Mattel buys Megabloks

[Faefrost]

Lego licensing Lone Ranger and Prince of Persia probably looked good on paper. They're both Disney properties, which are usually safe bets.

But they had no way of knowing at the time, that the movies would bomb.

Actually I don't think Lego's LR line bombed per se. If anything I think it did better and probably turned more profit than the movie it was based on. It actually flew off the shelves before the movie came out. which was strange. PoP however...

[B-Lister]

I dunno, they're hogging shelf space at full price at my TRU.

[rzetlin]

Mattel buying Mega Bloks may not lead to more Mega Bloks success. I remember Mattel acquired a Canadian children software company name SoftKey for $3.6 billion dollars. Due to mismanagement, SoftKey was run into the ground with $82.4 million loss. Mattel is a toy company, but not a brick company like Lego. The last few years Mattel’s sales are not strong. The purchase of Mega Bloks is a strategic move to increase Mattel’s profits. Mattel may not push Mega Bloks to complete head-to-head with Lego.

Only time will tell on what Mattel will do with Mega Bloks.

I will continue to support Lego to ensure the Lego Movie 2 isn’t called “The Battle of the Mega Blok Overloads”.

[lightningtiger]

Mattel is taking on MB's debt, perhaps the wheels began to turn last year with MB Hot Wheels and Barbie sets......both have seemed to have failed at least here in Oz.

They could be grabbing at straws to prop up their bottom line ?

[Legogal]

If you walk the toy aisles at Walmart, they are full of cheap looking plastic junk for the most part. The LEGO section is very small. The other toys mostly look like cheap junk, which us quite popular in the USA , and much of this junk is made by Mattel. It is scary how much shelf space they control.

At the higher end of the decent toy market, Mattel owns the American Girl Doll sold only through its stores and online. AGD has lost much if its appeal since Mattel acquired it moving the focus from learning American history through the story of each doll to the overcommercialization of a toy. Now it seems like a regular high end toy company with little focus on the educational aspect and the sole emphasis on paying an enormous amount for your doll to lead "the good life as defined by Mattel."

I am not a fan of Mattel and will not be buying their products for my grandchildren if I can avoid it. Wooden toys and LEGO will be at the top of my list.

[TheRedGuy]

http://mobile.bloomberg.com/news/2013-03-13/lego-builds-new-billionaires-as-toymaker-topples-mattel.html

No worries, my friends. Any quick search on what the biggest toy company is and you'll get one obvious answer.

[Arigomi]

Mattel is taking on MB's debt, perhaps the wheels began to turn last year with MB Hot Wheels and Barbie sets......both have seemed to have failed at least here in Oz.

They could be grabbing at straws to prop up their bottom line ?

That is exactly what is happening. Mattel's CEO has said "This acquisition is all about growth." Despite being the #1 toy maker, Mattel isn't in very good shape right now. Despite being iconic, Hot Wheels and Barbie are no longer brands that kids care about these days. Mattel's Monster High dolls actually sell much better than Barbie does.

Overall the toy industry has seen decline over the last few years. Some say that growth in the videogame industry is to blame. Whatever the reason, toy companies like Mattel are scrambling to remedy this situation before it is too late. TLG is an anomaly because it has experienced growth. Mattel sees this success as a market trend with potential for growth. Mattel bought MB because it is the fastest way to break into the building block sector of the toy industry before the trend cools off.

[Heppeng]

Lego is now the No.1 toy maker, by whatever definition you choose. It's also the worlds No.1 tyre manufacturer by number -albeit small ones!

[rzetlin]

This video explains what is happening with the toy market:

Mattel and Hasbro sales have been flat, Lego sales on the other hand have taken off like a rocket.

Mattel saw that Lego is making billion of dollars on bricks and The Lego Movie.

I see Mattel's purchase of Mega Bloks as a knee-jerk reaction to Lego's success.

Is Mattel a threat to Lego?

You don't see Hasbro's Kre-O line hurting Lego's bottom line, so I do not believe that Mattel Mega Bloks will destroy Lego.

[Freddy Bricker]

If you walk the toy aisles at Walmart, they are full of cheap looking plastic junk for the most part. The LEGO section is very small. The other toys mostly look like cheap junk, which us quite popular in the USA , and much of this junk is made by Mattel. It is scary how much shelf space they control.

At the higher end of the decent toy market, Mattel owns the American Girl Doll sold only through its stores and online. AGD has lost much if its appeal since Mattel acquired it moving the focus from learning American history through the story of each doll to the overcommercialization of a toy. Now it seems like a regular high end toy company with little focus on the educational aspect and the sole emphasis on paying an enormous amount for your doll to lead "the good life as defined by Mattel."

I completely agree. I remember Elementary when the girls in my class would pick up American Girl books, each dedicated to an individual character from the Toy line. Heck, even I read the books from time to time. Nowadays, it's just a girl in a box. It's sad to say that the Toy industry is plummeting, or at least that's what sales are indicating. If your going to go down in sales, go down in class.

[Creatorman]

Let's remember guys, Mattel was extremely close to buying LEGO during the 2003-2004 era due to the faltering sales. Now that LEGO's success with Ninjago, Legends of Chima, Star Wars, Superheroes, Friends and the movie, Mattel probably wants to find a way to compete, especially since sales in all any toys other than construction toys are faltering, Mattel is probably trying to find a way to survive, and with MB's popularity with their video game licenses like HALO, it seems as if Mattel is trying to invest in long term survival with these lines, only time will tell what Mattel will do with these licences and how well their lines will perform.

[Faefrost]

Mattel's chief concern is the only real growth subset of the toy market has been in construction toys. Their other core brands are flattening. When a specialty niche toymaker is suddenly overtaking them as #1 with only 1 principle product line they are going to want a piece of it just as a buffer. Lego's success is not unique to Lego. It has also been rising Megabloks value and Kre-O. Lego is doing it better. But those two subbrands are still growing better than the industry.

[Lyichir]

I've seen it suggested that Lego might buy out Hasbro a few times, but I don't see that as a likely occurrence for two reasons. Firstly, Lego is not THAT much bigger than Hasbro. They're bigger, for sure, but they only surpassed Hasbro last year and the two companies are still relatively comparable in scale. Lego's certainly not in a position to buy out Hasbro, at least, not at this point in time. Secondly, and more importantly, I don't think that Lego would even be interested in buying Hasbro even if they were able to do so. Lego has built its success by focusing on their roots as a building toy, and buying out a general toy company like Hasbro would represent a kind of diversification that I don't see Lego committing to. As much as I'd love to see Lego My Little Pony or Lego Transformers, buying out Hasbro would mean not just committing to creating Lego versions of those properties, but also becoming responsible for maintaining the traditional versions of those toys—in these cases, animal dolls and action figures, respectively. And that's just the products that would make the most sense as Lego products. What would become of Hasbro's other toys like Mr. Potato Head, Lite-Brite, or Lincoln Logs?

Luckily, I don't see the reverse (another company buying out Lego) happening anytime soon, either. Being such a large, privately held company gives Lego a large amount of self-determination. They can't be bullied into a deal that would result in short-term gains by shareholders, and they're able to plan far into the future for how to maintain and grow their brand's strength.

Edited March 2, 2014 by Lyichir

[rzetlin]

To understand what is happen we have to look at Hasbro and Lego 2013 Annual Report:

Mattel 2013 Results:

• Worldwide net sales up 1% from the prior year;
  
• North American gross sales down 2% and International gross sales up 5%
  
• Worldwide gross sales for core brands: Barbie down 6%; Hot Wheels down 4%; Fisher-Price down 6%; and American Girl up 11%;
  
• On a regional basis, full year gross sales were down 2% in the North American Region, with no impact from changes in currency exchange rates.
  
• For the International Region, gross sales were up 5%
  

Lego 2013 Results:

• Revenue for the first half of 2013 was DKK 10,363m compared with DKK 9,134m for the same period last year – an increase of 13%
  
• In local currency (i.e. excluding the impact of foreign exchange changes) revenue increased 15% year over year.
  
• The LEGO Group increased its share of the global toy market to approximately 8.8 % – up from 8.6% at the end of 2012
  
• Sales to consumers rose by 8 % in European markets and by 4% in North and Latin America.
  
• The strongest performance was experienced in Asia with growth in consumer sales of over 35% for the first half of 2013
  
• Top selling lines: City, Star Wars, Duplo, Friend and Chima.
  
• DUPLO, Technic and Creator experience high growth rates in 2013
  

Just glancing at the numbers Lego is doing well better off than Hasbro in terms of growth. (Hasbro 1% growth vs. Lego 13% growth)

Mattel have the problem that its traditional brand toys are not selling well at all.

Not surprising Hasbro had to do something to boast its sales or else its shareholders would questioning the board of directors direction.

Mattel is hoping to boast its sales by $405 million.

Edited March 2, 2014 by rzetlin

[Faefrost]

I think you are confusing Hasbro and Mattel a bit there. Hasbro will probably see a bit of a boost in 2015 as we get a new Star Wars. That has always been one of their big cash cows. (Of course Lego will get the same lift).

One interesting if unintended potential consequence of Mattel buying Megabloks. Our Canadian friends may see cheaper Lego prices. maybe on par with US pricing. Canadian Lego is so expensive because of a screwy Canadian tariff. An importer gets hit with a high Tariff if they are directly competing with a similar or equivalent product Canadian manufacturer. because Megabloks is in Montreal and is a directly competing product with Lego, Lego gets hit with the tariff. But when Megabloks gets bought by Mattel it may no longer qualify for the tariff protection.

[VBBN]

Also the new live action transformer movie will place their sales at a similar spot as 2007, 2009, and 2011, which were greater than 2013 I believe.

Many have tried. Tyco, Loc Bloks, BTR, C3, Kre-O, Mega Bloks.

All have failed.

When your development is stretched across multiple formats, you are not able to innovate or compete.

Kre-O is just offering a building brick alternative to the brands that Hasbro offers that Lego and Mega Blocks will not have, it's not necessarily meant to compete. it is geared towards transformer fans and is a compliment to the many styles of figures that exist. They also have Construct-Bots which follows a ball and clip system, which at first people think is a Bionicle rip off, but the clip system is already in the mainline transformers line. This allows construct bot parts to interact with that system. Megablocks is a more direct competitor, and they have not failed either. They continue to produce sets, obtain licenses, and have gained a lot of trust from people with the Halo subline. Call of duty is a flop, but Halo continues to stay strong and is a large portion of their income, and it is most certainly not a failure. As competition to lego, they will not slow them down in any way, other than securing licenses that lego might miss, but as a company, they are very successful in their own right.

[rzetlin]

I think you are confusing Hasbro and Mattel a bit there. Hasbro will probably see a bit of a boost in 2015 as we get a new Star Wars. That has always been one of their big cash cows. (Of course Lego will get the same lift).

Sorry, I used the wrong company name, but the link and stats I provided are correct.

Mattel Reports Fourth Quarter and Full Year 2013 Financial Results.

[Deathleech]

People act like this is a gang war or something and are fiercely defending Lego while bashing Mega Bloks. Some are worried, or telling others not to be like Lego could actually be in trouble. Really, isn't this a GOOD thing though? More competition means Lego might up their game even more. More competitive pricing, better quality, even more fresh and innovative ideas, etc.

Obviously Lego is and will continue to be the top dog in the building category. They better be, that is their main focus after all. Kre-O for Hasbro and Mega Bloks for Mattel are just one of a million types of different products those companies offer so they don't have the same focus on them. They just use them to buffer overall sales. If by some chance Mega Bloks becames more popular than Lego wouldn't that be ok though?

That would mean Mega Bloks has obviously surpassed Lego in a number of regards, whether it be innovation, quality, etc. It's not like Mega Bloks is going to steal the top spot and run Lego out of business with their poor interlocking bricks, lack of actual building components, and mass licensing. At least I would hope not. It's like people think Mega Bloks even has the chance to run Lego out of business offering the same "cheap" product they do now (the perception many consumers have of Mega Bloks...). and that is all we will be left with to buy. If by some chance Mattel is able to make Mega Bloks the number one building brand in a decade or two, then then something will have obviously changed. Either Mega Bloks has a huge surge in quality and innovation or Lego would of had to make a TON of horrible mistakes to kill themselves off. Regardless it's not going to happen over night and without reason.

[agentsmith]

source : http://www.youtube.com/watch?v=NPAttx-JzVs

Mattel's put a foot in the doorstep of brick world industry , i wonder how it would impact the new legos as they will probably need to reduce prices , or make other changes to compete better

from my perspective lego evolved alot in the last i think 6 years , i mean i'm looking at old star wars sets and they just are not as impressive as the new ones .

it would seem some themes will go only to ONE company , i grew up with lego so just looking at the mega blocks minifigures for example they just don't appeal to me in any way , and i probably wouldn't buy them at all , but that's just my pov , the bricks will probably damage each other if they get combined too often also , but i'm not 100 % sure it's true i just heard rumors

[LEGO Historian]

Well this brings up many interesting points in many different areas. One would definitely be quality. Mattel may try to bring up the quality of MegaBloks to LEGO standards. That would definitely make them more competitive.

Another area would be the licensing.

However, one area that Mattel may look at is this... What are the weaknesses of LEGO? And that is where they could make inroads into the LEGO unverse.

One area where LEGO is very weak is that being a construction toy... they have a very very weak selection of variety of windows. And even those windows that they do have are not uniformly produced in many colors. Need I say more than "the back of headlight bricks"?? If Mattel were to produce an amazing array of windows for their product, then I could see them makeing some inroads into the LEGO market. But that's just one narrow area....

Edited March 2, 2014 by LEGO Historian

[Lego Otaku]

In the past Mattel has a tendency to make whatever whey acquired manufactured even crappier with cheaper plastic, more inferior design and fittings, etc. to lower price. Megablock are already crappy to begin with, Mattel couldn't make it better without losing money and couldn't make it crappier because what little clutch power they have would fail and always fall apart.

[B-Lister]

This is already being discussed.

It is my opinion that this will not affect Lego long term.

Edited March 2, 2014 by Mister Blisterfists

[Faefrost]

Megabloks will be hard to "bring up to Lego quality". The problem with Megabloks isn't the design. It's the plastic. They use Polystyrene instead of ABS. It's a common Injection Molded plastic. Most plastic models are made from it. But it is nowhere near as durable or precise as ABS. It's great for plastic models. styrene can be chemically melted so it glues well. Plus styrene tooling is designed for lower temperature lower pressure injection. (So it doesn't cost as much as ABS to make new molds). The downsides is styrene is more brittle, is more prone to environmental factors like temperature, and is prone to warp. Plus it is softer plastic and does not hold its edge or clutch power over time. It's a bad choice for a construction toy. But here's the thing. The capital in Megabloks (or Lego) the value is ultimately in the tooling. It's the molds and machinery. In order for Mattel to brink Megabloks up to Lego quality they would need to retool everything. Pretty much toss the bulk of what they just bought and start with all new tooling and machinery.

Now they might be able to do some sort of rolling transition over time, where they slowly spin up some lines in ABS. But even then things can get weird. The companies two primary profit drivers are Halo and COD. And those lines are pretty much fixed in the Styrene design world now. It's the only material that really allows for the rapid new single use parts that the lines require.

I suspect that Mattel is not really seeking to displace Lego in the construction toy world. Sometimes better returns can be achieved by sitting in the #2 slot and drafting behind the leader. You make good profits with less effort and expense if you do it right. (Just ask Burger King. They work hard to stay right at #2). Mattel is looking to jump on Lego's growth train. Not necessarily challenge Lego head to head.

[B-Lister]

Well said!

[SheepEater]

One interesting if unintended potential consequence of Mattel buying Megabloks. Our Canadian friends may see cheaper Lego prices. maybe on par with US pricing. Canadian Lego is so expensive because of a screwy Canadian tariff. An importer gets hit with a high Tariff if they are directly competing with a similar or equivalent product Canadian manufacturer. because Megabloks is in Montreal and is a directly competing product with Lego, Lego gets hit with the tariff. But when Megabloks gets bought by Mattel it may no longer qualify for the tariff protection.

I have read something like this a long time ago too (I live in Quebec and lived in Montreal for 18 years, where Mega Bloks are located), but if that was the case then that's pretty hypocritical to tax Lego for being an import when Mega Bloks themselves manufacture most of their stuff in CHINA!

Edited March 2, 2014 by SheepEater