Danish toy giant Lego is building on its metaverse push by partnering with gaming facilitator Epic Games to target digital markets.
The Lego Group is collaborating with gaming engine company Epic Games to launch a metaverse-driven initiative targeting digital markets. According to reports, the popular Danish toy company seeks to diversify its entertainment offerings portfolio with this joint initiative. The Lego-Epic metaverse project entails a sprawling virtual world driven by the American video game and software developer’s resources.
According to the Financial Times, Lego is preparing to present details of its metaverse initiative with Epic Games. The interlocking toy brick company’s strategy to continue increasing market share and growth streak is establishing a presence in virtual worlds. The Denmark-based toy line could stoke online brand recognition by offering Lego products to customers in such markets.
Lego chief executive officer Niels Christiansen weighed in on the metaverse development, saying:
“We are doing a lot of things on the digital side. That is where we are upping the investment. We know very well how to immerse consumers into the Lego universe in stores. We’re working very hard to create that feeling of getting into the Lego brand universe also digitally.”
This development is not Lego’s first venture toward constructing a digital space for its fanbase. Last April, the Danish toy giant also partnered with Sony through a $2 billion investment in Epic Games. The agenda was to construct a metaverse platform to endear the toy brand more with kids in a safe and secure format. At the time, Lego described the digital space as specifically designed for younger users and “family friendly.”
Lego-Epic Metaverse Development Comes amid Toy Firm’s Sustained Profitable Run
Lego’s sales and net profit have both increased by two-thirds over the past three years, initiated by the Covid boon. During the pandemic, increased interest from children and adults in its easily-recognizable plastic bricks spurred Lego’s incredible growth. The Danish toy company also experienced significant growth in 2022, with revenues soaring 17% compared to 2021. Last year, Lego raked in a revenue haul of $9.3 billion, with net profits also rising 4% to $2 billion despite macroeconomic headwinds.
Lego’s incredible growth trajectory over the past three years also sees the toy brand leave its American rivals Mattel (Nasdaq: MAT) and Hasbro (NASDAQ: HAS) behind. Last year, Mattel realized revenues of $5.4 billion alongside net profits of $400 million. Meanwhile, Hasbro recorded sales of $5.9 billion against relatively tame net earnings of $200 million.
Lego’s sales surge was primarily due to strong numbers from Western Europe and America, as consumer sales grew 12% in 2022. However, the prominent Danish toymaker projects a “normalization” of growth in 2023 characterized by single-digit gains. Nonetheless, Lego still expects to grow faster than the toy industry. Further expounding on this development, Christiansen said:
“We expected that the growth would normalize into this year, and it has done so. We will continue to invest behind our momentum. Historically, the toy industry hasn’t been too cyclical.”
Lego is preparing to open factories in Vietnam and the US next year and in 2025. This goal seeks to leverage growth beyond the privately-owned toy company’s home region of Europe.