LEGO: The end of life is the beginning of profit

As an occasional LEGO collector, I’m always on the lookout for games worth investing in. Obviously, the intention and goal of investing in LEGO is ultimately to make a profit. Therefore, it is crucial for the casual investor to maximize their dollar investment, which is usually achieved only after a game is retired or, in LEGO parlance, reaches the end of its useful life (EOL). It’s no secret that the biggest factor in LEGO investment and set appreciation is EOL. In simpler terms, without EOL there is no profit.

For the LEGO investor, nothing is more eagerly anticipated and perhaps simultaneously feared than the three letters: EOL. For many casual LEGO investors, EOL comes too quickly and for others, too late. Many times EOL comes unexpectedly. One day apparently a game is there and the next it’s “Out of Stock” or “Call for Availability”. It’s also not good if you’re the outsider looking inward looking LEGO investor. There are many EOL theories and predictors to be found online with various claims from purported LEGO sources and inside information. Amid all the speculation, one thing is for sure: unless you work for The LEGO Group (TLG) and have actual knowledge of the product lifecycle, it’s all pure speculation and educated guesswork. Regardless of this fact, it is fun and potentially profitable to engage in this activity. Virtually all LEGO investors do. Historically, TLG uses an endlessly flexible and maddening two-year EOL rule where many teams see their final production run. I like to summarize the phenomenon with three main categories or EOL scenarios that I call: exception, perception, and deception.

Missing out on a great LEGO set is a harrowing feeling that happens all too often for the casual LEGO investor. The two-year rule is nothing more than a vague LEGO barometer for when a set might reach the end of its useful life. As with almost all rules, there are exceptions, in this case, many exceptions! Trying to identify a bright line EOL rule is a real dork. The following examples are just a few exceptions to the LEGO two-year EOL rule. The first and perhaps most extreme exception to EOL would be the Holiday Train set (10173). It was only available for a short holiday season in 2006 and then poof. The original RRP in 2006 was $89 and today it is valued at over $300. Granted, this was created for a special occasion, but still, such a short shelf life is a tough pill to swallow if you had any hope of acquiring it. Another notable exception set that many casual investors may have missed is the Trade Federation MTT (7662) which launched in late 2007 for $99 and ended in late 2008 with only a little over a year in production. The value of this set today is nearly $400, which is a whopping 285% increase. Another elevated example of an established EOL exception to the two-year rule is the VW Beetle (10187) launched in 2008 and achieved EOL status in December 2009 for a total useful life of less than 20 months. The original retail price was $119 and the current value today is trading around $350, an increase of nearly 200%. Unfortunately, there are many more sets that fit into the exception category, such as Market Street (10190) and Grand Carousel (10188), to name just two. They both make me want to kick myself for failing! These exceptions to the EOL rule highlight the dangers and pitfalls of investing in LEGO and any investor who snatched these exceptions to the two-year EOL rule was very lucky.

So we look at some exceptions to the two-year EOL guideline, now into the bulk of the rule. It stands to reason that a rule should have a large number of examples to support it. In other words, for exceptions to exist, there must be a collective perception of what is supposed to happen. There are numerous examples of the two year EOL rule which, if observed, still allowed casual investors to make a tidy profit. One of my favorite games that falls into this category is The Eiffel Tower (10181). Released in late 2007 and ending production in late 2009, this set is a great example of an almost exact two-year production run. The original RRP for The Eiffel Tower was $199. The current value is now an impressively high $850, which translates to a not too bad increase of 326%. Another good example of a great investment set with a production life of two years is Jabba’s Sail Barge (6210). This amazing set was released in 2006 with a modest RRP of $75. Today, this set is typically priced above $400, which equates to a 445% increase in investment. Perhaps the holy grail of the modular world of LEGO and the best example of the two-year production life cycle is found at 10182 Café Corner. Café Corner lasted two full years, from 2007 to 2009. The original mind-boggling RRP of $139 has now skyrocketed to a staggering $1,136, an increase in value of over 700%! Other notable assemblages that fall squarely within the two-year EOL sweet spot are the Taj Mahal (10189); the green shopkeeper (10185); The Millennium Falcon (10179); Vader’s TIE Advanced (10175) and much more. It’s hard to claim any surprises or generate much sympathy for missing out on any set that’s been around for at least two years. Two years represents the common perception of the average production lifespan of LEGO, and is often the determining factor when faced with an investment purchase of different sets: choose the set that is furthest along in its production cycle and generally will be safe. That is unless you fall victim to the LEGO hoax.

The LEGO hoax is nothing more than those sets that have outlived their welcome to the casual investor but simply refuse to die a natural death. That’s not to say that the general public agrees with that sentiment; in fact, they obviously don’t, or else these outfits wouldn’t be kicking around years after their debut. A perfect example of the EOL hoax is Medieval Market Village (10193). This set came out in 2008 and is still available today. The LEGO Shop at Home (S&H) currently lists this set as unavailable until August of this year. Does this mean it’s finally getting close to EOL? The two-year EOL rule would dictate this result, but this set seems to have strong legs and is still very popular. It may still have some life left in it. The original RRP of $99 is still an exceptional deal. Current value is trading at around $92, which is a 6% decrease from the RRP. Interestingly, the value of this set has increased by 6% over the last month. It looks like investors could start to make some modest gains in the next 6 months if it ends up reaching the end of its useful life this summer or fall. Another set that is still available long after the two-year EOL rule is the Fire Department (10197). This set was released in September 2009 and was thought to be a likely candidate for EOL in Christmas 2011! To this day, it’s still going strong and shows no signs of letting up, even after the launch of the modular Town Hall in March. There has been a lot of speculation around the topic of modularity and how many different active sets it can support at any given time. For several weeks this spring, most major outlets didn’t have the Fire Brigade in stock, including S@H and Amazon. This led to a small bubble in value that has since burst and is now back to almost the original PVP. Finally, one cannot ignore the biggest and most extreme example of the LEGO EOL hoax: The Death Star (10188). For many casual LEGO investors, it was this set that brought them out of their Dark Ages. So it’s kind of ironic that this set is still available four years later! In fact, it’s still a LEGO bestseller on Amazon, even at a massive RRP of $399. Unfortunately, the current value is “only” $383 and certainly doesn’t reflect the awesome firepower of the actual Death Star. and fully operational that it emulates so beautifully.

Many factors play a role in the application of the LEGO two-year EOL guideline. Certainly, popularity, earnings, theme, and price help dictate the lifespan of a specific set, and each of those factors could be looked at in great detail. For most casual LEGO investors, that’s not particularly practical or productive. For now, it’s best to keep an eye on sets approaching the two-year mark and use your best LEGO judgment. As with any investment, there is a large element of luck involved. Jump in too soon and you can sit with a lot of big boxes in every room of your home. Wait too long and you just want to have a lot of big boxes in every room of your home.