TLG to Axe 1400 Jobs

[Japanbuilder]

2 hours ago, lee82gx said:

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.

 

It is not just bootlegs, we should also look at similar competitors on the market and the nasty habit of kids to grow older faster than you would like. The first LEGO movie that skyrocketed interest in LEGO is on the wane now as a thing and those kids aren't as kiddy anymore. 

When looking at the overall range of product, you really start to feel the void if you are in your early to mid-teens of LEGO stuff that appeals to what you are into. Plus with other competitors making brick models to video games and other cooler things that LEGO glow can be easily replaced by something else altogether. 

Secondly, the actions taken here by LEGO signal their projections for the coming quarters are looking to angle downwards not upwards. Payroll is a constant cost and sadly, trimmings to off-set bad projections must hit payroll somewhere along that line. 

Very sad to see this happen but as a consumer of all range of sets(size-wise) I can testify that my interests converge on a very narrow range of themes with literally entire lines in both home-grown and licensed themes going ignored by my wallet and tastes. I imagine this will make them reevaluate how much puff they had been shoveling out and make them focus on making sets their own kids would love to play with for hours and hours on end with instead of these complex display pieces that teach kids nothing about using their imagination. 

Edited September 6, 2017 by Japanbuilder

[mobi]

I am not sure if bootlegs are to be blamed here entirely.

Lego historically never had market outside developed world, due to high cost (compared to per capita income in most Asian/African countries).

Bootlegs are doing good in those markets and it is bit naive to think that without bootlegs people would have bought the real thing (similar to claming big films losing money to pirates, as if all watching pirated films would have gone to theatres instead).

Also, for complex themes like Technic, bootlegs are no match.

However, for basic/easy themes, bootlegs are often as good as real Lego.

Since, we don't know Lego sales numbers by geography and theme, all we can do is speculate. I heard rumors that their USA market has performed poorly.

But I agree about the comment on having too many lines/themese. Tesco has decided to reduce 90 types of cereals into 20 because they discovered Lidl is doing much better with only 10 types!

Same for Apple, they just sell iPhone, iPads and Macbooks. It is better to have fewer themes and focus on them. 

[Aanchir]

4 hours ago, That Orange Thing said:

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.

You seem to have an overly simplistic view of why LEGO's crisis in the early 2000s came about. Need I remind you that the theme that saved them from bankruptcy in 2003 wasn't one of their classic "staple themes", but rather Bionicle? And themes like Ninjago and Nexo Knights are in many ways designed specifically according to the lessons that LEGO learned back then about how to manage a successful theme. The book Brick by Brick, easily the most authoritative resource on how LEGO got into that mess and how they got out of it, devotes entire chapters to both Bionicle and Ninjago due to what incredible success stories they were. If you read that book you'll see that LEGO learned a lot more valuable lessons from their financial crisis than any nostalgia-crazed 80s fanatic who thinks success is as simple as "do more of the stuff I liked as a kid and stop trying new things".

Edited September 6, 2017 by Aanchir

[Digger of Bricks]

22 hours ago, Digger of Bricks said:

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:

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

I should add this statistic highlighted in the Brickset report on TLG's press release, which emphasizes the double digit revenue climb in China juxtapositioned to the US and Europe's decline.

From Brickset:

Quote

The LEGO Group today reported fiscal results for the first half ending June 30, 2017. Revenue for the period totalled DKK 14.9 billion, a decline of 5 percent compared with the first half of 2016. Performance across the market regions was mixed. In established markets such as the United States and in parts of Europe revenue declined, while in a growing market, such as China, revenue grew by double digit.

 

[mobi]

From the same Brickset news link

 

During the first half of the year some of the best-performing themes were homegrown classics such as LEGO® City, LEGO Friends, LEGO DUPLO and LEGO Technic, while the LEGO Batman movie products also saw a great response from consumers.

 

[iv-tecman]

It is sad to hear 1400 will be losing their jobs. I hope all those facing redundancy find suitable work quickly .

Good to read the Lego classics are still selling well, its my fear that one day Lego will axe the Technic line, and I'll be extremely upset if that should ever happen. I buy pretty much all he Technic sets I can afford each year, even the ones that I'm not a massive fan sometimes. Like a few of this years 40th anniversary sets.

As for bootlegs (Knock offs) quite a few I know that are avid collectors of Lego have used the like of Chinese KO to grab kits long out of production such as Star Wars UCS sets - as lets face it, The money charged on ebay for these kits will never see its way back to TLG. The TLG long sold the kit to the speculator. So a bootleg copy of a set you missed out on does at times fill the gaps.

So its not all down to cheap copies - but I suspect its not helped. Whatever the reasons for the decline in our beloved Lego, I hope they find a way to re-invent and continue to offer amazing products for both kids and AFOL alike. 

[agrof]

2 hours ago, Digger of Bricks said:

I should add this statistic highlighted in the Brickset report on TLG's press release, which emphasizes the double digit revenue climb in China juxtapositioned to the US and Europe's decline.

From Brickset:

The LEGO Group today reported fiscal results for the first half ending June 30, 2017. Revenue for the period totalled DKK 14.9 billion, a decline of 5 percent compared with the first half of 2016. Performance across the market regions was mixed. In established markets such as the United States and in parts of Europe revenue declined, while in a growing market, such as China, revenue grew by double digit.

Well, smart managers like to forget while looking on the graphs, that from zero it is always easy to grow in the beginning. After a while the growing will be not exponential, not even linear... especially looking on today's situation: China is a very hard market, and domestic bootleggers evolved like lightning (way faster as expected and seen before!), which will result sudden break in optimistic business plan with Asia - in my opinion. I don't give a year and the above mentioned growth will be one digit only - with all of it's consequences. 

Edited September 6, 2017 by agrof

[Vindicare]

On 9/5/2017 at 4:17 AM, ElectroDiva said:

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? 

I was talking about this just today...they need to reel it in. It seems like they're trying too hard. Brickheadz was a market they never needed to get into. It's pretty evident they're jumping on the coat tails of Funko, in their own way. And, do we really need the DC Hero Girls? Juniors? It seems like they're trying to cater to every demographic possible, and that's a losing battle in my opinion. I get that they have people & market research who know more than the average collector, but it's just too much. 

Then we have big ticket items...it definitely feels like too much. There's currently...what? five Modulars are on the market? theres just so many great quality sets that are available at one time, it's hard to keep up.

 

 

[RetroInferno]

What caused this 5% diminution aside, they were booming by the double digits year after year. The executives made a motherlode of cash these last few years, and now the people at the bottom of the chainfood is paying for it.

Maybe there's other stuff behind the scenes that would help explainning this better, but firing 8% of your total staff for a 5% diminution in profits seems petty.

They could also give a call to Disney and tell them to price down their boring new trilogy Star Wars sets, that would help. 

[Littleworlds]

19 minutes ago, Vindicare said:

I was talking about this just today...they need to reel it in. It seems like they're trying too hard. Brickheadz was a market they never needed to get into. It's pretty evident they're jumping on the coat tails of Funko, in their own way. And, do we really need the DC Hero Girls? Juniors? It seems like they're trying to cater to every demographic possible, and that's a losing battle in my opinion. I get that they have people & market research who know more than the average collector, but it's just too much. 

Then we have big ticket items...it definitely feels like too much. There's currently...what? five Modulars are on the market? theres just so many great quality sets that are available at one time, it's hard to keep up.

I think its not dramatic yet. Regarding their success, TLG has issues on a very high standard in comparison. I think sales will plateau in the traditional markets after years of massive growth.

Cutting down the range of themes and merchandise is probably a wise thing to do indeed. It just became too much of everything. So many sets per year that compete for the customer's attention, more and more rapid turnovers. Reaching a peak was inevitable.

I would like to see TLG reacting with less themes and a more moderate pace for releases, together with better priced sets and keeping up making interesting, innovative themes.

[Aanchir]

33 minutes ago, Vindicare said:

I was talking about this just today...they need to reel it in. It seems like they're trying too hard. Brickheadz was a market they never needed to get into. It's pretty evident they're jumping on the coat tails of Funko, in their own way. And, do we really need the DC Hero Girls? Juniors? It seems like they're trying to cater to every demographic possible, and that's a losing battle in my opinion. I get that they have people & market research who know more than the average collector, but it's just too much. 

Then we have big ticket items...it definitely feels like too much. There's currently...what? five Modulars are on the market? theres just so many great quality sets that are available at one time, it's hard to keep up.

BrickHeadz is just an experiment. If it doesn't do well then they can retire it, but it would be stupid to never try things like that at all. It's hardly the first time LEGO has tried to blend their classic building toys with other types of product. I mean, you could just as easily say that Trains are a market LEGO never needed to get into. it's pretty evident they're just jumping on the coat tails of Lionel. Or Technic is a market LEGO never needed to get into. It's pretty evident they're just jumping on the coat tails of Meccano. But LEGO wouldn't be where they are today if they didn't take risks, and as risks go, BrickHeadz are a remarkably small one (low consumer entry point, zero new molds, and entirely based on themes that are already firmly established).

As for the DC Super Hero Girls, is that specific theme necessary? Maybe not. Are more girl-oriented themes necessary in general? Almost certainly. Ideally, girl-oriented themes should offer just as much variety as more boy-oriented ones. No reason to act as if three is the limit, particularly when none of those remaining three (Friends, Disney, Elves) veer into sci-fi territory to the degree that Super Hero Girls does.

Having an intermediate line like Juniors in between Duplo and the System play themes is nothing new. Juniors is to kids today what Fabuland was to kids in the 80s. It's a great way to recruit LEGO fans earlier than a typical play theme would be able to do otherwise.

Also, I don't exactly get your point about there being too many modulars out? For the most part, the modulars have been coming out at a fairly consistent pace of one a year, so the only way you'd have any fewer at one time is if they retired sooner, and wouldn't a smaller window of availability make it harder for people to keep up? I can understand the frustration when it comes to other types of high-priced that don't come out on such a strict schedule, but with one-a-year sets like the modulars, the more of them remain available, the easier they become to collect.

Edited September 7, 2017 by Aanchir

[samurai-turtle]

Well this seems to be all over the news. (A disclaimer I usually just watch CBS for the news.) But CBS evening news has a report on LEGO. Here is a link...

https://www.cbsnews.com/news/lego-revenue-profits-digital-headwinds/

But personally the video / TV report that I seen over the airwaves might be more informative. 

Edited September 7, 2017 by samurai-turtle
Add a comment

[jimmynick]

Maybe I'm cynical but a small decline in revenue & profit isn't really all that much and they would have laid off these 1400 people regardless; nothing less than ridiculous growth can satisfy the bean counters.

[Trekkie99]

15 hours ago, DrasticPlastic said:

 

 

Edited September 7, 2017 by LegoMonorailFan
Accidental post

[r5-j2]

17 hours ago, RetroInferno said:

What caused this 5% diminution aside, they were booming by the double digits year after year. The executives made a motherlode of cash these last few years, and now the people at the bottom of the chainfood is paying for it.

Maybe there's other stuff behind the scenes that would help explainning this better, but firing 8% of your total staff for a 5% diminution in profits seems petty.

They could also give a call to Disney and tell them to price down their boring new trilogy Star Wars sets, that would help. 

Summed up brilliantly..also they could spend less money hiring lawyers to threaten "You-tube" stalwarts like Jang and Just2Good for having the audacity to review items that were freely available before the official release date and to be blunt;  the likes of these "Force Friday"  release days are nothing more than  cynical moves to raise expectations and squeeze more money out of us !!  

[samurai-turtle]

36 minutes ago, r5-j2 said:

Summed up brilliantly..also they could spend less money hiring lawyers to threaten "You-tube" stalwarts like Jang and Just2Good for having the audacity to review items that were freely available before the official release date and to be blunt;  the likes of these "Force Friday"  release days are nothing more than  cynical moves to raise expectations and squeeze more money out of us !!  

I get the feeling that Disney was behind most of that "move". I was watching a PBS documentary (American Experience: Walt Disney). And it showed "Uncle Walt" could be an @$$, especially if you crossed him. So even in the early days the Disney Co. could be considered a type of dictatorship. And I don't think to much has changed from the early days to the present day. 

[Calabar]

On 5/9/2017 at 3:02 PM, 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.

That's exactly what I thought.
That, together with the politics of the last years about pricing and other things, is unfortunately turning me ever more away from LEGO.

On 5/9/2017 at 4:09 PM, Digger of Bricks said:

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.

I think that investing in China was something like opening the Pandora's box for TLG. Often greediness don't bring to happy endings.

[BrickFit26]

I just hope LEGO won't stop producing sets for the Modular line or scale back on CMF series. They also shouldn't be releasing major LEGO movies in the same year. Way too many sets to go along with them on one year, it's like we have to be picky about which sets we have to save money for in order to buy them.

[iv-tecman]

On 07/09/2017 at 2:41 AM, RetroInferno said:

What caused this 5% diminution aside, they were booming by the double digits year after year. The executives made a motherlode of cash these last few years, and now the people at the bottom of the chainfood is paying for it.

Maybe there's other stuff behind the scenes that would help explainning this better, but firing 8% of your total staff for a 5% diminution in profits seems petty.

They could also give a call to Disney and tell them to price down their boring new trilogy Star Wars sets, that would help. 

Have to agree with the prices of the newer Star Wars sets. The BB 8 is crazy priced, even the new star destroyer at UK £139 is a tad overpriced and I don't think it looks very good scale wise with mini figures.

Have to remember, TLG have had major set backs before, lets hope this is just a small blip. 

[Dharkan]

Cheapo murricans loving Lepin is the reason TLG is losing money. 

[sxpert]

On 06/09/2017 at 10:03 AM, That Orange Thing said:

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.

at least, those new lines use standard bricks, unlike the previous attempt, hence basically requiring no new molds (re-color and printing is pretty cheap)

I suspect what is to partially blame is most people's salaries not following inflation... hence, purchasing ability of families going down...

Edited December 5, 2017 by sxpert

[Mikuri]

Big problem for me is that they release so many meaningless vehicules in their sets, it's crazy. It's always a tiny half-assed house with 2 big vehicules. 

Just look at Nexo Knights. Minus the $130USD Castle, there is no small sets with like a wall/house with a few minifigures. And like 20 vehicules/mech.

The Lord of the Rings sets where amoung the best they ever did, I'm really sad I wasn't able to buy them when they were out. We all know most of LotR fans have bought multiple times the 9471: Uruk-Hai Army :P Back when I was a kid, this set would have been a blast!

[whitswj]

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Edited December 3, 2021 by whitswj

[Aanchir]

2 hours ago, whitswj said:

I think one thing is being overlooked. I see a lot of criticism about the expensive sets. I think the question should be, are these not selling? Last I checked, there's no deep discounts on many of $200+ specialty sets. To me, that indicates that the problem is somewhere else. Maybe the margins are too low on the expensive sets but it does not point to a loss. 

I guess the best indirect indicator is going to be what is still plentiful on the shelf the day before Christmas. There must be a lot of development and advertising costs for Nexo Knights, Lego Batman, Chima (discontinued), Ninjago, and Friends. I think those would need to yield a high volume of sales to justify development. 

The mention of Chima seems odd to me. As you mention, it's been discontinued since 2015, and throughout its lifespan the LEGO Group's overall sales and profits steadily rose. As for Ninjago and Friends, those are almost always among the best-selling sets and themes, so I think their continued development is more than justified.

[whitswj]

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Edited December 3, 2021 by whitswj