The achievement of numerous LEGO License agreements in recent decades has greatly contributed to the widespread triumph and recognition of The LEGO Group on a global scale. Licensing deals have proven to be highly effective marketing tools, as they can greatly boost product visibility. As such, licensing presents a valuable opportunity for businesses to expand into international markets and raise awareness of their own products.
For every USD a manufacturer invests in a license, it saves part of the marketing costs in return. This is because licenses with cinema, television, computer game producers or car brands bring with them a high degree of brand awareness. These costs of the licensee (The LEGO Group) are passed on directly to consumers, making the products more expensive.
The fast-moving business of licensing involves various risks for the toy industry, and yet hardly any manufacturer can avoid it today, because the licensing business is extraordinarily attractive for sales and margins. Remarkably, The LEGO Group itself has managed to turn the tables. For years, other companies have been acquiring licenses from The LEGO Group to promote their products with the brand (e.g. Adidas).
What LEGO licenses are there?
The LEGO Group has a number of licensing partnerships:
BMW, McDonalds, Ferrari, Arla, Maersk, Exxon, Danone, Nesquik, Deutsche Bahn, Weetabix, Esso, Star Wars, Harry Potter, Avatar, NHL, NBA, Discovery Channel, Little Robots, Ben10, Marvel and DC Comics, Lone Ranger, Sponge Bob, Bob the Builder, Thomas and His Friends, Pirates of the Caribbean, Lord of the Rings, The Hobbit, Bugatti, Spielbergs Studios, Galidor, Ford, Coca Cola, Ferrari, Indiana Jones, Prince of Persia, McLaren, Speed Racer, Vestas, Disney Cars, Mickey Mouse, Mercedes Benz, Toy Story, Lamborghini, Nvidia, Julus & Friends, Porsche, Tine, Little Forest Friends, Winnie the Pooh, ran Fußball, Telekom, Minecraft, Back to the Future, Turtles, Netflix, Volkswagen, various airlines, various ferry lines and Disney Fairy Tale.
The world’s largest licensor is the Walt Disney Company, which also owns Marvel Studios and Pixar. The U.S. entertainment giant secured the rights to Star Wars in 2012 through its multibillion-dollar acquisition of Lucasfilm. Productions such as Star Wars, Frozen or Cars are hardly missed by any well-known toy manufacturer.
It is well known that The LEGO Group signed the first licensing agreement with LucasArts and Star Wars in 1999. This licensing agreement has now been in place for over 20 years and is one of the most important licensing agreements in the history of The LEGO Group. Whenever a new movie, series or book is released, The LEGO Group designs numerous new LEGO Star Wars sets. In turn, these generate strong sales growth for The LEGO Group.
Why LEGO licenses?
Licenses bring attention, tell stories and convey emotions. Every now and then, The LEGO Group also tries to invent and tell such stories itself. LEGO Ninjago, for example, is one of these own creations. In the meantime, Ninjago comprises over 400 sets, there are cinema films and lots of merchandise. Ninjago is certainly the most successful own license of The LEGO Group.
As the release of new LEGO sets increased in recent years, the number of LEGO sets with licensing agreements increased at the same time. In 1999, the first year, only 29 LEGO sets had licensing cooperation. In 2020, on the other hand, there are already 260 LEGO sets. In the year 2020, the share is 39.5 percent. In this period there were always slight downturns, but the overall picture shows a clear trend that the share of LEGO sets with a licensing agreement is steadily increasing. Overall, the share has averaged 38 percent since 2010.
A company like The LEGO Group is happy to pay for the right of use. The right of use is acquired either for a fixed period or for an indefinite period. Usually, LEGO license agreements are passed on to the customer, with the product becoming correspondingly more expensive.
Therefore, it is often said that LEGO sets with LEGO license agreements are comparatively expensive. The main reason for this is, of course, the additional costs due to the license itself. These arise from the transfer of the rights of use by the licensor (e.g. BMW) to the licensee (The LEGO Group). There is no information about the license rates. It is unknown whether flat fees, minimum license fees or cost sharing are agreed upon.
To evaluate how high the share of license costs in the total costs of a LEGO set is, one ideally compares two identical LEGO sets each with and without a license agreement. For an optimal comparison, both LEGO sets should have the same individual bricks, parts, minifigures, e.g.
Although The LEGO Group has hundreds of LEGO sets with and without LEGO license agreements, there are no LEGO sets that are identical. All LEGO sets that could be considered for such a comparison ultimately differ too much in certain factors to make the comparison representative. Instead, we want to look again at the price per brick for LEGO sets with and without a license agreement and taking inflation into account.
For optimal comparability, certain themes have been omitted. The reason for this is that some themes have particularly high price-per-brick ratios due to their nature (e.g., few individual bricks and parts, high proportion of technical parts, different types of figures, etc.). These include Duplo, Galidor, Dimensions, Sports, Collectible Minifigures, Baby, Scala, Boost, Mindstorms, Serious Play, Dacta, Fabuland, Service Packs, Forma, Powered Up, PreSchool, Power Functions, Ben10, Primo and Education.
A look at the LEGO license facts
For the period from 1999 to 2020, data points are available for a total of 5,382 LEGO sets. Of these, 1,678 LEGO sets, or 31 percent, have a licensing agreement. This contrasts with 3,704 LEGO sets, or 69 percent, which are not subject to a licensing agreement. For LEGO sets without a licensing agreement, we see a sharp drop in average price-per-brick since 1999.
The average price-per-brick was $0.41 per brick in 1999, down 59 percent or $0.16 per brick in 2020. This is no surprise, as it has already been explained that The LEGO Group has ensured that the average price-per-brick becomes more favorable by improving production, materials, structures as well as organization in the past. On average, the price-per-brick for LEGO sets without a LEGO license was 0.25 USD per brick.
More surprising, however, is the finding that the average price-per brick for LEGO sets with a licensing agreement has been roughly unchanged or slightly declining since 1999, averaging $0.18 per brick and fluctuating at times between $0.12 and $0.31 per brick. In terms of price per brick, LEGO sets with a license agreement were comparatively cheaper than LEGO sets without a license agreement in the past.
Today, however, there is a persistent belief that LEGO sets with licenses are (significantly) more expensive than LEGO sets without licenses. This is not least due to the fact that LEGO sets with license agreement consist of significantly more regular bricks and parts and consequently have higher MSRPs.
FAQ
What was the first licensed LEGO theme?
The LEGO Group signed its first licensing agreement with LucasArts and Star Wars in 1999, making Star Wars the first LEGO licensed theme.
When did LEGO start licensing?
The first LEGO license signed by the LEGO Group was with LucasArts and Star Wars in 1999.
What’s the biggest LEGO License?
The world’s largest licensor is the Walt Disney Company, which also owns Marvel Studios and Pixar. The U.S. entertainment giant secured the rights to Star Wars in 2012 through its multibillion-dollar acquisition of Lucasfilm. Productions such as Star Wars, Frozen or Cars are hardly missed by any well-known toy manufacturer.
You are interested in LEGO as an investment? Then have a look at our article about investment costs or stickers/printings.
What’s your favorite LEGO License? Let us know in the comments!
