Star Wars and its effect on other themes

[legitimatealex]

Seeing how well this line is going despite the insane mark ups, I doubt it will be gone anytime soon. I cannot imagine what the prices will be like in a few years if they continue to be like this.

Probably 4 minifigure sets that are $20 now will reach $30 prices despite no discernible change in inflation... LEGO is more popular now than ever, their sales are increasing all the time and yet we seemingly get stuck with higher prices and lower quality. How is that even possible?

[toystest]

How is that even possible?

let me answer that with a question "Are you going to stop buying Lego?" :twisted:

As long as the answer is no (just like me) TLG can get away with this kind of prizing :)

[natelite]

How is that even possible?

let me answer that with a question "Are you going to stop buying Lego?" :twisted:

As long as the answer is no (just like me) TLG can get away with this kind of prizing :)

the effect on sales is more pronounced than you think. while in general you think it doesn't detract from LSW sales, it destroys sales in other themes or sales in other toys. a lot of families do not have hundreds or thousands of dollars of budget to spend on toys. if a family spend $50 to by a $30 value LSW set, you've just removed $20 of potential sales from the atlantis line, for eg.

the substitution effect is poor for LSW, hence even as price goes up it will keep drawing sales away from other theme instead of generating lower sales. i hate for TLC to be a one-trick pony so i don't think they should keep churning out so many and so expensive LSW sets. it doesn't matter what sets they make because sales will be poor. very few lego classic sets can compete with LSW sets.

the other license themes aren't as bad since the demand is still rather weak. and i believe they will continue to be weak as long as there are many LSW sets around.

[toystest]

the effect on sales is more pronounced than you think. while in general you think it doesn't detract from LSW sales, it destroys sales in other themes or sales in other toys. a lot of families do not have hundreds or thousands of dollars of budget to spend on toys. if a family spend $50 to by a $30 value LSW set, you've just removed $20 of potential sales from the atlantis line.

but from TLG's point of view, they changed a potential 20$ sale on the Atlantis Line, to an actual sale on the SW line. To them it's not lost money. For them it's the same amount of income, but production cost is also lower. They do however have to pay some royalties to LucasArts, but I am assuming they are compensating that byt increasing their own profit margin.

[vynsane]

the effect on sales is more pronounced than you think. while in general you think it doesn't detract from LSW sales, it destroys sales in other themes or sales in other toys. a lot of families do not have hundreds or thousands of dollars of budget to spend on toys. if a family spend $50 to by a $30 value LSW set, you've just removed $20 of potential sales from the atlantis line.

but from TLG's point of view, they changed a potential 20$ sale on the Atlantis Line, to an actual sale on the SW line. To them it's not lost money.

True, in this example, they not only made "$50 on a $30" set, but the Atlantis set is still on the shelf for someone else to buy - it's all profit for them in that respect.

That said, I'm predicting a lot more people will hold off to buy the newer SW sets on sale or hoping for clearances, thus evening the playing field a bit. Eventually a breaking point will be reached where LEGO is not getting the sales they expect and the prices will plateau or even recede to a (hopefully) more reasonable level.

[toystest]

True, in this example, they not only made "$50 on a $30" set, but the Atlantis set is still on the shelf for someone else to buy - it's all profit for them in that respect.

That said, I'm predicting a lot more people will hold off to buy the newer SW sets on sale or hoping for clearances, thus evening the playing field a bit. Eventually a breaking point will be reached where LEGO is not getting the sales they expect and the prices will plateau or even recede to a (hopefully) more reasonable level.

You managed to hit quote before I finished editing my post

[natelite]

but from TLG's point of view, they changed a potential 20$ sale on the Atlantis Line, to an actual sale on the SW line. To them it's not lost money. For them it's the same amount of income, but production cost is also lower. They do however have to pay some royalties to LucasArts, but I am assuming they are compensating that byt increasing their own profit margin.

this is where you are wrong. there are costs associated with developing a new theme. new molds. headcounts to pay. drawing too much away from your own proprietary themes to pay more in licensing fees to lucas is bad business. it puts too much negotiation power to your partner and not to yourself. the next round of license renewal, you can bet lucas will ask for a higher percentage of the revenue share.

why do you think TLC has been trying to find another hit for so many years? it's to diversify earnings away from LSW theme. unfortunately the current strategy of producing as many LSW sets and as expensive as possible is very short term focused. if it's just because they are trying to milk as much from a discontinuing theme, then it makes a lot of business sense. if they are going to renew the license, then they've just screwed over their other themes just to hand lucas more money from their dedicated customers.

[toystest]

but from TLG's point of view, they changed a potential 20$ sale on the Atlantis Line, to an actual sale on the SW line. To them it's not lost money. For them it's the same amount of income, but production cost is also lower. They do however have to pay some royalties to LucasArts, but I am assuming they are compensating that byt increasing their own profit margin.

this is where you are wrong. there are costs associated with developing a new theme. new molds. headcounts to pay. drawing too much away from your own proprietary themes to pay more in licensing fees to lucas is bad business. it puts too much negotiation power to your partner and not to yourself. the next round of license renewal, you can bet lucas will ask for a higher percentage of the revenue share.

why do you think TLC has been trying to find another hit for so many years? it's to diversify earnings away from LSW theme. unfortunately the current strategy of producing as many LSW sets and as expensive as possible is very short term focused. if it's just because they are trying to milk as much from a discontinuing theme, then it makes a lot of business sense. if they are going to renew the license, then they've just screwed over their other themes just to hand lucas more money from their dedicated customers.

I had not looked at it that way, and from that perspective they would be better off not renewing the SW license. What they should do is Drop the SW franchise and pickup the Star Trek License! I can't wait for a Captain Picard MiniFig. a completely flat head! :twisted:

[natelite]

True, in this example, they not only made "$50 on a $30" set, but the Atlantis set is still on the shelf for someone else to buy - it's all profit for them in that respect.

That said, I'm predicting a lot more people will hold off to buy the newer SW sets on sale or hoping for clearances, thus evening the playing field a bit. Eventually a breaking point will be reached where LEGO is not getting the sales they expect and the prices will plateau or even recede to a (hopefully) more reasonable level.

this is very short sighted view. a set sitting on the shelf = another set not being produced by the TLC factory. TLC has drastically improved it's inventory management such that you hardly see overages these days. you won't find too many sets on clearance, outside of the black friday sets.

in the end, the lego original themes will sit on the shelves unsold and that means a lot of the production costs like mold, design, designers, graphic artists cost for box design, etc. won't be recouped. it's actually worse off for TLC if LSW cannibalize its other themes. if it takes revenue from other toys, then it's okay but not if its own themes got killed in the process.

[vynsane]

this is very short sighted view. a set sitting on the shelf = another set not being produced by the TLC factory. TLC has drastically improved it's inventory management such that you hardly see overages these days. you won't find too many sets on clearance, outside of the black friday sets.

in the end, the lego original themes will sit on the shelves unsold and that means a lot of the production costs like mold, design, designers, graphic artists cost for box design, etc. won't be recouped. it's actually worse off for TLC if LSW cannibalize its other themes. if it takes revenue from other toys, then it's okay but not if its own themes got killed in the process.

That's only if no one buys them, which is pretty much not possible (because if no one else does, I will buy them ;)). I have documented proof, from a co-worker, where he brought his kids (who are all into LEGO) into NYC to go to the huge TRU in Times Sq. They had a BOGO50% sale going on at the time, and his son had saved up a LOT of allowance to buy some LSW sets (his favorite). My co-worker used the opportunity to teach him a lesson in value, explaining that other LEGO themes had more pieces for less money, meaning he could buy even MORE and the kids eyes absolutely LIT UP. He went about doing as much math as he could and used every last penny he had on non-SW LEGO sets.

[legitimatealex]

I'm gone for an hour out to lunch and this thread gets lit up like a Christmas tree!

LEGO probably would be better with dropping the Star Wars theme. It would be a devastating loss to all the LSW fans out there but it does seem like LEGO is focusing too much on Star Wars these days. They keep repeating sets. Let that settle on you for a moment. This isn't a 'repeat sets because they were great sets' repeating sets like when they re-released the Western Fort, this is 'let's repeat the set because...well can you think of anything else to do?' IE: The AT AT Walker that they have done a bajillion times now, Luke's Landspeeder, Slave I (which actually is awesome), the Snow speeder and every set that has been reproduced more than THREE TIMES.

The summer release of LSW had what, 6 or 7 new sets? How many did Atlantis get, 4? What about the new Space Police, a whopping 3! Where are all my new City Sets? New Castle sets? They're all losing it to LSW.

Plus there are so many Lego Star Wars sets compared to other lines that could use more sets. Have you seen in your local stores exactly how much Shelf Space is taken up by all the Star Wars sets? My Target is definitely at 50% or more for LEGO Star Wars.

I could rant more about LEGO Star Wars except that I really like it. It is definitely the most expensive line though. If I do the math for the piece count inside I can never justify it. I end up looking at the characters I want and then sucking it up and getting the set. This is why I own two magnet sets from the Star Wars line. I really wanted the characters. Gah.

[natelite]

That's only if no one buys them, which is pretty much not possible (because if no one else does, I will buy them ;)). I have documented proof, from a co-worker, where he brought his kids (who are all into LEGO) into NYC to go to the huge TRU in Times Sq. They had a BOGO50% sale going on at the time, and his son had saved up a LOT of allowance to buy some LSW sets (his favorite). My co-worker used the opportunity to teach him a lesson in value, explaining that other LEGO themes had more pieces for less money, meaning he could buy even MORE and the kids eyes absolutely LIT UP. He went about doing as much math as he could and used every last penny he had on non-SW LEGO sets.

exactly. your story is the perfect example of how LSW sets cannibalize the regular lego sets. his allowance is spent on LSW sets and any remaining money left is spend on non-LSW sets. if TLC raise prices on LSW sets, his allowance will go entirely towards LSW sets. as i said before LSW has poor substitution, so it won't be cannibalized by other lego themes, or by other SW toys (mattel or hasbro) for that matter. of course this means TLC can raise price for as much as it can...whether they should is another matter entirely.

and your point about if no one buys them then you would...is a funny one. if only one set, of course i don't doubt you have the money to buy it. i kinda doubt you can single handedly purchase 10,000 unsold sets or even 100,000 unsold sets. if TLC has good inventory management (which it does now), and only produced 1,000 sets. still the cost of producing the 1,000 is high since the molds, the designer's salary, the graphic artist's salary, the box printing, etc. costs are only spread through 1,000 sets. in the meantime, the $$$ earned on the LSW sets is being shared with lucasart in the form of licensing fees. and in a business plan review, the short-sighted analyst might just decide to cut the poor selling theme and meanwhile decided to increase the production of LSW sets thereby worsening the condition.

might i remind you that your purchase of an unsold retail set hinges on your expectation to resell the set in the secondary market. if not for one set, then definitely for 10,000 sets. let me just say right now that the lego secondary market is experiencing a bubble. prices will drop at some point when the end consumers can no longer support the resellers. you know the market is experiencing a bubble when everyone's grandma's cat has a set which they intend to resell. exactly the same condition which led to the housing bubble.

at first i didn't know what LSW price increase will do to the market but after a few years of observation especially during 2008 and 2009 when most luxury consumption dropped, the spending on LSW sets increased. TLC reported net increase in sales mostly on the back of LSW sets. if you check the BL or ebay market, the same story is repeated there. if the bubble pop, i think not only will the resellers suffer, but TLC will also suffer. TLC is effectively front loading the spending right now. any demand in the future is being replaced by current spending.

it's easy to see the tree and not the forest. if you step back a little, you'll see what i mean about cannibalizing and about what the original themes are suffering with the increase in LSW prices.

[toystest]

I'm gone for an hour out to lunch and this thread gets lit up like a Christmas tree!

Shhhhhh. he's back!

[toystest]

exactly. your story is the perfect example of how LSW sets cannibalize the regular..<cut>...what the original themes are suffering with the increase in LSW prices.

there is one item you are overlooking. By having the SW theme, TLC is also pulling in a certain amount of sales, that would normally not be made, from SW fans. Without more details on what percentage licensing fee they pay Lucas Arts and how many additional sales they sell to SW fans (not per definition Lego fans) I think it is hard for us to truly make a call. Lego has been keeping this license going and have said they are going to renew it. I assume that they have done the research and renewed it for a good reason.

[vynsane]

LEGO probably would be better with dropping the Star Wars theme. It would be a devastating loss to all the LSW fans out there but it does seem like LEGO is focusing too much on Star Wars these days. They keep repeating sets. Let that settle on you for a moment.

While the repetition of sets is puzzling, LEGO would definitely NOT do better dropping the SW theme. It's just too lucrative for them, regardless of how much the license costs them. It single-handedly brought them back from the brink of bankruptcy.

The summer release of LSW had what, 6 or 7 new sets? How many did Atlantis get, 4? What about the new Space Police, a whopping 3! Where are all my new City Sets? New Castle sets? They're all losing it to LSW.

Atlantis was a new winter 2010 theme, the main push was on the first outing - the summer Atlantis sets are augmentation to it. SP3 has been a year in the running totaling 15 sets now - 5 of which were released this year (Raid VPR and Smash 'n Grab were released this past January) meaning they're right on track with last year (judging by 10 in one year = 5 in half a year). Meanwhile, look at how many Kingdoms (7) and World Racers (6) sets (two brand-new themes) were released this summer. It seems to me that original themes have their releases spread out over four seasons, whereas LSW is only released twice a year. This is smart on TLG's part, as it lets the gap between SW releases be filled by non-SW buys.

your story is the perfect example of how LSW sets cannibalize the regular lego sets. his allowance is spent on LSW sets and any remaining money left is spend on non-LSW sets. if TLC raise prices on LSW sets, his allowance will go entirely towards LSW sets. as i said before LSW has poor substitution, so it won't be cannibalized by other lego themes, or by other SW toys (mattel or hasbro) for that matter. of course this means TLC can raise price for as much as it can...whether they should is another matter entirely.

I guess I wasn't clear - my co-worker's son bought ONLY non-SW sets because they were a better value for his hard-saved money.

and your point about if no one buys them then you would...is a funny one. if only one set, of course i don't doubt you have the money to buy it. i kinda doubt you can single handedly purchase 10,000 unsold sets or even 100,000 unsold sets.

Actually, that was mainly a joke. I rarely buy when things first come out, and nearly always wait for sales. I don't have the means to buy everything in bulk.

might i remind you that your purchase of an unsold retail set hinges on your expectation to resell the set in the secondary market. if not for one set, then definitely for 10,000 sets.

No, actually, it doesn't. I may pick up one or two more of certain items to resell if the opportunity arises, but it's not a regular occurrence by any means - in fact the most recent example is the first time I've ever done that. I really meant I would buy it for myself.

it's easy to see the tree and not the forest. if you step back a little, you'll see what i mean about cannibalizing and about what the original themes are suffering with the increase in LSW prices.

As I pointed out above, the greater picture is how many releases there are in a year, how they're spread out, and how they're priced - looking at the forest, they seem to plant a lot of SW sets in a localized area and then in between plant a lot of other themes sprinkled about, less sets at a time, but more often. It seems to me to be a great plan, really.

MOD NOTE: I've split this from the original topic, as it's a derailment, but a much more interesting and lively discussion.

[legitimatealex]

I cede my points on LSW detracting from the other lines but stick to my other ones. Also I'm not sure I can count impulse sets as real sets because they're one step above key chains. They're essentially there to sell minifigures that don't fit anywhere else, or to just include some accessory that doesn't fit anywhere else.

[natelite]

I guess I wasn't clear - my co-worker's son bought ONLY non-SW sets because they were a better value for his hard-saved money.

As I pointed out above, the greater picture is how many releases there are in a year, how they're spread out, and how they're priced - looking at the forest, they seem to plant a lot of SW sets in a localized area and then in between plant a lot of other themes sprinkled about, less sets at a time, but more often. It seems to me to be a great plan, really.

lol...okay, i guess i see what i wanted to see.

doesn't matter how they sprinkle the themes. when families go to the store to buy, you can be sure there are LSW sets to choose from at any point during the year. families don't go to store as soon as a theme is out, so the point about when the sets are released is moot.

by increasing the price of the LSW sets, TLC is effectively feeding the bubble frenzy. i.e. if consumers expect price in the future to increase, they will consume now or buy now for resale later. at some point, fatigue is going to set in....at which point the bubble pop creating excess supply (both from TLC and from the resellers) and virtually no demand because demand (i.e. end consumer) is bankrupted by the frenzy bubble. the marginal consumer will require massive price cut in order to have any incentive to consume further.

i think TLC should really cut down on the number of LSW sets per year from like 11-15+ to only 6 or fewer. keep introducing magnet sets to drive out resellers, at least for LSW minifigures. when you have consumers who buy sets to consume (instead of resell or scalp) you have less problem with a bubble forming. selling magnet sets drive out most scalpers since the most valuable components of a LSW set are the minifigs. fewer sets = fewer set collectors = more money to spend on other themes. more magnet sets and fewer sets = more sales based on merit of the set and lower resale value for the sets vs original msrp.

[vynsane]

I'm not sure I can count impulse sets as real sets because they're one step above key chains. They're essentially there to sell minifigures that don't fit anywhere else, or to just include some accessory that doesn't fit anywhere else.

No, impulse sets are there to get you intrigued in a new series without shelling out a lot of money - I got the Atlantis Sea Jet and Wreck Raider as a lark, thought they were cool looking and got the Typhoon Turbo Sub directly as a result of those purchases.

[legitimatealex]

I'm not sure I can count impulse sets as real sets because they're one step above key chains. They're essentially there to sell minifigures that don't fit anywhere else, or to just include some accessory that doesn't fit anywhere else.

No, impulse sets are there to get you intrigued in a new series without shelling out a lot of money - I got the Atlantis Sea Jet and Wreck Raider as a lark, thought they were cool looking and got the Typhoon Turbo Sub directly as a result of those purchases.

I bought the Wizard and Jester set because I wanted the Wizard and the Jester. I got the two Atlantis Impulse sets because I wanted another diving suit and a manta guy. I got the Traveler because I wanted his camera. I got the policeman impulse set because I wanted the dog. I also wanted that street cleaner but I couldn't find it anywhere anymore. I wanted him because he had a nice accessory.

This one might be hard to argue but from my shopping perspective the impulse sets are fluff with little bits of accessories that usually don't end up elsewhere in some sets.

[slacker]

There are somany good points on this thread. One thing I want to ask is how many new pieces are made every year? Molds are pretty inexpensive. The recovery for R&D is usually paid off after the first run of the product. Designers don't work on just one product a year. if they did, they would be out of business. Now this is based on how we function at work. I'm sure Lego is more efficient than we are.