Why Universal beat Warner Bros. for the Lego movie franchise

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It’s not every day that an iconic and lucrative block of intellectual property is up for grabs, but Lego was—and Universal Pictures jumped at the opportunity.

The studio announced Thursday that it has completed a five-year exclusive film partnership deal with the Lego Group, the Danish parent company of the popular building-block toy, paving the way for a new slate of films based on IP that made former Lego partner Warner Bros. more than $1 billion at the global box office. The news was first reported Thursday afternoon by Deadline.

Returns on the Lego film franchise have been in decline. The first of the four Warner Bros. movies, 2014’s The Lego Movie, got off to a roaring start, netting $468 million worldwide and rave reviews on a budget of $60 million. Its follow-up, The Lego Batman Movie, starring Will Arnett in the titular role, also impressed with nearly $312 million in earnings worldwide. But viewer fatigue seemed to set in by the third film, The Lego Ninjago Movie, which earned just $123 million globally on a budget of $80 million.

It didn’t stop there. When The Lego Movie 2: The Second Part arrived in theaters in early 2019, critics called the sequel a “franchise-ending box office failure.” Despite strong reviews, it earned $192 million worldwide. In comparison Smallfoot—another animated, family-oriented Warner Bros. title, based on an unpublished children’s book rather than a global toy empire—generated $214 million globally (on a budget of $19 million less than that of Lego Movie 2) a year earlier. As box office expert Scott Mendelson wrote in Forbes: “When the IP is performing weaker than comparative non-IP content, that means that the IP is potentially acting as a deterrent. At this point, Lego is hurting WB’s animation brand.”

So why did Universal go gunning for Lego after its deal with Warner Bros. expired? A billion dollars in global box office sales is nothing to sneeze at, but Universal sees a golden opportunity to inject fresh energy into the Lego film franchise with its own intellectual property—IP that has made billions at the box office on its own merits. Lego Jurassic Park, anyone? How about Lego Despicable Me? Lego Kung Fu Panda? A whole realm of mashups and spinoffs and altogether new Lego ideas await at a time when successful intellectual property remains one of the most effective draws for getting audiences to go to the movies—streaming competition and coronavirus complications be damned.

“The Lego System in Play gives people the ability to build worlds and create stories that they carry throughout every phase of their lives,” said Donna Langley, chairman of Universal’s filmed entertainment group, in a statement. “To partner with such an iconic brand that remains relevant and is constantly evolving allows for creativity in storytelling.”

Lego Group head of entertainment Jill Wilfert hammered out the deal with Langley. “Universal’s commitment to unique storytelling from diverse voices makes the studio the perfect partner as the LEGO Group enters this new phase of filmmaking,” she said in a statement.

Warner Bros. isn’t completely out of the Lego picture—the four existing Lego films and their characters remain with the studio, according to Deadline. (Warner Bros. did not respond to a Fortune request for confirmation or comment.) But the silver-screen success of the Lego franchise is now in Universal’s hands.

More must-read stories from Fortune:

—Why Hollywood is so anxious about Chinese theaters
Netflix reveals record subscriptions during the coronavirus pandemic
—Why Sonos launched a radio station
The verdict on Quibi (so far)
—Why Mrs. America and the 1970s fight over the Equal Rights Amendment are more relevant than ever

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