Lego joins forces with Epic Games for groundbreaking Metaverse collab

In this post:

  • Lego is partnering with Epic Games to expand into the metaverse.
  • The company aims to offer its products in digital markets and create safe virtual spaces for children to interact with its brand.
  • Lego’s revenues increased by 17% in 2022, and it plans to replace all fossil fuel-based plastic in its sets and packaging by 2030.

Lego, the Danish toy company famous for its colorful plastic bricks, expects to diversify its entertainment offerings portfolio, targeting the metaverse.

The company is preparing to present a virtual world in partnership with Epic Games, the gaming engine company, to continue increasing its market share and growth streak by entering new digital markets.

Lego’s strong financial performance

Lego had a great year in 2022, outpacing its rivals, increasing its market share, and posting strong financial results. According to a Financial Times report, the company’s revenues increased by 17 percent to DKr65bn ($9.3bn), while its net profits rose by 4 percent to DKr13.8bn ($2bn), despite the challenges presented by rising raw material, energy, and transport costs.

Niels Christiansen, the chief executive officer of Lego, credited the company’s success to its investments in digital playing experiences, e-commerce, and sustainable packaging. Christiansen told the Financial Times that Lego is “doing a lot of things on the digital side” and is upping its investment in the space.

Christiansen said that Lego is aiming to create a seamless experience for consumers in both the physical and digital worlds. He added:

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.

The company has been successful throughout the Covid-19 pandemic, with sales and net profits both increasing by two-thirds in the past three years.

Meanwhile, rivals such as Mattel and Hasbro of the US have struggled. In 2022, Mattel had revenues of $5.4bn and net profits of $400mn, while Hasbro had sales of $5.9bn and net earnings of just $200mn.

Lego’s growth is expected to normalize this year, with revenues forecast to increase by a single-digit percentage. However, Christiansen said that the company still expects to grow faster than the overall toy industry.

He has said the company will continue to invest behind its momentum, adding that historically, the toy industry hasn’t been too cyclical.

Diversifying into the Metaverse

Lego’s strategy is to continue growing by offering its products in digital markets, helping users recognize the brand even online. To achieve this, the company is collaborating with Epic Games to build a metaverse initiative that will enable it to enter new digital markets.

The partnership with Epic Games will clarify Lego’s future actions toward establishing a presence in virtual worlds and targeting users in digital markets. While other companies have been moving away from metaverse initiatives, Lego is focusing on constructing digital spaces for children.

The company invested $2 billion in Epic Games in partnership with Sony in April 2021 with the aim of creating its own metaverse platform to bring children closer to the brand in safe and secure virtual spaces.

Since then, Lego has been ramping up hiring to develop in-house digital experiences and plans to triple the number of software engineers in order to take a physical and digital approach.

Christiansen believes that entering the metaverse is the next logical step for the company as it seeks to stay ahead of its competitors.

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