Lego is crushing Mega Bloks, a rival that sells cheaper blocks.
I went to Toys R Us recently to buy my son a Lego set for Hanukkah. Did you know a small box of Legos costs $60? Sixty bucks for 102 plastic blocks!
In fact, I learned, Lego sets can sell for thousands of dollars. And despite these prices, Lego has about 70 percent of the construction-toy market. Why? Why doesn't some competitor sell plastic blocks for less? Lego's patents expired a while ago. How hard could it be to make a cheap knockoff?
Luke, a 9-year-old Lego expert, set me straight.
"They pay attention to so much detail," he said. "I never saw a Lego piece ... that couldn't go together with another one."
Lego goes to great lengths to make its pieces really, really well, says David Robertson, who is working on a book about Lego.
Inside every Lego brick, there are three numbers, which identify exactly which mold the brick came from and what position it was in in that mold. That way, if there's a bad brick somewhere, the company can go back and fix the mold.
For decades this is what kept Lego ahead. It's actually pretty hard to make millions of plastic blocks that all fit together.
But over the past several years, a competitor has emerged: Mega Bloks. Plastic blocks that look just like Legos, snap onto Legos and are often half the price.
So Lego has tried other ways to stay ahead.
The company tried to argue in court that no other company had the legal right to make stacking blocks that look like Legos.
"That didn't fly," Robertson says. "Every single country that Lego tried to make that argument in decided against Lego."
But Lego did find a successful way to do something Mega Bloks could not copy: It bought the exclusive rights to Star Wars. If you want to build a Death Star out of plastic blocks, Lego is now your only option.
The Star Wars blocks were wildly successful. So Lego kept going — it licensed Indiana Jones, Winnie the Pooh, Toy Story and Harry Potter.
Sales of these products have been huge for Lego. More important, the experience has taught the company that what kids wanted to do with the blocks was tell stories. Lego makes or licenses the stories they want to tell.
And kids know the difference.
"If you were talking to a friend you wouldn't say, 'Oh my God, I just got a big set of Mega Bloks,' " Luke says. "When you say Legos they would probably be like, 'Awesome can we go to your house and play?' "
Lego made almost $3.5 billion in revenue last year. Mega made a tenth of that.
But Mega Bloks may yet gain on Lego.
Mega now owns the rights to Thomas the Tank Engine, Hello Kitty, and the video game Halo. And, on shelves for the first time ever this week: Mega Bloks Barbies.