Subject:
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Re: Article text
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Newsgroups:
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lugnet.general
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Date:
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Mon, 1 Mar 2004 18:58:11 GMT
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Viewed:
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1000 times
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In lugnet.general, Ken Nagel wrote:
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Of corse I’ve heard of supply & demand. I’m the first to admit the castle
sales slowed. That left Lego with two choices... 1)redesign the set
2)increase the demand. One of these choices is signifgantly more costly.
Since they are whining about monetary loses the sensible thing to do would
have been to make more people aware of the original product thus increasing
the demand.
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Both cost considerable amounts of money. In fact, I’d be surprised if designing
a new Hogwarts didn’t cost significantly less than a huge advertising campaign
would (and anything less isn’t going to have the impact that you seem to
desire). Major advertisers are capable of spending millions of dollars per day
just to push their product, and if you want to really hit a nation-wide audience
(much less a world-wide one), you’ve got to play with the big boys. Hogwarts
Castle costs $90 in the US. Retail products generally have a 50% markup over
manufacturer price, so that means about $45 per Hogwarts goes back to TLC.
We’ll be (very) generous and pretend that half of that is clean profit about
production/packaging/shipping costs. That’s $22.50 per set that would stick
around after expenses. At that level of profit (which is unreasonable), they’d
need to sell about 45,000 copies per day just to recoup their investment on a
measly $1 million/day advertising campaign without actually making any profit.
The entire run of the set was only about 22 times that amount, which means that
a 1-month ad campaign would have exceeded the amount of revenue that they pulled
in with the entire original run. When you consider that they’re probably only
pulling in a few dollars of profit per Hogwarts, they start losing money in
under a week. And that assumes that the major store chains would even bother to
reorder it (and, since they probably wouldn’t, all that advertising would be
wasted money). Or they can invest a much smaller amount of money in designing
and producing a completely new Hogwarts that will attach to the original
section, and know that they’ve got a 100% unsaturated market that should buy
well enough copies to turn a profit.
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You don’t seem to know as much about business as you think you do. Keeping
the original set would have greatly increased the profit margin while all the
new surrounding sets would have kept the buy everything crowd ocupied. I
don’t think saving themselves from a very poor marketing plan would require
calling every family.
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You don’t seem to understand the economics of selling an expensive toy.
Hogwarts nearly broke 1 million copies produced. Impressive, huh? Well, for a
$90 toy, yes it is. However, as of a year ago, the BIONICLE line has sold as
many as 34 can/pod sets per minute (number quoted to me at Toy Fair 2003), which
equates to roughly the same dollar value as the entire Hogwarts run in about 20
days, and an average of about 1.5 million total copies of each can/pod set
produced. And, given the way things usually work, a higher percentage of profit
on all of those sets. Judging by my own experiences as a kid, the biggest value
of the larger $90+ sets is that they generate a lot more interest in the rest of
the line, and thereby cause the smaller sets to sell a lot better. In other
words, it’s advertisement that you get paid for instead of the other way around.
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http://news.lugnet.com/general/?n=44690
“profits stagnated because of the higher cost of producing the new products.
The company now plans to stop making the electronics and movie tie-in
products...”
Concrete enough?-Ken
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Nope. TLC trumps Business Newswire when it
comes to statements about what products they will or will not continue to
produce, and they’ve confirmed that SW, HP, and mindstorms are all still part of
TLC. Besides, you pay for the full term of the license whether you actually
produce anything or not. Dropping movie licenses like those at this stage would
be a horrifically bad business decision. They’re both selling very well (top 5
best-sellers in 2002, as I keep mentioning), they’re both profitable (despite
what Business Newswire assumed from the various quotes that they included), and
they’ve both got years left to go before the licenses run out.
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Message is in Reply To:
 | | Re: Article text
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| (...) Of corse I've heard of supply & demand. I'm the first to admit the castle sales slowed. That left Lego with two choices... 1)redesign the set 2)increase the demand. One of these choices is signifgantly more costly. Since they are whining about (...) (21 years ago, 1-Mar-04, to lugnet.general, FTX)
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