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I'm not even sure how they could implement a price cut- if they cut prices on their stuff, what happens to distributors who bought it at the pre-price cut rates? Do they have to suck it up to compete, or would they get a partial refund? How would that work?

I'd love their prices to drop by 40% too, but I don't think it's going to happen for those reasons. A price freeze is likely as much as they can manage, but it probably won't be enough. They've got to focus on adding value rather than reducing prices, I think. Not that I think they will- I think they definitely won't.

They can cut prices without cutting prices.

The intrinsic value of a kit is tiny once developed. Put an extra sprue/set of sprues in a Terminator box, you raise the value 100%, but don't significantly impact in the money you make from the sale of 1 box.

The decisions hinges on whether you would sell more "one box purchases" if you did that compared to how many "two box purchases" people are buying now. If GW were to sell, say, 65% (arbitrary figure from yours truly that feels about right) of the number of units because of the increased value encouraging people back into buying, then it would likely offset the increased costs sufficiently to make more money.

Every box should stay at the same price, but just make them "complete" boxes.

Land Raider = all variants. Done.

Terminators? 10 Models, both types.

Dire Avengers? 10 Man box.

Guardsmen? 20 man box, special weapons sprue.

None of the prices have to change, you just have to make it so you're selling a complete product. Some of the vehicles are a bit high and should be knee capped. Anything that's not an Apoc unit better be solidly under $100. And get everything that was in Apoc out of standard 40k.

The GW Annual Report came out a few days ago, and having an above average interest in finance and economics (and WH40K) I decided to have a look for myself and see what I could deduce from the health of GW from their annual report.

Disclaimer: I am not a financial analyst. I just find it interesting.

Now, let's make things clear - GW are making money. They made less money than last year, which was their strongest year to date, but they still made a profit. Their royalties are lower than before due to THQ going bankrupt. Now bear in mind, as this article points out, they spent a total of 8.5 million GBP on getting rid of management and upgrading the website (you can argue whether the 4 million spent on the website was money well spent), which are costs that won't occur every year and hit their profits.

So in reality, what's their problem? Let's look at some very exciting charts! Or as I'd say Norwegian, "sykt spennende figurer!"

2014 Annual Report wrote:
Reported sales fell by 8.2% to £123.5 million for the year. On a constant currency basis, sales were down by 6.5% from £134.6 million to £125.9 million; progress was achieved in Other sales businesses (+20.9%) and Export (+2.7%) while sales in UK (-7.1%), Continental Europe (-10.6%), North America (-7.5%), Australia (-9.4%) and Asia (-3.3%) were in decline.

Sales have dropped after previously strong showings. The question is why. Bear in mind their numbers are in no way devastating, or as Reinholt points out.

The punch line? They have, in terms of actual sales to actual customers, about the same revenue as 2006 if we correct for currency valuation. If we don't, they are just below 2009 levels. I wouldn't call this picture good, but I also wouldn't call it bad. Whatever complaints one may have with GW, they aren't currently bleeding revenue everywhere, and are flat over 8 years. Many companies have done worse.

Sales increase in percentage. This is very important to read properly.



Can you spot where they started getting rid of middle-managed and start cost-cutting? While their revenues have remained fairly stable, their profits have changed considerably as they have become a much better business. Their profits (even one year of losing money) were much lower (single digits) pre-2009, and if this was 2009 it would've been said to have been a fantastic year. However, you can clearly see their profits have taken a hit this year. To me, it appears cost-cutting turned the company around in 2009, but it appears more cutting is damaging sales. Let's now have a quick look at price increases in other sectors.



*2014 numbers were until June rather than July.

Now I personally believe these numbers are hilariously low compared to what they should be and real price increases are MUCH higher outside the ivory tower of the academics. I'm abstaining from using the word "inflation," as inflation more correctly describes the increase in monetary supply of which rising prices is a symptom. Regardless of my misgivings I'll use these numbers. So for argument's sake think of a 100£ boxed set in 2010. This, if GW followed CPI would cost 112.2£ in 2014, and for those of you not solid at maths this signifies a 12.2% net price increase. Most of their price increases are within reason, so stop whining about it - either they lower their workers' real wages and/or fire people, their profits take the hit or they raise prices. However, this can also be applied to their revenue and their profits, making them smaller than they otherwise would be in CPI-adjusted GBP.

What needs to be done is explore why sales dropped. Market saturation, market expansion and competition (they're all intertwined) is what strikes me as the core concepts here. The market is gradually going to be saturated with plastic crack, because let's be honest, even if many people are plastic addicts you can only paint so much before you decrease the rate of new plastic crack. Once you've got a 5000pt Eldar army, 8000pt Ork army and 6000pt IG you're not likely to buy at the same pace anymore.

This leads on to my second point, market expansion. I was in GW a few days ago and there were 3 people working, so I'm guessing my store hasn't been dropped to one guy yet. My brother, who doesn't play any GW game, was surprised at how nice the guys working there were, however, he also noticed the general smell of sweat and Cheetos. I seem to be in the minority (at least a vocal minority), but I tend to find the GW guys very nice, though I can see how certain things would rub people the wrong way, like them bringing up politics and flinging faux-intellectual conservative-bashing statements without knowing anything about my political views, or their quite frankly, hilarious sales techniques. Now I see the problem of only having a single guy working there; at busy hours there are loads of people in there - who's gonna be there to rope in the few people willing to brave the very unique smell of a GW store? Similar to Texan border patrol, they can't catch everyone and loads of people slip right through their paint-stained fingers. From a business point of view, if you've got a company that doesn't advertise, you better not let anyone who wanders into your store go unhelped, especially when there's a merica (plural for fat people, like a murder is for ravens) of neckbeard-sporting hambeasts tipping their fedoras at people and going "m'lady" while stinking up the place with their questionable hygiene.

Now I think 5 people to run a store is too many, but 1 is too few, and it would seem the numbers suggest this. Running campaigns, inventory, helping customers, helping people get their first plastic injection etc. takes time. A compromise of say 2-3 (without going deeper into their numbers) would greatly improve the experience, because regardless of how good their web store might be, they are 100% reliant on FLGSs, their own stores and word-of-mouth to addict a new generation of plastic junkies.

Reinholt over at Warseer underlines another point about GW's store strategy, but I'll give a quick summary here. GW's weak US numbers are essentially down to a complete lack of market research with regards to US demographics. Britain, and most of Europe, is well suited to placing GW stores, whereas due to the US' population spread out nature, it's nowhere near as profitable and they should restrain themselves to larger cities like NYC, Boston, SF, Dallas etc. Additionally, the edge they had over FLGSs is diminished due to this.

One thing in particular that mauled their NA numbers, as Reinholt pointed out, was what seems to be a complete lack of market research. Making an official GW forum with things like a monthly painting competition (50£ web store voucher and a picture in WD or something) would provide a invaluable source for market research and feedback at negligible cost. They can do polls on what models people would prefer to see and what they'd like to buy (this mean more money) and tailor upcoming releases and miniatures to what the customers want.

This leads me to my last point: competition from FLGSs. Competition from FLGSs is different from region to region, but if they have better customer service and a nicer atmosphere (and gaming tables...) customers'll go there instead. However, working against them on a sales level has also hurt profits. On a miniature level, competition from Privateer Press, Mantic Games and the like will also draw people away from GW products, though GW are masters at release schedules for codices and miniatures. This year in Warhammer 40k GW launched 7th edition WH40K, the Imperial Knights (apparently a financial success), a truly awful (IMHO) looking SW flyer (see picture below), new Imperial Guard (not too shabby), new Orks and a few other things. However, their miniatures must look awesome and their game needs to be best, as the price difference between GW and its competitors is significant.


The new Space Wolf flyer.

With regards to competition from other companies and keeping people hooked, let's have a look at what Rick Priestly has said.

Rick Priestly wrote:
But when we were in Enfield Chambers (prior to 91) the studio was a very easy going creative environment to put it mildly. We were left to our own devices for much of the time, and Bryan Ansell (owner and boss) pretty much kept the creative part of the business separate from the manufacturing and sales part. Bryan was a very creative and ideas driven man – I don’t think he’d mind me saying that – he always wanted to make great games with interesting mechanics and stimulating ideas – and he didn’t mind investing in creative staff. He was a real patron of the studio and took a real interest in all the models and artwork. Bryan always said that if the studio ever had to mix with the manufacturing and sales part of the business it would destroy the studio. And I have to say – he wasn’t wrong there! The modern studio isn’t a studio in the same way; it isn’t a collection of artists and creatives sharing ideas and driving each other on. It’s become the promotions department of a toy company – things move on!

Then let's read from Comical Kirby's annual report.

Annual Report wrote:
Because no one seems able to grasp the essential simplicity of what we do there has always been the search for the Achilles heel, the one thing that Kirby and his cronies have overlooked. These are legion. I run through the list from time to time when someone says that computer games will be the death of us – they are so much more realistic now! – again. This year it is 3-D printing. Pretty soon everyone will be printing their own miniatures and where will we be then, eh? We know quite a lot about 3-D printers, having been at the forefront of the technology for many years. We know of what we speak. One day 3-D printers will be affordable (agreed), they are now, they will be able to produce fantastic detail (the affordable ones won't) and they will do it faster than one miniature per day (no, they won't, look it up). So we may get to the time when someone can make a poorly detailed miniature at home and have enough for an army in less than a year. That pre-supposes that 3-D scanning technology will be affordable and good enough (don't bet the mortgage on that one) and that everyone will be happy to have nothing but copies of old miniatures.

All of our great new miniatures come from Citadel. It is possible that one day we will sell them direct via 3-D printers to grateful hobbyists around the world.That will not happen in the next few years (or, in City-speak, 'forever') but if and when it does it will just mean that we can cut yet more cost out of the supply chain and be making good margins selling Citadel 3-D printers. At the heart of the delusion is the notion that designing and making miniatures is easy. It isn't.

The part in bold is what I'd particularly want to address. Making good models is really important and some changes might be required. I left Warhammer and WH40K a decade ago and came back 6 months ago to a lot of really poor plastic models cast using metal casts. That needs to go. However, not all GW miniatures are awful and after going through a rough patch (read: Finecast) they seem to be back on track (with the exception of Mutts Cutts). Now to keep people hooked, GW should immediately allow for use of their IP with regards to miniatures rather than sue people who make things to complement their stuff. This could be allowed for free, similar to what WotC did for D&D 3rd edition, a game blessed with considerably longer lifespan than 4th edition. Allowing other companies to make models GW can't be bothered doing, like Praetorians or Black Dragon Space Marines, and they will add an extra dimension to their game. FW is a small step in the right direction, but it's not happening fast enough.

With regards to 3D printers, nobody will be dumb enough to buy Citadel 3D printers at a hefty mark up (look at their measuring tapes) and it also rides on people wanting to buy Citadel miniatures. All you need is the plans for it - someone else will make cheaper alternatives and Hell, even make their own model plans for people to freely download. What they can do when the time comes however is set up a Steam-like program where you can download the blueprints for a particular squad or model and then pay a nominal fee each time you use it. However, this is far into the future.

Competition from other companies is also getting stiffer, be it Mantic Games or Privateer Press, though neither is likely to overtake them as the market leader any time soon. Here they need to make sure their rules are as concise, effective and enjoyable as possible. And for God's sake, learn the singular of dice and plural of codex, it looks incredibly unprofessional not knowing basic English grammar. GW is not run by people who speak Colonial Pidgin English so they have no excuse.

I hope my analysis is of value to some people here

If we drill down to the heart of things, the core issue for GW is the same as it has been for years: poor management.

Their senior management and board seems to have a tin ear; they are blinded by arrogance and don't understand that their current approach is burning as many bridges as it builds, and their customer retention numbers are growing increasingly ugly. It's not a sustainable long-term trend.

The reality is that there are many ways to turn this around, I just don't believe their management is aware of what the real problem is. This is similar to hearing someone complain about how they don't love their tires and maybe their cat needs to finally have that rear view mirror that cracked replaced while the cat itself is on fire in their driveway. There is a far greater and more urgent issue, and they are completely ignorant of it while spending time on things that are not real issues.

This is why I think the real outlook for GW is ultimately that the current management crashes the ship into an iceberg, and after they sink / while they are sinking, someone else summarily executes the management (by which I mean they suffer either a hostile takeover or a buyout via receivership/bankruptcy acquisition) and puts the cargo (the IP and games) onto a new ship.

 Reinholt wrote:
while the cat itself is on fire in their driveway.

I totally agree with what you're trying to say but this seems like a whole other problem.

Or maybe it's a beautiful metaphor.

Anyway, I'm looking at those graphs and seeing a lot of downward trends recently. Can't see them going up without a radical change in the company.

Also, Kirby's claims as to 3D printing tech is hilarious. How the feth did he get a job?

 liquidjoshi wrote:
Or maybe it's a beautiful metaphor.

Anyway, I'm looking at those graphs and seeing a lot of downward trends recently. Can't see them going up without a radical change in the company.

Also, Kirby's claims as to 3D printing tech is hilarious. How the feth did he get a job?

I'm guessing that is a political statement more than anything else. I seriously doubt, GW is not planning for 3d printing, and i don't mean just raving like this speech, but seriously planing.

Kirby: "We fear no 3D printing!"

Dude in back: "What about Chinese recasters or your growing competition?"

Kirby: "Is it 3D printing?"

Dude: "Well,... erm, no, no exa"

Kirby: "Then it's not a problem. Nothing's a problem unless I routinely dismiss it before it ever becomes a problem. That's how it works, 'cause I'm the boss."

*blank stares from around the boardroom*

 MWHistorian wrote:
I don't think anyone's arguing that GW still isn't top dog. What people are saying is that they won't hold that spot for much longer IF things continue as they are.

And that it is quite possible to go from #1 to bankrupt without ever slipping from the #1 position.

TSR is a great bad example....

GW is not yet in danger of bankruptcy, at least the fiscal kind, but....

The Auld Grump, creative bankruptcy, on the other hand....

 liquidjoshi wrote:
Or maybe it's a beautiful metaphor.

Anyway, I'm looking at those graphs and seeing a lot of downward trends recently. Can't see them going up without a radical change in the company.

Also, Kirby's claims as to 3D printing tech is hilarious. How the feth did he get a job?

What he is right 3D printing is not going to effect GW, they would still need to be a company in a few years for that to happen.

 TheAuldGrump wrote:
And that it is quite possible to go from #1 to bankrupt without ever slipping from the #1 position.

TSR is a great bad example....

GW is not yet in danger of bankruptcy, at least the fiscal kind, but....

The Auld Grump, creative bankruptcy, on the other hand....

I mean, they did just release a product called a murderfang.

 Guildsman wrote:

 TheAuldGrump wrote:
And that it is quite possible to go from #1 to bankrupt without ever slipping from the #1 position.

TSR is a great bad example....

GW is not yet in danger of bankruptcy, at least the fiscal kind, but....

The Auld Grump, creative bankruptcy, on the other hand....

I mean, they did just release a product called a murderfang.

sorry...

You gotta say the full name... Murderfang the Curseborn™ who satiates Murderlust™ with Murderclaws™.

If I was investing in Games Workshop, my first investment would be a thesaurus. Then again, knowing the competence we've seen lately, they probably think that'd be a great release for Lizardmen.

Now you can have a Chaos Lord with a murder sword duel Murderfang to the death!

 Reinholt wrote:

Their senior management and board seems to have a tin ear; they are blinded by arrogance and don't understand that their current approach is burning as many bridges as it builds, and their customer retention numbers are growing increasingly ugly. It's not a sustainable long-term trend.

The reality is that there are many ways to turn this around, I just don't believe their management is aware of what the real problem is.

Tom Kirby wrote:
We do no demographic research, we have no focus groups, we do not ask the market what it wants. These things are otiose in a niche.

 Guildsman wrote:

 TheAuldGrump wrote:
And that it is quite possible to go from #1 to bankrupt without ever slipping from the #1 position.

TSR is a great bad example....

GW is not yet in danger of bankruptcy, at least the fiscal kind, but....

The Auld Grump, creative bankruptcy, on the other hand....

I mean, they did just release a product called a murderfang.

Wait...That's a real thing?!? Like for real, for real?!?!?! I thought ya'll were just messing around like a meme kinda thing.

God in heaven I am glad I am out of 40k.

 darefsky wrote:



Wait...That's a real thing?!? Like for real, for real?!?!?! I thought ya'll were just messing around like a meme kinda thing.

God in heaven I am glad I am out of 40k.

Equally ridiculous are his weapons: the Murderclaws. And his special rule: Murderlust.

Oh, and the fact his head is poking out of his dreadnought carapace snarling and gnashing his teeth.

 TheKbob wrote:
You gotta say the full name... Murderfang the Curseborn™ who satiates Murderlust™ with Murderclaws™.

... from the planet Omnicide.

 H.B.M.C. wrote:

 TheKbob wrote:
You gotta say the full name... Murderfang the Curseborn™ who satiates Murderlust™ with Murderclaws™.

... from the planet Omnicide.

Can... can a rabbit hole go that deep?

 gunslingerpro wrote:

 H.B.M.C. wrote:

 TheKbob wrote:
You gotta say the full name... Murderfang the Curseborn™ who satiates Murderlust™ with Murderclaws™.

... from the planet Omnicide.

Can... can a rabbit hole go that deep?

Words fail me....

I feel like Charlton Heston at the end of Planet of the Apes when he finds the Statue of Liberty.

And so this is how GW died.....

 darefsky wrote:

 gunslingerpro wrote:

 H.B.M.C. wrote:

 TheKbob wrote:
You gotta say the full name... Murderfang the Curseborn™ who satiates Murderlust™ with Murderclaws™.

... from the planet Omnicide.

Can... can a rabbit hole go that deep?

Words fail me....

I feel like Charlton Heston at the end of Planet of the Apes when he finds the Statue of Liberty.

And so this is how GW died.....

The good news? Your Murderfang gets a SEARCHLIGHT so it can see how fall down the rabbit hole it falls before it hits that juicy molten lava core.

 H.B.M.C. wrote:

 TheKbob wrote:
You gotta say the full name... Murderfang the Curseborn™ who satiates Murderlust™ with Murderclaws™.

... from the planet Omnicide.

Haha, you know I thought you were joking HBMC until I googled it--that's hilarious.

I do love a good word play, even if it goes over my head and I too have to google it ; p

If murderfang doesn't do it for you just close your eyes and just say "small jewel like objects of magic and wonder" over and over.

And the sad thing is...its not a bad model. I quite like it, but the name makes me burst into a fit of giggles.


Automatically Appended Next Post:

 Reinholt wrote:



The reality is that there are many ways to turn this around, I just don't believe their management is aware of what the real problem is. This is similar to hearing someone complain about how they don't love their tires and maybe their cat needs to finally have that rear view mirror that cracked replaced while the cat itself is on fire in their driveway. There is a far greater and more urgent issue, and they are completely ignorant of it while spending time on things that are not real issues.

I now have a mental image of a burning cat with a cracked rearview mirror strapped to its head. The new Nyan cat?

So the cat thing is what happens when you have the XKCD news extension installed...

http://xkcd.com/1288/

P.S. Spaaace Marines!

Thanks to youtube, players now see other games. Battle reports, tutorials and what is in the box. No surprise GW sales are down.

 Capt. Camping wrote:
Thanks to youtube, players now see other games.

Clearly the answer here then is to sue YouTube.

If that fails, then they pull all their own videos from YouTube and issue DCA takedowns for every other video featuring their product so no one on YouTube ever sees anything 40k-related again.

Then profit.

Based on latest financial disclosure Games Workshop Group plc has Probability Of Bankruptcy of 71%. This is 91.82% higher than that of the Consumer Goods sector, and 63.3% higher than that of Recreational Goods, Other industry, The Probability Of Bankruptcy for all stocks is 79.88% lower than the firm.

71% probability of bankruptcy within 2 years?

Ouch.

To be absolutely correct, it is 71% chance of a serious financial crisis possibly leading to bankruptcy.

However, suppose that revenue stays steady for the next year. The £4.5 M of exceptional expenditures does not have to be repeated. The £2 M of cost savings comes into effect. Suddenly, GW's profit is up by £6.5 M on the same revenue of about £122 M. (I am ignoring the effect of their increasing Cost of Sales.)

Everything would be looking pretty good.

The key worry is if Kirby's explanation for the revenue drop -- the difficulty of finding staff for the one man shops -- should be wrong. In that case there might be another 8% drop in sales, or worse. If he is right, though, they ought to be able to staff up and then we might even see an increase in revenue.

My personal view is that the one man shops are only a part of the problem.