numbers in front of me, but after years of solidly phenomenal growth for TLG, numbers should only be a part of this equation. Hopefully everything is handled equitably.

Edit: My guess is that they wouldn't be laying these folks off if they thought this was just a blip on the radar, a fluke--they would keep (many of) them on and weather the storm. Since they are doing the layoffs, they probably have a poor outlook going into the foreseeable future. I wonder what kind if systemic changes will be made as part of the restructuring?

Edited September 5, 2017 by rodiziorobs
More

[ElectroDiva]

@rodiziorobs - I wouldn't read too much into it at the moment.

 

It's just a new CEO coming in and making his mark in a pretty hard nosed, harsh way. There was a huge amount of expansion following their exceptional results in the past few years and they are taking an (arguably cynical) opportunity to scale that back

 

They're still the most successful toy brand in history and I don't think that's going to significantly change anytime soon 

[koalayummies]

At 2 point whatever billion dollars a year in revenue, I would wait out the stagnation for a year or two before panicking. Maybe that's why I'm not a cutthroat go-go 1980s wall street business guy. Don't you worry about Lego, let me worry about blank. 

[Littleworlds]

I think for a good part its also the lessons learned from around the millenium, when they almost went bankrupt. Its good they start questioning things now and not when its too late. That leaves them time and resources to react and readjust things. I just feel sorry for the employees.

[Aanchir]

4 hours ago, Littleworlds said:

I think we should not only look at these sets purely from the inflation-point-of-view. Today the piece-count of sets is often pushed up quite significantly with a lot of tiny decoration pieces. Our beloved cheese-wedges, for example 

Sets definitely have way more tiny detail pieces than they used to. However, I think that detail is usually for its own sake and for the sake of the building experience, not to "fool" people with high piece counts on small sets or anything like that. Like, just a few years ago it seemed like us AFOLs wanted LEGO to use more small pieces. Sets that used bigger pieces were condemned as "<insert that tiresome argument>", even if they had substantial brick-built detail elsewhere (like the Ninjago dragons) or used those big parts in ways that smaller parts would not have worked (like the counter-rotating drills from Power Miners). Nowadays, though, a lot of AFOLs seem to have a hard time accepting that LEGO would use smaller pieces for any reason other than to deceive us with disproportionately high piece counts — even though LEGO doesn't even put piece counts on the boxes in most of the countries where they operate!

To be honest I have a hard time even believing that the average buyer thinks about price-per-piece the same way us AFOLs do, instead of just buying based on how much they like the model on the package. Goodness knows the increased amount of building hasn't shut up all the parents who still think today's sets have way less bricks than they used to and "only build one thing". If they do any comparison shopping it'll probably just be comparing the piece count labels of the sets on the shelf right now (i.e. "this set is twice as big as this one from the same wave" or "500 is a big number and I'm not sure my child is ready for that, but 200 sounds just fine"). Not comparing how the piece counts of today's sets stack up against sets from five to ten years ago or whether they meet some threshold for what price per piece is good or fair. Some parents even seem to think of high piece counts as a disadvantage, since their own main interaction with the bricks is having to find missing bricks or clean up messes.

For those who do still feel like small pieces are a trick to make us AFOLs pay more for less, though, you can always compare set prices against their weight, which can give you a better sense of the actual volume of plastic you're getting. And in many cases that reveals that we are still getting a fair deal compared to the 90s! Like, according to BrickLink, the new Destiny's Bounty weighs more than ANY classic pirate ships, but as mentioned above, costs less than Black Seas Barracuda or Skull's Eye Schooner. The difference in piece count is much greater than the difference in weight due to all those tiny detail bricks, but regardless of which metric you use, you're still getting more LEGO for a lower price.

4 hours ago, rodiziorobs said:

Maybe this is just me, but I think that laying off nearly 1/12 of the people who depend on you for their livelihood because this year's pile of new money is 1/20 smaller than last years is an excessive response. Granted, I don't have all the numbers in front of me, but after years of solidly phenomenal growth for TLG, numbers should only be a part of this equation. Hopefully everything is handled equitably.

Edit: My guess is that they wouldn't be laying these folks off if they thought this was just a blip on the radar, a fluke--they would keep (many of) them on and weather the storm. Since they are doing the layoffs, they probably have a poor outlook going into the foreseeable future. I wonder what kind if systemic changes will be made as part of the restructuring?

The decision makes more sense in the context of what LEGO had been doing prior to this decision. Due to their long-running growth streak they had been taking on a LOT of new hires — in the year leading up to last year's interim result, they hired 3500 people, growing their workforce by a whopping 24%! And at least some of this was probably with the expectation that the cost of so many new hires would be offset by continued growth. Now that it turns out the growth HASN'T continued steadily, they've had to walk that back somewhat. Now, perhaps it would have been more responsible not to take on so many new employees in the first place, but as they say, hindsight is 20/20.

Edited September 6, 2017 by Aanchir

[BrickJagger]

Lego has gotten close to completely pricing me out of the hobby. Types of sets that I used to buy are rapidly inflating in price (SW Battlepacks, looking at you) and I don't find mountains of identical licensed sets very appealing. Hopefully they reverse course and bring back some of the classic themes for reasonable prices.

[BubbaFit45531]

I saw from a video that making new molds for pieces is really expensive. Maybe they shouldn't make so many weird ugly hair piece molds that very few people will want like the Ninjago Movie hair pieces.

[Littleworlds]

48 minutes ago, Aanchir said:

Sets definitely have way more tiny detail pieces than they used to. However, I think that detail is usually for its own sake and for the sake of the building experience, not to "fool" people with high piece counts on small sets or anything like that.

Well, the price-per-part-ratio is a criteria, as people use it obviously. Not as solitary criteria, but amongst others. Reviewers often refer to the piece-count, which mentally puts a set into a certain value-ball-park. (though I recently decided not to do it anymore). Don't get me wrong. I love good greebleing, and a huge chunk of plastic is not better than a tiny one. I would love to see the calculations they have though how much a certain set costs to produce and how these costs are broken down. 

1 hour ago, Aanchir said:

The decision makes more sense in the context of what LEGO had been doing prior to this decision. Due to their long-running growth streak they had been taking on a LOT of new hires — in the year leading up to last year's interim result, they hired 3500 people, growing their workforce by a whopping 24%! And at least some of this was probably with the expectation that the cost of so many new hires would be offset by continued growth. Now that it turns out the growth HASN'T continued steadily, they've had to walk that back somewhat. Now, perhaps it would have been more responsible not to take on so many new employees in the first place, but as they say, hindsight is 20/20.

...the number of new employees is new to me and very interesting, since it puts things in relation indeed. Good to know! 

 

[That Orange Thing]

This is recent history repeating in many ways and no lessons learned.

In the late 90's and early 2000's they almost went bankrupt doing exactly what they are doing now. They are trying to become a massive global all conquering  powerhouse and loose the wholesome, grounded, family run business image.

The lines produced are just too thinned out and diluted of focused quality. Back in the late 90's they pushed new products that moved away from traditional sets with znap, primo, galidor and scala. Now we have the likes of brickheadz, constractor and boost which is trying to be the new playground hit, resulting in a more scatter gun attempt at selling concepts.

‭‭Lego just needs to be Lego. Focus on the core themes again and the rest will follow as they say. It's as if they are scarred to produce the staple themes of city, space, castle and pirates because they are too plain. But I believe kids are willing to use their own imagination and build a world around the quality core Lego are capable of producing. Once you build an ever present group of characters like nexo knight or ninjago it becomes much more restricted.

finally, they have to stop pricing the core market out of their toys - KIDS! The themes produced by Lego are simply targeted at the high end of the price range and moving away from cheaper instant buy to one off Xmas or birthday presents. The recent Nijago And Star Wars releases are good examples of this. Yes a line needs a high value set to showcase the theme but now there are too many, such as the city, bounty, mechs and tank in the nijago release.

The short version would be; Have confidence in the core quality of your product and let kids join you with affordable sets.

 

Edited September 6, 2017 by That Orange Thing

[lee82gx]

I'm not sure why nobody is talking about the elephant in the room: Bootlegs.

I don't support or condone it but its effects are really easily seen in emerging economies (like mine in Malaysia). We had a very quick boom in 2014-2015, fueled by the Poly pack Shell lego craze and the scarcity of Modular sets, causing rises at even 30% above RRP. 

Suddenly in late 2015 came the onslaught of reasonable quality bootlegs from China, and it steered much sales from those willing to buy genuine at RRP (but no supply). Note that the 30%-50% premiums above RRP for big sets are a significant proportion of our average incomes. By the time Lego stabilized the supply with their new manufacturing facilities, we start to see even larger and more expensive sets (so called Ultimates etc) which I can understand from a business perspective of trying to upsell, but at the same time I feel that many of those willing to buy big sets were already sated by then.

I have no solution towards piracy, when you can see that in emerging economies is rampant in entertainment, creative products and even in cars nowadays. But it is certainly a factor against growth and demand for Lego.

 

[DrasticPlastic]

20 hours ago, Aanchir said:

 Just looking at some prices of beloved classic sets:
6285 Black Seas Barracuda cost $110 in 1989, or over $218 in today's money
6399 Airport Shuttle cost $140 in 1990, or over $263 in today's money
4558 Metroliner cost $149 in 1991, or over $269 in today's money
4563 Load and Haul Railroad cost $120 in 1991, or over $216 in today's money
6286 Skull's Eye Schooner cost $126.50 in 1993, or over $215 in today's money

Compared to these kid-targeted sets from the late 80s and early 90s, the prices for today's priciest kid-targeted sets like Destiny's Bounty or First Order Star Destroyer, and even some AFOL-targeted exclusives like the Carousel, UCS Snowspeeder, and Silent Mary, are actually pretty tame. There are more of these bigger sets than there used to be, but there are more sets at low- and mid-range price points as well.

Finally, someone willing to actually engage with the facts. Most people just seem to arrive at a random opinion and then present it as gospel.