GW and Price Rises: An Economic Hypothesis

[Omniassiah]

You're making a very valid point. In this case I think the theory behind the post works regardless of a lack of evidence. It's just that, a theory. That's why I say my quote from an older thread is out of context. Furthermore I don't think the language Jo-Jo uses is totally absolute. He leaves room for the fact this is a theory and a debating point.

Sadly, this is probably the reasoning behind what they are doing but its almost completely incorrect. The reality is that the supply is generally a negligible effect for a niche luxury item. Shortage of supply(or the appearance of) for a luxury item only effects the price if the demand is on a Large/market, think diamonds. If diamonds where more available sure the price would drop... because people could undercut to sell more. The fact that even if you reduced the price by 95% most people in the world still wouldn't give a rats-*** about the hobby means that the only thing GW should be looking at supply is avoiding having to much because it is just sitting capital.

The reality is like Reinholt had said is that GW prices are resistant to price change. What this means is that instead of a strait line when you graph Price vs. Demand it has more of a curve(closely represented by y=Log(-x) for you math folks). For those who aren't familiar with logarithmic curves, think of a cliff except the edge is rounded. Now for the most part a price rise won't effect the demand much if at all... Until it hits a breaking point where the price just start getting too high for more and more people and then it hits the true cliff where it demand plummets. The reason why the curve is that sharp comes to the critical mass point that Reinholt stated as well, getting people to try other games was difficult because most people didn't want to risk outlaying money from a game system that they were almost guaranteed to get a game in as opposed to one that there may only be one or two other players. Now we are seeing the cost to try other games be cheaper then a new unit in your old army, It's not that big of a risk anymore then buying a new unit and finding out you don't like it and because of that now, other game systems have enough people to play that you don't have that barrier of entry of "no one to play".

Now IMO we are in the fast transitioning part of the curve, I think we are just starting in it, and we'll really see the big drop off of demand come after the next two year's price increases.

If you need the logical reason why the OP theory doesn't work think of this: Once GW makes enough Land Raiders to cover the people willing to buy it at the current price whether they produce an extra 20 or 20,000 makes no difference. If they fail to produce enough to meet demand do you think that it is going to make that model worth more, not likely. Sure GW could try to make them ultra rare (like forgeworld used to be) and only make 250 each year for the entire world but even then its unlikely that people would want them anymore. I mean look a 3rd Ed. Space Hulk the price for that on ebay has been going down for a while because once they got out of speculators hands even though they are relatively rare to find up, not many people are really interested in them that don't already have them.

[iamfanboy]

I made this post in another thread, but it's also very relevant here:

The problem that I personally have with GW's decision to go after a premium market is that, and let's be frank here, gaming is not a premium market.

it's a niche market, to be sure, but not a premium one.

As xxRavenxx said, there are essentially two ways to go about exploiting and expanding a market, oddly enough exemplified by the two car companies he chose.

1) Create only a few of each product, but charge a high price for each one because it is a luxury; a status symbol that shows just how cool/wealthy/whatever you are. Your profit margin on an individual unit is high because you don't expect to sell that much.

2) Create a ton of your product and sell them at low low prices. While you might not make much margin on each one of your product, you can (and do!) make it up on volume.


Now, plan 1) lends itself well to a business that doesn't have the ability to mass produce its items for some reason; either a limited manufacturing capability, limited demand, lack of raw material supply, or not having control over the production (because they're actually being manufactured by another company). Think Forgeworld - not everyone needs a 28mm scale Thunderhawk or Phantom Titan, but those who want one are willing to pay for it. You use resin because the quantity being produced means you can take your time QA'ing it, so you don't need a high-reliability material.

Plan 2), however, is the way to go if you have your own high-volume factories, distribution network, control over your raw material supply, and a huge customer base willing to pay for your stuff... like Games Workshop?

For some reason, Games Workshop as a whole has decided to go the Forgeworld route, with a great deal of problems along the way.

[TheMav80]

That assumes that there would be cross over in that direction. I would safely bet that a large percentage of people who play 40K already have purchased Dawn of War or Space Marine (or the other GW based video games). However, I am not too sure that there are a large number of people who play video games who decided to drop a few hundred dollars on books, miniatures and all the rest of it. The two groups are sort of wired differently (especially when it comes to those who are playing the shooters). The price point becomes even more of an issue when they compare their current hobby (video games) with the potential of the new hobby. A video game normally goes for $50 or so retail, about the same price as a GW vehicle.

Dawn of War is how me and two friends got into playing 40K. So I have no idea how widespread it is, but it happened.

[Tresidentevil]

Gamesworkshop is a niche elite market. They will always follow plan 1. Forge world even more so. They can't follow plan 2 because miniatures are supposed to be high in quality.

Like it or not this hobby IS elite.

[Sean_OBrien]

Gamesworkshop is a niche elite market. They will always follow plan 1. Forge world even more so. They can't follow plan 2 because miniatures are supposed to be high in quality.

Like it or not this hobby IS elite.

A Bugatti Veyron is Elite. Miniature gaming is small.

There is a difference between an elite product, who's customers can wipe their butts with $100 bills - and a small market product, who's primary customers have an allowance.

Their are a lot of other niche markets out there which follow more realistic philosophies regarding their customers. Although GW would like to think of themselves as being elite, they are not. In the end, they manufacture toy soldiers that they sell to teenagers who will loose interest when they head off to college or head into the work force.

[Athelassan]

...England win the Ashes? Raise prices.

That would at least explain why prices remained relatively stable (if high) in my youth, and have ballooned out of all recognition in the last ten years or so.

[Tresidentevil]

Spending £20.00 on 10 plastic men is elite, it's aimed at rich middle class kids and rich middle class kids who grew up with it. You can't compare Warhammer to a car. Compare a car to a car. The size of miniature war gaming is totally irrelevant. I'd argue a product such as a Rolex or Bugatti is elite, few buy it. I'd also argue an iPhone is an elite product, millions buy them. Mine just cost however many hundreds £, I COULD have got a perfectly good smartphone for a hundred £ if not less. You have to compare Warhammers eliteness against products like it, i.e. fantasy products, rpgs, other wargames maybe even computer games.

[Sean_OBrien]

Spending £20.00 on 10 plastic men is elite, it's aimed at rich middle class kids and rich middle class kids who grew up with it. You can't compare Warhammer to a car. Compare a car to a car. The size of miniature war gaming is totally irrelevant. I'd argue a product such as a Rolex or Bugatti is elite, few buy it. I'd also argue an iPhone is an elite product, millions buy them. Mine just cost however many hundreds £, I COULD have got a perfectly good smartphone for a hundred £ if not less. You have to compare Warhammers eliteness against products like it, i.e. fantasy products, rpgs, other wargames maybe even computer games.

Even within wargaming, they are not Elite. They even pride themselves with not being elite - everyone who has ever gamed has probably at one point or another had a GW/Citadel miniature in their paws. Companies like Studio McVey, Hitech and even Scribor would be the elite of this industry. They cost more, are less readily available and the people who buy them tend to be miniature aficionados.

Even within the company itself - GW products are not Elite. That is what they have their Forgeworld division for. The GW branded plastics are miniatures for the unwashed masses, but they price them like they are something special. It is the difference between Scion and Lexus within Toyota. One is an entry level, low cost car for young people. The other is a luxury brand sold to upper middle class (and the occasional rich kid).

[Tresidentevil]

I'm not really interested in how GW advertise themselves. I'd argue War Gaming is an elite hobby in its entirety.

[Orrinocco]

I'm not really interested in how GW advertise themselves. I'd argue War Gaming is an elite hobby in its entirety.

Thats just snobbery though. What makes it elite? THat it costs lots of money? I'm told fishing can cost a lot of money, but thats not an elite hobby, as you could do it with a stick and some string. You can play wargaming with bottle caps or slips of paper if you want.

To me, an elite hobby is one that is not accessible to many people, mostly due to cost - so show jumping is a little elite as not everyone can afford to maintain a horse. Any hobby such as wargaming which can be entered into by anyone in the country, for relatively little outlay (as long as you don't buy GW )

[Sean_OBrien]

I'm not really interested in how GW advertise themselves. I'd argue War Gaming is an elite hobby in its entirety.

Well there you go.

I am pretty sure that I will not be the only one who disagrees with your assertion that gaming is elite. It is niche to be certain, far from mainstream. However, being a small market doesn't make it elite any more than ant farms are elite pets or hemp ponchos are elite clothes.

[iamfanboy]

I'm not really interested in how GW advertise themselves. I'd argue War Gaming is an elite hobby in its entirety.

...And you'd be wrong, but that's OK, you're probably used to it by now. Heh.

Wargaming is no more elite than Magic the Gathering, high-end board games (like Bloodbowl!), video games or role-playing games - that being the category of money/attention that it's competing for. Generally speaking, the buy-in investment is $100-400 USD for this category of hobby, with more outlays later on, which are generally less.

ELITE hobbies are things like competitive horse-jumping, owning a sailboat, ocean diving, that sort of thing - where the outlay of money goes into the thousands or more.

WITHIN the wargaming hobby, there are stand-out categories of 'excesses'; things like Forgeworld, or my buddy who owns close to 3 grand in Battletech minis so he can say he's got several full regiments and Galaxies of various 'Mechs. But if Warhammer 40k were an 'elite' wargaming hobby, they wouldn't be marketing to kids - people not exactly known for a great deal of money. They'd be marketing to my friend JB, who can afford to lay out a thousand dollars on a new game if it catches his interest (or pay me $100 a week to paint his 'Mechs).


And GW has complete control over its manufacturing chain; there's no theoretical reason that they couldn't be out-producing all these podunk companies like Perry Miniatures and undercut them on both volume and price at the same time. The fact that they don't...

Well, frozenwastes linked to a fun article on wikipedia about Lifestyle businesses, and that's my new theory on why and how the company is being run. Wells and Kirby are just maintaining the company so that they can ride it til they retire (not so far away), and why should they care what happens to the company after they're gone?

[Cxt]

I'm not really interested in how GW advertise themselves. I'd argue War Gaming is an elite hobby in its entirety.

Care to define 'elite hobby'? While I disagree, and I imagine most here do too, we can't really argue or discuss it unless we are coming from the same definition.

[Sean_OBrien]

Well, frozenwastes linked to a fun article on wikipedia about Lifestyle businesses, and that's my new theory on why and how the company is being run. Wells and Kirby are just maintaining the company so that they can ride it til they retire (not so far away), and why should they care what happens to the company after they're gone?

I am pretty sure a lot of the miniature companies out there could well be classified as a Lifestyle business - I don't think GW fits the bill. Once they assumed in house mold production and plastic manufacture, they overcame the scalability limitation. When they became publicly traded, they left behind the concept of maintaining a certain level of income - as they had to deal with market pressures. Small companies like Hasslefree probably fall in here, as well as slightly larger companies like Reaper and Iron Wind Metals (both of which are not against making money - just they are more or less content with the level of income they currently have).

If you take a look at the quote from the Wiki article that was linked, I don't really get that feeling regarding GW management:

These are firms that depend heavily on founder skills, personality, energy, and contacts. Often their founders create them to exercise personal talent or skills, achieve a flexible schedule, work with other family members, remain in a desired geographic area, or simply to express themselves. But without the founder’s deep personal involvement, such businesses are likely to, well, founder.

Just doesn't sound like the way Kirby et al are managing GW. I sort of see them more as the management of AMC in the late 1970s and 1980s. They don't quite know what they are to do with themselves anymore, so they are treading water until a bigger company offers to buy them out so that they can get out of the mess they created. As a result, they feel the need to do the price adjustments every year in order to make the brand look good on paper to potential suitors.

[Iron Puritan]

Just doesn't sound like the way Kirby et al are managing GW. I sort of see them more as the management of AMC in the late 1970s and 1980s. They don't quite know what they are to do with themselves anymore, so they are treading water until a bigger company offers to buy them out so that they can get out of the mess they created. As a result, they feel the need to do the price adjustments every year in order to make the brand look good on paper to potential suitors.

This meshes with what I thought when I read the Games Workshop corporate site. While I do understand that websites targeting potential investors involve a certain amount of corporate posturing, it is obvious that they are trying to sell an image to potential investors that is not consistent with Games Workshop's early history or the wargaming hobby in general. Only a person unfamiliar with the history or the market at large would buy the upscale/elite logic.

Another thing to consider is that they have painted themselves into a corner and are trying to save face.

[Sean_OBrien]

This meshes with what I thought when I read the Games Workshop corporate site. While I do understand that websites targeting potential investors involve a certain amount of corporate posturing, it is obvious that they are trying to sell an image to potential investors that is not consistent with Games Workshop's early history or the wargaming hobby in general. Only a person unfamiliar with the history or the market at large would buy the upscale/elite logic.

Another thing to consider is that they have painted themselves into a corner and are trying to save face.

I think it really goes beyond trying to save face. If you go way back to 1999 - GW had an annual profit of £12.5 million and was trading at 407p. Fast forward to last years report and they made £12.8 million and were trading at 427p. In over ten years time, they managed to grow their profits by £300,000 (less than 2.5% increase) and increase the stock price by less than 5%. Just to keep pace with inflation in the UK they would have needed to hit £17.88 million (according the official UK inflation numbers). As it is, investors might be better off sticking their money in things like magic beans.

[Scaryscarymushroom]

I'm not really interested in how GW advertise themselves. I'd argue War Gaming is an elite hobby in its entirety.

Well, this is a pretty contestable opinion.

In the United States, Skiing is vastly more expensive than Wargaming (hence, appeals to a more 'elite' crowd, making it an elite hobby). (BTW, you folks in Europe have no idea how lucky you are that skiing is affordable.) Travelling the world is an elite hobby. At $82.50 a piece (and considering the amount of time you could spend building, painting, and gaming with it), Storm Ravens are actually much more 'time occupied v. money spent' than a weekend overseas and a 190 euro dinner at a 5 star restaurant on Saturday night.

As evidence by the fact that every year GW's price hikes drive their customers away (and that it's already cheaper than a lot of hobbies), GW's clientele are a bunch of cheapskates. Not elitists.

On the whole, I'd say that Wargaming is probably about as elite as breeding Portugese water dogs. (Dog breeding is on the mind because I was bottle feeding a 2-week old puppy yesterday. And it was adorable.) That is, it's more elite than breeding mutts in the back of an alley, but less elite than breeding labradoodles on an enormous estate in Australia.

I am pretty sure a lot of the miniature companies out there could well be classified as a Lifestyle business - I don't think GW fits the bill. Once they assumed in house mold production and plastic manufacture, they overcame the scalability limitation. When they became publicly traded, they left behind the concept of maintaining a certain level of income - as they had to deal with market pressures. Small companies like Hasslefree probably fall in here, as well as slightly larger companies like Reaper and Iron Wind Metals (both of which are not against making money - just they are more or less content with the level of income they currently have).

If you take a look at the quote from the Wiki article that was linked, I don't really get that feeling regarding GW management:

These are firms that depend heavily on founder skills, personality, energy, and contacts. Often their founders create them to exercise personal talent or skills, achieve a flexible schedule, work with other family members, remain in a desired geographic area, or simply to express themselves. But without the founder’s deep personal involvement, such businesses are likely to, well, founder.

Just doesn't sound like the way Kirby et al are managing GW. I sort of see them more as the management of AMC in the late 1970s and 1980s. They don't quite know what they are to do with themselves anymore, so they are treading water until a bigger company offers to buy them out so that they can get out of the mess they created. As a result, they feel the need to do the price adjustments every year in order to make the brand look good on paper to potential suitors.

EDIT: Hypothetically speaking...
What if Wells and Kirby own most of the shares? Would you then consider it more likely to be a lifestyle business?

[Reinholt]

What if Wells and Kirby own most of the shares? Would you then consider it more likely to be a lifestyle business?

For reference, they do not. Kirby has roughly 6.75%. Wells appears to be <1%.

[Iron Puritan]

Magic beans indeed. Those numbers are not reassuring.

The company I used to work for parachuted an "expert" (basically an in-house consultant) in to oversee changes at the facility during a transitional period. Too bad I'm not in touch with the man because it would be very interesting to hear what he would have to say about the matter. The gentleman in question was a former paratrooper and Vietnam veteran. His take would be rather colourful...

[Scaryscarymushroom]

For reference, they do not. Kirby has roughly 6.75%. Wells appears to be <1%.

Ok. I wasn't sure, but I thought it might be possible. And the question still stands.