With Samsung, Apple and Sony for competitors…

Lego. Time to drop plastic bricks?

Vadim Makarenko, staff reporter of Gazeta Wyborcza

How Lego sees play in the future: problems it will have to overcome on the way and how it is trying to protect our children’s mental health.

Billund — Brest — Warsaw. Zachar is five. He lives in Brest, in Belarus, and is too young to be learning to read or write. When it comes to fighting for his parents’ laptop, Zachar usually loses out to big brother — five years his senior. And so Zachar spends a lot of his free time with Lego. His toy box has Lego from seven different kits, but only the adults who bought them can even vaguely remember what the sets were. The instructions are long lost and every day the Lego blocks are turned into something new. His parents’ tablet is the guide. Zachar turns to YouTube with his questions. Sometimes they are really long: How do you make a police van with a convict and a motorcycle or build a truck with a boat and a helicopter on it out of Lego?

Within seconds, the world’s largest video site churns out dozens, if not hundreds, of instructional videos shot by LEGO fans from all over the world. They don’t all suit but usually Zachar finds what he wants or something close to his vision. Building work begins.

Digital is the game changer
Lego’s dream scenario: a digital gadget enriches play, rather than distracts a child from the blocks. In the Danish town of Billund, where the company is headquartered, they call it “hybrid play” and see it as one of the strategic directions of research.

© Vadim Makarenko

But, as Zachar knows, things do not always go smoothly. Digital games have a vast capacity to soak up time, children can sit with them almost indefinitely. Real play has a greater tendency to self-limitation, because “people get tired a lot faster in real football than playing “FIFA 14” on the console” — according to Kamil Sijko from the Institute for Educational Research. Kamil is a fan of digital toys himself and runs the CoderDojo club, in which children use digital Lego blocks in virtual 3D modelling.

Making a fire engine from over 300 real bricks will take a five year old 3–4 hours. It takes the same time for a kid to drive a car a dozen laps in a race, as well as splitting fruit with a Japanese sword, releasing colourful birds and destroying buildings — all thanks to the parents’ smart phone or tablet. Win, lose and take revenge. Earn points, get virtual medals or collect stickers. And at the end they can even tell the world about their achievements on Facebook, Twitter, Snapchat or Instagram. Digital games also devour all other games because of the barriers associated with play in the real world. To play a real football you first have gather a group and find a pitch.

Digital play is faster than traditional one and offers much greater stimulus and immediate reward. That is why today’s children spend a lot less time with classic toys than did their parents. Moreover, this period of time keeps shrinking. The main consumers Lego — children in the 5–12 age range — spend several hours online every day. According to the UK research company Broadband Choices, more than half of all children under 10 in the UK already have their own mobile phone, and more than a quarter of children under 8 have their own tablets.

So, Lego’s competitors are not just the toymakers Hasbro and Mattel, but also HTC, Samsung, Microsoft, Sony, Apple and the likes. Lego CEO Jorgen Vig Knudstorp defines the competition broadly: “all those trying to get themselves on a kids’s wishlist for Christmas, birthdays, Children’s Day or any other occasion”.

Regular surveys by Knudstorp’s company show that children consider the boundaries between the digital world and the real to be blurred or non-existent. Kamil Sijko agrees that for a child playing football and playing “FIFA 2014” are similar activities.

And it is at the crossroads of these two worlds that the giant Danish firm is looking for new opportunities.

Agents spring into action
One of the fruits of research is Fusion Town Master — an experimental series that hit shelves in US shops last year. It allows you to arrange the blocks as a flat, one-dimensional house and then move it to the internet, where it becomes 3D. In this way, you get to build a virtual city from Lego blocks.

Another idea to combine traditional toys with digital gadget is the Ultra Agents series, which is available also in Polish shops. These kits don’t not just have the classic building blocks, but also allow the builders to control play in the Ultra Agents application on tablets.

Kamil Sijko is taking these ideas with a pinch of salt. “They are probably just the beginning,” he says. And adds: “And we will see many more of them but for me as a consumer they do not appeal. I’ve seen the Town Master app, but I had a feeling that it’s not sufficiently cool as either an app or as set of blocks”.

Every parent knows, as soon as he sees it, that hybrid play is a scam. The momnent a child moves on from a toy made from Lego to the digital world, the whole play moves there. Knudstorp contends however that “you can encourage children to come back, building bridges between these two worlds and build the mechanics of the game in a particular way. This is where our work will be in the coming years”.

To find these bridges, Lego’s researchers look at the search questions that children ask about gadgets. One day Zachar asked how to make the car from “Plants vs. zombies”? This popular digital game is one of his favourites and maybe one day Lego will offer a set of themed-bricks under license from Electronic Arts. Lego has had the successful “Minecraft” series, licensed by Mojang, on sale for three years now.

Lego CEO Jorgen Vig Knudstorp defines the competition broadly: “All those trying to get themselves on a kids’s wishlist

Since Knudstorp became CEO in 2004, the company has added more than 20 new licensed series to the catalogue, not counting extensions of existing ones, such as Harry Potter and Bob the Builder. Not all were successful. Prince of Persia or The Lone Ranger for Disney licenses did not, Knudstorp admits, sell as well as expected. The proportions of revenues attributable to such units are not disclosed, and the best-sellers rankings give no actual figures. “Take a look,” the CEO encourages. “The top five has only one from licensed series. The rest are our classics.”

Last year Lego’s bestsellers were:

  1. City
  2. Star Wars
  3. Friends
  4. Creator
  5. Duplo

“Everything is awesome!!!”
Giant blocks scattered at the entrance, the logo made of blocks behind the receptionist and large Lego sculptures in the centre of the hall. Passes for guests and employee’s business cards are also building blocks. The low-rise buildings and the intimate, colourful interior make the office look almost like kindergarten, but let us not be fooled by appearances. We are inside an international corporation that employs 14,700 people worldwide.

It was, Knudstorp said, “an awesome year”. “Everything went awesomely, and like in the movie we dance and sing,” he said. Journalists, who came from all over the world for the press conference were a bit suspicious, but the 46-year-old was already in Truchta-mode and intoned the song from “Lego Movie,” which — to the surprise of critics — won a nomination for this year’s Oscars:

Everything is awesome

Everything is cool when you’re part of a team

Everything is awesome

When we’re living our dream

“Bloody hell, look at that! We’ve got it, right?” was the camera operator’s comment to a German TV reporter.

On Lego’s balance sheet everything was awesome, indeed. Last year, revenues rose 15 per cent against an estimated growth in the global toy market of 1 per cent. The company’s profitability is impressive: last year it managed to squeeze out a margin of 33.9 per cent, which is closer to Apple than any toy manufacturer. This means that for each dollar invested company made one dollar and 34 cents. Net profit amounted to EUR 943 million and would have been a good EUR 400 million higher had Lego not invested in the modernisation of its factories and building new ones. After such peaks companies usually are heading south, but Lego’s CEO sees things differently: “I am convinced that we will continue to grow at a double-digit rate”.

It is not clear how the company intends to achieve this. Over recent years, it has expanded the number of sets and widened their subject matter, and done this with success. Three years ago, Lego had little on offer for girls while the Lego Friends series sits on the top of sales rankings today. The company also stepped into the computer games business and television production. It went into a partnership with Cartoon Network, which produces the animated series, and Warner Bros., which produced “Lego Movie”. The whole of 2014 is described by Lego’s top executives describe as “the year of globalisation”. And no doubt entry to the Chinese market, planned since 2013, will drive revenues for Lego even further.

“We always establish production close to markets. But we don’t have a good distribution or market share in China at the moment”, Goodwin added. “So, this investment requires faith that a market can be built”.

The decision to build a factory in Jiaxing was, according to John Goodwin, Lego’s chief financial officer, one of the most difficult and risky in recent years. “It will manufacture mainly for China — we always establish production close to markets. But we don’t have a good distribution or market share in China at the moment”, Goodwin added. “So, this investment requires faith that a market can be built”.

Idyllic, angelic, licensed
Such faith also requires the assumption that children — with access to increasingly efficient gadgets and more immersive digital games — will continue to enjoy playing with ordinary plastic blocks.

Parents are the great allies for Lego blocks at the moment. Most parents think computer games and gadgets are harmful and apply all sorts of restrictive policies to them. Some set a rigid time limit, no more than two hours a day for instance, while other parents make the time spent on digital games conditional on behaviour or performance at school, and yet others oppose children using computers in free time, but allow their use for learning. By way of contrast, it is apparent from Kamil Sijko’s observations, that Lego is “a sacrosanct, angelic toy that a child can play with freely the whole day long”.

Lego blocks are expensive in comparison with others, which can be frustrating for many parents. And Molly Wood, editor of the American CNet service, believes that the licensed sets the company offering more and more, actually do not develop creativity. A year ago Wood wrote: “Where I remember building and learning to build with the Lego blocks of my youth, these new sets simply require children to follow somewhere between 100 and 300 steps to build a very specific, one-time use vehicle or environs. Then, 2 to 7 hours later, they’re done, moved on to the next shiny branded toy.

But the blocks are still, for most parents, the very model of a toy that stimulates creativity and even complaints about tonnes of plastic littering the planet have been muted. Sijko points out that this is because Lego sets are rarely thrown away. The blocks from his childhood are still at home: “now my son plays with them”.

Sijko views the plastic bricks as — to some extent — a metaphor for life itself. Scattered across the floor, by their number and colour they define play, and thus impose a need for a child to plan. For their part, the number of digital blocks is infinite, which develps other valuable skills. The education expert observes however that “in real life we face limited resources more often than excess of them”.

In a qualitative study by the Institute for Educational Research, limited to 140 selected families, examining how Polish children spend their play time, Lego did not appear even once. Instead there has already appeared a bigger cloud on the horizon, shaped like more and more common 3D printers.

Lego’s ever-smiling CEO becomes more serious when I ask him about what happens when everyone is able to print out their own set of blocks. He says that ethnographic research conducted in homes equipped with a 3D printer shows that so far they are not printing blocks en masse. Trying to stay ahead of developments Lego proposed to families: “Create your own set, and we will manufacture it for you.” Although children and parents, able to buy the blocks in bulk and make them into sets of their own, stayed unmoved.

In the course of its 83-year history, the Danish giant has overcome many difficulties. In 2003 it simply did not know what to do, and swung from one extreme to the other, producing absurd toys that can still be seen in its corporate museum — houses equipped for Barbie dolls or enlarged versions of their own figures such as Jack Stone. Had it not been for the Star Wars series which supplied Lego with cashflow at a time of change, our children would perhaps be playing today with blocks made by some other company.

© Vadim Makarenko

But the most interesting moment in the history of Lego was in 1960, when a fire destroyed the warehouses — and with them almost the entire stock of wooden toys. Godtfred Kirk Christiansen, the son of the company’s founder, decided it was a good time to abandon the wooden toys which had been produced for 30 years and focus on the plastic blocks patented only two years before. Maybe the time has now come to abandon plastic and focus on digital blocks?

“We are well aware of this idea. However I think it would be a disaster. I do not believe that world of virtual games can ever replace real, hands-on play”. That would be, in the words of Lego’s CEO, “boring and very bad for children’s development”.

This story originally appeared in Gazeta Wyborcza, 2015–04–13