Brick-by-brick: How LEGO solved financial struggles

Luke Skywalker ignites his lightsaber, a faint blue against a dark, alien Cloud City. But look closer and it’s not silver screen Luke but instead, a LEGO mock-up. This past spring, “LEGO STAR WARS: The Skywalker Saga” leaped into hyperspace, topping video game charts.

Once known simply for plastic bricks, LEGO has sold over 200 million video games and pulled in more than $1 billion at the movie box office. Meanwhile, LEGOLAND theme parks bring in more than 15 million visitors annually.

Yet in 2003, LEGO was about $850 million in debt and racked up $240 million in losses in 2004 alone. At the time, LEGO pulled in less than a billion dollars per year and simple plastic bricks no longer seemed good enough. Now? Lego’s revenues have topped $7.5 billion.

How did LEGO turn things around? First, LEGO brought in Vig Knudstorp as CEO, who sold LEGOLAND to the Merlin Group for about $260 million. Increased mold and production costs had smothered LEGO’s finances, so Knudstorp streamlined a bloated portfolio of LEGO parts to 6,000, leading to substantial cost savings.

Knudstorp also shut down LEGO’s computer game division. However, the company partnered with external developer TT Games to develop new games. Now, LEGO video games sell millions of copies. Julia Goldin, LEGO’s CMO, notes that video games move bricks, with some kids video gaming before they even get into physical LEGO sets.

Building partnerships with major franchises like Star Wars and Harry Potter, also drove sales with some collector’s sets targeted for adults, retailing for hundreds of dollars. And in 2019, the Kristiansens, LEGO’s founding family and controlling owners, bought Merlin Group, bringing LEGOLAND back into the fold.

Thus, brick by brick, LEGO has emerged as a leading amusement park operator, film franchise, toy company, and video game franchise.