Why LEGO Universe failed and can Minifigures Online succeed?

LEGO has been interested in online gaming for a long time. It first ventured into online gaming in 2005, when it commissioned work on LEGO Universe (released in 2010, shut down in 2012), and it has two newer ventures into that space going on with LEGO Legends of Chima Online and LEGO Minifigures Online.

In this post, I will examine the story of LEGO Universe, look into what success in online gaming looks like, take a look at LEGO Minifigures Online, and consider potential niches for the LEGO brand in online gaming.

The rise and fall of LEGO Universe

The story of LEGO Universe is recounted in David Robertson’s book Brick by Brick. In October 2005, after LEGO had survived a major crisis, it again looked into expanding its portfolio, this time into online games. LEGO contacted several online game studios, amongst them the Colorado-based NetDevil studio that was selected to create the LEGO experience online.

Unfortunately, not everything went as planned. LEGO Universe eventually launched in October 2010, two years behind schedule, and it failed to attract a sufficient number of subscribers: there were only 38,000 subscribers to the game, and even though the game started to offer a limited free-to-play option in August 2011, which attracted a further 2 million players, it was unable to turn them into paying subscribers. Thus, on 30 January 2012, LEGO shut down LEGO Universe for good. This adventure ended up costing LEGO $50 million.

Robertson lists five reasons, or “bright red warnings” for this failure:

Don’t jump into a new business before you understand it. LEGO did not have a lot of experience on digital games, much less on massively multiplayer online (MMO) games. Likewise, NetDevil had hardly any experience on LEGO. LEGO had no clear vision what it wanted LEGO Universe to be, and that would prove to be one of the key reasons behind delays.

Don’t demand that a young technology deliver a near-perfect experience. At the time of its launch, a single LEGO brick in Universe was more complex than a complete, geared character in World of Warcraft. According to Robertson, attention to detail and strive for perfection needlessly delayed the launch of the game.

Insulate the project from the demands of other business units. Because LEGO Universe was based on the existing LEGO play themes, the game studio had to continuously coordinate with the owners of those product lines, and handle massive amounts of change requests and even new feature requests from stakeholders throughout the development period.

Make the product for customers, not managers. Given the long distance between the LEGO headquarters in Billund, Denmark and the NetDevil studio in Colorado, USA, LEGO managers made regular visits every six weeks to examine the progress of the game. The end result was that the direction was changed somewhat every six weeks, resulting in rewriting and starting over. One big issue that was debated over several months was violence: at first LEGO wanted to have none of it, while the game developers were convinced it was an important element of gameplay. Ultimately, it was the release of the successful LEGO Star Wars II by TT Games that convinced LEGO to accept a level of non-bloody violence in the game. The overall mood was also a constant subject of debate: should it be epic, should it be dark – there was no clear vision.

Price the product to meet what the market will bear, not to recoup your investment. Finally, LEGO Universe was priced quite high upon release. The DVD cost $40 and the monthly subscription required to play was an extra $10 on top of that. This pricing structure intimidated people from trying out the game.

In essence, Robertson’s recommendations echo the current trend to develop more basic products rapidly into a shape where they can be launched and improved through customer feedback – essentially what the Lean Startup movement is all about. However, it is reasonable to ask just how much these failures contributed to the eventual fall of LEGO Universe, and whether they were the truly fatal causes.

Lean Startup methodology and online games

The methodology of early testing with actual customers has become a standard business practice when it comes to building online games. To be fair, LEGO did some of that with LEGO Universe, as they had a group of people called the LEGO Universe Partners, almost 100 people, who helped them test the early versions of the game and create and adjust the content.

Nonetheless, they did not reach the levels nowadays standard in the industry, where a smaller-scale alpha test is followed by closed beta testing with waves of increasing numbers of participants (and possibly specific stress test events with even more participants) and finally culminating in an open beta test where anyone interested can play. This procedure also forms part of the marketing of the product and many games nowadays also already monetize this phase by selling access to alpha and beta stages. Archeage, Star Citizen, and Elite: Dangerous are a couple of good examples of this – at the time of writing of this all of them are still unreleased, yet they are already making at least some money.

The standard industry practice is not yet at the Lean Startup level, where the first version of the product to be sold to customers is the minimum viable product. Taking such a leap might be beneficial, but on the other hand, given the long development cycles of MMOs, it also comes with some risks of boring the initial crowd if there is a significant lack of things to do in the early versions. Star Citizen is actually fairly close to this model, as in the first version of Star Citizen (a space flight sim), the player could only walk around the hangar and not actually fly a ship at all! The rest of the game is also going to be released one module at a time.

OK, so clearly things could have went better in this area. However, was this a truly fatal error? Given the fact that the game did not end up as vaporware, but was published, and was run for a bit more than a year, I would say that this was not what ultimately doomed the game: there was enough time to make corrections, even though things could have been done smoother. So, this mistake probably cost millions, but did not ultimately doom the game itself.

Product pricing: network effects

When it comes to product pricing, we can observe two important effects: network effects and the shift in MMO business models in general.

First, there is the matter of network effects. Network effects describe a situation where the value of a good depends on the number of people using the good. The classic example is the telephone: if you have the only telephone in the world, it is completely worthless, you can’t call anyone! On the other hand, the more people have telephones, the more useful your telephone becomes, as you can contact more and more people with it.

MMO games are goods with network effects. If there are no other people playing, most people would become quite bored in an MMO, or playing it might even become completely impossible, depending on game design. This has two main consequences:

  • Product pricing needs to be such that it attracts new players, especially early on
  • Product design needs to be such that it is never a bad thing to have more players in the game

LEGO Universe failed on both counts. Pricing was high, especially considering the target audience, which is contrary to the usual strategy for goods with network effects, where the initial price needs to be low. To make things worse, product design promoted camping, kill-stealing, and griefing in parts of the end game.

One thing to keep in mind when considering network effects in MMOs is that the number of players does not have to be enormous. While World of Warcraft reached 12 million subscribers at its peak, one of the most successful first-generation MMOs, Ultima Online, peaked at 250,000 subscribers in 2003, and it was considered a massive success at the time. EVE Online, a highly successful niche MMO, reached 500,000 subscribers in 2013, and is also considered a success. Still, the 38,000 subscribers reached by LEGO Universe was obviously a very low number even compared to these figures.

Product pricing: MMO business models

A major shift occurred in MMO business models while LEGO Universe was in development: The subscription-fee based model reached its peak in 2010 at 30.6 million active subscribers after which it entered a decline. The new way: free-to-play with microtransactions.

Unfortunately, LEGO Universe failed perhaps the most of all in this regard. While it is still possible to operate a subscription-based game, given that the target audience of LEGO Universe was quite young and thus relying on parental permission for online subscriptions, it was not the ideal demographic for the business model. While a free-to-play (F2P) mode was introduced in August 2011, it was horribly crippled, and the only meaningful way out of it was to subscribe – no microtransactions were possible.

Star Wars: The Old Republic and Lord of the Rings Online were both saved by their move to a free-to-play model complemented by microtransactions. The Old Republic doubled its revenue after such a move in 2012 while Lord of the Rings Online tripled its revenue by the same means in 2010.

For LEGO Universe, this move was implemented in an extremely poor way, as there was no meaningful free-to-play experience and microtransactions were not implemented, so the subscription model remained the only alternative.

Thus, the real root cause of the failure was a business model that was incompatible with the target audience given the changes in the environment. This is quite sad, because implementing a microtransaction model would have been perfectly doable, and the game could have been saved even after the launch.

What does success in online games look like?

Most online games fail to produce significant profits. However, there are also many successful games out there, and what is interesting is that their recipes for success are quite different. Differentiation and tailoring your business model to your audience is of vital importance (not to forget building a good game!). Let’s take a look at some of the ways success is possible.

World of Warcraft

World of Warcraft (WoW) is the most successful MMO of all time. Launched in November 2004, the game peaked in October 2010 with 12 million active subscribers, after which it has mostly been in a decline interrupted by brief upward spikes when new expansions are launched. As of August 2014, WoW still has 6.8 million subscribers, which makes it the largest MMO game on the market.

WoW is the mass market MMO:

  • Something for everyone: PvE (player vs environment) and PvP (player vs player) – with server types separating between the two; crafting; party (5 people) and raid (10-25 people) content
  • Based on well-known IP, as Warcraft games had been around for a decade already
  • Made by a developer recognized for high quality and no compromises – very low level of bugs that interfere with gameplay
  • Low system hardware requirements (many people can play the game)

The business model is based on boxed or digital game sales (available at times for as low as $5) followed by monthly subscription fees (around $15) and in-game services and cosmetic features available as microtransactions. Also merchandise such as T-shirts and mouse pads are available.

There have been lots of games that have attempted to imitate WoW and grab a piece of all that revenue (according to SuperData Research, WoW revenues in 2013 were more than $1 billion), but they have all failed. This is not particularly surprising, because the players have invested a lot in their WoW characters, and unless the new game offers some kind of novel experience, the switching costs for players are simply too high. On the other hand, if the game is more focused on a certain niche, it is unlikely to have similar mass market appeal – which does not mean it cannot be successful, even if not on the same scale! Thus, WoW is unlikely to lose players to a single new entrant, but quite likely to lose players to multiple niche entrants who cater better to individual customer segments.

EVE Online

EVE Online is the prime example of a successful niche MMO. Launched in May 2003, the game gained more and more subscribers slowly but steadily, and in 2013, it reached 500,000 active subscribers. I have not found reliable subscriber data for the past year, with speculation going both ways.

EVE is set in the future, and in space, and the players command spaceships while living in a vast universe. EVE is a niche MMO because of a set of features:

  • Major commitment required – building up character skills can take months
  • Focus on PvP encounters, including non-consensual PvP (you are not fully safe even in populated areas)
  • Sandbox environment, where player-run corporations rule the world – EVE regularly makes the news with tales of massive battles, espionage, and betrayal.

The business model is a subscription model with a monthly fee of around $15. Furthermore, it is possible to buy an in-game item called PLEX with either real money or in-game money, and this item can be used for various character services (modifications), sold to other players in-game, or used to buy game time. Thus, the more hardcore players can actually play the game without paying any real money for it.

EVE has multiple differentiating features that, while lacking mass market appeal, have made it very successful and long-lasting. Its estimated revenues in 2013 were $93 million.

Star Wars: The Old Republic

Star Wars: The Old Republic was launched in December 2011 to an eager audience, rapidly reaching 1 million subscribers, and peaking at around 1.7 million subscribers mere months after release. It then entered a decline, and converted its business model from subscriptions into a hybrid free-to-play model with subscriptions (extra features) and other additional purchases available in November 2012. This move doubled its revenue, and has kept the game profitable. Its estimated revenues in 2013 were $165 million.

Star Wars: The Old Republic started out with the same premise as WoW: It has something for everyone. It has PvE, it has PvP, it has both solo and group content. The area where it has successfully differentiated itself from other MMO games is the storyline – it is widely recognized as having one of the most exciting leveling experiences, which brings in new players and keeps them excited, at least for some time. In WoW and EVE most of the action takes place once the character has been developed, so while starting out is more of a grind in those games, they have more to offer when it comes to retaining subscribers. Thus, the hybrid subscription/F2P model seems to serve the positioning of Star Wars: The Old Republic very well.

Guild Wars 2

Guild Wars 2 was launched in August 2012, and rapidly sold 2 million copies, eventually reaching 3.5 million copies sold in 2013 (last official figures I could find). It is a fantasy MMO in the general style of WoW, but with many differences focused on making it as easy as possible to play with friends regardless of everyone’s experience with the game: the content and characters scale to offer an even playing field whether it comes to adventuring together or doing PvP together.

It also has yet another business model: The game is sold as a full-price game (generally $50, although discounts have started to appear more often as the game gets older, with the best price so far being $25), and it has a store (gem store) for cosmetic microtransactions, but there are no subscription fees.

World of Tanks

World of Tanks was launched in August 2010, and it has gained a huge player base with more than 75 million registered players. Note that this is not the number of subscribers. Nonetheless, its revenues in 2013 were $372 million.

World of Tanks is different from the above-mentioned games in that it is not a role-playing game, but an arcade-like tank combat game where players engage in short (under 10 minutes) matches on random maps in 15v15 teams. All the maps and game modes are available for all players, and the best equipment is also available for everyone.

The content available for purchase comes in two varieties: premium subscription and premium tanks. The subscription gives the player faster progression to more advanced tanks, while premium tanks, while slightly worse than the equivalent tanks available through gameplay, receive further bonus income and thus make it easier and faster for players to acquire more advanced tanks. Thus, World of Tanks has managed to strike a balance where spending money does not increase your chance to win as such, but as it increases income and speeds up progression, it makes the game more enjoyable to play.

Another significant difference when compared to other online games is the pricing of the microtransactions. A good money-maker tank can easily set you back $40, and there are often bundles of tanks available at over $80. Here it all comes back to understanding your market: While World of Tanks is rated PEGI 7 (tanks explode, but no people are displayed, and the crew always recovers for another battle even though crew members may ‘die’ during combat), it attracts a mostly adult gamer crowd – it is significantly less hectic than most first-person shooters, and emphasizes tactics and situational awareness over reflexes. These adult gamers have more money to spend, and often also value their time more than money, so buying faster progression with money is highly convenient for them.

World of Tanks has also combined real-world goods and game benefits through its partnerships with model manufacturers Revell and Italeri, who sell model kits of tanks that appear in the game with bonus codes for game content included in the boxes. This is reminiscent of similar models in non-multiplayer games, pioneered by Skylanders, where actual physical toys unlock content in a game.

Online game business models

I selected these examples, because they illustrate the variety of online business models very well. To recap, the revenues come from various combinations of the following:

  • Box/download sales: either high price (GW2) or low price (WoW)
  • Subscription fees: either mandatory to play (WoW, EVE) or opens premium features (SW:TOR, WoT)
  • Microtransactions: cosmetic (WoW, SW:TOR, GW2, WoT), general services (WoW, SW:TOR, GW2), or something convertible to actual in-game benefits (EVE, WoT)
  • Physical goods that also unlock game content (WoT)
  • Merchandise, no effect to the game (WoW)

The specific ways to gather revenues depends on the game and its player base.

LEGO Minifigures Online

After closing down LEGO Universe, LEGO was soon back on the saddle and new licensing deals were announced in 2012 with both Funcom for LEGO Minifigures Online and Warner Bros (WB Games Montreal) for LEGO Legends of Chima Online.

Funcom, a long-term Norwegian MMO developer, had been amongst the final three candidates already for developing LEGO Universe, and now it was their turn to get a shot at the LEGO license. Funcom launched its first MMO, Anarchy Online, already in 2001. The game is still running, alongside Funcom’s other two MMO games, Age of Conan and The Secret World. All of the games are based on Funcom’s own game engine, DreamWorld, which is also the basis of LEGO Minifigures Online.

Funcom’s reputation can best be described as an innovative developer with new ideas and perspectives on things, whose products are unfortunately prone to suffer from a range of issues both from technical and service points of view. Funcom itself sees LEGO Minifigures Online as its first “smaller, more focused” online game, which should be easier to develop.

Things have definitely changed from LEGO Universe: LEGO Minifigures Online is a free-to-play game that provides revenues in the form of optional subscription (around $8 per month) and microtransactions. In the near future, there will also be physical minifigure packs that come with codes to activate those figures in-game.

The game is simplified a great deal from LEGO Universe, and is actually closer to the recent LEGO games such as LEGO Star Wars: it is mostly based on smashing opponents and items to bits and collecting the results. Building is completely pre-determined with no option to create own models; it is not even possible to create your own minifigures but only to choose from a pre-determined set of options. There is not much of a storyline to speak of, either. If comments from WB Games Montreal (developers of LEGO Legends of Chima Online) are anything to go by, this fast-paced action is the way LEGO games will follow.

Some lessons were learned

LEGO has obviously taken some lessons back home from the failure of LEGO Universe:

Working with a developer located nearby. Instead of being located on different continents, Funcom is located in Norway, a neighboring country from Denmark and on the same time zone. Thus, collaboration should be much easier.

Free-to-play model implemented from the start. The game does not require a subscription, or even buying a box, to play. This is in line with the purchasing habits of the target audience. Also the subscription fee is lower than most MMOs, another positive sign.

Gradually growing number of testers, culminating in an open beta test (during which subscriptions are also already available – money coming in). This is the expected level of testing for an MMO nowadays and also serves as marketing.

Other lessons were forgotten

Sadly, there are also a number of lessons that seem to have been forgotten:

Smashing everything is the best strategy. This is a curious step back. The early TT Games LEGO video games used to reward, or even mandate, players to smash as many objects as they possibly could. This often resulted in illogical ways to advance. However, TT Games got better as more and more titles were published, and in games such as LEGO: Pirates of the Caribbean and LEGO: Lord of the Rings progress was no longer halted because you had forgotten to blow a mundane rock to pieces to uncover a key. This lesson seems to have been forgotten now.

Penalties for not subscribing are at a record-high level. Again, this is curious, considering that LEGO Universe F2P experiment suffered from this same phenomenon. Let’s take a look at subscription benefits, and see how reasonable they are:

  • Bonus diamonds, star boost, discounts, bonus monthly minifigure: Pretty basic subscription bonuses, nothing to see here.
  • Access to pocket adventures: At the moment, the subscriber-only adventures are by far the fastest way to gather new minifigures, to the point where F2P players have a very hard time getting any. Getting more worrying..
  • In-game chat. Yes, that’s right. Unless you’re a subscriber, you are unable to communicate with others in the game. This is already a factor that completely ruins any (social) play experience.
  • Reduced smash timer: This last one is the real icing on the cake, however. When one of your minifigures loses in combat, it becomes smashed, and cannot be used again until it has recovered. You can use one of your other minifigures, if you have any that are ready. Smash timer means the time it takes for a minifigure to recover from being smashed. For subscribers, the timer is 60 seconds, but for non-subscribers it can extend all the way to 60 minutes! This is the only game where I have ever had to wonder with my child that play cannot be continued, because no minifigures were available! Perhaps Funcom has come to the conclusion that saving time is not in the parents’ interests when it comes to children playing, but children who complain of not being able to play at all will make parents open their wallets? They may be disappointed if the answer turns out to be “Play something else” instead of paying.

Can Minifigures Online succeed?

Obviously, it is a possibility. However, I would not put my own money on it. The game is simple and lacks depth, and the only potential lies in constant introduction of new minifigures and relying on people’s desire to collect them all – which in turn requires that people pursuing such a goal subscribe, as it is nigh impossible to achieve without subscribing.

Alas, with nothing resembling the real LEGO experience (no building or customization), I do not see why people would keep playing for an extended period of time. A month or two, maybe, but the game has only one trick to retain customers (new minifigures), and I can’t see how that would be enough.

Children are smart enough to build LEGO models, why dumb down their online content? After all, the mission of LEGO is to “inspire and develop the builders of tomorrow,” but this game does none of that.

What could LEGO do in the online gaming space?

LEGO has such incredible potential. Hey, Minecraft was inspired by LEGO (and LEGO representatives have said they wish they had invented it themselves – I would add that LEGO should also have invented Skylanders, although I’m happy for the success of Toys for Bob, a truly legendary developer who came up with the idea: before Skylanders they were best-known for Star Control II).

LEGO could operate in multiple segments when it comes to online gaming. Children are an obvious segment, but there is also a sizable community of adult fans of LEGO (AFOLs), who could form another target segment. Thanks to this generation-spanning nature of LEGO, they could also succeed in combining these segments and create games that parents can fully enjoy together with their children.

One rather obvious aspect that LEGO has so far failed to utilize is the building experience itself. It was actually a well-loved part of LEGO Universe! LEGO has also created the LEGO Digital Designer (LDD) software application that allows people to build LEGO models on their computer brick by brick. The user experience of that application does not quite match the intuitiveness of physical LEGO bricks though. Perhaps a combination of pre-determined blueprints for entire models, blueprints for partial models, and individual bricks could speed up building and allow for easier and faster customization while still maintaining an option to build everything brick by brick.

Building experience is related to one MMO feature that is always requested by some of the players of every game, but that has eluded game developers most of the time: player housing. The original MMO with player housing was Ultima Online (UO), in which players could claim plots in the world and build their houses there. Some games have featured instanced housing, but that is not quite the same. Archeage, currently in beta, is getting much hype for its UO-like player housing that is actually present in the persistent world. However, Archeage is strongly focused on the PvP niche, attempting to capture the type of players UO originally catered to. There would be room for a PvE-oriented game with player housing – UO itself moved to this direction with the Renaissance expansion in 2000 that introduced a part of the world, Trammel, where non-consensual PvP was not possible. This move increased the popularity of the game for several years.

To sum up all of this, I am a bit sad that the perception of online gaming at LEGO is currently only focused on fast-paced action with some humor thrown in the mix. I do not see how the current products connect with the mission of LEGO to “inspire and develop the builders of tomorrow.” Perhaps it can be argued that the attention span of children (and maybe all people) are getting shorter, so faster pace is required. Then again, the builders of tomorrow cannot have attention spans of mere seconds, so working out a way to attract users but also entice them for an extended period of time would be a challenge I’d love to see LEGO tackle.

Photo: LEGO Universe at CES 2010 by Dave Taylor @ Flickr (CC, cropped)

Author: Ville Kilkku

I run my own consultancy business, so if you find the ideas on this blog intriguing, contact me at consulting@kilkku.com or call me at +358 50 588 5043 and we can discuss how I can help you solve your business problems. I am currently based in Tornio, Finland, but work globally. Google+

  • GoodEnough Venson

    This was an excellent article. Thanks for the very structured and practical thoughts and insights!

  • Pingback: Can LEGO live up to its mission in the digital space? | 2 cents // Ville Kilkku()

  • John Hartman

    Hi I worked on the lego project since its pre-production phase, you missed SEVERAL key reasons why the game failed, one was that the art team grew to be about twice the size of the dev team during pre-production b/c of another project being canceled, lego would not pay up the big bucks for KEY personnel being in CO makes it very hard to convince talent to move, also too many chiefs not enough Indian’s the production staff was full of incompetent people and it grew to be about 40 people. Lego wanted a presentation every few weeks this horribly would derail the project as producers mostly focused on these short term goals instead of the long term ones causing alot of band-aid quick fixes, bad management of expectation. the nail in the coffin was when ND was acquired by gazillion, lego didn’t get along with them it was about 6 months after the acquisition lego shut down. personally, being far away from lego itself I felt had less of an affect on the game than their plain ignorance on gaming tech and gaming trends, I saw to many play tests of 6-12 year olds asking where was call of duty and couldn’t give 2 shits about mouse and keyboard platforming, bright colors, and chat boxes.

    • Hi John,

      Thank you for your feedback and insight!

      Your take on the subject closely mirrors some of the points made by David Robertson in Brick by Brick (lack of game understanding and the recurring reviews) while adding more detail on other failures.

      Nonetheless, despite all these issues, you managed to ship the game! Thus, while major production costs and delays were a reality, something tangible was also completed and delivered.

      This is what I am interested in – the experience that was delivered and that could have been delivered, and the business model that was used. After all, the production costs are sunk by the time the game is shipped anyway, so the real question becomes whether it can deliver a stream of income or not with the costs needed to support it.

      Some food for thought with a couple of examples from the MMO genre:

      First, consider Ultima Online – 18 years old and still going (I played it for around 4 years or so). Granted, it is on a low level of support, but it will keep going as long as it can provide profits.

      Second, World of Warcraft. With the revenues created by WoW over the years, the initial development costs have not been meaningful in any way for a long time now – it’s all about the ongoing development costs vs revenues.

      From an outside perspective, it looks like LEGO Universe could have been saved after release, and the business model played a key part in its downfall.

      With the details you added, it can of course be asked whether there was a real chance to get the internal work organized appropriately, but without changing the business model that becomes a moot point.