Toy blocks are the building blocks of success at LEGO. Keeping little hands busy worldwide for decades, LEGO Holding (dba LEGO Group) has made more than 480 billion of its interlocking toys. In a nod to kids' growing high-tech skills, the toymaker offers LEGO Mindstorms to build PC-programmable robots and BIONICLE sets that feature an evolving online story line. Other collections include LEGO Space Police and LEGO City. It makes its Star Wars and Indiana Jones toys under license with Lucasfilm. The group owns namesake retail outlets in the US and Europe and sells its products in more than 130 countries. Vice chairman Kjeld Kirk Kristiansen, grandson of the founder, is LEGO's majority shareholder.
Despite a downturn in the economy, LEGO has logged revenue increases while its traditional-toy rivals saw sales slide. The company points to the success of its classic toy lines -- LEGO City, LEGO Creator, LEGO Technic, and LEGO Star Wars -- for the rise in revenue. Geographically, LEGO expects moderate sales increases in its North American and Western Europe markets.
LEGO has been working to fine-tune its performance during the past few years. It has done so through product additions, such as the widely successful Harry Potter and Star Wars lines, as well as forming alliances with the NHL, the NBA, and NIKE.
And it's far from game over for LEGO's videogame business. The company secured the future of its LEGO Universe multiplayer online game in February 2011, when it bought the rights to the game's development from Gazillion Entertainment. LEGO publishes the game, but the move brings its development in-house. As part of the deal, the toy company plans to retain a handful of Universe game developers and their Colorado studio. In early 2010 LEGO also extended its licensing agreement with Warner Bros. Home Entertainment Group through 2016. The deal, which has developer TT Games Publishing creating LEGO videogames across multiple platforms, gives traction to titles LEGO Star Wars, LEGO Batman: The Videogame, and LEGO Indiana Jones: The Original Adventures. Collectively, LEGO has sold nearly 50 million units of the games worldwide. In mid-2010 it released Harry Potter: Years 1-4.
In a bid to make it to the big screen, LEGO launched its first full-length DVD movie in February 2010 under the LEGO: The Adventures of Clutch Powers title. The partnership with Universal Studios Home Entertainment is the first LEGO-based full-length direct-to-video motion picture produced.
LEGO already produces television shows, educational materials, and merchandise including books, video games, and computer game software. LEGO and Miramax Film Corp. (while part of Disney) partnered to produce (on DVD and video) BIONICLE: Mask of Light -- a 3-D animated film based on the BIONICLE toy line. It has strengthened its licensing agreement with book publisher Scholastic, giving the company the rights to publish a wide variety of materials based on LEGO's intellectual properties, such as the new Knights' Kingdom line, as well as existing products such as CLIKITS and Alpha Team.
Fears in the industry concerning toys made in China, which have had an unusually high number of recalls in recent years, could boost LEGO's bottom line further. LEGO only has a fraction of its production in China.
To streamline costs associated with production, LEGO phased out a production agreement in 2009 it had inked a few years ago with Flextronics. The strategy included moving production operations from Denmark, Switzerland, and the US to mostly lower-cost countries, such as the Czech Republic, Hungary, and Mexico. The shift, which eliminated some 1,200 jobs in Enfield, Connecticut, and in Denmark in 2009, was intended to lower LEGO's operating costs.
LEGO's legal tussle with rival MEGA Brands (formerly Mega Bloks) continued after the Canadian Supreme Court issued its decision in 2005 giving LEGO the right to appeal the verdict of the Canadian Federal Court of Appeal. The original suit claimed Mega Bloks infringed upon LEGO's intellectual property by passing off its micro bricks as LEGO bricks. However, LEGO lost on its appeal later that year. LEGO has also been involved in lawsuits with Best-Lock (Europe) over intellectual property rights.
While the company sold its LEGOLAND parks business in 2005, it retains a 36% stake in the theme-parks business, now operated by Merlin Entertainments Group.
The word LEGO is derived from the Danish words for "play well," and children have been doing so with the company's familiar building blocks for years. The LEGO brick celebrated its 50th anniversary in 2008. To boot, LEGO toys were named the Toy of the Century by FORTUNE magazine.