So when exactly did the brightly colored building blocks we played with as kids transform into a wildly successful multimedia entertainment platform? On February 7, the Lego Movie stormed theaters and notched one of the top opening weekends ever for a non-sequel animated film. Outside the cinema, Lego-themed video games and building sets featuring licensed properties have become incredibly popular with both children and adults. The most obvious indicator of the company’s recent success is its new position as the most valuable toymaker in the world. So how did they do it? Some of the success can be attributed to a forward-thinking business model that managed evolve the brand while honoring tradition. But mostly the new Lego is the product of lucrative licensing.
Lego’s breakthrough with licensed intellectual property began in 1999 with an agreement to license Star Wars characters and vehicles. Since the closing of that deal, Lego has sold over 200 million Star Wars Lego boxes and negotiated a new deal in 2012 that will allow the company to produce Star Wars themed products until 2022. On the heels of the Star Wars success, Lego smartly committed itself to obtaining licensing arrangements with established brand universes, including Harry Potter, Lord of the Rings, DC Comics, Marvel and Disney. The move paid off. In 2012, royalty expenses amounted to $263 million while profits reached $4 billion.
Licensing intellectual property has been a backbone of the toy business for decades, so why is Lego’s model making such a huge difference to its bottom line? For starters, the screening process for determining which properties Lego licenses is incredibly detailed, and its managers turn down far more licensing opportunities than they accept. By partnering exclusively with brands of wide global appeal, Lego has been able to ensure that the quality of its own brand isn’t diluted via association. Smart property selection helps, but what really sets Lego apart from other toymakers is the way it blends licensed properties with its own style to create what are essentially new properties. As a result, Lego’s Star Wars platform is more than mere reproductions of iconic Star Wars characters and vehicles in Lego form. It has become its own brand, Lego Star Wars. Additionally, many Lego interpretations of classic characters have assumed their own personality, and are often far different than their film or comic book counterparts. For example, the original Batman is dark and brooding, but Lego Batman is comedic and suitable for children.
Lego has also been able to secure separate licensing deals from brands that are themselves fierce competitors. While Warner Brothers and Disney engage in an arms race of intellectual property acquisition to order to bring ensemble blockbusters to the big screen, Lego works behind the scenes knowing that it stands to benefit from the success of both companies. In 2015, Disney will launch Avengers 2: Age of Ultron, and Star Wars Episode VII, two of the most highly anticipated movies of all time. In the same year, WB–who distributed the Lego Movie –will launch the tentatively titled Batman v. Superman, it’s own long-gestating ensemble act featuring a slew of globally recognized comic book characters from the DC comic book universe. With the necessary licensing agreements already in hand, Lego will be ready to capitalize on the success of all three, suggesting an even brighter future for the brightly colored building bricks.