The Economics Behind GW Price Increases

Forum adverts like this one are shown to any user who is not logged in. Join us by filling out a tiny 3 field form and you will get your own, free, dakka user account which gives a good range of benefits to you:

No adverts like this in the forums anymore.
Times and dates in your local timezone.
Full tracking of what you have read so you can skip to your first unread post, easily see what has changed since you last logged in, and easily see what is new at a glance.
Email notifications for threads you want to watch closely.
Being a part of the oldest wargaming community on the net.

If you are already a member then feel free to login now.

**deggreg@yahoo.com**

pretty good OP. I will say, everybody I know who plays 40k or fantasy who is complaining about the prices, complains about everything GW anyway, and most of them aren't working on an army..they are done and don't buy anything anyway.

If it's going to cost me $700 to do my next army (Chaos SM probably), now it's going to cost me $800. If I want to do it, I'm still going to, if the hobby is already too expensive for my economic situation...this is just the excuse I need to not do it.

Honestly, a nice dinner out for me and my wife costs $80. Going to the movies with snacks cost $40. It takes $120 to fill up my F150. Things are getting more expensive, just because our wages aren't keeping up with this...I don't intend to take it out on an already expensive hobby. The american economy is failing, the cost of manufacturing and transport go up..goods go up.

Everybody on here who says "This is the last straw, I'll never buy anything again" were just looking for an excuse to not buy IMO.

that being said, damn glad I bought my 4 rhinos and 1 LR for my army earlier this year...lol

**LunaHound**

Aren't the store's up keep cost and staff wages part of the turn over amount?

If it is, then after all the store and staff cuts, GW is still at break even? That means they lost money.

If it isnt, then nvm.

**deggreg@yahoo.com**

LunaHound wrote:Aren't the store's up keep cost and staff wages part of the turn over amount?

If it is, then after all the store and staff cuts, GW is still at break even? That means they lost money.

If it isnt, then nvm.

I don't think the stores are really money makers, they are there to recruit people and hopefully at least break even.....then those people buy GW stuff everywhere for the next 10 years, not just at GW. I think if GW relied on their stores as their income stream, they'd have been out of business a couple of years back.

**Griever**

All this is well and good (I have a degree is business so I've taken several economics courses), but at the end of the day I draw the line at paying $60 for a toy tank.

I just bought Diablo 3 for that much and it's going to entertain me a hell of a lot more. Not to mention, I can buy just diablo 3 and enjoy it. In order to enjoy that $60 predator I have buy several other hideously overpriced models as well. Having one predator is useless.

I think they've just crossed the ceiling. Having to pay $500+ just to play their game is preposterous (that's rules, paints, modelling stuff, miniatures). And they're target market is supposedly teenage boys? My parents used to laugh me out of the room when a box of space marines cost $25.

**LunaHound**

deggreg@yahoo.com wrote:
LunaHound wrote:Aren't the store's up keep cost and staff wages part of the turn over amount?

If it is, then after all the store and staff cuts, GW is still at break even? That means they lost money.

If it isnt, then nvm.

I don't think the stores are really money makers, they are there to recruit people and hopefully at least break even.....then those people buy GW stuff everywhere for the next 10 years, not just at GW. I think if GW relied on their stores as their income stream, they'd have been out of business a couple of years back.

No, Im fully aware the stores acts as a sphere of influence and nothing more.
What Im saying is, if GW trimed / saved bunch of money by closing shops and fire staff into 1 man stores, they should have saved tons of money,
and it should show on the report of the trim.

**notprop**

GW stores also generate turnover and margin since the recoup at full RRP.

I don't imagine that any GW store is allowed to run at anything other than a profit. Ergo why unsuccessful ones are closed or moved.

Regarding cost cutting generally this is the first move by all companies day one of a downturn. That annual report stated that they had grown fat over the good times and were taking action to increase efficiencies, so store and job loses

**Surtur**

notprop wrote:GW stores also generate turnover and margin since the recoup at full RRP.

I don't imagine that any GW store is allowed to run at anything other than a profit. Ergo why unsuccessful ones are closed or moved.

Regarding cost cutting generally this is the first move by all companies day one of a downturn. That annual report stated that they had grown fat over the good times and were taking action to increase efficiencies, so store and job loses

Actually, GW stores are run under the idea of growth. The upper management is always thumping it's chest about growth. I don't think I ever heard squat about profit or loss working there. I know for a fact that the place I worked had no chance of breaking even (overpriced mall location that catered to teen girls). Half the people walked in asking for gamestop or some other shop. The store was the mall's second information booth.

As for the one man store concept, as I pointed out in my big ass post (which seems to have gotten ignored, nothin new), they've hit rock bottom in terms of cutting costs. They have no more to cut and have limited choices when it comes to their capital. It's kind of like how the near zero interest rate is considered bad because it means you have one less tool to use.

**Necro**

Trasvi wrote:A few things:
1) They made a loss in Australia last year. A combination of exchange rates and price hikes, but they lost a lot.

2) There are many alternative wargames. No-one else makes Warhammer, and GW (as the primary wargames advertiser) does their best to convince people that they are the only one, but there are a lot of alternatives.

And the major one:
3) I don't know what the economic theory is about 'social' products, but I think that GW has a enormous social/network effect that it is losing.
People wanting to get into wargaming like the idea of GW, because there is basically a guarantee that there will be people playing the game near you. You'll find opponents and clubs. And wargames are something that fundamentally requires opponents.
So every time they lose a customer, they essentially devalue their product because it is less likely that you'll be able to use it. No matter how price inelastic the last customer is, they will stop buying because the product has no value.
You can see this effect hugely in social networking sites or multiplayer computer games

Well said. GW is getting smaller and smaller in Oz with ever passing year.

Its a social game and you need to have people to play against. It's so true that with every person that bails from the game, the more it hurts.

It's getting harder and harder to find games in my area, as there are less people playing.

While it may be true that they are making as much money now by increasing prices but selling less, it also means that their customer base is shrinking and that is a fatal slope for any business to be riding on.

Most of my friends have gone back to playing board games which for $80-$100 can provide pleanty of nights of entertainment for 4-6 people.

We all throw in about $20 bucks and buy a game. Wish they were playing 40K still but it has just got to expensive for some of them

**Hyd**

Surtur wrote:I disagree with your conclusion that GW is inelastic. The fact that they are not a necessity already poses a great problem to that. If you look at wargaming being just GW, then yes they are inelastic within their own stores, where they require their models. They force a monopoly market within themselves, but they cannot control what happens at your house or at your friendly local gaming store. If you consider alternative models, they are abundant. If you consider alternative games, they are abundant as well. If you consider other forms of entertainment, well you see. It depends on how you consider your sample to define it's alternatives. It is simplest to think of it in competition with every other wargame, in which case there are tons of alternatives and substitutes.

If you consider loyalty, that is probably the strongest part they have.

Pretty much what I wanted to answer after reading the OP. I raised an eyebrow when Ozymandias mentioned luxury products as an example of inelastic goods, as they usually have a high number of substitutes available ; essential goods, on the other hand, are unanimously considered inelastic (you can only curb your consumption of gasoline or water so much, thus you'll have to accept price changes on those).

The rationale about relative inelasticity being the reason for repeated price hikes still stands. Indeed, the way you could say GW products are inelastic is if we assume its customers are extremely loyal and therefore do not consider other options as satisfying substitutes. It's already been mentioned what can make this true : great intellectual property, an established presence and worldwide community, relative quality of models.
However, they might be running into problems if we consider customer loyalty to be their best asset. It's no secret here that they are getting on the nerves of their "core" fanbase with an apparently increasing disregard, and some are quitting as a result. If we assume their main target is teenagers, they have quite a challenge on their hands if they want to retain their loyalty.

So unless they somehow "recruit" more mature customers than they lose, or unless they do manage to shape youngsters into long-term loyal clients, that key asset of theirs might be unravelling. Which means they're overestimating the inelasticity of their products.

Pure conjecture on my part, but their lingering first-mover advantage in the world of non-historical wargames (you could say they are to fantasy miniatures what Apple is to tablets) might be all that keeps them afloat today. I can't see them gaining ground at present, and the numbers seem to indicate they're losing some. As Surtur pointed out (thanks by the way, your post was not lost on me at least !), they're running out of easy solutions.

**deggreg@yahoo.com**

LunaHound wrote:
deggreg@yahoo.com wrote:
LunaHound wrote:Aren't the store's up keep cost and staff wages part of the turn over amount?

If it is, then after all the store and staff cuts, GW is still at break even? That means they lost money.

If it isnt, then nvm.

I don't think the stores are really money makers, they are there to recruit people and hopefully at least break even.....then those people buy GW stuff everywhere for the next 10 years, not just at GW. I think if GW relied on their stores as their income stream, they'd have been out of business a couple of years back.

No, Im fully aware the stores acts as a sphere of influence and nothing more.
What Im saying is, if GW trimed / saved bunch of money by closing shops and fire staff into 1 man stores, they should have saved tons of money,
and it should show on the report of the trim.

well, the prices go up every year...rent goes up every year....so growth is a must to break even. I would put out there that mall stores were actually money losers and had to be closed. And GW closes unprofitable 1 man stores, GW probably just made their business more profitable by closing stores that were bleeding money. I used to own a business and I'd imagine that Mall stores cost 30K a month in rent, with a full staff of 4 dudes (one lead making 50K, 3 redshirts making 90K)...that's $500,000 in cost. To me that means that GW has to sell a million dollars a year at a mall store to break even (I don't know their margin...maybe 750K?).

Warhammer is too much of a niche hobby to sell a million dollars a year in a typical mall. They would have to sell the entire store every other week. There aren't enough potential hobbyists who might be interested in our expensive ass nerd hobby....lol.

**Vermillion**

What shocks me most is that people will be up in arms that little plastic, resin and metal toys are going up in price and they cannot get as many, yet aren't protesting in the street about the insane increases in the cost of living. Energy costs, food, rent, taxes etc. are all far more important and many have got to the point where they are going without one of these things seen as essentials to try to cover the others.

However if you want a simple comment about said toys, the plastics and resins are made from byproducts of oil refining, if oil goes up in cost, which we have all seen it has then so will said products. As oil is not an infinite resource I think it's a moot point really. Maybe I'm just in one of those moods however...

Plus why just attack GW's prices? PP as many are very, very quick to point are also pricey (I decided to skip those despite some nice werewolves) and Avatars of War are also very expensive for characters, though in their case comparing the UK costs, import costs I'll let them off for those lovely sculpts I feel are worth that much.

What I would like to see if a large scale fantasy setting ruleset to compete with WHFB for the inevitable GW goes bust

**Pacific**

Vermillion wrote:

What I would like to see if a large scale fantasy setting ruleset to compete with WHFB for the inevitable GW goes bust

Take a look here Vermillion..

http://www.kickstarter.com/projects/1744629938/kings-of-war?utm_source=Mantic+Games+Newsletter&utm_campaign=16fef6931e-Mantic_Games_Newsletter_153&utm_medium=email

**Eidolon**

I was priced out of GW about a year ago. Sadly, I have found going to bars to be a better deal for the money.

**Ozymandias**

Certainly necessities are inelastic, however my points about substitution and brand loyalty still hold. I can find some alternatives in the form of Mantic models, but if I want a space marine and a rhino, there aren't any cheaper alternatives out there.

In the end, GW is acting like their product is inelastic, and I wanted people to better understand the concept.

**Surtur**

Ozymandias wrote:Certainly necessities are inelastic, however my points about substitution and brand loyalty still hold. I can find some alternatives in the form of Mantic models, but if I want a space marine and a rhino, there aren't any cheaper alternatives out there.

In the end, GW is acting like their product is inelastic, and I wanted people to better understand the concept.

Fair enough. You phrased it a bit odd and I speed read so I thought you were arguing in favor of GW. That said, if you narrow the market without considering alternatives as viable, of course it is going to seem inelastic, but that's not the case. GW is not the entire market and there are a fair number of growing alternatives from scibor, mantic, avatars of war and so on so I really don't think they have a lack of substitutions.

Food is inelastic. You need food and if the overall price of food goes up, you'll still pay it. Bananas are elastic. If the price of bananas goes up, you can get something else. GW is bananas.

I think it's a bit more than just elasticity at work in GW's thought process. I think they believe themselves a monopoly. It explains their attitude and behaviors too well. A monopoly focuses on revenue and profit, not efficiency, has no problems charging more and having a smaller market so long as they make more and strong arms competition to prevent it from entering the market. GW has all of these behaviors. Finecast maximized profits and came with price increases while using old capital they had. Their one man stores are rather overworked at times leaving their labor wanting in favor of reduced costs. Their price hikes have shrunk sales and market share while maximizing revenue per unit. They have leveled lawsuits and threats against other companies to protect "their" IP (raging heroes llamasu anyone?) and prevent them from competing. That's my opinion as to the reasoning behind GW's changes.

**Hyd**

Ah, that's another possibility, indeed. Interesting, I hadn't considered that but it does make sense... Well, in so far as we consider they could delude themselves so much. I mean, I find the idea that they could consider themselves a monopoly mind-blowing (who in their right mind would, ffs ?) even though I've got to admit it's consistent with observable clues. In the end, the only effective monopoly they have is on their IP, and substitutes do exist.

If that's true, it bodes even more ill for them. The reality check will be nasty.

**Vermillion**

Pacific wrote:
Vermillion wrote:

What I would like to see if a large scale fantasy setting ruleset to compete with WHFB for the inevitable GW goes bust

Take a look here Vermillion..

http://www.kickstarter.com/projects/1744629938/kings-of-war?utm_source=Mantic+Games+Newsletter&utm_campaign=16fef6931e-Mantic_Games_Newsletter_153&utm_medium=email

The only problem being I'm not a mantic fan tbh. I saw Alessios ranting about wanting a game HIS way where opponents HAVE to bow to his tournament driven mindset and instantly switched off. Plus Flicking through the rules when they were first available it seems that like GW they are looking to use only their own models not for example use any light cavalry for elves as unit x, the heavy ones thats unit y and so on. But at least it is a start, I hope other companies follow suit and produce a fantasy rules system where it can be skirmish to huge battle and one happens to be a ruleset I enjoy using and it catches on and doesn't dissapear

.

**Lanrak**

To be fair , Kings Of War works just fine for narrative gaming.
(Most games that are written for competative play are far easier to adpt to your narrative needs in my experiance.)

KoW allows the game play to come from the players, rather than trying to script cinematic events that dont realy make sense, but clutter up the rules horribly..

If you are not keen on the models fair enough, there are loads of exellent fantasy minature manufacturers!

GW plc assume that thier loyal fan base is rich/stupid enough to pay whatever price they want to charge.
And have not noticed thier loyal fan base is shrinking rapidly year on year!

**Dysartes**

I didn't think KoW insisted that you use Mantic figures - though I'm not 100% sure on that.

**Davylove21**

http://www.bloomberg.com/news/2012-01-05/games-workshop-highest-since-2005-as-profit-margins-increase.html

This article from January says all is well, they're obviously neutral, I doubt GW effed it all up too much in 4 and a bit months.

**infinite_array**

Dysartes wrote:I didn't think KoW insisted that you use Mantic figures - though I'm not 100% sure on that.

Nope.

In fact, there's a thread over in the KoW forum discussing using the KoW rules with 10mm minis - something I want to try out.

**Lanrak**

I was responding to the impression the previous poster had about Mantic wanting you to use only thier miantures.(I could have totaly misunderstood!)
I am sure they would prefer you to use some of thier minature and hobby product range.

BUT getting the games played by gamers and generating positive word of mouth appears to be far more important to Ronnie.
And I think he is right!

**Dysartes**

Lanrak wrote:I was responding to the impression the previous poster had about Mantic wanting you to use only thier miantures.(I could have totaly misunderstood!)
I am sure they would prefer you to use some of thier minature and hobby product range.

BUT getting the games played by gamers and generating positive word of mouth appears to be far more important to Ronnie.
And I think he is right!

That was the same post I was responding to, too.

**TheLionOfTheForest**

Ozymandias wrote:
Wargaming models are generally considered luxury goods. They aren’t a necessity, there aren’t a lot of substitutions. and gamers are generally pretty brand loyal. Wargaming models, in particular warhammer models, are inelastic. So if GW raises the price of everything by 10%, they may see a decline in the total quantity sold, but not in the overall revenue of their products.

So essentially what you are saying is, Because GW can make the same amount of money by selling their product to fewer people, then why should they make it more accessable?

From the post "GW committing a slow corporate suicide: http://www.dakkadakka.com/dakkaforum/posts/list/30/451765.page#4329056

TheLionOfTheForest wrote:The only GW purchases I will be making will be 2nd hand from Ebay. GW's prices are absurd to begin with, this price hike feels more like a shakedown!

I am 30, married with a 16 month old, I can afford GW's products even less now then when I was 15 years old with a part time Job! When I was 15 making $8.50 an hour I could afford to buy 3 paint pots or 1 blister pack containing 2 models. At todays current minimum wage you would have to work for at least 2 hours to be able to afford 1 finecast (garbage) model. GW minis just aren't in the budget when you pay for a mortgage, car leases and other assorted living costs. $18.50 for 1 finecast model, $70+ for a Landraider ? I have also heard rumor that the codexes will be all hardcover now, so again they will cost more. Are you kidding me ? I dont know who GW thinks their market is but they have just narrowly cut their sales, which I suppose will mean more price increases down the road to make up for the decrease in sales.

This hurts our local gaming stores. Before I didnt mind paying a bit more than the amazon price for models so that I could support my store where I play. Now the stores will probably loose money as people decide to make their purchase off of the internet just to make their $$$ go a little further.

I brought a friend to my local store to try and get him back into 40K, he scoffed at the prices... I had to agree with him. And theses are the prices before the increase to come!

GW has opened the door to 3rd party companies selling miniatures that people will use in place of their own. They have opened the door further to people straight up copying their products with a simple mold making and casting (its really not hard at all). If I have to spend $2000 on a 2000 point army OR spend $2000 on pro quality mold making equipment and casting equipment more people will make the decision to just start making molds.

If I hadn't been collecting GW mini's for 18+ years I would not be getting into the hobby now.

I think this is pretty sad. Why raise the entry barrier to a game with an already high entry barrier?

As far as a solution.... Maybe GW can give independent retailers a significant wholesale discount so that people can still afford to support their local store. I mean GW can't even keep their own stores in business, if they hurt their 3rd party retailers how does that help the game, or the company, or the community?

A move like this, I cant understand. The miniature range has never been better with so many armies and models to choose from, GW has had success entering into the video game market and with a whole new line of paints of superior quality would seem to be indications of success?! If profits are down year to year, how about consolidating your position as a company, maybe decrease the range, DONT spring on new paints, and make the existing range CHEAPER! Move more product, surely the more you sell the more you produce, the cheaper your cost. Bring back the old miniature range in metal and have it be a cast on need basis, I wouldnt mind waiting 5 weeks to know I can get something I want at a decent and FAIR price. Bring back 2000 point army boxes with a significant price break. Dont package your army boxes with useless or underused vehicals or models because people will not buy them and the people that do will be annoyed when they find out they got duped ("ah gotcha.... that vehical is total garbage, you need this one at $55+ per"). Bring back the troop & transport box for our local stores, from what I understand they couldn't keep them on the shelves. Re-release ALL your PDF articles of all things you can build yourself.. the bunkers the tanks the scenery.... AND keep them archived for everyone to use. I mean come on GW, most of them we can find on some russian website anyway with a little hunting why be a jerk about it. What you think if you give us a print out cardstock PDF bunk we won't spend $45 on your plastic kit, well you are probably right maybe the plastic kit should be $30 instead......THESE are the reasons we used to LOVE you GW.... Things just aren't the same anymore... Yes your models are more smoking hot then ever, they just are too costly.

Is this price increase caused by GW eating it on FineCast returns?
Or was the Australian pricing just a test to see if people would just pay more for the same product and due to the test being "successful" that pricing instituted to everyone?

I for one am more upset than angry, as I simply just cannot afford to purchase any more of GW's mini range. Its upsetting because this type of move is more and more evident in today's economy, you just get so much less for your $. My household pulls in $67k before taxes... we are by no means poor.... I guess we're just not rich enough to buy 40k miniatures.

~A very sad Lion~

Its not that I disagree with the economics of it as you have put it. Its just that luxury items in today's economy are the first things that we all cut out of our budgets. Especially ones that continue to get more and more expensive. Evidently you need to be one of the following to play Warhammer : Child with wealthy parents willing to spend large amounts of money on said child's interests. Single 20-30's with either a good solid job or living or part time job living in parents basement. Or crazy old guy with too much money and too much free time.

Compare the cost of 40k luxury items to other luxury items. How much does a $2000 point army list (on average) cost ? maybe $2000 ? 5 Vanguard vets cost $45 bucks. What other luxury items can you buy for $2000.... a motorcycle... a MASSIVE LG plasma TV.... a KICK ass solid state computer with video processing insanity. Items need to be priced in some context. I recently cancelled Cable TV because the pricing for it is absurd... absurd compared to the price of internet tv services such as Netflix. Absurd compared to the fact that my montly cable bill for the triple play "deal" (phone, internet, cable tv) was costing as much as my monthly lease on a brand new Hyuandai Elantra. The cable companies have been hurting for years... the price keeps going up... they hurt more as more competative companies launch services with a modern business model. I would assume a lot of people will change games to other companies such as warmachine, or people will continue to play with what they currently own and not really make additional purchases.

just my 2 cents

**AgeOfEgos**

What I don't understand is;

If they are opening up one man shops and using those as a way to get players into the hobby--why are they adjusting their pricing based off current customers not reaching their threshold--rather than holding inflationary increases to grab new customers?

Regardless, I can't see how this is going to be sustained by GW. If you look at practically every factor that determines PED (I am not an economic major, I just took what I had to!

);

Substitution available: In spades right now and every week we see another brilliant company enter the market on Dakka
Price increase v. income percentage: They are outstripping inflation and wages are stagnating vs. inflation. Which means each price increase that is over inflationary increase is felt even more as a percentage of income.
The length they keep prices high: Hasn't changed and I can't imagine they ever will
Necessity to daily living: Nope

I know my spending for GW product has decreased a great deal compared to prior years.

**Milisim**

The weird thing about it all is that the Battalion boxes which are the Starter army for most first time buyers is going up! They should be going DOWN.

hook the guy into the hobby and then make your profit back on all the other models in the line that they will want to play with and try out etc....

I used to work at an Aquarium store many years ago, The basic Tank and pump were ALWAYS sold at cost basically... The money was made on buying fish, decoration, food, cleaning equipment etc.... Once they commit to a tank it takes a ton of money to maintain a good fish tank.

**Buttons**

Norn King wrote:Regarding the video games; yes we do pay $100 for new ones.

You poor poor things.

**Milisim**

I find the reverse argument is true with videogames... Most games I buy are overhyped. I buy them for $60 and then within about 10-14 days later, I delete it from my HDD.

I could buy a couple of boxes of models for that and play with them for the rest of my life....

Im not saying that $60 for a few plastic models is a good deal, im just saying Video games are an even WORSE purchase in most cases compared to playing TT games.

**nkelsch**

infinite_array wrote:
Dysartes wrote:I didn't think KoW insisted that you use Mantic figures - though I'm not 100% sure on that.

Nope.

In fact, there's a thread over in the KoW forum discussing using the KoW rules with 10mm minis - something I want to try out.

Dear god, that would be awesome.

If someone made 6mm or 10mm figures and had a good ruleset with them I would be really attracted to trying out that game system. What 10mm models are they using with the KOW rules? I am not aware of much fantasy 10mm.

**infinite_array**

nkelsch wrote:
infinite_array wrote:
Dysartes wrote:I didn't think KoW insisted that you use Mantic figures - though I'm not 100% sure on that.

Nope.

In fact, there's a thread over in the KoW forum discussing using the KoW rules with 10mm minis - something I want to try out.

Dear god, that would be awesome.

If someone made 6mm or 10mm figures and had a good ruleset with them I would be really attracted to trying out that game system. What 10mm models are they using with the KOW rules? I am not aware of much fantasy 10mm.

Pendraken!

Awesome line of 10mm Fantasy. You've got Orcs, Goblins, Men, Elves, Dwarves, Undead, and a tone more.

Basing to use is Warmaster-style (so people can use their Warmaster and Warmaster Ancients for KoW and KoW Historical), so 40mm x 20mm basing, 5 infantry to a base. Then change all measurements from inches to centimeters.