have a laugh at Mega Blocks misfortunes...

[CP5670]

This seems to be a fairly common story in the business world. A previously successful company expands too fast and makes bold acquisitions, and then falls down hard. It reminds me of what AMD did with ATI a few years ago.

The article also talks about TLG's similar experiences a few years ago. They say that 2003 was an especially bad year, which I find puzzling since they actually made a lot of great sets that year, in a variety of themes. I guess their problems went beyond just the sets they were selling.

That's what I said, they aren't trying to please stock holders (because they don't have any public stock holders - and Megabloks does, as do most of Lego's other competition)

They are privately owned but still for-profit. They still need to please their private stock holders (primarily the Kristiansen family, which no longer runs the company themselves). Of course they are in the business to make money. And there's nothing wrong with that.

And it wouldn't be any sort of loss to me if Mega Bloks went out of business. Just another fake-LEGO company

Only if you don't mind paying more. As Eilif said, if MB goes bankrupt, you can expect to see price increases on Lego across the board, as they are certainly the largest of the clone brands.

[alex12]

I would never buy mega blocks i'm lego through and through.

That said in the world today people need jobs real bad and if it goes under its the people not the product i'll feel for.

[Yloquen]

That's interesting coincidence , because today for some reason I decided to look at Mega Blocks stock price. I am no economist, but my interpretation of the tenfold drop is that their chances of survival are slim indeed. However, to all those who are worried about competition - LEGO has plenty of competition. They don't compete only with compatible building block manufacturers, but also with a lot of other toys, so the pressure on them will not drop. It might even be good for them, because, even though the ruling of the court in the LEGO vs MEGA lawsuit was that compatible building blocks are allowed, all those brands are not doing a favor to LEGO or anyone who loves LEGO. It might seem tempting to buy from them, justifying that with free market principles, but consider this - there is no way those brands put in the effort in the design of sets and pieces that LEGO does. All that mental labor and manufacturing overhead is included in the price of each piece you buy. So, if another company just takes the design of all those pieces and puts them in some half thought out sets and makes everything with lower quality materials and lower quality control - of course it will be cheaper. Thus LEGO does not get back part of their investment in the end product.

Now, I'm not some crazy purist, and I don't mind to other building toys, but they should try their own systems. For example I always wondered what would happen if LEGO had chosen the height and the width of their bricks to be equal (1 unit). Would it be better? Or worse?

[CP5670]

That's interesting coincidence , because today for some reason I decided to look at Mega Blocks stock price. I am no economist, but my interpretation of the tenfold drop is that their chances of survival are slim indeed. However, to all those who are worried about competition - LEGO has plenty of competition. They don't compete only with compatible building block manufacturers, but also with a lot of other toys, so the pressure on them will not drop. It might even be good for them, because, even though the ruling of the court in the LEGO vs MEGA lawsuit was that compatible building blocks are allowed, all those brands are not doing a favor to LEGO or anyone who loves LEGO. It might seem tempting to buy from them, justifying that with free market principles, but consider this - there is no way those brands put in the effort in the design of sets and pieces that LEGO does. All that mental labor and manufacturing overhead is included in the price of each piece you buy. So, if another company just takes the design of all those pieces and puts them in some half thought out sets and makes everything with lower quality materials and lower quality control - of course it will be cheaper. Thus LEGO does not get back part of their investment in the end product.

You're missing the point. I have no intention of buying MB myself because their products are not to my satisfication, but I still want them to stay around and keep TLG from overcharging on Lego. Lower quality bricks at lower prices is not something that appeals to me but I do understand that other buyers might find such products attractive. It's a weaker product at a lower price, which makes sense.

TLG had the standard 15 year period to capitalize on their basic brick designs, and they made tons of money from it. There is a good reason why patents expire after a certain period and why all of the recent legal rulings on that issue have gone against TLG. If a major clone brand disappears, the competition on TLG will certainly not disappear altogether, but it will obviously be reduced to varying degrees, depending on how big a market you look at.

As for set designs, I'm referring to MB and other companies who actually make their own sets here, not the blatant (and illegal) copycat brands like Enlighten.

[simonjedi]

It was also a very interesting read, loved the picture at the start of the article.

Edited May 29, 2009 by simonjedi

[brickzone]

It might seem tempting to buy from them, justifying that with free market principles, but consider this - there is no way those brands put in the effort in the design of sets and pieces that LEGO does.

There's nothing particularly "worthy" about free market principles. They can be useful, but I can't understand people who would wish to live their lives in a society that is a slave to them.

In any case, Megablocks or other brick manufacturers being present or not is not entirely relevant. Lego's main competition comes from other toys - and that may or may not keep them on their toes ("competition" is not of course some magic wand that means consumers are better off).

The article was quite informative about issues such as the US being behind in building toys, and also Lego having less of the preschool market there. I think Lego until the last year or two had Duplo going too much in the direction of almost customisable playsets rather than a real building toy.

[Eilif]

Alot of folks here seem to be trying to discount the importance of MB as a counterbalance to TLG by saying that MB is not LEGO's biggest competitor. This grossly oversimplifies the situation.

It is true that Video games are a huge competitor to the construction toy market, but it's not really proper to single out LEGO in that. The choice between video games and toys is one choice, the choice between various construction toys in another, and that is where a diverse selection of toys including Knex, MegaBloks, Lincoln Logs and others helps act as a counterbalance to the powerhouse that is LEGO. LEGO is clearly dominant, but when combined, there is an impressive amount of shelf space dedicated to the previously mentioned brands and others. These companies are LEGO's competitors.

I freely acknowledge that the situation I describe is here in the USA, and might not describe the situation in all countries. However, note that in countries with much less competition (Europe, etc) they pay much higher prices for their LEGO than Americans do in a land where competition for construction toy dollars if fierce.

Anyone who denies the connection between higher quality and/or cheaper products and their relation to competition is missing some fundamentals of economics. Without competition LEGO very well might keep the high quality that they are know for, but the customer would pay considerably more for it. Additionally, without competition, even the most well intentioned company does not have as much incentive to innovate and maintain quality.

Yes, MB doesn't compare to LEGO, but be glad they and other companies exist to keep fostering the healthy competition that has produced so many brilliant LEGO toys.

Edited May 29, 2009 by Eilif

[Ricecracker]

I agree with most of what you've said, though there is one point I'd like to clarify.

I freely acknowledge that the situation I describe is here in the USA, and might not describe the situation in all countries. However, note that in countries with much less competition (Europe, etc) they pay much higher prices for their LEGO than Americans do in a land where competition for construction toy dollars if fierce.

While this may be so, why is it that prices in Canada are noticeably higher than in the U.S., whereas, from what I've seen, the shelves here are filled with a higher ratio of clones:Lego than the USA? Again, this is based on what I've seen, and I'm wondering if you would know the answer.

[Capt. Redblade]

Some might have read this already, I found it on the BrickLink forum. It's an article detailing the business misfortunes of MegaBlocks

Mega Blocks in trouble

Ah. It was bound to happen. At my local mall a couple months ago I saw some Megabloks (read with disgust) on friggin' CLEARANCE! (read with overwhelming joy) Lego rules, Mega sucks.

[furious]

I agree with most of what you've said, though there is one point I'd like to clarify.

While this may be so, why is it that prices in Canada are noticeably higher than in the U.S., whereas, from what I've seen, the shelves here are filled with a higher ratio of clones:Lego than the USA? Again, this is based on what I've seen, and I'm wondering if you would know the answer.

The cost of doing business. i.e. wages, taxes, import tariffs, retail space, storage, transport, marketing etc.

That is why in Australia we pay such high prices for goods compared to other countries like the USA. In Australia we have a 30% company tax plus 10% gst on goods. We also have import tariffs and spread out population so that transporting goods around the country is expensive. And also remember that it is not only the cost of getting the lego to the you that you pay for. It is also a factor in the final retail price that each company that handles the goods takes a cut for their profit. This is why manufacturing outside Australia is only about 10% cheaper than manufacturing in Australia. That same is correct for all countries.

[larry marak]

The question of Lego pricing remains unresolved. Lego is 40% cheaper in the U.S. than in Europe because there's more competitor presence here and TLG choses to lower their price.

As for the MB article, the company's financial situation is indeed just as bleak as discribed. The only errors in the article were details of the licensing agreements. MB never had a brick licensing deal for Transformers (Rose Arts had a coloring book deal, hence the confusion) and the Iron Man movie brick license is for the 2nd film.

Edited May 30, 2009 by larry marak

[Eilif]

Furious,

Thanks for shedding light on that. I think you're probably right, or at least very close to the answer regarding Canadian prices.

Ricecracker,

I think that Furious is probably on the right track, but there are alot of mysteries about our noble neighbor to the north that I don't understand. One other factor I might add is that it could be partly economies of scale. If many more sets are sold in the USA than Canada, then that could make it easier for TLG to sell LEGO for less in USA.

[Lord Admiral]

I would say that Lego's competition is the entire toy market, not just the construction toy market. Construction toys competes against action figures, card games, car and train models, and video games. The construction toy market has to compete with all of these other distractions, and the individual companies have to compete within that. Back in the late 80's, toy companies were creating television cartoons to sell their toys. Incidentally, I consider that period of time the golden age of both. While Lego producst has a huge share of the US construction toy market, perhaps even the largest piece of the pie, the construction toy market is a very small part of the overall toy market, and hence Lego products actually only have a very small slice when seen in that light. Of course, looking at it as the glass being half full, it just means TLG has plenty of growth opportunities here, because while kids in the US perhaps don't buy a lot of LEGO sets per capita compared to kids in certain other countries, they do buy a lot of toys in general.

I'm pretty sure children in other continents have far fewer toys, and I'd like to think they are more selective about each purchase. The high import tariffs of US goods and high quality control standards means that even cheapo toys in the US end up costing comparable to LEGO sets. Thus, most of the throwaway toys simply can't compete with the higher quality stuff, and don't even try. This, I think is what TLG means by higher competition in the US.

I don't think MB's presence is relevant to TLG's performance in the market. MB is targeting a segment that TLG is completely ignoring: the lower cost, lower quality portion that TLG refuses to enter (and thankfully so, I would say). There's a market for cheap construction sets, but I think people who gravitate towards these purchases as toys tend to put more value in quality. I guess young kids couldn't always be bothered to discriminate between Lego and MegaBloks. But I think as they grow older, they will start to pay attention to the differences, and that's when quality (piece quality as well as set quality) will start to matter.

Personally, I'm currently a big fan of minifigures and building System models and have been for many years, but what cemented Lego as the construction toy of my choice was actually the two or three freestyle Technic sets I owned. While I was building and playing with Legoland sets concurrently, Technic offered something no other construction toy brand could (K'nex and Erector were close, but not perfect), which produced my brand loyalty to Lego. Ironically, I won't touch Technic anymore (I absolutely loathe Bionicle, though that's because of the crass commercialism that TLG subjects the line to), though I still have a soft spot for Technic pieces in the System sets. I haven't seen any competition to Technic, though to be fair, I haven't seen any competition even from TLG to the freestyle Technic sets offered back in the day.

[CP5670]

At some level, you could say that Lego's competition is all other goods and services out there. They all compete for the consumer's money, after all. You have to draw the line somewhere, and MB puts out what for most casual buyers is a product similar to Lego.

Technic is also one of the main attractions of Lego for me. By "freestyle" it sounds like you mean the Universal/Multi-model sets, although I'm curious why you gave up building Technic. Bionicle is a separate line these days with no connection to Technic.

[Lord Admiral]

In general, different segments of the market do not overlap. For example, toys do not compete with groceries, as the budget for groceries is separate from the budget for toys. Granted, when money is tight, the money for entertainment goes by the wayside while money for essentials like food, clothing, and shelter remain the same. At best, you can say that toys fall under the entertainment umbrella which is as diverse as from movies to travel to big-ticket electronics. But only toys for teenagers and adults belong there, and believe it or not, that's a very niche market. Otherwise, toys targeted for children are a separate category altogether. Kids' entertainment typically have a separate budget, or rather, have a separate allocation in their parents' budget. One can go as far as to say that toys compete with childrens' television, but childrens' TV is free for the most part (or included in the cable package), and TV and toys don't necessarily compete for the attention either, so only in very specific instances does a toy compete with television. Construction toys and puzzles, I believe, are among those that are most likely to complement television, as it's not hard to have the television on and tuned to a favorite show while putting the pieces together.

Anyhow, the general rule of thumb is that the competition of the biggest fish in the little sea is probably found in the big sea. Lego is a dominant brand in construction toys, so it's actual competition is one category higher, i.e. toys for school-aged and preteen boys. If the Lego brand ends up dominating that market, then its competition will be toys for boys from 6 to 18 or something of that sort. In fact, TLG moved into the teenage and adult market with Mindstorms.

As for Technic, I do mean the Universal set when I say freestyle, but freestyle also includes other sets not restricted by any models, like the Basic sets. Technic fell out of favor as my interests turned towards minifigures and the visually richer models of Legoland. I never liked the Technic models, or the large figures that came with them. They looked too much like crash test dummies, which sort of freaked me out, since that was also the time of the crash test dummies commercials. That, and the battery pack required 3 C sized batteries, which meant it was extremely bulky and a bit expensive to operate. The last Technic models I built were all hand-powered, which wasn't too bad. I eventually lost too many parts, and since they discontinued the freestyle Technic sets, there was no way to buy a large amount of varied Technic pieces in one go. Besides which, my interests were firmly in Legoland by then, and there wasn't any going back.

I dabbled with Mindstorms and the original NXT brick for a bit. I couldn't get back into it though, as Technic building requires a slightly different mindset than System building. And the API was pretty bad at the time, so the NXT brick was largely ineffective as a recreational pursuit to me.

[Peppermint_M]

It's sad that MB is going under, after all they employ people and who would lose their livelyhood. I think a small amount of competition for Lego is a good thing. You can say what you will about being slaves to the free market but you can't deny that quality has vastly improved in Lego since MB became a global (in a "where building toys are big" sense) competitior. In the late 90s they were in shops in the UK and for a while there were more MB products in shops than Lego. MB gave Lego the kick up the backside it needed to sort itself out and improve quality. If you examine sets from a long way back until today you can see a huge improvement in recent years compared to quite similar construction from the 70s to the late 90s. You can argue that this is a natural improvement over time but I wonder what Lego would be like today if MB didn't exist, or had a signifcantly smaller market share?

Who could say what anything would be like without competition and threat?

Rockets that could launch a payload and Radar were invented and developed for WWII.

Computers advanced beacuse the companies wanted to stay ahead.

We have motion sensing and touch controls from Nintendo because Sony had the Playstation (Look at the pattern, Gamecube failed against Xbox and PS2, but the Wii is soundly beating them) who knows what Sony will create to get more market share?

The free market, although a somewhat loathsome thing and the basis of a greedy system, helps us have high quality goods. (Heh, those two years of Sociology didn't go to waste )

[Eilif]

This thread has turned into a very interesting discourse on toy industry and competition.

Lord Admiral,

Good point about the overlapping nature of the various toy markets. I think my initial scope of "competition" and customer decisions might have been a bit too rigid and compartmentalized. Your description of the difference between the US and other market seems to be spot on.

CP5670,

Spot on about the "casual buyer". While there are some folks who intentionally prefer the playset nature and scuplted figures of Megabloks sets, or the percieved value inexpendive bestlock sets, in general, the buyer who wants a high quality brick building set is going to buy LEGO, and there are alot of those buyers. It's the casual buyers -Grandparents, impulsive kids, and alot of parents- who I suspect are choosing Mega-bloks, and there are alot of those as well.

Peppermint_M,

Interesting observations about competition on a larger, historic scale.

[JCC1004]

""Mega brands has been a household name in toys for many years in Canada. I enjoyed the article and hope that this company can be revived.Go Mega Go Mega"" 0 0 Report Abuse

But what percentage of those kids accutaly call them MegaBloks? The AFOMs? ( Adult fan of MegaBlocks.)

[Eilif]

But what percentage of those kids accutaly call them MegaBloks? The AFOMs? ( Adult fan of MegaBlocks.)

That's a very interesting question for the folks in Canada. In the USA, pretty much everyone calls all LEGO compatible bricks "Legos". Is it the same in Canada? Are LEGO and MegaBlocks both used? How often?

[CP5670]

I was thinking the same. Most people I have seen don't really know or care about the differences between MB and Lego. You can also see this with mislabeled ebay auctions and bulk/unsorted used Lego lots that are mixed with MB.

As for Technic, I do mean the Universal set when I say freestyle, but freestyle also includes other sets not restricted by any models, like the Basic sets. Technic fell out of favor as my interests turned towards minifigures and the visually richer models of Legoland. I never liked the Technic models, or the large figures that came with them. They looked too much like crash test dummies, which sort of freaked me out, since that was also the time of the crash test dummies commercials. That, and the battery pack required 3 C sized batteries, which meant it was extremely bulky and a bit expensive to operate. The last Technic models I built were all hand-powered, which wasn't too bad. I eventually lost too many parts, and since they discontinued the freestyle Technic sets, there was no way to buy a large amount of varied Technic pieces in one go. Besides which, my interests were firmly in Legoland by then, and there wasn't any going back.

This is a little off topic, but if you liked Basic then Creator has essentially become the same thing today, just with a new name. It's easy to get a lot of Technic parts by just buying one or two large Technic model sets, although it sounds like you're coming from 1980s Technic and the theme has changed a lot since then. I like the Technic figures, although they never appeared in the larger model sets and haven't been produced in many years anyway.

Edited June 1, 2009 by CP5670

[Ricecracker]

That's a very interesting question for the folks in Canada. In the USA, pretty much everyone calls all LEGO compatible bricks "Legos". Is it the same in Canada? Are LEGO and MegaBlocks both used? How often?

I don't even think my grade of 30 even knows what Megbloks are, but that might just be because of my Lego brianwashing attempts . Seriously, though, as far as I know, everyone calls building blocks Lego or Legos, and I don't think I've ever actually heard someone call them Megbloks.

[Lord Admiral]

"Legos" is definitely what everybody calls building blocks, whether they're actually made of Lego bricks or not. There's probably a way for TLG to capitalize on this mindshare, though I would be careful, as MB has the home court advantage in North America.

This is a little off topic, but if you liked Basic then Creator has essentially become the same thing today, just with a new name. It's easy to get a lot of Technic parts by just buying one or two large Technic model sets, although it sounds like you're coming from 1980s Technic and the theme has changed a lot since then. I like the Technic figures, although they never appeared in the larger model sets and haven't been produced in many years anyway.

Yeah, the theme has changed, with the emphasis now on models made with beams. They had a few models back then too, but made of bricks and with pneumatics and other advanced pieces. These seem to be tamer versions, without a lot of the more advanced elements Technic sets once had. Which is great if that's what sells Technic, but I'm not really interested in them. I just want a bunch of gears, axles, and bricks and plates with holes in them. Beams are OK too, but there's place for those, and it's not in lieu of bricks. I might spring for the models to get the more specialized parts, as well as the power functions elements once I can get a decent collection of gears, axles, and technic bricks going again, but that's dependent on what I'd want to build.

[CP5670]

Yeah, the theme has changed, with the emphasis now on models made with beams. They had a few models back then too, but made of bricks and with pneumatics and other advanced pieces. These seem to be tamer versions, without a lot of the more advanced elements Technic sets once had. Which is great if that's what sells Technic, but I'm not really interested in them. I just want a bunch of gears, axles, and bricks and plates with holes in them. Beams are OK too, but there's place for those, and it's not in lieu of bricks. I might spring for the models to get the more specialized parts, as well as the power functions elements once I can get a decent collection of gears, axles, and technic bricks going again, but that's dependent on what I'd want to build.

I do agree with you on that issue. Since 2003, TLG has more or less removed studded parts from Technic sets completely, which I think has been a bad development for several reasons. The good thing is that studded Technic beams and plates are very common in other themes these days, so it's easy to buy them from Bricklink for MOCs.

The modern sets are actually comparable to the 90s sets (and better than the 80s ones) in terms of mechanical sophistication, but the studless construction gives them a quite different feel to build. I find the builds unintuitive and less like Lego, although the functionality remains great and I continue to buy any standout Technic sets TLG releases.

[SuvieD]

I honestly think MB should stick with what makes them money and expand into the teen and adult miniatures gaming instead of tops. They are already producing small plastic parts and figures, all they would need is a working game setup that is easy to play and with plenty of variety to increase challange. They could even pursue a deal with D&D or Warhammer for a simpler version of those games, something to get kids interested in playing tabletop games at a younger age which would get more of them doing so as adults and also include less serious game players to start playing.

Nintendo is proving that the world is a big blue ocean and you need to get something out there to meet the needs of those not already part of their current sales demographic.

[HumanPackMule]

I honestly think MB should stick with what makes them money and expand into the teen and adult miniatures gaming instead of tops. They are already producing small plastic parts and figures, all they would need is a working game setup that is easy to play and with plenty of variety to increase challange. They could even pursue a deal with D&D or Warhammer for a simpler version of those games, something to get kids interested in playing tabletop games at a younger age which would get more of them doing so as adults and also include less serious game players to start playing.

Nintendo is proving that the world is a big blue ocean and you need to get something out there to meet the needs of those not already part of their current sales demographic.

They need to keep working on the top series in my opinion. That way they'll over expand and collapse, just like the U.S.S.R.