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Made in gr
Did Fulgrim Just Behead Ferrus?





The Netherlands

Food for thought

https://www.pcgamesn.com/warhammer-videogame-revenue-royalties?amp

Bits Blitz Designs - 3D printing a dark futuristic universe 
   
Made in fi
Locked in the Tower of Amareo





Seeing GW doesn't have any other big royalty sellers no surprise. It's pretty hard for cups and mugs to outweigh PC games. Black library books are their own so don't count(obviously GW's miniatures don't count either) so it's basically video games, cups, mugs and the clothing. No surprise video games are biggest one of those. How many buy space marine hoodie? How many buys dawn of war?

This message was edited 1 time. Last update was at 2019/08/01 06:41:24


2024 painted/bought: 109/109 
   
Made in ca
Posts with Authority




I'm from the future. The future of space

Gross margin declined in the year in line with our expectations (2019: 67.5%; 2018: 71.0%). This was as a direct result of sales mix of new and existing product - 38% of sales from new releases and 62% of sales from existing product - as well as channel mix changes"

I am always pleasantly surprised how much GW shares in their reports since Rountree took over. This sort of data is fascinating-- and also an indicator of future price increases to come.

Earlier in the document they stated that margin is one of their key result areas they review and monitor at the board level. They are going to address this. And how they go about it is obvious-- improve the margins on the existing products that are selling better than expected.

So definitely expect more price adjustments in order to bring their margins in line with when their new release sales were higher. If they only increase their prices on new release and existing products sell better than expected, the reduction in margin is inevitable.

Unfortunately I think a key thing that will go ignored is that existing products selling better might be the direct result of their lower prices. So it's possible that increasing prices on them will hasten the return to more normal year over year revenue changes for GW. My prediction is that next year sales grow about 8-10%, the year after that 4% or so and then a year of no growth but still amazing sales, return on capital, margins and dividends.

Retail profit: 2019: £10.4m 2018:£7.2m

This is actually impressive. It means their stores are actually on average, turning an increasing profit. It was not too long ago that GW's own stores lost money and more and more were being cut and replaced with single employee operations. It's also worth noting that the direction has changed. Single employee stores are shrinking in number compared to the mult employee stores.

"Range management - as discussed above we are reviewing our range to ensure that we are exploring all opportunities. The risk is that we
don’t fully exploit all the opportunities that are available to us or that we have too much stock."

For those wondering about the Age of Sigmar Order units that have been disappearing from the web store, don't expect them all to return. I think there are going to be a large number of products that are not in the Cities of Sigmar battletome and they will become out of production (if they are not already). You can't release a million new products and keep every product you ever released in stock or at the warehouse forever and many kits are 20+ years old at this point.

There are even a handful of blisters with metal miniatures on square bases that are still in stock. Think about how slowly they must be selling to still be around in metal with square bases. When was the switch to finecast? 2012? I imagine things like the wood elf spellweaver have been just barely selling for the last 7 years.

"Closing cash and cash equivalents 29,371 28,545"

That's right, even after paying 50 million pounds in dividends, GW still has over 29 million pounds in cash.

Some bad news about GW's growth going forward is found in the break down by channel. The vast majority of the year's growth was in trade sales. New and existing independent stores deciding to sell GW's product. The growth in their web store and their own stores has been not nearly so impressive.

As GW has gotten back a ton of lapse customers, I imagine they have gotten back a lot of lapsed regions of trade sales. If their own web store and their own retail stores are not growing as impressively, then it's possible that rate of growth is the actual natural growth. A new trade account, just like a new player, has a high up front cost. They stock shelves, get paint racks and fill them and generally buy a lot up front.

Their trade sales are basically doing business to business sales to try to get people to sign up to carry GW stock. They probably have already gotten all the easiest accounts. The stores that were ready and willing to stock GW-- perhaps their customers were asking for it. There are just only so many stores in a given city and I bet GW has called most of them multiple times at this point.

Hopefully those involved in trade sales at GW won't have their jobs depend on maintain this rate of account acquisition. I don't think it's sustainable.

Overall, I'm glad to see GW continue to succeed ever since they basically stopped being dumb and started talking to their customers, reducing barrier to entry, using the internet, stopped sicking their lawyers on accessory makers and fan web pages and so on. Even if they end up returning to a low growth situation, I hope they remember what they turned away from that produced this period of growth.

Balance in pick up games? Two people, each with their own goals for the game, design half a board game on their own without knowing the layout of the board and hope it all works out. Good luck with that. The faster you can find like minded individuals who want the same things from the game as you, the better. 
   
Made in us
Ancient Venerable Dreadnought




San Jose, CA

tneva82 wrote:
Seeing GW doesn't have any other big royalty sellers no surprise. It's pretty hard for cups and mugs to outweigh PC games. Black library books are their own so don't count(obviously GW's miniatures don't count either) so it's basically video games, cups, mugs and the clothing. No surprise video games are biggest one of those. How many buy space marine hoodie? How many buys dawn of war?


I'd buy a Salamanders hoodie if they'd make one and have not purchased a WFB/40K/AOS video game and am not planning on starting.

I think they could do a little more in familiarizing the general public with 40k. The Eisenhorn tv show & blood Angel's animated thingy will do a decent job for launching it into the mainstream mediasphere but whether it'll have staying power, remains to be seen.
   
Made in de
Regular Dakkanaut




Not £45. £4.50. Quite a fall actually, their highest not so long ago was up at £7-8 IIRC.


It's actually 45 Pounds, the highest point was around 50ish pounds. I've got shares in my portfolio, bought them a few years ago, they're worth about 10 times that much now.
   
Made in si
Foxy Wildborne







Congrats to GW, proving time and again that quality and sales don't necessarily correlate

The old meta is dead and the new meta struggles to be born. Now is the time of munchkins. 
   
Made in us
Veteran Inquisitor with Xenos Alliances






BrianDavion wrote:
 Azreal13 wrote:
Not £45. £4.50. Quite a fall actually, their highest not so long ago was up at £7-8 IIRC.


can proably blame that all on Brexit worries.
GW is position such that it shouldn't matter as much. They have an international footprint and if the pound isn't doing to well they can use that foot print to hold their money in foreign currencies. The pound declines, all those dollars are worth more pounds and so on a domestic level they've received more than they anticipated. Buying materials my be more demanding, but that again is where having an international foot print can help. Instead of those materials costing more pounds and buying them in pounds, they can buy them in dollars or euros and cancel out the fluctuation. But I don't think they're doing that, which is boggling. They seem to want to just convert it to pounds near immediately and its probably costing them significantly.


frozenwastes wrote:Gross margin declined in the year in line with our expectations (2019: 67.5%; 2018: 71.0%). This was as a direct result of sales mix of new and existing product - 38% of sales from new releases and 62% of sales from existing product - as well as channel mix changes"

I am always pleasantly surprised how much GW shares in their reports since Rountree took over. This sort of data is fascinating-- and also an indicator of future price increases to come.

Earlier in the document they stated that margin is one of their key result areas they review and monitor at the board level. They are going to address this. And how they go about it is obvious-- improve the margins on the existing products that are selling better than expected.

So definitely expect more price adjustments in order to bring their margins in line with when their new release sales were higher. If they only increase their prices on new release and existing products sell better than expected, the reduction in margin is inevitable.

I think this perspective of theirs is the problem. They are margin-centric but they only drive up margin by increasing the prices. They are however a manufacturer that mass produces gaming products, but are pricing like they're more of a boutique operation. Its a failure to leverage an inherent advantage.

The fact margin on existing products needs "improving" only shows how much more markup their newer products have and it also shows something about their practices or accounting are screwed up. For every product there is some threshold where the distributed costs of product development and tooling are paid off and the per piece margin goes up. Existing products should have hit that point and received a significant bump in margin as a consequence. Either they have and GW's newer products are just priced at even crazier markups than we imagined or GW's actual development costs are much much lower or GW needs to hire a process engineer to rethink their production work flow.

GW seems to approach this with the mind set the "sooner we get there the sooner we get a greater profit", but they don't have any interest in pricing to get there sooner. They would rather sell 10,000 units for full price then 20,000 units at 90% the price, or 30,000 units at 80% the price. Taking it to a hyperbolic extreme GW's pricing mentality is a race to the fewest customers; they would rather sell 1 model for $40k than 40,000 models for $2 a piece. Part of this is perception control and not wanting to be seen as a disposable or lower value product, but it isn't as if we see how they come to set their prices anyways and most would continue having this perception if they held prices where they're at. We just see what they've made before, what those things cost, and what the new things costs.

I think a lot of the high pricing comes from their very apparent inability to estimate demand and necessary quantities. GW really doesn't like to keep more than a minimal amount of stock on hand. They estimate low, sell out of products, and they do so frequently. They would rather underestimate than overestimate their needs. That means they lose out on sales, and end up with a lot of revenue opportunity uncaptured. So they never even see the opportunity of capturing margin with higher volumes. GW's mindset requires them to shoot for a perfect estimate, where if they think the consumers want 10,000 of something at GW's price, GW only makes 10,000. Most companies do not want their products to sell out; selling out means odd are a company has failed to meet its customer's needs and promotes piracy. Most companies expect there to be left over product that will be marked down and sold to the more price sensitive customers; the way GW is, that doesn't really factor into it.

In this assertive effort to control perception and raise prices for better margins, more and more they've started undermining the usefulness of older models in the game to drive up sales of new product. In the past the ability of their sold products to retain value was partially in their value as collectible, but largely in their value as alternatives to current desirable product. In undermining that value to drive sales, it makes the longterm value of their products less than they would be otherwise.
   
Made in de
Regular Dakkanaut




GW really doesn't like to keep more than a minimal amount of stock on hand. They estimate low, sell out of products, and they do so frequently. They would rather underestimate than overestimate their needs


I would guess strongly that running out of stock frequently wasn't actually the plan, thus the new factory and machines that will be able to double their current production plus the extra warehousing.

This message was edited 1 time. Last update was at 2019/08/01 16:07:38


 
   
Made in ca
Posts with Authority




I'm from the future. The future of space

aka_mythos wrote:
The fact margin on existing products needs "improving" only shows how much more markup their newer products have and it also shows something about their practices or accounting are screwed up. For every product there is some threshold where the distributed costs of product development and tooling are paid off and the per piece margin goes up. Existing products should have hit that point and received a significant bump in margin as a consequence. Either they have and GW's newer products are just priced at even crazier markups than we imagined or GW's actual development costs are much much lower or GW needs to hire a process engineer to rethink their production work flow.


One of the issues is that the cost of goods sold is actually pretty high for GW even after the initial capital investment is paid off. The tooling and up front design is certainly paid off on older products, but when you look at the actual tooling costs in the report they're actually low. Like 3 million pounds a year or something. So even if they recalculated the margin on the older products to no longer include their design and tooling costs, the actual production, packing, distribution, marketing and administration costs is what's causing them to want more money per unit sold on existing stock.

And the mark up on the newer releases has been pretty crazy. Some 10 miniature boxes are 15 pounds but many new ones are 25 or 30 pounds at retail.

GW seems to approach this with the mind set the "sooner we get there the sooner we get a greater profit", but they don't have any interest in pricing to get there sooner. They would rather sell 10,000 units for full price then 20,000 units at 90% the price, or 30,000 units at 80% the price. Taking it to a hyperbolic extreme GW's pricing mentality is a race to the fewest customers; they would rather sell 1 model for $40k than 40,000 models for $2 a piece. Part of this is perception control and not wanting to be seen as a disposable or lower value product, but it isn't as if we see how they come to set their prices anyways and most would continue having this perception if they held prices where they're at. We just see what they've made before, what those things cost, and what the new things costs.


There's definitely a disconnect between having your business built around injection moulded plastic where the marginal cost of the next sprue is both tiny and always decreasing on average and premium pricing. When GW is growing thanks to their internet marketing and dealing well with trade accounts, the demand can totally deal with the high prices. But as GW showed for a decade, when you aren't growing, their pricing model destroys demand rapidly. Those years where they were jacking up prices across the board 10%+ a year and sales were stagnant and even declining meant their actual volume of kits sold and some combination of the number of customers and how much they each bought were all declining rapidly. I'd say over the last half decade of Kirby, GW could have easily lost a full half of their customers, perhaps more. If you basically double your price and have flat revenue, you're selling half as much.

There is some price where the units sold times the price gives the greatest possible revenue. I think that number is outside the bracket GW has set because of their margin goals. It's entirely possible that their revenue and profit would be maximised at margins they ran with during the LOTR years. However, that would result in drastically lower return on capital and make them very vulnerable to any sudden change in volume. And since trade sales are making up the bulk of their new growth and trade sales are products that might not yet be in customer hands, the growth could stop at any moment. GW even acknowledges this in their report with Rountree saying he can't in any way guarantee that growth will continue in the next reporting period.

I think a lot of the high pricing comes from their very apparent inability to estimate demand and necessary quantities. GW really doesn't like to keep more than a minimal amount of stock on hand.


In a way, they shunted this onto other retailers. Trade is the fastest growing and the largest sales channel, but each sale there isn't directly to a customer. At any moment stores could go "actually my shelves are pretty full, so I'll just take a couple of each new release this order" and the growth vanishes. There's probably a massive amount of GW inventory out there that's already been counted as sold in terms of GW's financials but hasn't yet made it's way to customers. And as some portion of those products are true dogs, shelves can eventually fill up with the worst product. One store local to me still has 3 copies of speed freaks on the shelves and an entire unopened case in the back. I don't know if GW has a buy-back policy.

They estimate low, sell out of products, and they do so frequently. They would rather underestimate than overestimate their needs. That means they lose out on sales, and end up with a lot of revenue opportunity uncaptured. So they never even see the opportunity of capturing margin with higher volumes. GW's mindset requires them to shoot for a perfect estimate, where if they think the consumers want 10,000 of something at GW's price, GW only makes 10,000. Most companies do not want their products to sell out; selling out means odd are a company has failed to meet its customer's needs and promotes piracy. Most companies expect there to be left over product that will be marked down and sold to the more price sensitive customers; the way GW is, that doesn't really factor into it.


GW definitely manages their risk. It's why they are so focused on margins. They would rather reliably sell out a new release at a higher price and lose some potential sales on volume than risk losing actual money on narrowing margins. The money they leave on the table only happens when they are already succeeding and have sold out a production run. That only translates into real losses if you also have narrow margins and the money you could have made would make the difference between profits and losses. The break even point for GW in terms of units sold is far lower than for a product priced for volume of sales. A badly selling product (like Speedfreaks) may have still sold enough that they broke even on the thing thanks to their aggressive protection of margins.

And then add in that they are operating at capacity. They simply can't actually take advantage of the declining marginal costs of injection moulded plastic if their machines are operating non stop and they are making as many products as they can while getting the electical grid upgraded and another building built. What would lower prices to increase volumes accomplish at this point? The same sales (the maximum they can produce) but less money for the same amount of product. You can only take advantage of volume increases like that when you have the capacity.

Balance in pick up games? Two people, each with their own goals for the game, design half a board game on their own without knowing the layout of the board and hope it all works out. Good luck with that. The faster you can find like minded individuals who want the same things from the game as you, the better. 
   
Made in ca
Decrepit Dakkanaut





It's especially difficult where they're selling new kits like the Mek Guns and new Ork vehicles with the new premium pricing for an army that's basically a legacy product at this point, and needs to be bought in bulk.
   
Made in ca
Posts with Authority




I'm from the future. The future of space

Spoiler:
If I didn't score a couple of used boxes of fantasy orcs to use the extra arms that boyz and burnas/lootas come with, I wouldn't even have orks. Having to buy 4 more kits would have pushed things a bit too far for me. And all my vehicles are converted from toddler toys (I find the toys labelled for toddlers have more 40k like proportions). I'm thinking I might make a mr potato head gorkanaut.

https://www.youtube.com/watch?v=OBOIn0fIkg4

Not being a tournament player at all I find that I can use the stuff that comes in start collecting, starter sets, easy to build and the two army sets just fine. Between Kill Team and 500, 750 and other 1000 points or less games where I don't need a powerful 2000 point list, I can get by spending less than many other people.


There's definitely a mismatch though between the huge 40k armies at 2000 points and GW's premium pricing model. At least GW has addressed this by finally having lower model count games. There was a solid decade where all they tried to sell people on was huge games of warhammer fantasy and 40k. 40k is still enormous but at least there's lots of support for smaller games.

This message was edited 1 time. Last update was at 2019/08/01 20:01:13


Balance in pick up games? Two people, each with their own goals for the game, design half a board game on their own without knowing the layout of the board and hope it all works out. Good luck with that. The faster you can find like minded individuals who want the same things from the game as you, the better. 
   
 
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