Real LEGO cost question.

[bobalego]

Why does my title say "real" in it? Well my question would be for Steve D of "Ask LEGO" forum, but since he seems to be MIA, I would open this for some one who actually may have a documented answer, i.e. link to an official LEGO report. Aside from the obvious, oil prices, why are non-character themed LEGO so expensive? Years ago, way back in 2004 (Notice the sarcasm?) I bought 4-1000 piece buckets (MSRV $20), that because of a special promo came with an extra 500 piece box of random elements and bricks. To add to the value, TRU was having a BOGO 50% sale. At the time I was angry and remember not being the only one as there was a thread here at fbtb that we all complained about where the buckets said 1500 pieces on it and the "extra 500" pieces were attached in a separate box, leading us to believe we would get 2000 pieces. Now if only we could get 3000 LEGO pieces for $30! This was only 6 years ago!!! Why in the heck does 400 LEGO pieces cost $30!!! If the box said 400 SW LEGO parts on it, I might understand...here is an exact quote from a LEGO representative:
"Because we have so many specialized pieces, the average cost per piece is difficult to name. For example, a 2x4 Lego brick does not require the complexity to produce as a Lego minifigure or a Lego fence piece. The molds that we use to create Lego elements are very expensive to design and produce."
So bulk brick sets should be much cheaper!!!

[onions]

that bucket with the attached box? that box was a parts dump by lego to free up some space in their storage. you'd get some wacky colored pieces and/or rare elements that were hard to get. that is not a regularly scheduled product offering so i wouldn't take that into consideration when trying to determine "real" costs.

the answer to your question? global economy. prices for everything goes up. you can't expect prices to stay flat for 6 years. the other thing is those old buckets may have been undervalued at market.

[pacific493]

IMHO, the answer to your question is because that's what Lego can charge and get people to pay. I watch prices pretty closely and it seems clear that Lego has been testing the market with its prices over the past 3-4 years. If you dial the clock back 10 years, TLG was selling Star Wars battlepacks for $6 (i.e., Battle Droid Carrier #7126). A few years ago, they were selling battlepacks for $12 and are on the cusp of raising battlepack prices to $15. I have no idea what TLG's manufacturing and licensing costs are or how much they have increased over the past 10 years, but I have a hard time believing that they have gone up 2.5x during that period of time. Rather, I think that the popularity of the brand has increased to the point where the market will bear higher prices now than it would in 2004 and TLG has followed the market.

[bigospedros]

Have people never heard of inflation? Nothing today costs exactly the same as it did a few years ago ...

[MisterFubar]

I look at the MSRP of sets I had as a kid(80's-early 90's) and I can't really say that LEGO is any more expensive than it was then. In fact I think it's an even better value now.

I'll use Black Monarch's Castle 6085 as an example. I still have my original instruction book that I(or my parents) wrote the price of $64.99 on. It's a 702 Piece set with 12 Minifigs. That's right at 9.25 cents per piece.

Compare that to the new King's Castle 7946 at $99. It's a 933 piece set with 9 minifigs. That's about 10.5 cents per piece.

$64.99 in 1988 money is about $125 in today's dollars according to the first inflation calculator that popped up in a google search. So in today's dollar, Black Monarch's Castle would be almost 18 cents per piece.

Just about everything I can think of has at least doubled in price since 1988. A dozen eggs, a gallon of milk, gas, a postage stamp, average home, average new car, and wages... but LEGO hasn't.

Am I the only one that sees it this way? Sure, the price of LEGO is going up, but so is the dollar and my wages and it seems that those are going up at a faster rate than LEGO.

[that guy]

I would agree with Mister Fubar above. Just from an anecdotal standpoint, I feel like the non-licensed themes are a far better value than in the past. Sure the SW and such are occasionally outrageous, but for the most part but Knights, Racers, City, and others are a great value by in large with many of them well below the $.10 per piece golden rule. That being said, I do believe the bulk buckets aren't the value they once were but they certainly are targeted for a different market and as such may be a little more per piece but as stated above, they are still well within or for that matter under standard inflation. Also, keep in mind that Lego is a privately held company so they aren't held to the whim of a board of directors worried about investors freaking out at every quarterly report. This allows them to set prices however they see fit for right or wrong but given their success can anyone really blame them? While some sets are a bit overpriced, it is still one of the best priced toys on the market as far as playability and resale. I mean really, how much can you get for a Furby or Tickle Me Elmo now that your kid is bored with it?

[Draykov]

TLG was selling Star Wars battlepacks for $6 (i.e., Battle Droid Carrier #7126).

I'm pretty sure MSRP for 7126 in 2001 was $9.99...at least here in the US.

[pacific493]

TLG was selling Star Wars battlepacks for $6 (i.e., Battle Droid Carrier #7126).

I'm pretty sure MSRP for 7126 in 2001 was $9.99...at least here in the US.

You're right...I was thinking of the first round of small sets, like the original Landspeeder and Lightsaber Duel.

[legodavee123]

For the record, pricing a set according to how many pieces are in it is misleading.

The real cost of a set isn't the pieces. Each element costs virtually nil-- a set with 20 1x4 blue bricks and another identical set with 30 1x4 blue bricks instead costs effectively the same amount for LEGO. The difference would probably be less than a penny.

However, the same set with 5 blue 1x4 bricks, 5 red 1x4 bricks, and 5 yellow 1x4 bricks (15 bricks instead of 20) actually would cost LEGO MORE money.

That's because the cost of an element is divided into lead time, running cost, and material cost-- the latter two being pretty negligible. Running cost is actually pretty large-- you're paying people to monitor the machines, electricity to run them, atmospheric systems to keep the environment a constant temperature, humidity, etc, and probably other things. However, you're producing so many pieces that the average cost of any given individual element is pretty small. Probably less than a penny in most cases. Material costs are similar-- LEGO buys gobs of raw material so that the plastic and dye used in a given element is very small. Again, probably less than a penny per piece.

However, lead time is expensive, and produces no tangible results. I've been told it takes days or even weeks to set up a production run, during which time you have to pay for running costs, material costs, testing costs, and human costs to finagle the settings for each test run. And that's the same cost for a run of 1 million elements as it is for 50 million elements-- the lead time cost is the same for both. As a result, the cost of the setup time is divided among the resulting pieces-- the more pieces you make, the less each individual element costs.

Additionally, lead time also encompasses the cost of the mold-- another cost which is pretty steep. We've been told that molds can range from $5,000 to $100,000 if I remember correctly, depending on the quality and complexity of the mold. Again, remember that it isn't just the cost of the mold itself, but it's also the time it takes for someone to DESIGN the mold. The LEGO chain element (for example) required INCREDIBLY complex molding techniques because of the number of injection points, the timing, and things like the separation points of the various parts of the mold.

And that's only covering the cost of a particular element, without looking at set design, packaging, storage, marketing, distribution, management, legal, and everything else that goes into a set.

When all is said and done, the cost per piece is woefully unimportant. LEGO might use it as a guideline to gauge how much consumers will be willing to spend for a set, but it's effectively unimportant for LEGO as a pricing tool reflective of their internal costs.

Another point (about the tubs in general) is that we've heard they're what's known as "loss leaders". LEGO actually makes a LOSS on some of those tubs (or effectively breaks even). The goal in those cases isn't to make money, but instead to "grow the brand". It's a way of providing something that will encourage people to buy MORE LEGO. In fact, I even heard it mentioned that the collectible minifigures were intended to be a loss leader as well-- which might very well be why the price has been raised for more recent releases.

Anyway, suffice to say that pricing things out by price-per-piece isn't the best method. Or, rather, it doesn't really reflect LEGO's costs-- it's really more of an indicator for aftermarket cost. IE, how much should a BrickLink seller charge for it, or how much you should pay for a huge pile of miscellaneous LEGO.

DaveE

[Novastinger]

Legodavee12 makes a lot of great points, though I think you need to look no further than the raw materials cost, just take a look at these average crude oil prices by barrel per year, starting in 1998 (which was the lowest average since 1974):

US Domestic Crude Oil Prices
Year _____Nominal _____Inflation Adjusted
1998 _______$11.91 ________$15.93
1999 _______$16.56 ________$21.62
2000 _______$27.39 ________$34.65
2001 _______$23.00 ________$28.32
2002 _______$22.81 ________$27.62
2003 _______$27.69 ________$32.82
2004 _______$37.66 ________$43.42
2005 _______$50.04 ________$55.80
2006 _______$58.30 ________$63.02
2007 _______$64.20 ________$67.37
2008 _______$91.48 ________$92.31
2009 _______$53.48 ________$54.24
2010 Partial _$70.67 ________$70.84


As you can see, there's a really huge difference in materials cost depending what year it was, when Star Wars sets came out in 1999 the economy had fantastic oil prices, but more recent times have been considerably steeper.

FYI the above data was pulled from:
http://www.inflationdata.com/inflation/ ... _table.asp

[bigospedros]

That may well be true, but to mitigate these cost increases, TLC have been moving their manufacturing to more low cost countries. So, to just look at one source cost in isolation is incorrect ...

[legodavee123]

US Domestic Crude Oil Prices

There's an inherent danger there-- First off, that's the US Domestic Crude Oil price, and LEGO doesn't buy the crude oil, they buy ABS and other plastics from at least 2 sources, whose country of origin I don't know (actually, I know one source is within China). But really, even though the cost of oil is increasing, there are a lot of factors to take into consideration. If the crude oil cost is 15% of the set, then yes, oil cost will VERY MUCH affect set and piece prices. However, if it's only 0.0003% of the cost of a set, then it can fluctuate wildly and be totally unnoticeable.

If LEGO has cited it for a reason for increasing costs, then that's certainly a valid consideration. But if they haven't, I'm not sure it's really a good indicator without more information. Perhaps another plastics manufacturer would be another valid source of info?

DaveE

[turtle]

In 1994 I worked for Zebco. One the many things I did there was operate an injection molding machine that made ABS parts for fishing reels. I also worked in their machine shop where they made their molds for a while. At the time ABS cost $0.12 per pound. Adjusting for inflation in the price of oil, that's about $0.60 per pound today.

How much does a set cost TLG?

example:
The new T6 Jedi Shuttle
http://www.bricklink.com/catalogItem.asp?S=7931-1

says it weighs 921 grams - thats about 2.1 pounds - or about $1.21 worth of ABS
Does bricklink include the weight of the cardboard box in their numbers?

Changing the color of plastic in an injection molding machine wastes about 2 pounds of material, and the machine takes a few minutes to heat the new material up to the correct temperature. Mold changes require about 10 minutes. reloading the raw material hopper is done without stopping the machine. The molds for the overwelhming majority of lego parts fall into the $5k mold range. A small injection molding machine, would hold a mold that made 16 1x2 bricks. And it would make a sprue of parts that size about every 8 seconds. 1x1 round plates are probably made in a 50 cavity mold, with a cycle time of about 4 seconds. A well made mold, if properly maintained will survive literally millions of cycles. The larger the part in cross sectional area, or the lower it's surface area, the longer the the cycle time. The parts have to cool before the mold can open, or they will deform as they are pushed from the mold. Frosted parts are caused by wrong temperature molds, or escessive amounts of mold release agents.

The cheapest molds are molds that only have 2 parts, the more parts, the more expensive the mold. Near as I can tell the chewbacca minifig head required a 4 part mold. Such a mold would require a machine built to operate a 4 part mold, and becuase of the complex curvature of the part, is probably only a single cavity mold, because it would have been too difficult to make all the cavities identical. You can usually tell how many parts a particualr mold has by counting the casting lines on the part, the mold will usually have one more pieces than the number of flashing lines you can see. The chain element is probably the most expensive mold that TLG has ever made. And if they've ever spent $100k making a mold, it was on that one. But most of their molds are simple 2 part molds. If you look at the back of a lego part, you'll see some numbers. Those numbers tell you which mold the part was made in, which cavity of that mold it came out of, and probably what year that mold was put into service. That's pretty typical information for people to put in their injection molds. If a cavity goes bad, they dissable it, and keep right on making parts with the rest of the mold. If you don't see any numbers, it's probably a single cavity mold.

Based on talks with a friend that works for a custom box printing company, the box for that set probalby costs TLG about $5

it probably costs them a little over $5 to ship it to the retailer.



But lego is proportionally less expensive than it used to be.

[legodavee123]

At the time ABS cost $0.12 per pound. Adjusting for inflation in the price of oil, that's about $0.60 per pound today.

As I recall, the average piece/weight ratio for system bricks is about 350 pieces per pound. If both that and the above are true, that'd be roughly 0.001714 per piece-- somewhere around 1/50th or 1/60th of the MSRP. I think the price of plastics has gone up since then, but even if it's been doubled, you're still talking in the ballpark of 1/30th of the MSRP cost.

Does bricklink include the weight of the cardboard box in their numbers?

I believe so-- I think it's the weight of the sealed set, so that people selling the sealed box will know what it weighs when they ship it. So that includes the pieces, the bags, the box, the instructions, stickers, catalogs, and any other packaging that might be included.

Changing the color of plastic in an injection molding machine wastes about 2 pounds of material,

I think a lot of the wasted material is recycled into other ABS elements. I remember being told that it's often ground up and re-used into things like black elements, which are too dark to notice the small imperfections. So, not sure it's eating up much material cost per se in terms of sprues and color switching. Dunno what percentage is reclaimed, though. Probably not all of it, but I seem to recall that it was a good chunk.

The molds for the overwelhming majority of lego parts fall into the $5k mold range.

I don't think that's true, but I could be wrong. I believe the high-tolerance, long-lasting molds that LEGO uses for most of its elements (IE non-licensed elements that they expect to get a lot of use out of) are more expensive. Maybe someone can find the quote, but I believe they've told us it's in the $20-$50k range for most molds, and under $10k for the cheapo limited-use parts.

A small injection molding machine, would hold a mold that made 16 1x2 bricks. And it would make a sprue of parts that size about every 8 seconds.

That sounds about right-- I know the 2x4 molds have 8 chambers, and 1x2's would probably be around twice that. LEGO's also said that it takes on average 7 seconds for an element to cool and be ejected.

Those numbers tell you which mold the part was made in, which cavity of that mold it came out of, and probably what year that mold was put into service.

Yep-- Design ID, Mold number, Cavity number. Although not the year (that I know of). Maybe on a few token parts it'll have the year? Some say "(c) LEGO", but I don't remember any giving a date.

Based on talks with a friend that works for a custom box printing company, the box for that set probalby costs TLG about $5

Really? That seems high to me considering the number of smaller box sizes. If it's $5 for a large box, I would've guessed roughly the same for printing a smaller box, and that would be a HUGE percentage of the MSRP. Is that the cost of the box itself plus the cost of printing? Does that include the die-cut and assembly of the box?

it probably costs them a little over $5 to ship it to the retailer.

That seems rather high to me too-- plus, it's missing the step of getting to the distribution center. Not sure what steps it goes through nowadays-- I believe it used to be that LEGO would send the boxes to their internal distribution centers that would in turn send them to the retailers, and/or the retailers' distribution centers.

If true about this and the box price, we're talking $10.67 of the $60.00 retail cost, and that's not including the price of packaging, set design, license fees, product testing, advertising, market research, legal, etc, etc. Given that LEGO's probably selling this to retailers at around 50%-70% of the MSRP, LEGO's got to make a profit on $30 at the least.

DaveE

[Solo]

turtle's post is very interesting and it's cool to hear from someone who's worked with a similar process, but ultimately it's mostly unverifiable guesses at the material cost without addressing the hundreds of other factors that go into the price of Lego sets. I would love to hear the real numbers but really doubt Lego will cough them up. I have no doubt that he's generally close though in that the raw plastic is a small fraction of the retail price, and the box itself might even cost more than the set it contains sometimes.

All the talk about mold capacity reminded me that I have a shot of a retired 2x6 plate mold at Legoland:

[turtle]

Packaging and shipping are probably always the most expensive part of any toy. The packaging is the biggest piece of advertising for most of these products. It's why the lego boxes are so much larger than what they actually contain. It's also why the boxes are flat, instead of a much more materially efficient cube shape. Lego probably doesn't spend that much on a box. I would be extremely surprised if they didn't print their own boxes. The price I got from my friend is what they would charge a customer for a similar printed box, and we were talking about the box for the 8073 "Anikin's Y-wing". I'm sure the smaller boxes are much cheaper.

Lego, just like any company, makes money by selling something for more than it costs them to make it. -shouldn't surprise anyone....

A big cost that I left out was the cost of the lisense. Lego is probably paying at least 3% of msrp, and possibly as much as 10%.

The sprues that injection molded parts are usually attached to, are generaly recycled as fast as they are made, by running them through a machine that "re-granulates" (translation - chews them up), and they go right back into the material feed hopper. The "purge" from a color change is a big solid lump, that a re-granulator can't chew up. Also, when the purge is done, a bunch of trash that was contaminating the raw material comes out with it. So you wouldn't want to run it back through the machine. Instead, the "purge" goes in another box, and eventually those are shipped back to the raw material provider, so they can recycle it instead.

This picture of a retired mold is cool ! The parts don't appear to have a sprue! This mold has been cleaned up, chrome plated, and had some blueing done. A production mold doesn't look nearly that pretty. through the 70's. 80's, & 90's Injection molding of all types of plastics was a big indrustry in the town I grew up in. And in the mid 90's it's collapsed. Everybody I ever talked to told me the same thing. The Chinese government decided that the injection molding business was a great industry for them to employ a lot of untrained people in. As, it basically doesn't require any skill at all to operate one of these machines. So, Chinese injection molding operations started offering to provide molds for free. You contract for a large enough number of parts, and all you've got to do is give them a blue-print. They make the mold, and you get the parts. The down side is, they generally use the same blue-print to make molds for making knock-off product.

As far as mold dates, I don't know if lego has ever done that, it's just something that a lot of people do. If they put the date in there, it's usually just the last digit of the year, or a sometimes a letter and a number with the letter being the month, and the year just a single digit. There are differnt codes. But lego does appear to put a part number in a lot of their parts.

[Solo]

The injection point for bricks and plates is centered on the top of one of the studs (as far as I've seen and remember), so the sprue would be hidden inside the right hand block. You can spot it from the deformed "LEGO" letters on a single stud most of the time. And yes, they really fancied that one up for the little walk through tour.

[turtle]

Am I mistaken, that it says, "Retired after making 120,000,000 bricks" right there on the brass plate below the mold in the picture?

That pretty much settles the life span question doesn't it?

[Arkov]

Am I mistaken, that it says, "Retired after making 120,000,000 bricks" right there on the brass plate below the mold in the picture?

That pretty much settles the life span question doesn't it?

So if a mold cycle is 8 seconds it means that mold was running for a little over five years

[legodavee123]

So if a mold cycle is 8 seconds it means that mold was running for a little over five years

I get 3.8 years-- 120,000,000 elements made = 15,000,000 individual runs = 120,000,000 seconds spent = 2,000,000 minutes = 33333.333 hours = 1388.888 days ~ 3.803 years.

Of course, I've got no idea how long that means in "real" years. I tried running some stats using BrickLink data, but there's just not enough useful information available to make a prediction. But probably safe to assume that a typical mold's lifespan is in the ballpark of 3-10 years?

DaveE