HOW LEGO IS BUILDING ITS BRAND IN HOLLYWOOD

In 2007, Warner Bros. producer Dan Lin and writers Dan and Kevin Hageman flew to the tiny town of Billund, Denmark — population 6,155 — to pitch Lego executives a movie based on the classic interlocking blocks.

At the time, toy properties were all the rage in Hollywood thanks to the $710 million worldwide box-office haul of Transformers, a surprise hit spun from the Hasbro alien robots. But when Lin and the Hagemans presented their vision, they were greeted with skepticism.

“Every year, Lego’s sales were seeing 25 percent gains, and that was during a major recession,” Lin recalls. “So, they asked us the tough question: ‘Why make a movie when we already have a successful toy line?’ “

Six years later, Lego, which recently became the second-biggest toy company in the world behind Mattel, is making a play to dethrone Hasbro as the hottest toy brand in Hollywood. Warners’ Lin-produced The Lego Movie is set for a Feb. 7 release. Lego has two hit Cartoon Network series — Ninjago: Masters of Spinjitzu, which the Hagemans also wrote, and Legends of Chima — and more than 85 million video game units sold for Warner Bros. Interactive Entertainment, including Lego Batman. At the same time, Lego is leveraging the strength of its brand (and willingness to say no) to score more favorable treatment in Hollywood.

Even though the company doesn’t work with an agency — unlike Hasbro (WME) and Mattel (CAA) — its film deal eclipses competitors’. Sources say Lego enjoys an escalating first-dollar gross deal on the upcoming film (Hasbro received only a producer’s fee for the Transformers and G.I. Joe franchises and Battleship). Lego’s Jill Wilfert, the brand’s gatekeeper and Hollywood liaison, also has been cutting shrewd licensing deals with studios, bringing diverse characters from Lucasfilm’s Han Solo to Disney’s Jack Sparrow to Warners’ Harry Potter to Marvel’s Avengers into the Lego toy and video game universe.

“That kind of dealmaking should be beyond the realms of possibility, but with Lego, it gets done,” says Jon Burton, managing director of TT Games, the Warner Bros.-owned developer of the Lego video games. “Warner Bros. has made a Pirates of the Caribbean video game thanks to Lego. That kind of inter-studio collaboration is unheard of.”

The Lego Movie, which sources say was made for $60 million to $65 million and co-financed with Village Roadshow (cheap for a CG-animated feature), will test the full potential of the Lego-Warners union. The story of a Lego minifigure (Chris Pratt) who joins a quest to stop an evil Lego tyrant (Will Ferrell) from gluing the universe together, it’s a colossal undertaking, with a simultaneous release for the movie, video game and a new toy line — the most expansive line Lego has attempted.

“It has been an unbelievable partnership,” says Greg Silverman, Warners’ president of worldwide production. “What’s so unique about Lego is, they have a deep understanding of their consumer. Because of that, we have gone way beyond our contractual obligation with them and have constantly solicited advice.”

In fact, Lego negotiated only to approve the film’s treatment. But the studio kept the toy company involved in every step of the process. Wilfert, based in Carlsbad, Calif. (near the Legoland theme park), provided script notes to directors Phil Lord and Chris Miller (Cloudy With a Chance of Meatballs). Artists in Los Angeles drew ideas for characters and sets, which prompted Lego designers in Connecticut and Denmark to create prototypes. Animators at Australia’s Animal Logic melded the two visions.

“I think other toy brands are looking at Hollywood as another revenue stream,” Wilfert says. “But for us, it’s a way to build and enhance the brand. We really don’t approach Hollywood as a way to sell a toy.”

But at least one Lego success clearly has spurred toy sales. After Ninjago debuted on Cartoon Network in 2011, it quickly became the company’s highest-grossing original launch. Though Lego doesn’t release figures, it says Ninjago sales grew exponentially in its second year, and demand continues.

By contrast, Hasbro has had mixed results in Hollywood. The fourth Transformers film is due in 2014 and G.I. Joe’s second outing grossed $376 million worldwide last year, but Battleship flopped big in 2011 and a planned Stretch Armstrong film was scrapped Oct. 12 by Relativity. In addition, the Transformers and G.I. Joe franchises, which skew older than the toys’ core consumer, never translated into sustained sales. On Oct. 21, Hasbro announced that its boys’ toy business, which includes Transformers and G.I. Joe, fell 17 percent in the third quarter, its sixth straight quarter of decline.

Lego, instead, allows its brand to be attached only to content that is made for its core consumer, boys and girls ages 5 to 12. Its video games are a huge seller for Warners, including Lego Star Wars, Lego Harry Potter and the slightly older-skewing Lego The Lord of the Rings. The Lego game franchise only slightly trails Mario, Call of Duty and Grand Theft Auto.

On TV, Chima ranked No. 1 on Wednesdays among boys 6 to 11 and 9 to 14. For 2012, Ninjago ranked No. 1 in its time period among kids 6 to 11. In July, Cartoon Network and Lego unveiled Mixels, with animated content, a digital game and a toy line. The initiative is unique because the IP was developed jointly.

Says Cartoon Network’s Rob Sorcher, “Most animators have a love for Lego second only to their mothers, so this has been a creative sync from our first trip to Denmark.”