Brokering Bricks: The World of Lego Investing
By Ben Lowell
Investors looking to diversify their holdings have historically turned to many sources: foreign markets, real estate, cryptocurrencies, tulips, or even art. Sometimes, trendy new investments backfire, as the notorious Beanie Baby bubble did. Other times, your niche market of high-end Magic: The Gathering cards might attract the attention of Martin Shkreli. And then there are LEGOs, the plastic brick building sets that have been the scourge of many unprotected feet for over 80 years.
Consider the following: In 2000, you, enterprising investor, might have bought some index funds from the S&P 500 and, financial meltdown and all, ended up doubling your money by today. By contrast, if you invested in one (or several) collector’s edition LEGO Imperial Star Destroyers for $270, you would have made quintupled your money. Today, the same factory-sealed set can fetch over $1,500.
Huw Millington is the founder and creator of Brickset.com, an online community dedicated to the buying, selling, collecting, and discussion of all things LEGO. The website currently boasts over 210,000 registered users and crossed 100 million annual page views in 2016.
“Even though there’s a saying that you can never have too much LEGO, I think probably you can,” Millington said.
Millington built LEGO sets as a child, but cast aside the hobby as he got older, as most kids do. But after taking out his old bricks for his daughter to play with, he rediscovered his old passion and dove in headfirst.
Searching on AltaVista, Millington started to piece together an online LEGO community for adults. “Prior to that you would have been an adult playing with Lego in isolation. They might’ve thought it was a bit weird, but when you find out that there are other people out there with a similar interest doing the same thing as you, it obviously spurs you on a bit.”
Already a web developer, he launched an early form of Brickset in 1995, originally meant to track promotional LEGO sets that weren’t cataloged anywhere else on the Internet. But it quickly became a database of sorts, a definitive compendium of every LEGO set ever produced.
There are many websites that mirror Brickset’s purpose, offering a wide range of tools to track LEGO data: part inventories, historical sales, quotes from different retailers, even a live price ticker.
When LEGO fans stumble on a site like Brickset, they will quickly uncover the massive financial market built by their beloved bricks in recent years. But most children relying on their allowance don’t have thousands to spend on toys, so who is?
AFOLs (adult fans of LEGO) represent a large chunk of the purchasing power in the LEGO aftermarket, supported by fan-curated websites and in-person meetups and conventions all around the world. In an age where nostalgia dominates entertainment, this trend might not be all that surprising. Toys, after all, are the number one collectible category across all age groups, as Eric Bradley writes in his book Toys: How to Pick Antiques Like a Pro. Repurchasing a long-lost toy can bring back some of those warm and fuzzy feelings from childhood.
LEGO is an expensive hobby, and some AFOLs will buy and sell to each other in order to fund their own collections. However, there are also dedicated LEGO “flippers,” people who aren’t necessarily fans of the product but see an opportunity to take advantage of a niche marketplace. You can even take an online course on how to turn a brick-based profit.
Even though LEGO purists and opportunists may philosophically differ, Millington doesn’t think that matters. “Resellers get a bit of a bad press. [They do] provide a useful service. If you are after the Cafe Corner, if there weren’t resellers, you wouldn’t be able to get one at all. At least now, if you’ve got the money, you can actually go and buy one.”
When released, Lego pricing is fairly consistent. Sets usually cost around 10 cents per brick, 36,000 of which are molded every second at the LEGO factory in Billund, Denmark. LEGO sets can be priced at anywhere from a few dollars to hundreds, and attract buyers of all ages and backgrounds. A modest version of the Star Wars Millennium Falcon released in 2018 was priced at $9.99 for 92 pieces, while the larger-scale Falcon released in 2007 contains 5197 bricks, priced at $499.99.
LEGO sets only remain in production for one or two years before entering “retirement.” And as soon as a LEGO set leaves store shelves, its value will often skyrocket. This is where collectors and investors swoop in.
That $499.99 Millennium Falcon from 2007? It currently sells for around $1500, a 200% return.
With such high stakes, the habits of collectors and flippers can get a little intense. Online forums are filled with stories of those going to great lengths to get the perfect deal. On Brickset, you can find a discussion chain with over 5,000 responses by collectors bragging about their travels to every big box store and garage sale to snag the best deal. To store these massive inventories, some retrofit and redesign entire rooms in their homes. In one scenario, a 650-pound LEGO collection threatened the survival of a Swedish couple’s marriage. The passion for LEGO can even have legal consequences.
In 2012, financial executive Thomas Langenbach was arrested while buying a LEGO X-Wing Starfighter at his local Target. In a hare-brained scheme of fraudulent arbitrage, Langenbach was printing his own, low-price UPC stickers at home and sticking them onto LEGO sets in stores before checkout, sometimes paying less than one-fifth the actual price. He earned more than $30,000 reselling the sets on eBay, but Langenbach was both a flipper and a fan; the Santa Clara County District Attorney’s Office described his home as a “mini Legoland.”
If you ask Millington, his most extreme collecting habits came around the same time as Langenbach’s, but those days are in the past. “I think probably 2012 was the peak year for buying Lego for me, and I probably bought … a third of the total product selection that year. Which was probably far too many.”
And as of now? “It’s around the 3,000 set mark.”
What exactly makes a set valuable? One big indicator of value is the set’s theme, according to The Ultimate Guide to Collectible LEGO Sets authors Ed and Jeff Maciorowski.
Licensed properties like Star Wars tend to be valuable, as do original LEGO themes such as LEGO Ideas, LEGO City, and LEGO Architecture. LEGO Creator includes one of the most valuable subthemes, the Modular Buildings series. These are some of the most expensive sets LEGO sells, and each set can be attached to another to form an entire city block, an enticing prospect for the completist collector. The first Modular Building produced, the Cafe Corner, was released at $139.99 and today sells for more than $1600 in new condition.
The Cafe Corner was one of the sets responsible for jumpstarting the aftermarket frenzy, according to Millington. “People might have traded or sold their spare sets,” he said, “But they certainly didn’t go out of their way to stock up, as it were, on the sets while they could, in an attempt to make a profit later.”
As a company, LEGO is well-aware of what drives AFOLs, and often caters to both adults and children. However, this wasn’t always the case, and their reluctance to do so once put the entire organization in jeopardy.
In the early 1990s, the LEGO Group was at a crossroads. While it had already established itself as a global brand over the last 60-plus years, the Danish firm was struggling to compete against the newest offerings on Toys ‘R’ Us shelves: Game Boys, Tamogachis, Nerf Guns, Furbies, not to mention the advent of home video and cable TV. For those looking to build their own fantasy world piece by piece, the personal computer offered games like SimCity and Roller Coaster Tycoon.
The LEGO Group’s fifteen-year streak of double-digit growth ended in 1993, leading to a frenzy of creative development that only exacerbated the company’s woes. Over the following five years, LEGO tripled the variety of sets it produced under more than 25 new themes, including the eccentric worlds of Spyrius, Unitron, Dark Forest, Aquazone, and Insectoids. The effort failed.
In 1998, the company laid off more than 1,000 workers after a $48 million loss — the first in its history, according to David Robertson and Bill Breen’s book Brick by Brick. At the same time, a new strategy was quietly in the works that would change the entire nature of the company.
Peter Eio had served as president of LEGO’s American operations for the prior eight years, and traveled to the company’s global headquarters in Billund to pitch a very American idea: licensing. Star Wars Episode I: The Phantom Menace was still two years away from theatrical release, but Eio already had Lucasfilm sold on a possible partnership. He came to Denmark to unveil his plan to LEGO senior management.
“Over my dead body will LEGO ever introduce Star Wars,” a LEGO VP retorted.
The executive’s reaction was not unique. Eio recounted, “Normally the Danes are very polite people… but their initial reaction to Star Wars was one of shock and horror that we would even suggest such a thing. It wasn’t the LEGO way.”
How was the “LEGO way” under attack? Up until that point, all LEGO themes were ideated by the company, almost never drawing on outside intellectual property. There were a few rare exceptions (i.e. the Volkswagen Beetle), but never before had Lego drawn on an existing fictional world… or galaxy, according to Robertson and Breen.
Additionally, the partnership threatened one of the core tenets set by the company’s founder, Ole Kirk Christiansen: that war would never be made into child’s play. While LEGO had produced the occasional minifigure revolver or pirate cannon, it wasn’t prepared to launch an entire product line with Wars in the name.
Eio proposed a way forward — why not just ask the parents? And after getting overwhelming approval in both Germany and the U.S., LEGO gave the green light to design and produce Star Wars sets.
By the time Episode I was released, the Star Wars theme outperformed forecasts by more than 500 percent, comprising more than one-sixth of company sales, as chronicled by Robertson and Breen. The partnership was a massive success, introducing an entirely new universe of fans to the LEGO brand (a young Anakin Skywalker even makes reference to the not-so-inconspicuous “moons of Iego” in the film). A wider audience of children — and adults — couldn’t wait to build their own TIE Fighters and Millenium Falcons.
In 2000, one year after the original Star Wars LEGOs launched, the company introduced the Ultimate Collector’s Series (UCS), a theme of high-end Star Wars sets, the first specifically designed for adults. With massive brick counts and intricate detail, the gap between the UCS Star Wars sets and the ones that had come before was stark, both in quality and price.
To understand the difference, we can turn to one of the most iconic spaceships in Star Wars, the X-Wing. The standard edition was one of the first Star Wars sets released, including minifigures of Luke Skywalker, R2-D2, and deleted scene victim Biggs Darklighter. The set was originally priced at $29.99, but now fetches around $137 still new in its box.
The next year, LEGO released the collector’s version of the same ship for $150, with five times the number of bricks at five times the price. With a display stand and descriptive plaque, this set was clearly designed with the AFOL in mind, and today, fetches over $400 in factory-sealed condition.
Star Wars opened a whole world of licensing opportunities: Harry Potter, Lord of the Rings, Batman and more. When a new movie is released, LEGO sales of that particular theme jump. The Ultimate Collector’s Series came to include Star Wars models of all factions and eras, and also forged a path for LEGO to branch out and create adult-level sets under a variety of other themes. It was a whole new business model for a company that was in dire straits only a few years earlier.
Now taking in more than $5.4 billion in annual revenue, LEGO is in a secure financial position to continue churning out bricks for years to come, but there is concern that the aftermarket might not have the same longevity.
From his perch as the leader of Brickset, Millington thinks LEGO aftermarket has become oversaturated. “The bottom has fallen out of the market to some extent… there are too many people trying to make a quick buck from reselling Lego, and consequently supply is vastly out-stripping demand.” LEGO already limits the number of sets one can purchase from their online store, discouraging flippers with deep pockets. But because LEGOs are sold through so many different platforms, it’s difficult to obtain hard data suggesting a slowdown. (Searches for “LEGO eBay,” however, seem to have peaked in 2012, and have been in a steady decline since.)
LEGO has proved it can be both a commodity and a toy simultaneously. Even then, these priorities aren’t mutually exclusive.
Since Huw Millington’s first reentry into the world of LEGO nearly 25 years ago, the bricks have taken over his entire professional life; managing Brickset has been Millington’s full-time job since 2012. Asked if he would do anything different across his entire LEGO journey, he only remarked, “I think I’d probably have left work earlier.”
