Toymaker Lego teams up with Chinese internet giant Tencent

BEIJING - 15 January 2018: Danish toymaker Lego is teaming up with Chinese internet giant Tencent Holdings Ltd (0700.HK) to jointly develop online games and potentially a social network aimed at Chinese children.

Privately-owned Lego has seen a slowdown in sales growth in recent years, but the Chinese market has been a bright spot with sales growing 25-30 percent in 2016.

It is competing with Barbie maker Mattel Inc (MAT.O) and Hasbro (HAS.O), the firm behind My Little Pony, for a slice of the $31 billion toys and games market in China.

Lego said on Monday the partnership with Tencent, China’s biggest social network and gaming company, aimed to create a safe online environment covering content, platforms, and experiences tailored for Chinese children.

“What we are looking for now with Tencent is just to find more creative ways... (of) reaching children, and creating bespoke content with Tencent, in this case, video games,” Jacob Kragh, head of Lego in China, told Reuters on Monday at joint event with Tencent in Beijing.

The partnership includes developing a Lego video zone for children on the Tencent video platform, as well as developing and operating Lego branded licensed games, the toymaker said.

It also includes LEGO BOOST - a building and coding set that lets children turn their brick creations into moving objects - and will explore developing a joint social network for children in China.

Tencent is Asia’s most valuable company with a market capitalization of $537 billion.

Last year, Mattel struck deals with Chinese e-commerce giant Alibaba Group Holding Ltd (BABA.N) and online content developer BabyTree to sell interactive learning products based on its Fisher-Price toys.

Lego has about a 3 percent market share in China, followed by Mattel and Hasbro with around 2 percent and 1 percent, respectively, according to Euromonitor International.

In November 2016, Lego opened a factory in Jiaxing, China, which it expects to produce 70-80 percent of all Lego products sold in Asia.