LEGO: The end of life is the beginning of profit

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

For the LEGO investor, nothing is more expected and perhaps at the same time feared than the three letters: EOL. For many casual LEGO investors, EOL comes too fast and for others too late. Many times the EOL arrives unexpectedly. One day it seems like a team is there and the next it’s “Sold Out” or “Call for Availability.” It is also not good if you are the LEGO investor from the outside looking in. There are many EOL theories and predictors that can be found online with different claims from alleged LEGO sources and inside information. Amid all the speculation, one thing’s for sure – unless you work for The LEGO Group (TLG) and have real knowledge of the product life cycle, it’s all pure speculation and guesswork. Regardless of this fact, it is fun and potentially profitable to participate in this activity. Virtually all LEGO investors do. Historically, TLG uses a maddening and infinitely flexible two-year EOL rule in which many ensembles see the end of their production cycle. I like to summarize the phenomenon with three main categories or scenarios that I call: exception, perception, and deception.

Missing out on a great LEGO set is a heartbreaking sensation that occurs all too often for the casual LEGO investor. The two-year rule is nothing more than a LEGO barometer of waves to determine when a set could enter EOL. As with almost all rules, there are exceptions, in this case many exceptions! Trying to identify a brilliant line EOL rule is sheer nonsense. The following examples are just a few exceptions to LEGO’s two-year EOL rule. The first and perhaps the most extreme EOL exception would be the Holiday Train set (10173). It was only available for a meager holiday season in 2006 and then poof. The original RRP in 2006 was $ 89 and today it’s valued at over $ 300. Okay, this was a special occasion set, but still, that short shelf life is a tough pill to swallow if you had any hope of acquire it. Another notable set of exceptions that many casual investors may have missed is the Trade Federation MTT (7662) which launched in late 2007 for $ 99 and entered EOL in late 2008 with just 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 service life of less than 20 months. The original retail price was $ 119 and today’s value is trading at around $ 350, an increase of nearly 200%. Unfortunately, there are many more outfits 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 LEGO investing and any investor who appropriated these exceptions to the two-year EOL rule was actually very lucky.

So we looked at some exceptions to the two-year EOL guideline, now on most of the rule. It makes sense for a rule to 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 allows occasional investors to make a considerable profit. One of my favorite games that falls into this category is The Eiffel Tower (10181). Released in late 2007 and ending its EOL in late 2009, this set is a great example of a near-exact two-year production. The original retail price of The Eiffel Tower was $ 199. The current value is now an impressively high $ 850, which translates to a not-too-regrettable increase of 326%. Another good example of a large investment with a two year production life is Jabba’s Sail Barge (6210). This impressive set was released in 2006 with a modest RRP of $ 75. Today, this set is typically priced in excess of $ 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 was established at 10182 Café Corner. Café Corner lasted two full years from 2007 to 2009. The incredible original RRP of $ 139 has now rocketed to a staggering $ 1,136, for a more than 700% increase in value! Other notable ensembles that fall directly 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 a set that went on for at least two years. Two years represents the common perception of the average lifespan of LEGO production and is often the determining factor when faced with an investment purchase of different sets – choose the set that is most advanced in your production and therefore general, you will be safe. That is unless you are a victim of the LEGO deception.

The LEGO deception is nothing more than those sets that have outlived their welcome to the casual investor and simply refuse to die a natural death. That is not to say that the general public agrees with that sentiment; in fact, they obviously don’t or else these outfits wouldn’t be around for years after their debut. A perfect example of EOL hoax is the 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 that you are finally nearing the end of your life? The two year EOL rule would dictate this result, but this set seems to have some strong legs and is still very popular. You may still have some life left. The original RRP of $ 99 is still an exceptional deal. The current value is trading at approximately $ 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 their end of life ends 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 at Christmas 2011! To this day, it remains strong with no signs of giving in, even after the launch of the Modular Town Hall in March. There has been a lot of speculation around the modular issue and how many different active sets it can support at any given time. For several weeks this spring, most major outlets did not have the Fire Department in stock, including S @ H and Amazon. This led to a small value bubble that has since burst and has now returned to its near-original RRP. Finally, the largest and most extreme example of the LEGO EOL deception cannot be ignored: The Death Star (10188). For many casual LEGO investors, it was this set that pulled them out of their Middle Ages. So it is somewhat ironic that this set is still available four years later! In fact, it’s still a LEGO best-seller on Amazon, even at a whopping $ 399 RRP. Unfortunately, the current value is “only” $ 383 and certainly does not reflect the impressive firepower of the real, fully operational Death Star that it so wonderfully emulates.

Many factors influence the application of the LEGO two-year EOL guidelines. Certainly popularity, earnings, theme, and price help dictate the lifespan of a specific set and each of those factors could be analyzed in great detail. For most casual LEGO investors, that’s not particularly practical or productive. For now, it’s best to keep an eye out for sets that are approaching the two-year mark and use your best LEGO judgment. As with any investment, there is a great element of chance involved. Jump too early and you can sit down with lots of large boxes in every room in your home. Wait too long and you just wish you had a lot of large boxes in every room in your home.