How Disney lost its brand ownership of 'magic' and 'tech storytelling' to LEGO
Posted by Huw,
This article by Bryan Jensen was first published on LinkedIn earlier this week and has been reproduced here with permission. It's a fascinating read if you have an interest in toys-to-life games:
Last week Disney suddenly announced an end to its Disney Infinity toys-to-life (TTL) video game products (only three years old in the market) together with closing another of its subsidiary studios in the Disney Interactive family: Avalanche Software in Salt Lake City.
What initially shocked the gaming industry is that Disney has made over three billion in sales with this franchise. Yet their recent loss of stock value can show that even with three recent movie blockbusters in Star Wars: The Force Awakens, Zootopia, and Captain America: Civil War—with YOY quarterly growth of 2% and $2.1 Bn in profits—not making as much money as analysts predicted demonstrates the cliché that no good deed goes unpunished.
Before we merely accept a story of the creators of these Disney Universe mash-up products as the victims of the Hulk of corporate greed, I offer this unfortunate news as an opportunity to think about the challenges of integrating brand promises, product value, and user experiences. We might then see that there is some logical rationale (shortcomings to Disney's corporate-management-by-profit-center choices aside) driving why the House of Mouse is taking their battle damage now—and what we can learn from it.
Brand Promises in a Crumbling City
What "promise" does Disney stand for? Disney built its brand reputation around owning two strong concepts: magic and family experience. The Walt Disney Co describes itself as having "technology powered storytelling at the core".
Disney Infinity 1.0 was built on properties instantly recognizable as Disney's likeToy Story, Monsters Inc., Cars and Pirates of the Caribbean. Though not the first TTL video game system to require the purchase of extra toys and add-ons to then digitally import into enhancing the video gaming experience, Infinity was the first to leverage highly recognizable IP brands. As Activision created a billion-dollar market with its first-to-market Skylanders, Disney entered the fray with over $100 million development to deliver gorgeous mini-sculptures of their property characters envisioned in a fresh kind of Japanese-like soft-and-sharp-edged design. Beside high quality production, this also helped the different character properties look unified. In addition to console gaming, Infinity crossed over to grab those users who wanted to engage via tablets— and eventually Apple TV— which seemed brilliant. Infinity also upped the quality ante and made Appleraise the size of files their iOS platform supported.
Yet like the city of Sokovia in Avengers: Age of Ultron, the ground has been crumbling around video game console sales. And for more crumble: In March of this year, buyers of the new Infinity Marvel figures found none of them working on AppleTV.
Add that Euromonitor was predicting that 2015 would be the toys-to-life segment's peak, followed with a slowdown in 2017, and stagnation setting in by 2018, and you can begin to see some explanation. In terms of the BCG Matrix—one of the ways of considering the life cycle strategies for a product line— even though Infinity was a big cash cow it was headed towards becoming a dog, not a star. Why? Because the overall market wasn't growing enough to allow their loss of market share quickly to a new market entrant.
LEGO Dimensions Conjuring New User Experience Magic
Disney had continually gathered complaints that their universes didn't really cross-over. Sure, you could buy characters and mix them up in a Toy Box environment where Wreck-It Ralph could rough it out against Rapunzel. But interactive stories were contained to specific sub-universes. As Marvel joinedInfinity in 2.0 and Star Wars in 3.0 these walls became more rigid. Your daughter might love Merida (from Brave) but Merida couldn't lead Iron Man against Darth Vader within a Toy Story-themed story-level. Disney's internal licensors wanted users not to co-create story experiences but consume them within these boundaries.
Yet when LEGO Dimensions debuted in fall 2015, it was built around cross-over teamwork. You could mix and match any character you wanted. Dr. Who could help Gandalf and Wonder Woman complete a Wizard of Oz story-level. And all characters had multiple cross-over powers. If you don't have Bennie the astronaut from The LEGO Movie to solve an in-game puzzle, you possibly might have Doctor Brown from Back To The Future with the same powers. Depending on what characters the user mixed and matched the game is replete with easter egg surprises from unexpected, funny dialog to hidden bonus worlds (like the city of Bedrock from the Flintstones).
Brand Equity, Pricing Strategy, and Core vs. Critical Integration
In a price competitive space like toys-to-life Disney has priced single 4" figures around $14–15 MSRP. They routinely have been sold at 30% off, which is common for sales promotions in the space. Even 50% off promotions were not rare. Such price-promotion strategy is okay for maintaining incremental sales with buyers who already have a habitual buying pattern or for short-term promotion to users of competitive products. Disney's difficulty in maintaining high price points for a specialty product vertical without attracting enough new players to TTL showed that their character brand equity was not as strong as needed. With the tech requirements of a chip inside the figures, coupled with their high expectations of production quality, Disney ended up gold-plating a quality level scaled above a market not growing enough to help offset the reduced margins. Furthermore they leveraged their brand power to make retailers buy high inventories—so when Infinity 2.0 figures began plugging shelves, it reinforced an impression that it wasn't popular.
Disney may have made gorgeous Infinity figurines—which I loved collecting—but toymaking is not its core competency. (Now they are taking a $147 million charge for inventory, knelling the death for Disney video games except as licensed properties.) Meanwhile LEGO already has toy production verticality mastered.Dimensions fully complements their core manufacturing and play system: Kids upgrade little vehicles for the figures by earning in-game rewards, but they can actually play and create things with the toys apart from the game.
One thing about branding is that the more one's product is vertically integrated (i.e., owning control of the process from inception to manufacturing), the more that user experience is a strong driver of the core brand expectation. LEGO in its video games and movies —critical drivers of extending and supporting the core brand promise and experience— is not focusing on the critical, but their core of wide property licensing and producing toy awesomeness. For critical measures they are trusting close partnerships with the Warner media family to still make sure the user experience fits together.
Thus when LEGO entered toys-to-life gaming late with base figure sets (that also included a miniature themed Lego vehicle) for $13 MSRP, they had the integrated toymaker power to deliver more core product value and better absorb the competitive discounting that the video game space requires.
Hulkbuster: Customers with Experience Expectations.
One thing that has commonly dogged the toys-to-life space is the high ongoing participation expense. Where buying upgrades for in-game improvements is not new to video games, parents didn't always immediately perceive the value of buying a new toy for each new character a child wanted to play with in-game. Especially a shock to Disney's potential share of parents's wallets if they had, or were, already buying into another TTL system for their children.
Thus LEGO anticipated and delivered on tremendous cross-over IP power, and allowed it to more fully reflect a different kind of storytelling and play experience. If anything, LEGO, now the world's largest toymaker, owns the words "play" and "fun" and "create with your imagination". Not only that, The LEGO Movie that they had teamed with Warner Bros to release in 2014 set the cross-over universe storytelling stage for their partnership on Dimensions. Though serious risks still remain in the TTL category, for user experience LEGO-Warner has functionally captured the ownership of "magic" and "technology storytelling" away from Disney.
Combined with the expanded physical product play value, and facing retail discounts they were better prepared to absorb by also having a strong direct-to-consumer relationship, LEGO competed powerfully for the 2015 holiday season to outsell Infinity 3.0 software. While the quality of the actual in-game graphics ofInfinity garnered higher praise, LEGO appears to have delivered the better value curve: They won strong launch position to the space even though Disney still appeared to have the majority of market share. When retail facings were shrinking this spring, and Marvel Civil War Infinity releases failed to be implemented for AppleTV, the writing was on the wall that Disney had lost much mojo in 2015.
“After a thorough evaluation, we have modified our approach to console gaming and will transition exclusively to a licensing model. This shift in strategy means we will cease production of Disney Infinity, where the lack of growth in the toys-to-life market, coupled with high development costs, has created a challenging business model."
This month's release of Disney-themed LEGO Collectible Minifigures —which have been selling out at retail— presages a strong possibility for a successful introduction of licensed Disney properties to Dimensions, especially since LEGO already licenses Star Wars. Meanwhile DC Comics has established a competitive TTL foothold to Marvel in the LEGO-Warner team. However, Disney's withdrawal from TTL could signal that Euromonitor's prediction for stagnant growth in a round-about way may become a self-fulfilling prophecy.
Whether the licensee is LEGO or Electronic Arts, Disney has the brand equity to assure revenue for itself, and indirect customers because of the brand and reputation strength of those licensees. Yet for Disney's reputation not only are there limited lingering damages to face depending on how they help the people who have lost jobs through their Disney Interactive studio closures; but with parents, kids, and the "family" and "technology" that their brand promise has stood for, they have given up trust, control and resources to shape the customer experience directly in video gaming. And they have cut off the direct customer relationships these fun experiences add for multi-generational brand loyalty.
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36 comments on this article
Is Lego Dimensions really doing well? Why are they always so heavily discounted?
I might purchase LEGO Dimemsions if Star Wars, Marvel, and other Disney themes come.
Some good points made and an interesting article, I'd like to see more of these sorts of articles :)
Very interesting read.
It just goes to show that even though Disney may be the much bigger brand, LEGO has a better hand in both toys AND video games to produce something much more worthwhile than Infinity.
It is a shame to see Infinity pass, as it was just beginning to improve. However, seeing Disney franchises in Dimensions will be a dream come true to me, and I'm sure it would be to the benefit of both brands if there were to be a partnership for this soon.
One other difference between the games is definitely freedom. I was disappointed that I couldn't play as Jack Sparrow in the Toy Story playset or Perry in the Incredibles playset, for example. However, Dimensions gives you the option to mix franchise characters with worlds and levels even more... Infinity should have learned from that. The tagline was "Infinite possibilities, endless fun" but it didn't really live up to that. Which is sad because, after all, Disney is where dreams come true...
Really interesting article. Great read and great points made.
I thought LEGO Dimensions was going to be better than it turned out to be. I enjoy playing it with my Son on occasion but he rarely goes to LEGO Dimensions before other TTL games. He enjoys 'PLAYING' Disney Infinity much more but he enjoys 'COLLECTING' LEGO Dimension characters more. He asks for more Dimensions Packs than Disney Infinity, yet mins (and hours) spent 'gaming' would be double on DI compared to LD.
It will be interesting to see what boundaries there will be in the next version of LD game if Marvel and/or Star Wars appears on the platform.
Thanks for sharing!
My wife and I decided to not get into Dimensions no matter how much we liked it as even though it has more playability than DI, we knew it wouldn't take long before neither us nor our children bothered to assemble the pieces and just played using the bases.
On top of that, the lack of ability for two parents to play simultaneously with a child (or two) or for three kids to play together was a dealbreaker.
I fear that these things are bound to plague Dimensions just as much as they did DI, and that in all reality, even Dimensions won't last that long.
It comes as a surprise to me that Dimensions is doing well. I have bought perhaps one or two sets at full retail and see them heavily discounted pretty much everywhere. Also, I find the game seriously lacking compared to other Lego games. In my peer group, simply no-one likes the game as a game.
Many levels are simply incredibly tedious and downright boring and kids can easily get stuck. The "mixing of characters from different universes" is forced, since you simply need other minifigs to open up all content. I am still not convinced Dimensions will have a long life-span.
I have been thinking of actually selling the bases, since you do not need the minifigs to play the game and I rather like some of those.
Interesting read. I think another point is that Dimensions has the advantage that many people who won't be interested in playing the game itself are still LEGO collectors, so will still spend money to buy the figures and models included in the packs. This is a draw I can't imagine Infinity having had; although the figures were lovely.
For example, I don't play videogames anymore, and as a result I would have no interest in purchasing Infinity figures, but the Dimensions Level and Character packs do have a certain draw, especially those with exclusive figures. And I imagine I'm far from being the only one in such a position.
LEGO Dimensions are on sale because that's how video games work. Retailers discount video games way quicker than toys, and they fall into the former category. That's why they are always on sale despite doing well.
(Source: LEGO Dimensions rep)
The "infinite possibilities" of DI were realized through the Toybox, not the Playsets. Does LD have a free-build realm analogous to Toybox? If not, that's a major miss, as LEGO has built a reputation around creative building and play.
^^ I suspect videogames have a huge profit margin, as much as 50% maybe, which allows retailers to deeply discount them if they don't shift.
Typically they have a very short shelf life, don't they, before being superseded by the next big thing, so there's always a need to shift old stock.
@Brother Brian As far as TTL games go, I think Dimensions has been rather successful. As the article mentions, deep discounts are not uncommon in this sector. The frequent discounts seen on Dimensions may also be a strategy to garner more market share in a highly competitive market.
Thanks for sharing this article. As a consumer who isn't really in the TTL market, it helped me understand the current situation and Dimension's future prospects better.
LEGO Dimensions follows the same LEGO Video Game style of past offerings only now you can collect physical representations of all the characters used in-game. While Disney Infinity offered up something like the Toy Box, LEGO Dimensions does not need something like this because the formula for LEGO Games is established to the point that many people still enjoy this approach to gaming.
Granted the LEGO Dimensions Gameplay is less involved and offers new limitations to the series because of this gimmick, however I do believe that with the next series we might see more innovation, such as the Disney Infinity Toy Box implemented, though I'm not so sure on that. As you'll recall we've seen some of that style before, most noteably in LEGO Star Wars III and LEGO Indiana Jones 2, you could build things in-game through the level building mechanic and while it was an interesting idea it didn't seem to be executed very well. I for one found those features to be disappointing, limited and just plain frustrating because it was nowhere near the same as grabbing a handful of bricks and starting to build.
What this article tells me is we may be able to see Disney IPs in Dimensions in the future, which would be very interesting. However there is still Series 2 to get through and we haven't seen more than Supergirl and Green Arrow promotional products from that series. (Which I hope will be readily available to everybody, because I can't stand having an incomplete collection.) So while Disney might ok including IPs in Dimensions, we have to get to Series 3 more than likely before that can even happen. Though that doesn't preclude the possibility of in-game cameos during Series 2 being programmed, such as Marvel, Star Wars or Disney locations appearing similar to how Flinstones and Jetsons got Cameos in Series 1.
Overall, I look forward to the future of Dimensions and hope it can prove to have staying power. Disney Infinity never really interested me, without the cross over aspect it loses some of the charm, Epic Mickey had more fun than Infinity ever could because all the characters existed in the same universe and could interact with one another without some silly walls being used to keep characters out. Heck even Kingdom Hearts knows what appeals to Disney fans, even if you only get Donald, Goofy and Mickey traveling between the worlds.
Dimensions is doing well, but not as well as budgeted by corporate. If they can bring Star Wars to the party they may be able to stave off the inevitable but it will take some doing.
I'll admit that when I heard about Infinity going down my first thought was that maybe we would be able to get Marvel and Star Wars characters for LEGO Dimensions. Now to wait and see.
I can appreciate the statements in the article discussing the stagnation in console sales. I myself have a second-hand Xbox 360. I have 3 games for it and haven't found enough time to play any of them all the way through. I'm interested in a Xbox One, but if I can't get to my old games, who's to say I have time for new ones? I used to play a ton of Halo, just like everyone else, but now I'd rather work on my career, hone my video-making, or build with physical LEGO. (except I would like a LEGO Portal Fig...) Looking around at folks I know, even kids, the story is pretty close to the same thing. That's not to say Video Games are going out of style, but with how spendy consoles & games are anymore I can see the truth to the claims.
@vynsane Even the Toy Box feels limiting, and aren't the actual "worlds" of the franchises, so it limits the crossover appeal still. Dimensions nailed it by having you use whatever character you want in both levels AND Adventure Worlds (the game's equivalent to the Toy Box).
I spoke with my Lego store rep about Dimensions and she said it is a slow seller. I have two problems in my household: Money and time. If my kids are playing with expensive Lego sets when do we have time and money to play with expensive video games?
I feel sorry for those who worked at Avalanche Studios. A parent of a friend, used to work at Avalanche. He'd make the commute from our small town into downtown Salt Lake to work there. It was always fun playing video games with this friend as he could always show games his dad had worked on. Fortunately this man left Avalanche to work at EA Studios Salt Lake before the Disney Infinity debacle went down. However I still feel sorry as he must have many ex-coworkers that lost their jobs last week, and had he not left for a new position at EA and had stayed at Avalanche... He would have lost a job to. Very sad situation.
I'm in the same boat as @wunztwice - I don't have the time or the money to spend on videogames that I had when I was younger, so getting into consoles from the generation before has proved the way to go, and I currently have a secondhand Xbox 360 and Wii. Now and then the temptation to go current-gen rears its head, but then I see what both consoles and games cost and scurry gratefully back to the pre-owned corner of my local GAME.
But I still keep half an eye on current developments, and I've been curious about the TTL thing. From what people are saying here, the problems are predictable ones - if you promise people a creative, fun, wide experience but then box them in according to arbitrary stuff like licensing (and a little kid playing Disney Infinity probably won't care that the characters are owned by different companies; she'll just want to know why she can't play as this character in that world). Dimensions sounds more fun in that respect, but the comments above about it being as limited re: multiplayer experience as Infinity gives me pause, and seems odd in the light of the drive these days to make everything possible a multiplayer experience...
When we bought Lego Dimensions for our home PS3, I figured we'd buy just a few of the sets, knowing that some of the "worlds" could not be completely explored. I had no idea that by now, we'd own three of the games/portal bases (the two additional ones are for our two college students who wanted a PS3 in their dorm rooms). The "main" system at home now has a collection of Lego Dimensions sets that's shockingly near every set produced. Playing the game involves three people, which includes one person devoted to running "the board" and fetching the needed characters and vehicles from their storage containers.
On our "main" system, we've almost completed every task in every "world". This game is addictive for teens and young adults (as well as parents). Everyone in the family takes turns playing. Here is hoping that LEGO can convince other license holders (including Disney) to "come on board" for later releases of the product.
I have one issue that wasn't really brought up.
Fun packs were $15, not $13. Now they are $12. Doesn't that tell you something when the MSRP droops within about six months AND they are on sale 30-50% off all the time. But that isn't in the article.
^ Yeah, I thought that was strange, almost as if they were intentionally trying to make Dimensions sound better than Infinity..
I actually liked Disney Infinity more than Dimensions.
I've played both... and I have to say Disney Infinity is really boring. Dimensions has actual LEGO, huge amounts of sandbox mode, and an actual story-based game under it.
If you ask me, the discounts are because Dimensions packs are too expensive to start with...
First a thanks to Green Brick Giant on the orig base MSRP correction. I appreciate the good feedback all around. Dimensions is distributed through a Warner partnership not just the regular retail distribution and merchandising—and it is a VERY price competitive space, in which LEGO is a stronger position to make the numbers work. Yet there's no doubt that the TTL category still faces some serious challenges.
While I think the "value position" that Lego created fits their improvements for user experience, I also like seeing all the comments about pricing. Lego has maintained a lot of brand strength (equity) because of the premiums they usually sustain. But what we have to remember here is that Dimensions represents an extension of their core that integrates well in tech (I'd say even better than Infinity and its awkward character coding) and traditional play. And as I wrote I don't think Infinity ultimately delivered wholly on Disney's core brand promises. (Which is tough because I know Avalanche folks who worked their hearts out despite some breakdowns in internal property alignments and what that meant for user experiences.)
Anyhow, great to see all the comments. Best wishes from Salt Lake as an AFOL and "Lego Parent"! —Bryan
Well-written and insightful, but I worry about a potential critical fault in one of the core premises of the article. Is LEGO Dimensions actually selling well, today? In other words, did WB/TLG out-compete Disney, or have they simply become winners by default? I know they had a good launch, but from what I've seen on store shelves and in social media, consumer excitement over Dimensions has already all but disappeared.
@theJANG: Dimensions won in platform software sales to Infinity 3.0 and their retail inventory situation is fairly healthy still with good facings and availabilities. (And they have tremendous brand and performance strength in toy sales—which gives them leverage with wholesalers, and helps that Dimensions are not necessarily just a "shelved collection".)
So I'd say it is accurate to say LEGO beat Disney for a key season in the industry cycle, not merely outlasted, and for also winning for the brand, product and experience reasons I mentioned.
While the LEGO TTL toy sales numbers have not been publicly disclosed, and inventory "turns" have slowed of late, that is not unusual for video games nor toys this time of year. The small wave releases are liked from wholesalers for keeping inventory freshened. But LEGO are not out of the woods. Naturally they still have much more leverage for introducing new IPs to the line, possibly with some limiteds or exclusives. Yet as other commenters have said, there is opportunity for them to still improve in the game play features too. (Character trees is one thing Infinity did better, for ex.)
But no doubt mobile with its lesser media costs is exerting tremendous pressure on video gaming; even kids have more options for their limited entertainment time too; and the global economy still has significant issues at hand. But I think there's a lot to commend LEGO for as the "Age of Information" is in transition to the "Age of Experience."
Fascinating article. I still wish Dimensions would add a three player option.
@ Mickitat ... "I have been thinking of actually selling the bases, since you do not need the minifigs to play the game and I rather like some of those."
That's what I've been doing. I buy the sets for the figs (because I love collectible minifigs) and then resell the discs/bases on eBay for half of what I paid for them. It's a little time-intensive, but I'm getting minifigs for what amounts to a decent price, all up. And I get to keep all those interesting and different figures.
So there we are, the only proven way to keep a TTL game afloat is still Nintendo fanboys....
This all just seems like deja vu from the 80's with the video game consoles.
The reason dimensions is a slow seller in Lego stores is probably because they do sell them full price, most of my dimensions stuff is from amazon with a couple of 3 for 2 offers from toys r us. Discounting doesn't necessarily mean it isn't selling well, more that retailers are competing with each other. Also the fact that dimensions is so expensive could be to allow retailers to discount them (put it on to take it off) so it appears you are getting a good deal and the retailer still gets the profit they wanted. Either way, I am a huge dimensions fan and look forward to seeing what's coming next.
I hope this means we will see Star Wars characters in Lego Dimensions. (I don't play the game, I just want the minifigs)
Most TT LEGO Games are two-player co-op. It's their standard style, and quite frankly with the ability to have 7 characters in-game at once the split screen effect for co-op is probably already a pain on the eyes, I'd hate to see what would happen if they even could make it three or four players, which considering the toy pad takes up a controller slot would be rather impractical or difficult.
Since Lego beat out Disney, I think Lego is the sort of scary company now.
Never liked "toys to life" stuff never will