What's going on?

Famed Danish toymaker Lego announced on Monday that it�s joining forces with Chinese tech giant Tencent to develop Lego-branded video games for Sino-tots.

What does this mean?

Lego has fallen on hard times recently as annual sales of its physical bricks fell for the first time in 13 years (tweet this). On top of that, the company has only had moderate success developing mobile games, even as play turns increasingly digital.


Enter Tencent, one of the world�s most formidable gaming companies and a major player in China�s tech ecosystem. Tencent also part-owns Finland�s Supercell, responsible for the massive mobile gaming hit Clash of Clans. The plan is to have Tencent distribute Lego-branded games and video content on its platforms, like WeChat; the pair are also toying with the idea of building a Lego-themed social network for kids and intend to launch the new-wave Lego Boost in China, helping build up the Lego brand inside the world�s second-largest economy.

Why should I care?

The bigger picture: Kids these days can�t seem to put down the iPad!

Touch-screen gaming is now one of the most popular ways for kids to play, beating out the old gods of construction blocks and puzzles � and, increasingly, even console gaming. Venerable gaming titans like Nintendo and Square Enix, reading between the lines of this toy story, have been making more and more mobile games lately � some of which (like Pok�mon GO and Super Mario Run) have played well with audiences.

For markets: Some traditional toymakers are playing for time.

Last year saw Toys �R� Us go bankrupt, as well as trouble at Mattel (responsible for Barbie and Hot Wheels), whose shares are trading at multi-year lows as the company struggles to build a credible business plan for the digital era. Potential suitor Hasbro, for its part, saw its stock rise more than 20% last year as its profits grew more from its exposure to the Star Wars brand and a suite of franchise video games than physical toys.