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OK, a couple of fact to chuck into the hypotheticals:

GW's current share price (as of 4pm GMT 6th July 2006) is 263p and falling. That's pretty much the lowest its been since 2001, i.e. pre LotR.

GW's published forecast figures are for the y/e 31-May-06 Total revenue: £115.97M Pre-tax profit: £3.08M

This compares with actual figures for the y/e 29-May-05 Total revenue: £136.65M Pre-tax profit: £13.51M
and for the y/e 30-May-04 Total revenue: £151.77M Pre-tax profit: 19.57M

Of course these include all the LotR fluctuations (and the rest...). The latest figures I have for the pre-LotR days show:

for the y/e 02-Jun-01 Total revenue: £92.63M Pre-tax profit: £9.36M

All of these are verifiable facts from publically available financial information.

What we read into them of course is much more interesting...

In all fairness, it could be that the gamers are simply sated with GW products and no matter what they do it won't have a big impact. I myself have got 3 40k armies and of those 2 are mostly complete, the only major purchase I may do is when the Eldar are released.

Apart from that, I'm building force Menoth, Trollbloods, Urban War & |Confrontation. So not only is my money being used on those products, but I'm having to spend time learning them, so my 40k time is nil at the mo.

Derek: That's called inflation; and GW's price increases have drastically outpaced inflation for the past five or six years. Since 2001 the price of a squad box has gone from 25 to 35 dollars, a 40% increase. If we assume 4% inflation over that time period a GW squad box should cost 30 dollars.

Look, this has been hashed out before. GW's price increases and declining revenue aren't a result of global economic conditions, the increased price of oil, or anything of the sort. They were faced with falling revenue in their core lines (40k and Fantasy) since probably around 2001 or so (I suspect the short-lived success of the LOTR line from 2001-2005 actually masked GW's declining health for a few years). Management being what they are panicked and picked the easiest solution, which was to raise prices to increase profit margin to make up for shrinking volume. They wrongly assumed demand for their product was price inflexible. Fast forward to 2006 and you have their current condition. Add increased competition from other superior products (Warmachine, Flames of War, Confrontation), an overall shift in the broader gaming market (hi WoW) and the fact that GW produces a pretty crappy product (the actual game itself) and you have a company in decline. Profits are down, stock price is depressed. The long term solution's pretty easy - replace management, stop the price hikes (and maybe even institute some targeted rollbacks; the 50 dollar terminator box comes to mind), and get a decent set of rules out there. It's not hard, but at this point management has a vested interest in maintaining their current direction - otherwise they'd have to admit they're wrong and management is loathe to ever do that.

Posted By derekatkinson on 07/06/2006 9:05 AM
"I love listening to people that aren't in the financial industry talk about "hostile takeovers" and replacing CEOs as if it's a certainty. Just because you heard the word in a movie doesn't make you qualified or certified to make those claims.


Thank China and India for modernizing their economies."

That much is true, anyway, I 've seen prices literaly double overnight for material we use in my industry because China is buying them up like crazy.

"Thank the 20 year bear market for making it next to impossible for companies to get funding to open new mines and oil wells."

By that statement you make it sound like the oil industry is at a standstill.  Sorry, chummer, gotta tell you that I work making parts that go into drill bits for oil rigs and over the past few years I've been putting in serious overtime to try to keep up with demand.  The only real slow period I remember, and I've been working at this company for over 13 years,  is around '97 through '99.

 We've never been busier. 

Oh, and:

I think you are missing the point here.. When you have prices of everything go up you have to pay more for rent, employees, healthcare etc. Cost of doing business is going up and it's hurting all companies.. not just GW

Inflation from 2000 to 2006 has been around 2%-3% annually. The premise that "everything is more expensive which is why GW models are more expensive" is simply a nonstarter.l

I have read your post, the question I have is when did this 20 year slow down of oil wells happen? As I said, I've worked in this industry 13 years and the only slow years I remember were from 97 through 99. Every other year we've been seriously busy trying to fill drill bit orders.

This is possibly the most intelligent thread that Dakka has ever seen...

Although I am probably not one to talk. Please guys keep this one civil, remember, financial analysts don't agree on most of these things, there is no way that there will be agreement between dakkites here.

Relapse you hailing out of Houston, Calgary, or Brittania?

Utah, of all places. There's a big drill bit industry here with several established companies and a few start up ones that are branching out.

How would lowering prices increase net revenue unless you also sold more?

Ed,

That's the point, lower prices to sell off surplus, lower prices increase demand, causing the eventual raise in equilibrium price bringing GW prices up again, so short term lowering of prices.

All,

I haven't read most of the posts on this board, and I realise I'm giving Ed an answer from page 2 sighs, but I'm swamped at work, and will read this whole thread, and yes it does sound like the most educated thread I've seen on Dakka...

As a note, they should be trying to lower costs first, all manufacturing to China would be a great start. Next, lower prices to indy retalers (Rogue Traders) and give them more support. Go out to ALL gaming conventions to promote your product, as well as 'out of the box' marketing (Street games would be a starter)

financial analysts don't agree on most of these things, there is no way that there will be agreement between dakkites here.

As an analyst I take offense Haha just kidding... But you are right, whatever side pays me more, I'll make the #'s work for them, just like any analyst knows how to do.

Back on point, the economies are of scale, also remember warhammer and GW produced products are not staple goods; that is you do not need them to survive <i.e. food, water, shelter, etc...>

Due to inflation, the rise in production costs on plastics and transportation costs <take into account oil is needed in the production process of plastic and the costs of shipping both materials and final product> with oil/gasoline prices at a very high cost; GW must raise prices to keep with this trend <Now does GW need to raise prices as high as they have, my guess is no, but thenagain, I do not know their internal cost structure>.

So as a luxury good with increasing prices, it is only certain that GW will take a hit in sales. With this decrease in sales, but with the same overhead and cost structure, prices must go up and overhead must be reduced.

As a note, they should be trying to lower costs first

Way to lower costs would be to eliminate someof their employees/stores/expenses, and as long as there is a somewhat steady demand, they will not lower prices.

Next, lower prices to indy retalers (Rogue Traders) and give them more support.

For all we know those prices are low now and we are just getting hit by markups either on GWs end or the retailers, posibly both...

Go out to ALL gaming conventions to promote your product

Agreed, the cost it would take to set up a few spots at any convention would be worth it, mainly because you hit your target market... For example GenCon 05' me and my 2 friends walking around saw a game called Rezolution, we all played demos and soon enough people were watching us and playing too, long story short between us we put down about $300, not to mention what the other people who were watching us bought, probably about another $200-$300 worth, and the nice guys gave us 2 free rulebooks for attracting that much attention and spending like that. So after about 30 minutes of explaining a game they sold close to $600 worth of stuff... A lesson for GW, give stuff to your loyal high paying customers haha GW will never give a free one, they even charge you for the lube when you are about to get violated by their next price hike...

Yeah, the 3rd edition Master Maze at GenCon got my brother and
I playing Dungeons and Dragons again. It was also cool playing high
level characters.

More importantly, it got us buying the books.

Posted By Blank on 07/06/2006 11:54 AM

As a note, they should be trying to lower costs first

Way to lower costs would be to eliminate someof their employees/stores/expenses, and as long as there is a somewhat steady demand, they will not lower prices.

Agreed 100%

Next, lower prices to indy retalers (Rogue Traders) and give them more support.

For all we know those prices are low now and we are just getting hit by markups either on GWs end or the retailers, posibly both...

Utah hey,

Well at least you don't worry about hurricane season.

 

Nope, just earthquakes!

Derek, Every year I worked up to '97 saw a fair sized increase in rig counts, so somebody was pulling oil out of the ground.

In all fairness, it may have just been that your sales force was doing a good job and your quality was better therefore taking away business from other companies

That's a fair statement we are putting out killer products, but in all our company meetings til 97 we were always being told about increased rig counts.

  Then the oil industry put in a couple of hard years and around 2000 took off like gangbusters.

Posted By derekatkinson on 07/06/2006 9:05 AM
I love listening to people that aren't in the financial industry talk about" hostile="" takeovers="" and="" replacing="" ceos="" as="" if="" it="" s="" certainty="" just="" because="" heard="" the="" word="" in="" a="" movie="" doesn="" t="" you="" qualified="" or="" certified="" to="" make="" those="" claims="">

The reality is GW has performed inline with the S&P 500, DJIA and NASDAQ over the past 5 years. Over that period the bases prices for commodities have soared. Since 2002 Oil has gone from the price of $20 a barrel to $75. What do you think plastic is made out of? Compare that to the price of a box of space marines.. $25 vs the current $35 box. This isn't restricted to just one commodity either. In fact i can not find a single commodity that has not doubled in price since the end of a 20 year bear market in from 1980 - 2000. Taking a look at the CRB index you can clearly see that prices have risen dramatically. That is why GW has disappointed shareholders. It's not because of management. Prices have increased because demand for commodities has overtaken the supply.

Thank China and India for modernizing their economies.

Thank the 20 year bear market for making it next to impossible for companies to get funding to open new mines and oil wells.

And finally.. Thank the federal reserve for printing money and lowering the value of the dollar, raising the prices of commodities across the board.

I dont think youre very knowledgable on the subject yourself.

GW has freely admitted in their last financial statement and other trade articles concerning how oil has had no impact on the price of production. The oil used for plastics is a refining byproduct afterall. The rationale that the price of plastics oil considerably impacts the production costs of a subpar manufacturing facility in terms of out put is simply ludicrous.
GW may try to use that rationale on the general public, but for anyone who researches one little bit, that rationale is shown for what it is by their own contradicting words saying otherwise.

If I remember Hellfury the price of metal and oil is around 3% of the price of the figurine we pay.

GW has also been able to control their cost. At the last financial report they published they were having less expense than the year before. It is the fact that they sell a lot less that impact their revenue

That is correct. It was said to be 2-3% of plastic production costs.

Posted By happypants on 07/05/2006 10:42 AM
I would love to see Wizards take over, they are an amazing company and did wonders for D&D.<?

 

Sweet Jesus Christ on a stick ARE YOU INSANE!!!

 

If Wizards take over 40k it would get stamped into the ground like DnD did, they Didn?t do wonders for it, they made it into a huge joke. Now with Hasbo in real control 40k would get watered down and would end up a massive joke aimed at 10-15 yr olds!

 

IMHO anyway

I think the reason that people on Dakka are against WOTC/Hasbro taking over is because you are all elitist gamers (oh just admit it, you are) WOTC is an amazing company, yes their games are mostly aimed at a younger crowd but I have to say that at 28 I am more in to D&D 3.5 than I was EVER in to 2nd ed. AD&D. They support their games better and seem to have more respect for their audience than most other gaming companies.

And for those of you who think that making money/wanting to make money makes a company bad... I really don't know what to say besides that you are without a clue.

I agree with Happypants. Most who are against a wotc/hasbro takeover are just posturing elitism. But, at least they're not as bad as music snobs who only listen to garage (garbage,haha) music until the band gets a major record label. Heh, at the very least we'll get consistent errata or FAQ sheets.

Yep, I admit it, I am an elitist gamer, that must by why I think WOTC buying GW could be horrible.

I'm sure that having dealt with WOTC on a professional level since they first put out magic has nothing to do with it. I've worked with them as a retailer, and as a playtester. I also have very good info from the people that were running their shortlived miniatures division.

 That's the nightmare that scares me. It was ineptly run, with sculptors not allowed to do a miniature until the art department had a drawing done and then approved. The people hired to head up the miniatures department had to answer to every other part of the company, and nothing was ever allowed to get happen. Months went by with nothing being done, and then a hurried frenzy to get the first dozen figs sculpted in just 3 weeks. They had hired some of the best people in the miniatures business, with decades of experience, and would not allow them to do their job.

There's also the matter of their own chain of retail stores. Spend a couple million per location, then never have the stores posting profits, and close them up at a huge loss. Those stores were insanely run. If they had not had the money from magic/pokemon pouring in, they never would have been built. Only the huge profits they were reaping at the time made it possible to throw that much away on badly run stores. With Hasbro stockholders to satisfy, I doubt you will see WOTC ever again talk about opening a retail chain.

Yep, they might do a bang up job running workshop. I'm sure the spacemarine line of pre painted plastic kiddie figs would roll out the door right on time. It's the very real chance of them sinking the company, or turning it into a monstrosity, that I don't feel like rolling the dice on.

I look at it as a random chance of getting a nice raise in your paycheck, or getting terminal cancer. Yeah, a better run workshop would be cool, but a bankrupt workshop isn't something I'd like to give the people at WOTC/Hasbro a chance on.

Following on Mike's remarks, I maintain it's incredibly naive to think that GW products would only be improved by a corporate takeover, no matter what company we're taking about. Because GW really only has their core games, they'll always be far more protective of those products than some corporate parent for which they'd be only a couple items in their product line. Like Mike said, it'd be basically a roll of the dice. And I guess that die roll didn't exactly come up a "6" for Avalon Hill customers, huh?

As far as the dumb-a$$ "elitist" comment goes, I'll disclose that I have zero interest in CCGs and clix games, and the last time I was interested in D&D was about 1983.

But my opinions are what they are because I've seen firsthand what mergers and takeovers can do to companies and their products. I worked for a company at which all the old-timers constantly griped for new ownership, no matter who it was, because "they couldn't be worse." Well, they got their wish. A much larger company (one of the largest) bought them, fired all those old-timers and generally gutted most of the operation, keeping only the most valuable bits. Woulda been hilarious except that I was one of the many that got laid off (and I was new there). Continue being naive if you want, but you have to be very careful what you wish for in these things...

I think Big 5 Sporting Gear. That way, straight after the football players shoot up with steroids and eat 12 pounds of beef they can prove their might and "grey back" status to their friends by beating up on little GW store kids!

Fun for all!

Chuck

I'm surprised no one's mentioned Wizkids yet (at least that I've seen). They're the ones behind the clicky-clicks and Mage-Knight, so I'd think they would be the most natural purchaser of the company. They've also done a pretty good job 'preserving' Battletech; Mechwarrior clickies for the kiddies and the bottom line, and Fanpro's "Classic Battletech" for the metal-and-hexmap traditionalists.