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Salacious Greed wrote:

GW's half year report wrote:As a niche business, Games Workshop, in general terms, neither benefits nor suffers from macro economic factors.

In other words, GW themselves do not ascribe their results to the state of the economy.

GW no longer subscribes to the economy. Though it costs less than White Dwarf, it was cut out in the name of efficiency.

Win.

Bloodwin wrote:The big problem with that is that GW keep pushing the Apocalypse scale games whilst their competition focuses on games with a dozen figures either side.

I would agree. WM/H and Malifaux have entry level costs of $50 for the equivalent of a 750-1k pt level for 40k--and all armies are priced at this $50 entry area, and all armies are valid. To make any sort of mech build for 750-1k 40k you're going to spend double that on transports. 40k's per-model cost is pretty similar to other gaming systems, but the buy-in and the end target price levels are very much higher.

This is a huge deal when it comes to recruiting players to the game systems. Malifaux and WM/H really do basically sell themselves just by dint of new players wanting to join the gaming community, and being able to for $50.

I have quit spending. How come Blackreach box set when it first came out was $75, and now 2, or is it 3 years later, it is now over $108, WTF?! That is almost a $35 increase and then add in taxes.

Geez, when I got my Blackreach boxset, it costed me $75. What extra do you get now? Nothing. So they increased the price, so now that is less money for a codex or other minis or supplies.

And speaking of codex, $40 fracking bucks for a Codex? Are you kidding me? Yeah GW has priced themselves out, with me at least.

As someone said, $100 for GW stuff, OR 2 games for the 360 or PS3. Hmmm.... I wonder what my son will enjoy more.

Also why would I want to spend my money on GW when I am not even considered anymore since I spent my $500. Why do I want to come when I feel like I am more of a burden to them?

I went to a GW store, was going to buy something, but as soon as some "fresh blood" came into the store, I was ignored, so I left without even buying anything. I can see how important I am too them.

I hope GW goes Bankrupt. Not like they want me in the store anyways, so I don't care if they go away anymore. There is more things to do than play with plastic toy soldiers. At least my son is smart, he wants IG, he goes to the dollar store and buys them from there, and gets 100X more than he ever would buying at GW.

Slashing costs is no long-term strategy. All corporations slash costs to give their stock price a short-term boost in value when it's sagging, but in the long-term one has to have a strategy to grow the business or the stock price and the company quickly fade to nothing. This crazy one-man store cost slashing strategy that is being used all over the globe leaves stores closed at all kinds of hours shoppers would normally expect to be able to buy product, especially since every time there are unforeseen circumstances now it forces those stores to close. My local store's busiest day is often Wednesday and yet every quarter when GW has their sales conference in Las Vegas the store is forced to be closed the Wednesday after due to travel time back from Las Vegas. GW stores were like this back in the early 1990s just before they closed all of them completely for 2 years in the US and I fear they are going back to that kind of unreliability that heralds the closure of many if not all their stores here. If stores cannot maintain reliable hours customers will and do go elsewhere.

Some number crunching from Sureshot05 over at Warseer:

It appears that their drive to save costs was worth it, but still hasn't addressed a key issue in lack of sales.

Key figure's that I see of relevance are:

Revenue
2010: 60,035
2009: 62,539

Cost of sales
2010: 13,995
2009: 16,014

So it cost them 2 mill less to produce their goods, but they suffered a 2.5 mill reduction in total sales. Every region suffered loss of revenue. With a large loss in Northern Europe (UK) (see below).

Location, this year (last year) Change in sales
Northern Europe, 16,999 (18,250) LOSS - 1251 7% decline
Continental Europe 17,514 (17,756) LOSS - 242 1% decline
North America 14,520 (14,840) LOSS - 320 2% decline
Australia 5,032 (5,159) LOSS - 127 2% decline
Emerging Markets and Japan 1,647 (1,857) LOSS - 210 11% decline
All other sales businesses 4,323 (4,677) LOSS - 354 8% decline

BTW Northern Europe includes UK and those numbers are not considering inflation and price increases.

what if they are going to close everything ? Could they really go bankrupt ?

I've always heard this in the last couple of years but I've seen no collaps yet and furthermore... they are investing in new miniatures.

I'm confused by all this because I haven't a clue of what it means. But could someone please simply explain to me whats happenning. Is GW going to go bankrupt????

All in all, the starter kits are still good value. If I recall correctly, they have always been very expensive prior to the new direction introduced with "McCragge". I think the 3rd Edition starter circa 1998 was $150cdn.

Blisters appear to have gone up 40% in price over 10 years.
Tanks have been mostly stable, with certain ones getting cheaper, but the majority seem to have only increased a modest 25% in price over 10 years.
Plastic infantry have increased in price drastically where basic infantry are 100% more expensive now than they were 10 years ago.

My 3rd edition 1500 point Biel-Tan Eldar army is 50% more expensive now than it was 10 years ago. It is a mix of metal and plastic and covers all GW pricing bands with an Avatar, 33 aspect warriors and 20 guardians, mostly mounted, with vyper support. That said, the new models are nicer and weapon options are much easier to get. Unfortunately, the standard sized game has crept to 1850, pushing the overall cost of the army towards the 1k range.

Considering that for the same price, one can afford a 40" 1080p HDTV and an xbox360, I can not see how GW can expect to entice new customers to the fold.

I don't think so. They just keep doing bad decisions (like raising prices - "we might sell less, but we'll make more!" ) which is eroding the company. They aren't going bankrupt, at least not yet.

Sincerely, I don't know how the Administration of such a large-spanning company has such a blocked mentality.

Well from my limited education in accounting/finances it appears;

They gained from the currency shifts
They gained from efficiency/production relocation efforts
They gained from IP branding via HH novels and video games

...yet....

Sales still dropped across the board. People aren't buying the miniatures as much anymore....perhaps they finally priced themselves out of their target.

Im sure i heard they nearly went to the wall once before, but pulled it back with heavy investiment in plastic kits and just generally upping their game design wise. Plastic is certainly alot better than it was 10 or so years ago.

Products are really good, just slow to come out and not alot of variety from month to month. The last release for orks was a year ago and there is nothing on the horizon, thats alot of time in which its easy to get board with no love from WD either...

and of corse there is price which will always be the biggest prohibitive factor. I think they put too much investment into stores (in the UK, i'm aware elsewhere the opinon is there isnt enogh). opening a new store might be exciting for the local area for a while but inevitably it dies down and in the smaller UK towns there is only one person manning it at a time anyway - how is that providing any kind of gaming hub? one person cant run a store, paint the armies for the window and still have time to talk you through the game or fluff or help you paint... so all your left with is an expensive store that bearly operates manned by one person who is then manager by default so costs another 16 - 19k a year, pointless. So prices have to support the stores which are used by perhaps 10 - 20 regular gamers there, usually all kids.

i just count myself lucky that i have access to a great gaming group in my area because if the GW stores were all that were on offer i wouldn't be at all interested in playing - and therefor not interested in buying much.

...perhaps they finally priced themselves out of their target.

I've been discussing that with friends off and on for the past 15 years every time they raise prices and it never seemed to actually happen before, but this time I see signs of it all over their stores. There are certain kits that people just do not buy virtually ever due to the pricing on those specific sets. And the number of such sets keeps increasing each year as GW pushes the limits of pricing. Sometimes they win big with certain items, others clearly do not excite customers enough to pay the premium pricing on them and they languish on the shelves and in the warehouses.

I know, for me, GW stuff has become cost-prohibitive. Spending $500 on a decent-sized army? That's excessive, especially when I can get an army for Malifaux for $50, or Flames of War for $100.

Now, I don't know much about economics, but it's probably way too early to be talking about bankruptcy. GW isn't going under any time soon, right?

Emerging Markets and Japan 1,647 (1,857) LOSS - 210 11% decline

The first time I saw the prices of GW product in Tokyo my eyes bulged out of my head like an old fashioned cartoon. It was the first and last time I was in a Japanese GW. It saddens me to think that Japanese people may lose out being exposed to such a rewarding hobby because GW didn't figure out the right approach for this particular market.

So the pattern goes something like:
Sales go down, cut costs & increase prices to compensate.
Now repeat year after year.

When do we hit the point when this cycle will no longer work, that is when there are too few costs left to cut and the price has exceeded what the market will bear?

I've heard plenty of nay-sayers over the year claiming that GW has finally hit the point of instability. I'm at the point where I just don't care any more. GW isn't the only dealer in town anymore.

Kilkrazy wrote:"Sales through independent retailers grew in Northern Europe and North America."

To me that indicates that more customers are going to indies for the lower prices.

Nonsense. We all know their path to success in NA relies on blanketing it with one-man GW stores. All 7,248 that it'll take.

Good luck with that, GW.

If GW keeps on their current course I would not be surprised if they go under. They neuter their retail stores by going to the one man system. This not only effects the hours that they are open, but also things like the academy program which is very important for beginners. On the other hand they spend like pigs to send their managers to Las Vegas four times a year.

I would not be surprised if they closed many, if not all, of their stores. However, if they do so I suspect that their sales will plummet as people will not have places to play.

They made less profit, but they still made profit.

Look at gross margin - 76%, this is essentially the sale price/cost of production. So a £10 box only costs them £2.40 to produce. This will though ignore any central/admin costs, office rental etc but still a pretty decent lump.

If they get the planned codex launches, second wave of BA and DEldar etc out on time, then no real problems for 2011 ...

crimsonfist832 wrote:I'm confused by all this because I haven't a clue of what it means. But could someone please simply explain to me whats happenning. Is GW going to go bankrupt????

No they are not going bankrupt. Refer to the Company's Statement of Cash Flows from their last Audit Report (or equivalent in the UK).

You think we can convince our respective governments to bail out GW in case of bankruptcy?

To be honest however, when a company is going out of business, typically they try to get rid of as much crap as they can. I think that only an extremely suden and huge drop in prices would be a sign of the apocalypse *ahem* GW closing down for good. Then again, that could also be them growing a soul, compassion, and some common sense as well.

In the meantime, I'm hitting the swap shop

Guildsman wrote: I know, for me, GW stuff has become cost-prohibitive. Spending $500 on a decent-sized army? That's excessive, especially when I can get an army for Malifaux for $50, or Flames of War for $100.

Now, I don't know much about economics, but it's probably way too early to be talking about bankruptcy. GW isn't going under any time soon, right?

even though my income has increased, my purchases are down year after year. i'm just not interested in paying their prices for the products in general. the only official new "army" i've gotten is my space hulk deathwing force and that was because the space hulk box was a steal (12 terminators if you include the dead one plus 25+ genestealers and the actual board game for less than the price of 10 terminators). i kept one complete set and traded/sold the genestealers/board pieces/rules from the second to get my third set of terminators. there is NO way i would have paid another 80% more for my 30 terminators and 2 HQs. i've pretty much restricted myself to trading/selling my old collection for the stuff i want. i don't have a problem trading a $50 kit i own already for a $50 kit i want (especially if i only paid $30-35 for it way back). i agree that quality has significantly increased since the old RT days and comparing the old RT marines to the current ones is not fair (both in price and quality)... but comparing the 3rd edition marine tact squad that started at $20 with the current one at $37.25 (which is IDENTICAL except for the accessory sprue) is fair. i've got 15,000pts of painted figs the last time i checked and there is NO way i would have collected even half that at the current prices. i vote with my wallet.

ruminator wrote:
If they get the planned codex launches, second wave of BA and DEldar etc out on time, then no real problems for 2011 ...

Except even with the first wave of DE, the release of 8th WFB, and cutting costs profits still fell. But sure, maybe DE and BA can right the ship.

GW isn't the only dealer in town anymore.

Even though I hear about warmachine and hordes in passing on these boards, it was not until I read the first couple posts in this thread that I checked out their site for the first time. I must say, I liked what I saw. Not quite there yet...but it feels like an honest to goodness alternative. Just a little push...

ruminator wrote:They made less profit, but they still made profit.

Look at gross margin - 76%, this is essentially the sale price/cost of production. So a £10 box only costs them £2.40 to produce. This will though ignore any central/admin costs, office rental etc but still a pretty decent lump.

If they get the planned codex launches, second wave of BA and DEldar etc out on time, then no real problems for 2011 ...

Right, I think they outlined this with their shift of production facilities/efficiency efforts. However, the question I have is have they exceeded their price point? Before, I said "Whatever, people are still buying". It doesn't appear they are now, even with a given 20% discount from online retailers.

Plus, I would also add I think their pricing mentality is leading to FLGS death. If they assume that vendors will sell their products at 20% discount and price accordingly, then it makes very difficult for your FLGS to compete with the Warstore.

Not suprising, but they are still making profit. I've been reading these commentaries for a long, long time now, and I think it's the same general tone each and every year, or half year, or whatever. What 2010 is notable for is the sheer sparsity of releases, which I wonder if it has to do with firing creative staff. They seem like the worst people to fire, to me.

Kilkrazy wrote:I know many of us including me have often said that GW stuff is price inelastic, meaning that people go on buying it despite the price increases.

But when revenues drop 4% in a year, which GW themselves don't both to explain, only talking about how the economy doesn't affect a niche market, you have to wonder.

So for a laugh, I price up what a youngster or their father might need to spend to get into the HHHobby.

AoBR £55
IG Army Book £17.50
Eight tanks and vehicles at average £20 = £200
10 boxes of infantry £155.50
Some special models, like characters £30
Paints, tools and stuff £40

Total = £498

You should get a pretty reasonable army out of that, however compare it with the cost of a PS3 and a bunch of games, or a holiday in Italy, and so on.

Maybe they really have priced themselves too high.

Are the figures they are using currency adjusted?

Destrado wrote:I don't think so. They just keep doing bad decisions (like raising prices - "we might sell less, but we'll make more!" ) which is eroding the company. They aren't going bankrupt, at least not yet.

Sincerely, I don't know how the Administration of such a large-spanning company has such a blocked mentality.

I didn't see this in their last set of financial statements, could you reference this for me? I did see that they are still making a profit and their margins have remained relatively consistant (only a 2% increase). What that tells me, is that they raised the price of their product by 5% and only saw a 2% in their gross margin. That is in no way indicative of anything less than adjusting the price for increase in materials charges. Also their price increases are based on historical trends (based on the PY) so they adjust their prices to reflect this so they didn't lose money producing their product.

For those of you who don't know what gross margin and gross profit are, its Revenues less cost of goods sold. Cost of goods sold does not include administrative charges, accounting, back office support, marketing, et al. So unless you're actively part of producing their miniature or a sales person, your salary should not and would not be included (US GAAP) and as an FYI UK GAAP is VERY SIMILAR in nature since we based US GAAP originally on UK GAAP. Our GAAP has evolved to be more stingent than UK GAAP due to the SEC Acts of 1933/1934.

crimsonfist832 wrote:I'm confused by all this because I haven't a clue of what it means. But could someone please simply explain to me whats happenning. Is GW going to go bankrupt????

Not quickly.

The situation is that since the glory days of the Lord Of The Rings films, GW's annual sales and revenues have been declining.

They have managed to compensate for this by increasing efficiency in the supply chain, and by increasing prices faster than inflation. This means they are still making a profit, but the profit is shrinking.

This is not viable as a long term strategy, since it is impossible to be more than 100% efficient, or increase prices to infinity.

GW therefore need to increase sales numbers to increase profits without increasing prices.

The problem people on Dakka Dakka are having is that as GW Management do not explain their falling profits by the bad economy, they also can't expect a growing economy to help them. Therefore they need some other plan to increase sales. They do not seem to have one.

I wonder if part of their problem is that its too easy to pick up GW goods second hand. I mentioned in another thread that I scooped a sealed box of Thunderers (RRP - £18.50) for less than £6.00 on ebay the other day.

My personal circumstances (wage cuts, mortgage and baby) mean that I very rarely buy new these days if I can find it somewhere else for much cheaper.

Frazzled wrote:

Kilkrazy wrote:I know many of us including me have often said that GW stuff is price inelastic, meaning that people go on buying it despite the price increases.

But when revenues drop 4% in a year, which GW themselves don't both to explain, only talking about how the economy doesn't affect a niche market, you have to wonder.

So for a laugh, I price up what a youngster or their father might need to spend to get into the HHHobby.

AoBR £55
IG Army Book £17.50
Eight tanks and vehicles at average £20 = £200
10 boxes of infantry £155.50
Some special models, like characters £30
Paints, tools and stuff £40

Total = £498

You should get a pretty reasonable army out of that, however compare it with the cost of a PS3 and a bunch of games, or a holiday in Italy, and so on.

Maybe they really have priced themselves too high.

Are the figures they are using currency adjusted?

The figures presented in the financial statements are currency adjusted.

My figures aren't as I am just doing a rough calc based on the British market, for purposes of illustration.