The Lunacy of Lego Investors

[obsidianheart]

What's the value of negative "buzz"?

Because people are still talking about it. Even the FOLs who hate it are (constantly) talking about the SDCC 'figs. They'r scouring the web for information on what the figures are, were, or will be. They're talking about it with each other and non-FOLs are hearing those conversations. Maybe some of those non-FOLS are comic fans, maybe some of them like superhero movies, maybe now they're interested. There's a guy in the "Open letter about SDCC Minifigs" thread who says he was there, and even though he got nothing at the end, the LEGO buzz at SDCC is why he's here.

First rule of marketing, there's (almost) no such thing as "Bad Press".

[ritzcrackerman]

It is a bubble that is going to pop.

Yes.

Not completely true. Speculators artificially inflate demand. Which does cause changes in production numbers. And which can cause long term harm for the producers if they are not very very careful. Ideally producers want to produce what the end point consumer market will bear, and not much more. They want their product to effectively go through and off the market. They want their product to reach the point of use.

Also yes.

Previous commenters have mentioned people taking out 401Ks, storing stacks of LEGO in storage sheds, etc. etc. I've seen the opposite from my vantage point - there is a mini chain of B&M re-sellers where I live, and they post on Facebook regularly of gluts of collections they're taking in for resale. The ROI is just not going to be as high for anything purchased in the last 3-4 years - unless you got the perfect combination of scarcity and desirability.

I've bought some duplicate sets myself, but I am selling as fast as I can. I think the ceiling has been hit for most speculative pricing and I'm not going to see any further increase.

[ummester]

Just thinking on this - I recon the LEGO bubble will pop also. Mainly because LEGO keeps releasing more and more collectible sets.

The market is becoming saturated - it's similar to what has happened to certain video game franchises - Guitar Hero, Modern Warfare - they just kept pumping them out until everyone was over it and the idea lost it's appeal.

I was looking at the new LEGO Tumbler, the LOTRs set with Smaug and some of the upcoming Star Wars sets. Totally tailored to collection of minifgs, priced a little too high to be a mainstream Xmas toy for the kids and a little too low to cater purely to the AFOL collector. I think LEGOs marketing is going to destroy the appeal of it's own product - and this is something that always happens when things become popular, corporate greed always pushes things too far, trying to squeeze every last little drop out of something.

[obsidianheart]

Keep in mind that LEGO learned a lot about brand management when they almost went bankrupt 15 years ago. We might not have the same long-view of the situation that they do. We may see the things that we disagree with as cataclysmic mis-steps, but they seem to be doing pretty okay for a while yet to come.

[ummester]

I don't think TLG will kill the appeal of it's brand overall, obsidianheart - I think they have learnt enough to adapt their way out of trouble with this. I only think that they might kill the appeal of LEGO as a collectible item.

Evergreen themes will survive - LEGO City, for instance, will always be able to be designed and marketed at the right price point for a toy. I think Star Wars is interesting because it is almost evergreen now, it's a licensed property that has become a LEGO mainstay and has pretty much replaced LEGO space. City and Star Wars both now have set definitions that work with all price points and age ranges. You can get Star Wars fig packs, or small city vehicles at the right price point for when your children are invited to birthday parties, all the way up to modular buildings and UCS style sets to keep the AFOLs, and spoiled kids, happy.

I only think that the set's packaged more for collection than line expansion or play may be due for a crash.

[klinton]

I don't see how the 'value' of past sets and limited minifigs is a bad thing.

It keeps sales of new kits brisk, as people anticipate having to pay more later. It adds a new dimension to collecting, as there are 'crown jewels' in one's collection (either to be prou of, or to hunt for).

No one needs everything. And for the collector that does insist on every piece in a line, it gives them more of a challenge, and thus a more satisfying 'complete'.

I really don't see a downside here, in regards to the Lego Group's market position. Limited sets drive up the demand for the product as a whole.

[ummester]

You can pander too much to something klinton, make people bored of an idea. I'm suggesting 'collectable' LEGO may be reaching saturation point.

[klinton]

You can pander too much to something klinton, make people bored of an idea. I'm suggesting 'collectable' LEGO may be reaching saturation point.

I'm not sure. If Lego continues to retire sets, they will always retain a certain amount of collectibility.

Will they be as 'hot' as they are right now? I doubt it. Lego is in a bit of a spotlight right now, and people are being all 'Beanie Baby' about it. The inflated secondary market won't last, but the collectibility will remain. :D

[ummester]

You could be right.

I was discussing the Simpson House with someone who is a minor collector - whether that set would increase in value quickly once retired. We considered that every second person interested in LEGO is becoming a collector/minor investor to some degree and that the Simpson House could be being purchased in duplicate by every AFOL that can afford it, with dreams of profit down the track. It may be the secondary market that is becoming saturated, more than the market for collectable sets.

I personally don't understand why people don't get bored with collecting the same thing, just in new packaging - but I don't really have a collector's mindset anymore. Had it briefly with Star Wars - was trying to get a LEGO version of every vehicle from the classic trilogy. When I got to the point where LEGO was re-releasing models I'd already collected, I thought it was a mugs game. I gave up on expecting anything fresh from TLG sets entirely.

[Off the wall]

Like all investments, and I'll be generous enough to call lego and collectibles in general an investment, there are peaks, valleys, bubbles, etc. I collect old radios. I'm looking at one that in the early 90s sold for at least $15,000 USD. If you could find someone who would part with one. I bought mine for $9000 in 2008. I could probably sell it for $7000 today.

Of course, lego has a wide following with decades of interest behind it. But, so did other collectibles that peaked and then sustained a significant drop in value.

I like to look at ebay sales of the high dollar lego sets. Like 10179. Many of the ones marked sold appear not to have really been sold. Re listings, lack of feedback, shill bids, etc.

Of course some do sell at a high price. But there's a big difference between asking price and selling price.

There will always be rationalizations as to why lego is the exception to the rule. Maybe it is. I certainly don't know.

The important thing is to like what you collect. That way, even if the investment aspect of it doesn't pan out, you're still enjoying it.

[62Bricks]

Like all investments, and I'll be generous enough to call lego and collectibles in general an investment, there are peaks, valleys, bubbles, etc. I collect old radios. I'm looking at one that in the early 90s sold for at least $15,000 USD. If you could find someone who would part with one. I bought mine for $9000 in 2008. I could probably sell it for $7000 today.

Of course, lego has a wide following with decades of interest behind it. But, so did other collectibles that peaked and then sustained a significant drop in value.

I like to look at ebay sales of the high dollar lego sets. Like 10179. Many of the ones marked sold appear not to have really been sold. Re listings, lack of feedback, shill bids, etc.

Of course some do sell at a high price. But there's a big difference between asking price and selling price.

There will always be rationalizations as to why lego is the exception to the rule. Maybe it is. I certainly don't know.

The important thing is to like what you collect. That way, even if the investment aspect of it doesn't pan out, you're still enjoying it.

Your radio example is a good illustration of how collectible markets are cyclical, especially in the "nostalgic" collectible market. People who collect old radios are more like people who collect Classic Space sets than people who speculate on new and recently-released sets. The larger Classic Space sets routinely sell for over $100 on eBay, even more if they include a box and instructions. Who is buying them? My guess is it is people who played with them as kids and who are now in their 40s with some disposable income. As the base of LEGO fans ages, nostalgia for other themes will probably intensify as a new generation of fans enters their middle age and starts looking for the sets they remember from their own childhood. Perhaps in 30 years, Chima sets will be selling for thousands of dollars as today's 8-year-olds try to recapture some of their youth, and Classic Space sets will be as "worthless" as a Samsonite 2x4 brick. This type of market seems somewhat predictable. For example, I am starting to see Blacktron sets creep up in value on eBay. If I gad to guess, I'd say Harry Potter is due for a resurgence in 5-10 years as that generation enters its "collecting" years.

There are also external factors like the LEGO Movie, which has driven up the price of Classic Space minifigs (especially those in Benny-blue) and has probably supported the prices on Classic Space sets by reminding a lot of people of the sets they had as kids. If the next LEGO movie features a character from another theme, we might see demand for that theme increase, too.

[Faefrost]

I don't think TLG will kill the appeal of it's brand overall, obsidianheart - I think they have learnt enough to adapt their way out of trouble with this. I only think that they might kill the appeal of LEGO as a collectible item.

Evergreen themes will survive - LEGO City, for instance, will always be able to be designed and marketed at the right price point for a toy. I think Star Wars is interesting because it is almost evergreen now, it's a licensed property that has become a LEGO mainstay and has pretty much replaced LEGO space. City and Star Wars both now have set definitions that work with all price points and age ranges. You can get Star Wars fig packs, or small city vehicles at the right price point for when your children are invited to birthday parties, all the way up to modular buildings and UCS style sets to keep the AFOLs, and spoiled kids, happy.

I only think that the set's packaged more for collection than line expansion or play may be due for a crash.

Actually Star Wars, and now Super Heroes are the two licensed lines that Lego internally considers "Evergreen". or at least "Evergreen until the license is gone". Evergreen means it will either always be on the shelves, or be a constantly returning or recurring theme. Star Wars has obviously been there for a long time. Super Heroes was just named as such in their last stockholders report.

You can pander too much to something klinton, make people bored of an idea. I'm suggesting 'collectable' LEGO may be reaching saturation point.

I'm not sure 'Collectable" is the right word. I think "Investible" Lego might be a better description of what we are talking about. There will remain Lego Collectors regardless of the bubble. Most of them, as others have said, collecting for the joy of the product, and seeking older classic sets, or a full run of Star Wars figures, etc. These types don't really drive the secondary market as strongly as we think (and a bubble burst benefits them.). It's the speculative behavior that drives the bubble. Not so much the collector behavior beyond the basic "if there is a market for something, someone will be selling it and making a profit.".

[ummester]

Yes, you have probably phrased it more correctly Faefrost - 'investable' LEGO may be due for a crash, I do think it is tied into the vast number of sets released that seem tailored to collection though.

Re Star Wars and Super Heroes - I would agree that Super Heroes has become a very profitable line for LEGO and, although their stockholders think of it as evergreen, would be hesitant to call it such - because of external factors, not the LEGO line itself. The Star Wars franchise has already stood the test of time, like LEGO - they are both embedded positively with various generations. The modern Super Hero resurgence could be a fad, in comparison. Yes, Super Heroes in comics are well and truly embedded - but I'm talking about the run of Super hero films that have flooded the cinema in the past decade. Nolan Batman, no breaks between Spiderman reboots etc - the modern Super Hero movie has to reach saturation point soon, there has just been too much, too quickly and, when it dies down, toy lines will die down with it.

Edited August 18, 2014 by ummester

[Darth Punk]

Collectibles will always be connected to potential investment to some degree. The problem comes in when investment buying exceeds the collectible market and supply is greatly increased without an equal collectible demand. Baseball cards is another great example of what turned from a collecting hobby to a business and now many of those baseball cards are viewed as worthless. Baseball card companies flooded the market to match the skyrocketing demand. But that demand was mostly driven by investors who cashed out leaving a glut of cards with no customers to equal the supply.

LEGO will continue to be collected for a long time I imagine regardless of its perceived value just like some collect radios, or spoons or postcards, etc. The investors will eventually on to the next hottest item and less people will buy for their nest egg.

[skateboard34]

While it seems like LEGO investment would possibly be a fun thing to get into on the side of a real job, the time investment vs. net income is not worth it at all. The sheer effort of ordering used sets on eBay, finding missing parts on Bricklink, etc. is way too much to justify the hobby.

[TheLegoDr]

Don't get me started on collecting cards! Granted, I never bought them to "invest." I only bought them because I liked collecting my favorite players.

As for LEGO, I have been "collecting" certain minifigures, but ultimately I'm buying what I want or what I can afford. Buying extras for resale later can be great for some people (and I'd love extra money in the future) but what good is that extra money if you just keep buying other sets to sell again later?

Personally, I'd rather buy extra sets that I had a need for instead of trying to resell it later. Although, the one exception was the B-Wing because of the cut in price. I had/have no intention of ever buying it or building it, but at that price, I bought it and would love to sell it to someone else at market value. But otherwise I am not a reseller.

[Off the wall]

Don't get me started on collecting cards! Granted, I never bought them to "invest." I only bought them because I liked collecting my favorite players.

As for LEGO, I have been "collecting" certain minifigures, but ultimately I'm buying what I want or what I can afford. Buying extras for resale later can be great for some people (and I'd love extra money in the future) but what good is that extra money if you just keep buying other sets to sell again later?

Personally, I'd rather buy extra sets that I had a need for instead of trying to resell it later. Although, the one exception was the B-Wing because of the cut in price. I had/have no intention of ever buying it or building it, but at that price, I bought it and would love to sell it to someone else at market value. But otherwise I am not a reseller.

I'm with you doc. I can make a lot more money (and have) on my computer with stocks. Lego is a hobby. I don't like my investments stacked in my house taking up space when, like I said, I can make a lot more elsewhere. But, for some unknown reason, I did buy a superstar destroyer. Maybe I can trade it for a modular in a few years as after I lugged that thing through the mall, I decided I didn't want to build it. It looks like one of the carp in the lake behind my house.

[Legogal]

Many folks may be interested in investing in extra LEGO sets but just don't have the space to store them inside their homes. I had to choose between buying spare sets or getting things I want to build because my closets are full. Now I am just picking up what I want to build. And rarely a spare unless it seems it will look better in a larger version.

It seems that too many people are seriously investing in LEGO and that the bubble has to pop at some point. What if they all decide to sell their spares in the next ten years as they retire? If those who merely invest in LEGO... and don't build or play with it...leave the market because something else like tulip bulbs becomes more attractive, it looks like the bubble will bust. So I choose not to buy sets as an investment. Maybe I will trade a few sets I am tired of, but buying more than one of something is less satisfying than it used to be. And there are enough bricks sorted by color in my LEGO room to build almost anything I want. So there is no reason to buy sets that do little for me. I do hope that LEGO investing does die down so prices become lower for most sets and more folks can afford them.

[AKSamurai]

It's the free market. People can buy and sell as they choose.