I've figured out why Wells etal are driving GW into the ground!

[xxRavenxx]

Certain actions and inactions * cough * unwillingness to advertise or use the internet * cough * are so extraordinarily hard to understand, that it is hard for us outside the company to understand what is going on in the heads of the likes of Wells and Kirby and what logic they are following. This makes any kind of speculation difficult. It's a bit like trying to look into the mind of a madman and find reason.

Its possible that they really don't see the need to.

Start with the obvious: All savvy people run adblocks. So to hit the whole market is impossible. I'd never see a GW ad if they placed it.

Next: There is no point advertising GW to wargamers. We know it exists. So that venue is missing.

So where DO you advertise, given it costs a lot? I think a TV advert would be an idea. So long as its not... terrible. (Example.)

As has been mentioned so many times before, GW like using their stores to advertise. In the UK they are in city centres next to well known clothes shops, food stores, etc. so that "mum" will trip over them. They stick them in shopping centres at high cost, to advertise.

Its possible that they then don't want to spend even more on advertising when so many adverts go ignored.

[Iron Puritan]

As much as that may have worked for Games Workshop's chain of B&M stores in the past, they went over the tipping point of being able to sustain that model financially some time ago. Games Workshop's continued existence is due to the strength of their intellectual properties. Expecting an entity that owes its existence to the fruit of the creative process to apply some creativity to marketing their product is an entirely reasonable proposition. The internet is where the most traction is being made in terms of marketing, and there are plenty of agencies that would absolutely love to have a client of GW's size if they are unable or unwilling to do the work in-house.

[iamfanboy]

...and suddenly, so much becomes clear.

Hey, as long as you don't start dismissing my argument because of some weird effects of a medication I haven't been taking for too long (in other words, attacking the arguer because you can't attack the argument), we'll be peachy-keen.

Though I frankly admit that my ephedrine-induced ephiphany (Ephephiny?) makes little sense to me now, several days later.

And Raven, GW themselves seems to have admitted the failure of their stores in high-rent locales as advertisement, even in the UK; part of their agenda in their 2010 report (that was fulfilled by their 2011 report) was the moving of as many stores as possible to cheaper locations. The fact that they've taken measures such as privatizing the Memphis Battle Bunker (into an indie store) says they're slowly trying to get out of the retail game...

Which is both good, and bad. Good, because it's what's been dragging their company down for a long time. Bad, because the retail chain is the only justification for their high prices (and the only way other countries can subsidize their monopoly in England!)

[The bearded one]

Its possible that they really don't see the need to.

Start with the obvious: All savvy people run adblocks. So to hit the whole market is impossible. I'd never see a GW ad if they placed it.

Next: There is no point advertising GW to wargamers. We know it exists. So that venue is missing.

So where DO you advertise, given it costs a lot? I think a TV advert would be an idea. So long as its not... terrible. (Example.)

As has been mentioned so many times before, GW like using their stores to advertise. In the UK they are in city centres next to well known clothes shops, food stores, etc. so that "mum" will trip over them. They stick them in shopping centres at high cost, to advertise.

Its possible that they then don't want to spend even more on advertising when so many adverts go ignored.

In another recent thread I mentioned the 'battlegames in middle earth' magazine series by deagostini, which was a great succes. I actually got into wargaming from that, as my 11 or 12 year old self saw a tv ad for that, and picked up the first issue and subscribed the next day. Apparently a lot of people started with warhammer after picking up boxed sets like space hulk in any old store.

[Omniassiah]

Its possible that they really don't see the need to.

Start with the obvious: All savvy people run adblocks. So to hit the whole market is impossible. I'd never see a GW ad if they placed it.

Next: There is no point advertising GW to wargamers. We know it exists. So that venue is missing.

So where DO you advertise, given it costs a lot? I think a TV advert would be an idea. So long as its not... terrible. (Example.)

As has been mentioned so many times before, GW like using their stores to advertise. In the UK they are in city centres next to well known clothes shops, food stores, etc. so that "mum" will trip over them. They stick them in shopping centres at high cost, to advertise.

Its possible that they then don't want to spend even more on advertising when so many adverts go ignored.

Unfortunately those places are often extremely expensive in rent and require a much higher daily till income to compensate. GW can use stores but they need to be better placed in a combination marketing plan. Put stores in secondary or tertiary retail locations where overhead can be anywhere from a 5th to a 10th for a larger foot print area. Bring back Space Hulk/Hero quest in a manner that is cheap to sell (think cardboard stand ups) so you can place them in toy stores to compete with other games. Make sure you provide a note in the Mission book that more missions are available at the Spacehulk/Heroquest website (NOT THE GW WEBSITE). At the separate website you show a video of the game being played with models. List on the Website "expansion packs" containing models for the game, painting guides, etc... These packs only sell in retailers the sell the full line of GW so when they click on the nice little list of available locations to buy them you get them going to a GW or LGS which has the models of the full games. Doing this allows GW to get almost the same foot traffic in there stores but with possibly a 90% savings(thats if your high street retail space costs are like the US's Mall space costs).

No true advertising is needed, GW can do what it does decently and its more cost effective so that little Timmy needs to get his parents to spend less for GW to start seeing sales actually net them money, since currently in the UK it takes sales in the US to help cover the cost of Timmy's recruitment since he never buys enough to cover costs.

[Eldorad]

Last estimate was around the £130 million mark. But it wouldn't cost that much too effectively "own" the company.

The Nomad Investment Partnership LP holds the largest amount of stock atm, 6,800,000 shares which is 21% of the total stock. Depending on the stock value you would need about 50 million to hold enough stock to devaluate current holders enough to weild major decision power at share meetings.

Not that I've researched buying the company

You're almost spot on!

Market cap today is £178 million http://www.google.co.uk/finance?q=LON:GAW

So you'd need £178 million to buy all the shares. You'd need to also buy out all the debt they have (what we call the "enterprise value") which as at their last statement was about £1 million, but they have cash in the business (which you'd net off) of around £15 million. So the purchase price is therefore £174 million.

Which is always fun to consider in comparison to other well known companies.

Eg. W H Smiths, who are worth at least £650 million.

Games workshop is small. People need to stop getting so excited about their results and how much their directors are paid (which is incidently, not a lot in comparison to other FTSE and AIM cos).

There is no conspiricy.

[Eldorad]

Right here, that's the reason why.

With the last dividend, Kirby managed to add an additional, what, 300,000 pounds to his already modest paycheck?

The share price has doubled since 2010 - why shouldn't he get some reward for that?

Whilst the group contiues to do well we continue to get new minatures.

[PsyberWolf]

@RunepriestRidcully
@Vos

I see what you are saying as not so much a problem with capitalism but with "corporatism"

If Bob wants to create miniatures and sell them would you have a problem with that? I doubt it. The issue comes when you have some joker, who didn't build the company, come in and profit from the company in the short-term at the expense of the long-term value of the company.

[StraightSilver]

I am sorry but I just don't "get" a lot of these types of threads.

GW are currently in very good shape for a retail company, and their future is set to get a lot brighter in the next 6-18 months with the release of The Hobbit.

I worked in retail for 20 years, so I can tell you for any company in the current market to not only be making profit but also awarding dividends in the Uk right now is certainly something special, which is why the FT highlighted it.

Yes their sales are down, but that's the case across the whole of the UK at the moment, and probably the rest of the world.

But they are still turning a profit, and haven't even begun to capitalise on their IP in terms of licensing yet, because they haven't really needed to.

I am not "White Knighting" the company, but they are doing incredibly well in a really tough economic environment, and as much as people don't believe it they are a very strong, solid company.

They are also one of the very few UK companies that are not known as "Highly Geared", which means their debt outweighs the value of their business, which is the case for many retailers at the moment.

As an example, HMV and Waterstone's in the UK are really struggling right now, and we lost Woolworth's, and Virgin, and may soon lose Clinton's and Game / Gamestation.

GW doesn't rely on suppliers and manufacturer's like other retailers as it does it all in house, and had paid off most of it's debts.

OK we may not like it's business practices but trust me they will be around for a long time just yet, and once The Hobbit comes out expect their share price to rocket much like it did with LOTR, unless the movies bomb which I doubt very much.

[General Veers]

"...and probably the rest of the world."

The World Bank disagrees with you:
http://siteresources.worldbank.org/I...kly_051012.pdf

[Bunnahabhain]

In most retailing, goodwill of the customers is worth a huge amount. For instance, our family had a number of chemists shops. When they were sold, the goodwill, i.e the familiarity that the customers had built up with the staff and location, and force of habit of going there not online or a supermarket, was worth about the same as the premises themselves.

The GW churn and burn strategy, poorly balanced rules, price rises and degradation of their IP with Z grade cartoon writing is burning through their goodwill for the sake of short term profit.

Look at the "Honestly, are you stopping buying " thread. There are a whole load of people there who have spent thousands on GW stuff in the past, and most of them are saying they'll cut back heavily or stop altogether. Very few of them are saying they''ll stop spending money on wargaming stuff, just it's going to go to competitors they regard as giving much better value for money.

The lack of increase in revenue in line with price rises shows they are not keeping their customers. Their competitors seem to be increasing their sales, so it's not the market, it's GW.

[Iron Puritan]

The companies that currently have the best prospects for the future are those who are both innovating with regards to competition and fiscally conservative in terms of monetary strategies. Games Workshop needs to be thinking about where they will be five to ten years from now, not just the next eighteen months.

[Eldorad]

I am sorry but I just don't "get" a lot of these types of threads.

GW are currently in very good shape for a retail company, and their future is set to get a lot brighter in the next 6-18 months with the release of The Hobbit.

I worked in retail for 20 years, so I can tell you for any company in the current market to not only be making profit but also awarding dividends in the Uk right now is certainly something special, which is why the FT highlighted it.

Yes their sales are down, but that's the case across the whole of the UK at the moment, and probably the rest of the world.

But they are still turning a profit, and haven't even begun to capitalise on their IP in terms of licensing yet, because they haven't really needed to.

I am not "White Knighting" the company, but they are doing incredibly well in a really tough economic environment, and as much as people don't believe it they are a very strong, solid company.

They are also one of the very few UK companies that are not known as "Highly Geared", which means their debt outweighs the value of their business, which is the case for many retailers at the moment.

As an example, HMV and Waterstone's in the UK are really struggling right now, and we lost Woolworth's, and Virgin, and may soon lose Clinton's and Game / Gamestation.

GW doesn't rely on suppliers and manufacturer's like other retailers as it does it all in house, and had paid off most of it's debts.

OK we may not like it's business practices but trust me they will be around for a long time just yet, and once The Hobbit comes out expect their share price to rocket much like it did with LOTR, unless the movies bomb which I doubt very much.

I agree with everything you've said here. GW is very healthly right now given the state of the world markets and we should be thankful for that, not throwing mud.

[Eldorad]

The lack of increase in revenue in line with price rises shows they are not keeping their customers. Their competitors seem to be increasing their sales, so it's not the market, it's GW.

Where have you got this from?

The last published statements (5 January half year report) showed a revenue increase of 4.5%, which is pretty much in line with last year's price rises.

The demand for GW product is inelastic.

[Bunnahabhain]

I though last years price hike was around 9-10% on average. That would imply (in gross terms, excluding licensing and currency fluctuations) a ~5% drop in sales volume.

[Reinholt]

Where have you got this from?

The last published statements (5 January half year report) showed a revenue increase of 4.5%, which is pretty much in line with last year's price rises.

The demand for GW product is inelastic.

This is factually incorrect, as I have pointed out multiple times before, and you can pull it from the GW financial reports.

I am going to just use the constant currency numbers from GW's own reports to make this point. Here are the 2008-2011 revenues as reported by GW:

2008 - 110.3mm
2009 - 113.9mm
2010 - 126.5mm
2011 - 122.8mm

If we assume a 10% price increase (assume whatever you want, and you can figure out the numbers yourself), here are their constant costs per unit:

2008 - 1
2009 - 1.1
2010 - 1.21
2011 - 1.33

Given this, here is what we see for constant cost sales volumes from 2008 onwards:

2008 - 110.3mm
2009 - 103.6mm
2010 - 104.6mm
2011 - 92.26mm

This year is likely to be even lower. Basically, GW is bleeding off customers. It looks, from the data, like the optimal pricing point for the company was passed somewhere in the 2008-2010 window, hence my repeated commentary that I would cut prices by ~10%, but also re-balance the pricing scheme to make cost of entry lower and the lower volume add on items more expensive. GW is totally wrong way on price at this point, and I expect that their sales numbers this year will reveal that while revenue remains strong, their customer base is static or still declining. This is not a long-term path to success.

[Eldorad]

This is factually incorrect

Whilst this is good analysis (and I think on reflection I probably agree with you), I have a couple of criticisms:

You've assumed 10% price increases, which whilst for FY11 and FY12 might be right, I don't know if it's right for FY10 and before.

The 2012 half year shows an increase in revenue, as I said, even on a constant currency basis, so you can't be sure that "This year is likely to be even lower".

It's a bit of a leap to get to "Basically, GW is bleeding off customers". One could easily argue that the market is saturated - once you've got a space marine army, you don't need another one, prices increases or not. Thus you won't spend as much the following year.

Volume can fall due to demand - the product could still be insensitive to price.

re-balance the pricing scheme to make cost of entry lower and the lower volume add on items more expensive.

I totally agree with this comment by the way.

[eldargal]

Hm, dwindling sales since 2008, almost like a global financial crisis started in that year or something. What happened 2005-2008, after the LOTR bubble burst but before the GFC?

[Reinholt]

Whilst this is good analysis (and I think on reflection I probably agree with you), I have a couple of criticisms:

You've assumed 10% price increases, which whilst for FY11 and FY12 might be right, I don't know if it's right for FY10 and before.

The 2012 half year shows an increase in revenue, as I said, even on a constant currency basis, so you can't be sure that "This year is likely to be even lower".

It's a bit of a leap to get to "Basically, GW is bleeding off customers". One could easily argue that the market is saturated - once you've got a space marine army, you don't need another one, prices increases or not. Thus you won't spend as much the following year.

Volume can fall due to demand - the product could still be insensitive to price.



I totally agree with this comment by the way.

My notes:

- 10% is about right on average. There is variance for every product, but it's a surprisingly good run rate. Subsitute anywhere from 7-13% and the results do not change. 3.5% is about the point where GW breaks even on volume, and I think we all agree that is too low.

- I'm talking about constant volume when I say this year is likely to be lower. I predict revenue will be stable or slightly increased, actually.

- The market saturation argument is a tough one for me, for a few reasons: people tend to play multiple armies, but higher cost of entry inhibits expansion into new armies just as much as it inhibits new players joining the game; most players still would buy new things for their current armies, barring those with gargantuan collections; GW has stopped producing specialist games or skirmish rules, so the saturation would be partially their own fault anyways due to lack of diversity in offerings.

I do agree volumes could fall due to lack of demand, but given that competitors are taking chunks out of GW and most are growing rapidly, I don't think that's the case. If your view is that there is a structural impediment to demand for GW products, then what they are doing is also wrong; they should be contracting the company, shuttering stores, and increasing prices while cutting their capex and expenses and basically milk it for cash until they are done.

But point is, I don't believe there is a demand issue. When everyone else is growing customer bases and you are shrinking yours, the problem is probably what you are doing, not a structural issue in your market.

Hm, dwindling sales since 2008, almost like a global financial crisis started in that year or something. What happened 2005-2008, after the LOTR bubble burst but before the GFC?

I would find this more compelling if everyone else in this market wasn't experiencing growing sales. Is there a reason GW in particular got hurt by the crisis but Battlefront, Privateer, Malifaux, etc. are immune to it? If the whole industry were getting hit, I'd buy this explanation, but as GW is an outlier, I find it hard to give it much credibility. GW was actually losing sales volume ex-LOTR prior to the crisis as well due to price increase (though not as badly - again, 2008/9 appears to be the point where they crossed the inflection point for pricing elasticity).

[Eldorad]

But point is, I don't believe there is a demand issue. When everyone else is growing customer bases and you are shrinking yours, the problem is probably what you are doing, not a structural issue in your market.

Well... there is a demand issue since you've just demonstrated volume is falling. I'm asking whether it's on the basis of pricing (which I think is most people's gripe) or other factors.

I.e. is it because of price that their customer base is (argueably) shrinking, or something else?

They could be losing customers because people are looking for alternative product - systems or backgrounds - as you suggest, due to lack of specialist games etc.

I can't see that the wargames market overall (in the UK at least) is growing or shrinking, so we can agree that customers are moving elsewhere. But I think it's due to other factors (promotion, place) rather than price.