Why did LEGO encounter serious economic difficulties in the late 1990s?

In the late 1990s, LEGO faced serious economic difficulties due to several factors, including increased competition from digital toys and Video Games, which reduced demand for traditional building blocks. Additionally, the company expanded its product lines too quickly, leading to overproduction and a dilution of the brand's core identity. Poor management decisions, including a lack of focus on the classic LEGO experience, further compounded these challenges, ultimately resulting in significant financial losses.