GW and Price Rises: An Economic Hypothesis

[Jezbot]

Humble, genuine question: As someone who only did 'A' Level Economics - isn't the above theory basically just the price elasticity of demand curve?

Yes, and the OP's basic argument is that the demand line for GW is inelastic.

The problem with this argument is that we, as a bunch of hobbyists, have absolutely no idea if that position is actually true. We can only infer that it is probably true because that's how GW is behaving, but it's entirely possible that GW is completely wrong (and the most likely case for this is, as people have pointed out, GW is only focussed on short term elasticity, and may be exposing themselves to long term consumer drop off).

[frozenwastes]

When I mentioned the lifestyle business thing, I also mentioned that they set themselves up in a situation where they get to *act* like it's their lifestyle business. They've got their shares in the hands of institutional investors who don't care about how it preforms. I also recall the largest holder too the opportunity to increase their position at pretty much the exact bottom of GW share prices. For them, GW has done a bang-up job.

Many, many companies have issues with management running the company for themselves rather than for the good of the shareholders. Add in GW's history of management payment and bonuses being well above the average and the majority of the shares being held by people who probably don't look at them too closely and you've got a perfect setup for management to supply themselves with an excellent lifestyle and retirement.

Why should GW's upper management try to fix things? Why should they take risks and go after a larger market share like they had back around 2000? They can just keep increasing prices, rehashing army books and re-releasing editions. As long as revenue stays mostly flat and they can keep expenses down, they can keep going on with the status quo. And when the status is not quo, to quote Dr. Horrible, they can issue themselves stock options, offer themselves a bonus if they can turn things around, cut and slash and expenses the best they can and do some sort of big splash release and voila-- back to status quo, with dividends and bonuses.

[Jezbot]

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.

It makes more sense to compare it to nerd entertainment in general. And within that market you, with almost every single product, see a whole lot of complaining about it despite how cheap it can be. I mean, an RPG costs about $40, or I guess about £35, and will likely last a year or two, and maybe 20, and can be shared by about 5 people. And yet the complaints about the cost of RPG books is endless.

And yeah, £20 for a small amount of moulded plastic is a fair bit, but if you take the hobby as a whole it really isn't that pricey. It takes the average painter probably about an hour per figurine, for rank and file troops, so for £20 you've got about 10 hours activity. Without factoring in playing time, it's already a really cheap way to spend your time.

Now, none of that means people should, or would, pay more for their models. Afterall, people don't think in terms of 'how much will this hobby cost me on a per hourly basis'. Instead they look at the price and then compare that against a whole host of factors, many of which are completely irrational (the most irrational being how much a product 'should' cost). Which basically is me making the argument, again, that it is very difficult to predict consumer behaviour, and anything we're likely to do here has to be no more than guesswork.

[Jezbot]

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

To be an elite product, it would need to have some element of status. ie If you spent your weekends playing polo it would show you're the kind of person that can afford the upkeep for a horse and membership at a polo club.

Wargaming has no such elite status. It's a niche hobby.

From my personal experience, among the adult players I'd say almost every wargamer I know is between lower middle and middle in their income. Professionals, let alone genuinely rich people, are scarce on the ground. Which makes sense for a hobby that requires a huge time investment.

[Jezbot]

I have to disagree here. Once you leave GW games, you encounter scads of games with better mechanics and cheaper price points. What GW has is market share - the ability to go more or less anywhere and still be able to get a pickup game.

Absolutely, GW have market share, but they also have something else that is rarely picked up on in these conversations - they have their own stores in well trafficked streets. This means that for any kid interested in a wargame, their first contact with the industry will almost certainly be a GW store, and that means their first game will almost certainly be a GW game. This is a huge thing, and is basically the cornerstone of the GW business model.

It's why, for now anyway, the market consists largely of GW and a lot of other companies fighting over the consumers who moved away from GW and tried other games.

[lanrak]

Hi Jezbot.
15 to 20 years ago ,a chain B&M stores was the ONLY way to pomote products and grow your market share.

If we assume GW plc are targetting 11 to 25 year olds from middle incomes TODAY.(Who have easy acess to the internet.)
They are much more likely to look up 'wargames' in the internet ...along with everything else thay may want to know about.

[canberraguy]

Hi Jezbot.
15 to 20 years ago ,a chain B&M stores was the ONLY way to pomote products and grow your market share.

If we assume GW plc are targetting 11 to 25 year olds from middle incomes TODAY.(Who have easy acess to the internet.)
They are much more likely to look up 'wargames' in the internet ...along with everything else thay may want to know about.

I agree to a point but I just think there is no good way to recruit as many people online into a hobby that is so touch and feel based.

[Baragash]

I agree to a point but I just think there is no good way to recruit as many people online into a hobby that is so touch and feel based.

Which is probably true. The point, being made over in the B&M Strategy topic, is that the cost of doing so is far too much for what it generates.

[alphastealer]

While I understand economics I wish to comment from purely a gamers experience. 10 years ago I was keen to get into wargaming and started with 40k tyranids. At the time GW was the only gaming company I and my local game community were aware of. We played regular events and social games and built up our collections to multiple armies in 40k.

Then came the jump to fantasy as a more challenging game system, and once again the now expanded community forked out for new armies each. During this time GW kept sliding prices upwards. We would moan about it a bit but then life would go on and we continued to buy, just buy a little bit less.

Then the change came 2 years ago. Our community was becoming very large with multiple tourneys each month for 40k and fantasy. We were getting really pissed at the current price hikes and power creep that us long term players had begun to feel was hurting the games. Purchasing was at an all time low. The general feel was to trade in second hand models or do conversions. Many events had players using copied codexes for various marine factions that they could switch out between events and still use the same models.
White dwarf, which used to get us all wide eyed about special tactical reports and large events was now just a giant catalogue of models we could no longer justify paying full price for.

Then a few guys started playing warmachine and hordes. Initially they were ignored while us veterans tried to reason through why GW was not doing it for us anymore and how we could make house rules or customise events to bring back the appeal of the game. Slowly but surely after ewatching a few warmachine games a few of us vets decided to give it a go and have a few demo games with the other guy's models.

Wow! It was like someone opened a door to a tomb to let in the frsh air. It did not take long for us to see that PP have built their game system specifically to avoid a lot of the pitfalls that GW had fallen into. No longer would we have long waits between model and faction book releases that end up over powering the new stuff in a never ending chain of power creep. Gone were the need for codexes altogether, the stat card is all you now need for your models, and if they decide to update them, then you just order the new card!
Factions are well balanced which makes events more fun and fairly competative.

The list is long so I will not go too far into the advantages but the results are what is relevant here. In the last year half our community has made the move from GW games (40k and fantasy) to PP (warmachine and hordes). These players are prepared to spend money on models, just not GW models. Not because the actual models are bad, but because the fuller experience is better with PP. Prices are also not too different. A PP army will also set you back but it just feels more worth it. You get the feeling that while PP are just as keen to make profit they are playing the long game and trying to capture and retain a significant portion of the market.

GW with their price increases coupled with poor rules and international support are going to feel the pinch within the next 1-2 years. I am sure my community is only one of many out there who has made this change. Others might have moved to other games like infinity, mantic or malefaux. The result is still going to be the same for GW; loss of market share which will lead to loss of sales and thereby lower profits.

The sad thing is that by the time this becomes aparent the GW titanic would have taken on too much water.

[tu33y]

do we really NEED any of these little plastic things?

god yes.

I benefit so much from the hobby... i am not musical, to lazy to write stories, so painting miniatures, particulary tanks, gives me a sense of enormous fulfillment. we all have a desire to "make" something, and it is nice to look at things you have made and admire them. I pity the people who only experience half of this feeling by buying lots of consumer goods and making "hoard" videos and pictures.

I am at the point where I get so much from the hobby while it is still a "luxury" I will always find a few bob somewhere to buy some. musicians dont give up guitar beacuse the new Fender is too expensive...

[iamfanboy]

No, but there are other companies that make cheaper guitars for guitarists to start out on, and quite often they'll find that those cheaper guitars produce just the same sound as a Fender does.

[PsyberWolf]

@frozenwastes

They also have some really compliant people on their corporate board.

I guess in Britain there is a rule that people can only serve as a director for so long before they are no longer viewed as an independent outsider. Several years back, in one of the annual reports, Kirby was going on and on about how some of the directors that have been on the board for a long time were still independent. My guess is they're on the gravy train too.

[Dyrnwyn]

Warhammer *can* be cheaper than it is, if you go to eBay or garage sales or steal it from people.
Those prices that you're quoting for Golf seem to be second hand. i did a bit of checking for what it would cost me to start golf at new prices, and the result is about $1500 for clubs/bag/balls/gear, $1500 nomination for the local golf course and $1500 per year membership.

Prices I quoted are for new equipment - just searched golf clubs and golf bags online and looked for less than 5 minutes for the cheapest stuff. You can get a bucket of random balls through most courses - they tend to sell the balls collected from water hazards and lost in the rough. You can start playing Golf for under $200, around $150 if you are particularly frugal. Though obviously not the best gear, you can start playing with it. What's this nomination and membership nonsense? Play on a municipal course. $4500 is more than I've paid in my life to play golf, and I've never had a club membership, and this nomination thing is entirely foreign to me.

Which pond? Your location says you live in the middle of the Pacific

Har har har. I meant North America in general.

Absolutely, GW have market share, but they also have something else that is rarely picked up on in these conversations - they have their own stores in well trafficked streets. This means that for any kid interested in a wargame, their first contact with the industry will almost certainly be a GW store, and that means their first game will almost certainly be a GW game. This is a huge thing, and is basically the cornerstone of the GW business model.

Are you in the UK? You have to be. This high street business model keeps getting thrown out like it's a big deal. I understand that GW is a big, ubiquitous thing in the UK. In North America, it's not. If there's a wargamer in the US, it's a fairly safe bet he was brought in by a friend or an indie store. There are only 3 GW stores within a hundred miles of New York City. There are over 80 indie stores in that same radius that stock GW product. Not a single one of those indies is going to stock GW and GW only. Every single one of those players will be exposed to other lines of product and other games.

It's why, for now anyway, the market consists largely of GW and a lot of other companies fighting over the consumers who moved away from GW and tried other games.

I disagree with your picture of the market, but I'm too tired to fully argue it at the moment.

[Reinholt]

Absolutely, GW have market share, but they also have something else that is rarely picked up on in these conversations - they have their own stores in well trafficked streets. This means that for any kid interested in a wargame, their first contact with the industry will almost certainly be a GW store, and that means their first game will almost certainly be a GW game. This is a huge thing, and is basically the cornerstone of the GW business model.

It's why, for now anyway, the market consists largely of GW and a lot of other companies fighting over the consumers who moved away from GW and tried other games.

This may be true in the UK, though the internet renders it less true by the day. It is definitely false in the EU, and however false it is in the EU, it's about 50 times as false in the US.

This, I think, is one of GW's problems; they think their entire business is like the UK. It is very much not, and that's why they are getting hit much harder by competition outside the UK than inside it.

For instance, I used to live in Minneapolis. Closest GW was over 400 miles away, or basically the entire size of England north to south. You can't credibly say kids are learning about the wargaming hobby primarily through GW stores when you have to travel a full England to even find a GW store.

[ColShaw]

For instance, I used to live in Minneapolis. Closest GW was over 400 miles away, or basically the entire size of England north to south. You can't credibly say kids are learning about the wargaming hobby primarily through GW stores when you have to travel a full England to even find a GW store.

Yup. I live just south of Minneapolis, and this is totally true.

[weeble1000]

Yup. I live just south of Minneapolis, and this is totally true.

I would have to drive all the way to Texas...and then there'd be a comparatively bewildering number...followed by a desert of GW until you go practically all the way to LA.

[Sean_OBrien]

This may be true in the UK, though the internet renders it less true by the day. It is definitely false in the EU, and however false it is in the EU, it's about 50 times as false in the US.

This, I think, is one of GW's problems; they think their entire business is like the UK. It is very much not, and that's why they are getting hit much harder by competition outside the UK than inside it.

For instance, I used to live in Minneapolis. Closest GW was over 400 miles away, or basically the entire size of England north to south. You can't credibly say kids are learning about the wargaming hobby primarily through GW stores when you have to travel a full England to even find a GW store.

Which is something that they just don't get - and I am not too sure they will ever actually understand.

http://www.games-workshop.com/gws/st...Retailers=true

If you take a look at that map (it will take a bit of time to load up as I sort of messed with their variables in order to cover the whole US) - you will see where every GW store is and where independent retailers are as well. There are huge areas between clusters of GW stores (10 or so in the LA and surrounding areas) but none in areas which might make sense (San Diego for example - I hear military guys wargame from time to time). Another half dozen in the San Francisco Bay area - but none in Sacramento. There just doesn't seem to be any actual method to their store locating process.

Moving away from that though, in the US, Canada and Australia - there is still a significant rural population. Many of these kids, young adults and even adults actually have a lot of expendable money and the mentality to enjoy wargames. Quite often there isn't even an independent store within 100 miles, let alone a GW store. The policy which GW has taken towards online retailers (the internet ban in the US and the Southern embargo for Australia) pushes those customers into other games almost by default. Just to illustrate that point, I did a similar search for Australia as above:

http://www.games-workshop.com/gws/st...Retailers=true

And if you Aussies think you have it bad - consider this one:

http://www.games-workshop.com/gws/st...Retailers=true

This map shows an interesting contrast (notice South Africa compared to Southern Europe)

http://www.games-workshop.com/gws/st...Retailers=true

Anywho - GW's High Street philosophy probably was sound...20 years ago...in the UK. Now, everywhere else - it hurts them more than they could ever imagine.

[weeble1000]

I think GW reduced America to a handful of representative cities and once it had "claimed" those cities GW felt that it had sufficiently saturated the US market.

GW has the East Coast (Baltimore), the Midwest (Chicago), the South....well, it has Texas at any rate (Dallas and Houston), the Northwest (Seattle), and the West Coast (San Francisco and Los Angeles). It is nice to know that those cities encapsulate all that is America. GW has a presence in the US from sea to shining sea. Clearly, GW has won America.

It makes sense though too, because when you play Axis and Allies, you get the whole left half of America by parking some troops in California...oh, wait...yea, you need the "Great Plains" too, but who the heck ever puts guys there anyway, right? That's just a waste of resources. As if the Nazis would invade from Mexico...

[ColShaw]

It makes sense though too, because when you play Axis and Allies, you get the whole left half of America by parking some troops in California...oh, wait...yea, you need the "Great Plains" too, but who the heck ever puts guys there anyway, right? That's just a waste of resources. As if the Nazis would invade from Mexico...

Hey, I took California once with Japan by invading Alaska, then sweeping down through the Northwest Territories.

[Sean_OBrien]

I think GW reduced America to a handful of representative cities and once it had "claimed" those cities GW felt that it had sufficiently saturated the US market.

GW has the East Coast (Baltimore), the Midwest (Chicago), the South....well, it has Texas at any rate (Dallas and Houston), the Northwest (Seattle), and the West Coast (San Francisco and Los Angeles). It is nice to know that those cities encapsulate all that is America. GW has a presence in the US from sea to shining sea. Clearly, GW has won America.

It makes sense though too, because when you play Axis and Allies, you get the whole left half of America by parking some troops in California...oh, wait...yea, you need the "Great Plains" too, but who the heck ever puts guys there anyway, right? That's just a waste of resources. As if the Nazis would invade from Mexico...

I can actually half see them in their late night board room meetings doing that as well. Though, I would guess it is a Risk game board as Axis and Allies would complicate their economic strategy too much.