Lego shifts from outsourcing to in-house game development
BILLUND, DENMARK — After years of outsourcing its function to outside companies, Lego, the Danish toy giant, is strategically turning toward in-house development of video games. This move marks a major change in the company’s digital approach and a move that aligns with its financial situation.
Financial growth powers digital expansion
Lego’s financial performance was outstanding; operating profit jumped 10% to $2.7 billion, while revenues grew 13% to $10.1 billion in 2024. Lego’s great performance has exceeded American rivals such as Mattel and Hasbro, therefore enabling Lego to make significant investments in its digital capabilities.
“We can definitely say as long as we’re under the Lego brand we can cover experiences for kids of all ages, digital or physical. [Games development in-house] is something we’re building up,” Niels Christiansen, Lego’s chief executive, told the Financial Times.
While developing its digital infrastructure, the company has committed several hundred million dollars to tripling its software engineering headcount since 2022. This investment comes after Lego’s revenues doubled to $10 billion from its value in 2019.
Reversing previous outsourcing strategy
This latest strategy is a major turnaround from Lego’s past approach. Two decades ago, the corporation, almost bankrupt, had outsourced video game development in addition to theme parks and other non-core operations. Lego now thinks it can support additional in-house activity given its better financial situation.
With externally developed games and partnerships, Lego has had great success. Recently, it teamed with Fortnite, drawing 87 million gamers. The business has also produced actual Lego sets based on well-known video game franchises such as Sonic the Hedgehog and Super Mario.
According to the Financial Times, Lego has “continued to outpace US-based rivals such as Mattel and Hasbro in both revenues and profitability, growing faster than a toy industry that has been weighed down by existential worries about digital devices stealing children’s play time”.
As Christiansen noted, “We have made quite a few investments in the future – I’d almost rather overinvest. That’s the benefit of being family-owned and long term.”
