Lego's empire: discussing brand strategy and diversification

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90 min
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1

Think about these questions before watching. Share your ideas with a partner.

  1. Think of a brand you loved as a child. How has that brand changed or evolved since then, and do you think it has remained relevant?
  2. When a company known for one core product starts expanding into other areas like movies or theme parks, do you think it generally strengthens or weakens the brand's identity? Why?
  3. What challenges do you think a long-established company faces when trying to appeal to younger generations in the digital age?
2

Watch the video carefully. Pay attention to the main ideas and key details.

Video script147 segments · click a timestamp to jump

- [Narrator] This is what Lego products looked like

in the 1980s.

♪ Lego maniac ♪

And this is a Lego product now

♪ Everything is awesome ♪

That's because the company has become more than just blocks.

- They have video games, movies, theme parks,

all these activities which ultimately reinforce the core,

which is the sale of Lego sets.

- [Narrator] All that content helped it become

the world's largest toy maker,

raking in billions of dollars every year.

Here's how the company uses licensing deals in media

to expand its customer base and build its content empire.

This is the Economics of Lego.

- Lego is 90 years old.

It was founded in Denmark in 1932

and initially it was a company that made wooden toys,

but then in the 1950s, it launched its trademark product,

the one we all know now, the plastic Lego brick.

- [Narrator] Since then, Lego has be out Hasbro and Mattel

to become the biggest toy brand worldwide.

In the first six months of 2022,

the company's revenue hit 27 billion Danish Kroner,

or about $3.47 billion, up 17% from 2021.

And it's anticipating growing demand,

so much so that the company's building two new factories

in the US and Vietnam.

Lego has made the bricks the building blocks

of its business.

- Lego is still essentially a toy company.

What they always say

is their core is still to make the plastic bricks for kids,

but, of course, they do now do a lot more than that.

- [Narrator] Some of Lego's first moves into content

started in the 1990s.

- [Lego Character] The island is right behind us!

- [Narrator] When the company's sales slumped.

It was trying everything,

from new toys to electronics to theme parks.

- [Announcer] Can you find the power?

Bionicle!

- Bionicles came along in the early 2000s,

and that was a time

when the Lego brand was actually in danger

of becoming a little bit stale.

- [Narrator] The Bionicle franchise

featured buildable action figures

and multi-platform storytelling.

- [Announcer] Agile, determined, unstoppable.

- [Narrator] The franchise built a content universe

through comics, books, movies, and video games.

The bet proved successful.

In 2003, when the toy maker saw 26% loss in net sales,

Bionicle was its best selling line.

- And it really revitalized the brand

and showed them a way that they could engage audiences

with different types of content,

with cartoons, movies, comics.

- [Narrator] And it wasn't just original stories.

Lego released its first sets based off of license material

in 1999, "Star Wars".

In 2005, it brought that into content

with a five minute short called "Revenge of the Brick"

that aired on Cartoon Network.

- It was a twist, of course, on the "Revenge of the Sith",

which was the "Star Wars" movie, which came out at the time.

That really paved the way for the content partnerships

which we've seen in subsequent years.

- [Narrator] That Lego twist has since been put to use

on all sorts of franchises,

like "Batman", "Marvel", and "Jurassic World".

- Really, we are now used to seeing

not just the basic Lego kits,

but Lego "Star Wars" kits and so on.

That's really an integral part of what Lego does now.

So, really, the content has changed Lego's identity.

We think of it as part of these popular franchises

which we all know, like "Marvel".

- [Narrator] And licensed material was on full display

on the company's smash hit, 2014's "The Lego Movie",

which grossed over $450 million worldwide.

It held the top spot in the US box office

for three weeks after its release.

- [Vitruvius] Superman, Wonder Woman, the Mermaid,

Michelangelo, and the 2002 NBA All Stars.

- The goal of "The Lego Movie" was to market Lego

to a wider audience.

I think it was a lot more successful than anyone imagined.

It was a very successful movie in its own right,

a big hit at the box office.

That laid the template for a lot of the content creation

that Lego has done since then.

- [Narrator] Lego and Warner Brothers released

three more feature films, the latest in 2019.

None earned as much as the first.

- Of course, there is a risk of oversaturation.

Lego doesn't want to do too much,

but I think they're still very much

at the stage of growing in a lot of markets.

- [Narrator] Content has helped the toy maker

break into new places like China,

where Lego is growing its presence.

Of the 66 new stores it opened in the first half of 2022,

46 of those were in China.

Almost 42% of the company's 833 locations are there.

Movies and games assist in raising awareness of the brand.

- The main challenge Lego has faced

in new markets like China

is that the grownups, the parents,

just don't really know about Lego.

They don't have Lego in their own backgrounds

like a lot of grownups in the US and Europe do.

- [Narrator] And using licensed material in that content

also helps reach more audiences.

- Being part of these popular franchises,

like "The Avengers", for example,

is a great way for Lego to reach out

to all kinds of different generations,

people across the world,

people who don't necessarily even know Lego.

- [Narrator] Content is also a way

for it to appeal to its adult fans,

as the brand has been trying to do in recent years.

- [Announcer] Find your Flow.

Build with Lego Bricks.

- [Narrator] Reality TV show "Lego Masters", for example,

features adults building extreme creations

out of the titular plastic bricks.

- The original Lego fans took to Lego as kids

and they're now grown up

and a lot of those people are still very keen on Lego

and I think Lego very smartly realized

that a lot of those people would be willing to buy kits

that are are pretty complex, pretty expensive,

and are designed specifically for grownups.

- [Narrator] The company has its eye set

beyond just the two-dimensional screen.

Last April, Lego and Epic Games announced a partnership

to build a digital experience in the Metaverse.

- All of this content,

certainly in the company's current thinking,

the movies, the games,

that all is there to support the core product,

which is the same as it has been for decades,

the plastic brick.

(playful music)

3

Answer these questions in your own words. Support your answers with evidence from the video.

01According to the video, what role did the Bionicle franchise play for the Lego company in the early 2000s?
Sample answerBionicle was introduced when the Lego brand was becoming a bit stale and sales were down. It was a huge success that revitalized the company by using multi-platform storytelling, showing them how to engage audiences with comics, movies, and games.
02How did Lego's content strategy evolve after its first partnership with the 'Star Wars' franchise?
Sample answerThe first 'Star Wars' short film in 2005 was a major turning point. It proved that creating content based on licensed material was a successful model, which 'paved the way' for all the future partnerships with big franchises like 'Marvel' and 'Batman'.
03Beyond its financial success, what was the main strategic purpose of 'The Lego Movie'?
Sample answerThe main goal was to market Lego to a much wider audience, not just children who play with the toys. It was so successful that it basically created a template for how Lego would create content in the following years.
04Why is creating content like movies and games particularly important for Lego's growth in markets like China?
Sample answerIt's especially important in China because most parents there didn't grow up with Lego, so they don't have any nostalgia for the brand. The movies and games help build brand awareness from scratch and make the toys familiar to new generations of families.
4

Key vocabulary for brand strategy

Vocabulary
These expressions will help you discuss the topic with more precision and fluency.
Examples
To branch out into (something) — to start doing a new and different activity or business from the one you usually do.
Usage note: This is a common phrasal verb in business. You can say a company branched out into a new area, like video games, or simply that it branched out to diversify.
To tap into a new market — to access and start selling to a new group of potential customers, especially one that wasn't accessible before.
Usage note: This phrase emphasizes successfully connecting with a customer base. It's often used with adjectives like 'untapped' or 'lucrative', for example, 'to tap into the lucrative adult fan market'.
To stay ahead of the curve — to be more innovative and advanced than your competitors by anticipating future trends.
Usage note: This is a common idiom in business and technology. The opposite would be 'to fall behind the curve'. It suggests being a leader, not a follower.
A steady stream of revenue — a reliable and continuous flow of income for a business.
Usage note: This collocation is more formal than 'making money all the time' and is useful for describing a stable business model. Companies create multiple revenue streams to ensure stability.
To leverage (something) — to use something you already have, such as a strong brand, reputation, or assets, to achieve a new advantage.
Usage note: This is a key verb in strategic discussions. For example, 'Lego leveraged its brand recognition to launch a successful movie franchise'.
5

Decide if each statement is true or false. Correct the false ones.

01The Lego company was founded in the 1950s and its first products were the famous plastic bricks.
02Lego has recognized the market for adult fans by creating more complex and expensive sets designed specifically for them.
03According to the video, all of Lego's media content is ultimately designed to support the sales of its core product, the plastic brick sets.
04While 'The Lego Movie' was a box office hit, the three subsequent feature films were even more successful financially.
05To meet growing demand, Lego is currently in the process of building new factories in both the United States and Vietnam.
6

Complete the sentences with words from the box. One word is extra.

Word bank
01A well-known company can its brand recognition to launch new products successfully.
02By investing in AI research now, the tech firm hopes to stay ahead of the and dominate the market in the future.
03The coffee shop out into selling merchandise like mugs and t-shirts to increase its sales.
04The company developed a new app to into the younger demographic, which they hadn't reached before.
05Subscription services are popular because they provide a steady of income for the company.
7

Choose the best answer based on what you heard in the video.

01What does the video mention as evidence of Lego's leading position in the toy industry?
02What recent partnership does the video highlight as part of Lego's strategy to expand beyond physical toys?
03What does the video say about the Lego company's origins?
04Which of the following strategies is NOT mentioned in the video as a reason for Lego's success?
8

Brand strategy sentence matching

Complete the sentences to learn more about how companies grow.

Match the beginning of each sentence on the left with its correct ending on the right.

Drag or click to match
Definitions
9

Discuss these questions with a partner. Try to use vocabulary from the lesson.

  1. Think of a major company from your country that has successfully branched out into new areas. How did they leverage their original brand identity to tap into new markets, and do you think this strategy has secured them a steady stream of revenue for the future?
  2. The video presents Lego's diversification as a huge success. However, is there a risk that a company can branch out too far from its core product? At what point does this strategy stop being innovative and start damaging the brand's original identity?
  3. Looking at the toy and entertainment industry today, what future trends do you see emerging? If you were a strategist for a company like Lego, what new areas would you suggest they explore to stay ahead of the curve and continue to leverage their brand effectively?