Wednesday, September 12, 2012

LEGO Follow-up

You guys sent in some interesting LEGO-related e-mail, so let's take a look.

First, from Matt Perrin:
I just wanted to chime in on something Lego quality related. Last Christmas "Santa" brought my son one of those Lego boardgames (Wild Wool) that they have now. The games themselves are not the deepest experience but to a 6 year old with a fascination to learn how things are built, it's been great.

So, my son gets this boardgame but we don't actually get around to opening it up and playing it until a rainy day in March. And, tragically, we are missing two not so critical pieces. I assumed we were kind of out of luck since it had been months since we bought it and we didn't have a receipt. I follow the steps in the game's manual which points me to the Lego website to report the missing pieces along with my personal info. Three hours later I get an email saying they were going to send us the replacement parts. Three days later the parts appear in the mail. Now that kind of blew me away. For a $15 game, Lego shipped us the replacement parts, two tiny Legos, using Priority Mail? Mind = blown.

Next, from a very intelligent person from another continent who wishes to remain anonymous:
There are certainly lessons to be learned here for the gaming industry.

I did some work for a few years with the toys industry locally and got to meet a few people from both Lego and their competitors, and one of the interesting things when we presented data to them was they were always trying to understand how Lego was different from say a Mattel or Hasbro, and if their company could be like Lego, not in a product sense but could some of the strategy be applied?

The biggest reasons always came back to a few core principles – the first being the “newness” or “excitement” of Lego. Every year they have a number of completely new ranges (eg Ninjago, Alien Conquest, the young girls focused Friends range), while other companies are trotting out the same dolls with a new dress or an action figure with a new accessory. A key point is that some of these new ranges are usually released when there isn’t much else new in the toy market. Ninjago for example, came out in January 2011. Can you imagine launching a new toy range just weeks after Christmas? Most companies wouldn’t risk it, and a lot of retailers will tell you you’re crazy, but if you’re the only one doing it you can benefit.

I always find it interesting that no major publisher tries to launch anything of note between April-late August in games outside of Rockstar or Blizzard. I’m sure Assassins Creed 3 will do fine this year, but I often wonder what it would do with a full month to itself in May, rather than living in the shadow of a Call of Duty or a Skryim. I know there are often financial reasons for having a title in a specific period to book revenue, but surely there would be a benefit for giving some titles a bit of breathing space and keeping them away from the Q4 insanity?

Lego is also great at hitting multiple price points, having something at $10, $20, $30 etc up to the giant $400+ sets like the Death Star/Taj Mahal. Yet for gaming there’s no mid-level or budget range now for big publishers or developers, who seem to be afraid of being associated with anything that isn’t AAA.

Lego is also additive. Every piece builds up someones “Lego universe”. So you’re not necessarily buying Lego to replace a previous set, but buying it to expand their world, even if they’re buying a different series since the blocks are universal.

Again we have the gaming comparison of expansion packs & DLC. Skryim DLC is probably the closest thing, adding to its existing world. But so much DLC misses the mark – skins, weapons, characters, standalone missions. Then of course you have something like Minecraft, which is basically digital Lego for adults, in which the world is always expanding.

This quote particularly hit on something I’ve been thinking about for a while.

“Unfortunately, the gaming industry has rapidly turned its back on both, although there are exceptions (thank you, Bethesda). Instead, they want you to buy DLC. Lots and lots of DLC. They want total content control. To the gaming industry, I'm just a revenue stream.”

The thing that I’m not seeing mentioned in many places (if at all), is that with a lot of companies apparently transitioning to Free To Play or In App models, the focus of design and marketing hasn’t really changed (yet). The problem is they’re no longer in the business of selling, they’re in the business of retention. Are any of them prepared for it though? Look at how well current games retain their users, and that is after you have people investing up to $60 in them on day one. Now they have to deal with people who have not invested any money, just their time, who can (and will) cut bait when they see something they don’t like. I can imagine massive levels of churn for these companies who haven’t got their head around how to retain users other than setting up the clichéd energy paywall.

Maybe I’m the one missing it and they don’t need to change, with advertising and the 1% who buy $1000 items enough to sustain them, but I just don’t see F2P or IAP being the holy grail that some companies like EA think it will be, and it appears to be on the downturn for companies like Zynga. The focus will only be on the revenue stream as you state, never on cultivating a strong user experience or community that is behind titles that do successfully retain their users (Team Fortress 2, DOTA/LOL, Minecraft, Blizzard titles).

Here’s another Lego story for you that one of their senior staff told us. For 2011 one of their strategies for some ranges was to have smaller boxes with more pieces inside at a lower pricepoint. Keep in mind that this was not just for their core range like City, but also for licenced properties like Star Wars. So a $120 set may come in a smaller box with more pieces for $100. Can you imagine anyone doing that in gaming? Instead we have companies offering less for more and holding back extra content. Lego know that their customer is valuable and worth keeping for the long term, while gaming companies think short term and that their customer is a sponge to be constantly squeezed with no value other than what they can spend.

The point on licencing is also a good one, and again something to learn from in that they are very successful with the Star Wars and Harry Potter series, but they don’t rely on them. Their own ranges like City, Ninjago, Friends, and Bionicle, are often some of their best sellers and they could probably survive without the licenced products that usually have a limited shelf life. Something like the City range is timeless and can always be easily refreshed.

That is a terrific, thoughtful analysis.

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