GW and Price Rises: An Economic Hypothesis

[Jezbot]

Actually - I would say early adoption of plastics. It really wasn't until plastics that GW really became a big money company. It allowed them to mass produce at very, very low costs. It also cut the weight of their product by a huge margin that allowed them to not only sell in the UK, but also ship their goods around the world for reasonable fees. Other metal companies of the period (even GW/Citadel) either licensed molds or used contract casters when they wanted to say sell in the US from the UK or vice versa.

The brick and mortar stores might have helped within the UK, however I don't think they did much in terms of making GW a global company.

Plastics likely made a big difference, that's a fair point. I don't think it can account for their success by itself, though, not by a long shot. Plenty of other companies have since offered plastic lines, and none have had anything like the success of GW.

[Jezbot]

They definitely helped in the UK. A density strategy is possible there, and GW executed it. The B&M strategy does deserve credit there, and GW should preserve it.

In the US, not so much; the claim that GW has ever had much of a street presence in the US is just false. You can look at the data on where all their stores were located over time and they never cover a significant portion of the country. Even now, they are re-positioning but will never get there. I mean, there are massive US states where GW has no stores, and where there aren't even that many good locations for them in the first place. The country is just huge. We have states the size of the UK, after all. It's like trying to cover a country the size of China, but with 1/5th of the population, with meaningful retail stores.

Yeah, agreed on stores being a significant factor in the UK, though I'd also hasten to add the strategy works in other countries with reasonably dense populations. And it's there that looking at population size and comparing it to geography is a bit simplistic. To return to the point about Australia and the US, Australia is far less densely populated across the whole of the country, but most of the population is clustered around a half dozen CBDs - so a couple of mainstreet stores in each city give GW a presence to most of the population.

GW definitely made a mistake in trying to apply the same model to the US - and this is something they've recognised, which is why they reversed policy in the US and closed a lot of the stores there about five years ago.

[Scaryscarymushroom]

Plastics likely made a big difference, that's a fair point. I don't think it can account for their success by itself, though, not by a long shot. Plenty of other companies have since offered plastic lines, and none have had anything like the success of GW.

How many of those companies started off in the same footing when they began to offer plastics?

Mantic and Privateer Press are doing pretty well with their plastics. Sure, they aren't doing as well as GW is, but they weren't even around 12 years ago. That's like... ∞% growth in only 12 years! Way better than GW!

[lanrak]

I have to agree with Scaryscarymushroom.
Since 2004 GW plc have doubled thier prices over the rate of inflation.(2004 was the hight of GW plc popularity with the help of the LoTR.)

And thier turn over has fallen by over 30% in real terms.

So the LoTR bubble bursting cost them appx 30% of thier turn over.

And the price rises over inflation since then have losts them apprx 50% of thier sales vlolumes.

GW plc is like a massive iceburg floating into tropical waters, and slowly metling at a faster and faster rate,under the water line,as it player base shrinks with each price increase.
The other smaller companies are now taking ex GW customers and showing how they actualy care about game play and offering them value for money.

Oddly enough these small companies are growing from strenght to strenght...

The current GW plc buisness model will depends on;-
120,000 gamers willing to pay £1000 for thier hobby every year,
Then eventualy,
12,000 gamers willing to pay £10,000 for their hobby every year,
Then eventualy ,
1,200 gamers willing to pay £100,000 for thier hobby every year.
Then eventualy
120 gamers willing to pay £1M for thier hobby every year.

Why doesnt this worry everyone!

[UberBeast]

120 gamers willing to pay £1M for thier hobby every year.

Why doesnt this worry everyone!

Imagine how far the last 2 gamers will have to travel just to get a game in every weekend?

[EmperorNorton]

Imagine how far the last 2 gamers will have to travel just to get a game in every weekend?

Don't worry, they probably have their own private jets.

[BeatTheBeat]

Haven't read through the entire thread, just the original post, and want to say KUDOS! to the OP for such a well-written and informed post. Good to see some well-applied economics here. Now post a link to this thread in every single whine-thread on these forums

Cheers,
BTB

[iamfanboy]

Haven't read through the entire thread, just the original post, and want to say KUDOS! to the OP for such a well-written and informed post. Good to see some well-applied economics here. Now post a link to this thread in every single whine-thread on these forums

Cheers,
BTB

If 'well-informed' means 'using economic theories from over a century ago that has as much relevance to modern economics as Freudian theories have on modern psychotherapy', then I wholeheartedly agree with you.

The real problem is that his post holds up if you consider GW miniatures to be a 'vital good'; that is to say, something you'd have to buy simply to keep yourself alive and/or employed.

They are not.

If proof is required, since 2004 prices have went up 50% overall on their miniatures; if they were a vital good then GW would be earning 50% more than it was in that time.

It does not.


And EmperorNorton, HERESY! How dare you even SUGGEST that GW's last two players would DARE to keep luxury jets instead of selling them for more SupraCast minis, now with 30% fewer holes!

[Torga_DW]

If 'well-informed' means 'using economic theories from over a century ago that has as much relevance to modern economics as Freudian theories have on modern psychotherapy', then I wholeheartedly agree with you.

Well i just had to comment on this one. Freud was many things, including paid hack and sex-warped theorist. But his concept of the id, ego and superego balanced against the concious and unconcious mind really fits well in todays cognitive behavourist paradigm.


Back on topic:
GW is just another modern corporation. As long as the CEO and his executives are making good money, thats all that really matters. Lots of stuff could be done to improve the company, but it won't, as the men in charges financial needs are already being met, and thats their bottom line. Many examples of this sort of behaviour in other businesses, and part of the reason we have that global financial crisis recently, and probably will again in the next year or so.

But gw still produces some fantastic models, even if they're overpriced.

[iamfanboy]

Yes, but his idea that everything comes back to sex, sex, sex is more indicative of his own neuroses than anything else - though perhaps I should have said "child development" rather than "psychotherapy," that being the context I studied him in most recently.

And a 'good' corporation, one that wants to be around, should be studying long-term trends and predicting from there. The only thing that GW seems to know from their long-term trends is "Durr, they don't matter, durr..."

[Torga_DW]

I agree, i just think that its important to point out that GW is far from alone in the category of 'not good' companies. Theres a lot of "Durr, they don't matter, durr..." going around.

I wish GW (and others) were different, but like the father in 'grumpy old men' said: you can wish into one hand and crap into the other, and see which one fills up first.

[Reinholt]

I agree, i just think that its important to point out that GW is far from alone in the category of 'not good' companies. Theres a lot of "Durr, they don't matter, durr..." going around.

I wish GW (and others) were different, but like the father in 'grumpy old men' said: you can wish into one hand and crap into the other, and see which one fills up first.

I just want to step in for a moment to emphasize the truth of this. GW is not an outlier in terms of their behavior; in fact, they are arguably in the majority with regard to small to medium sized companies. They happen to have made it public, which many do not, but that doesn't confer any special abilities upon them.

The reality is that most companies are some degree of poorly run or averagely run. This is why well run companies can have such astounding valuations and make such large amounts of money (Apple, Google, Goldman Sachs, to name a few) over long runs when they actually run themselves well, and why if the things that made them work begin to break down, they tend to lose it.

GW, going down the "ignore our customers and act like we're clueless" route, is following a well explored path with known consequences for most firms that travel down it.

Spoiler alert: it ends badly, but takes longer to do so than most would suspect (so it's a lot like Oliver Stone's Alexander).

[I3uLLioN]

How does a fall in sales volume mean a decrease in player base? Esecially when you can play for years on a single one-off purchase? I thought the thread on "Will you start a new army this year?" was quite telling in that the vast majority of people said they wouldnt, but that didnt mean they would stop playing all together. If you stand back and think about it, then the GW player base could be growing. If the majority of their sales are to new customers as people on here always claim, those sales are adding people to the player base, as those that already have considerable collections dont tend to spend much on a monthly buisness.

The statement that "Falling sales volume means less people are playing" is so simplistic and silly it is laughable.

[shelfunit.]

How does a fall in sales volume mean a decrease in player base? Esecially when you can play for years on a single one-off purchase? I thought the thread on "Will you start a new army this year?" was quite telling in that the vast majority of people said they wouldnt, but that didnt mean they would stop playing all together. If you stand back and think about it, then the GW player base could be growing. If the majority of their sales are to new customers as people on here always claim, those sales are adding people to the player base, as those that already have considerable collections dont tend to spend much on a monthly buisness.

The statement that "Falling sales volume means less people are playing" is so simplistic and silly it is laughable.

Whilst true, I think it what was meant was not decreasing player base, but decreasing customer base. Having even a million players playing your game as a miniature manufacturer is no good if none (or very few) of those players is buying your miniatures. Falling sales does not 100% mean less people are playing, but neither is it a sign that any more are - which is (or should be) the aim of any company - growth.

[Reinholt]

Whilst true, I think it what was meant was not decreasing player base, but decreasing customer base. Having even a million players playing your game as a miniature manufacturer is no good if none (or very few) of those players is buying your miniatures. Falling sales does not 100% mean less people are playing, but neither is it a sign that any more are - which is (or should be) the aim of any company - growth.

More to the point, you can think of players as falling into three buckets:

1 - Those who are starting new / starting new projects.
2 - Those who are not starting new projects or new players, but still purchasing maintenance items (supplies, the occasional unit, army books, etc.).
3 - Those who are literally purchasing nothing but still playing.

Reduced sales volumes can mean several things when you think about this framework:

1 - You are not attracting new players.
2 - People are not starting new projects and are instead falling into category 2 or 3 above.
3 - People are not making maintenance purchases and are falling into category 3.

So basically, everyone in the first list is shifting down to tier 3, if we assume those are the only options.

However, there is a fourth option - they are no longer playing at all / playing much less and instead focused on other things. It has been my experience that those who are truly not buying a single thing from GW are also those most likely to quit. They are probably buying things for other miniatures games, or playing less miniatures games overall. Thus, if you want to say the sales volumes are not tied to player base, you have to essentially make the argument that there is a large "silent majority" of GW gamers who, despite having extensive enough collections to play, also don't buy anything.

The other (more likely and obvious) option is that people are actually playing less/stopping entirely and playing new games. Given the external evidence that other gaming companies are experiencing increases in sales volumes while GW has falling sales volumes, I'm going to put my money on less GW players and more players of other systems.

See elsewhere in this thread and others: the prices are high enough for entry and new projects that GW is actively driving people into the arms of competitors, and when that happens and new games catch on at clubs or in an area, GW gaming slows down or stops. I know of a lot of clubs that have "flipped" in the past few years, and it's only getting worse, not better.

This may be more of an issue in the US than the UK, as GW never had the market penetration here that they had in the UK, but I still see it. I don't think it's credible to say there are just as many GW players actually playing their games.

[Jezbot]

And the price rises over inflation since then have losts them apprx 50% of thier sales vlolumes.

No, it hasn't. That doesn't even slightly match the sales figures GW have given.

Why doesnt this worry everyone!

Because I've been hearing these claims since the early 90s, and they've been wrong every time.

Haven't read through the entire thread, just the original post, and want to say KUDOS! to the OP for such a well-written and informed post. Good to see some well-applied economics here. Now post a link to this thread in every single whine-thread on these forums

To summarise the thread - just because the OP hid his assumption behind a lot of economic explanations, doesn't mean his explanation is true. His argument only holds if it is true that GW has an inelastic demand curve, this is something the OP is happy to assume is true, but he provides no evidence for it and there is every reason to think it is not true.

If 'well-informed' means 'using economic theories from over a century ago that has as much relevance to modern economics as Freudian theories have on modern psychotherapy', then I wholeheartedly agree with you.

What? Those economic theories are still an essential part of any modern microeconomic analysis.

The real problem is that his post holds up if you consider GW miniatures to be a 'vital good'; that is to say, something you'd have to buy simply to keep yourself alive and/or employed.

Inelastic goods aren't only limited to vital goods.

[shelfunit.]

No, it hasn't. That doesn't even slightly match the sales figures GW have given.

Yes it does - as has been shown many times. Just think about it - sales revenue not increasing. Prices going up. Describe an alternate conclusion.

Because I've been hearing these claims since the early 90s, and they've been wrong every time.

You must be the only one then. "These claims" have only really been around for the last 8 or so years - since GW's growth stopped and their dropping or static sales results began.

[lanrak]

Thanks Reinholt for explaining why I used the term 'player base shrinks with every price increase'.

If we bring GW plc 2004 turn over forward into todays money.(Increase turn over at the average rate of inflation in the uk.)
Its £177m.(I may be a smidge out+/- 2%)
Last years turn over was £123M.

IF GW plc had maintained its sales volumes from 2004 to the present day they would have had a turn over in exess of £300M!
Flippin' 'eck its worse than I thought!

[Jezbot]

Yes it does - as has been shown many times. Just think about it - sales revenue not increasing. Prices going up. Describe an alternate conclusion.

A vastly less exaggerated version of the same claim, not built around picking the high point of the LOTR bubble.

You must be the only one then. "These claims" have only really been around for the last 8 or so years - since GW's growth stopped and their dropping or static sales results began.

I may well be the only one. I was also the only one for much of the 90s saying 'no, just because you don't like having to pay that much for a box of models doesn't mean it costs too much'. That I may well still be the only one saying it doesn't make the claim that GW have really, truly, finally gone too far with their pricing.

Thanks Reinholt for explaining why I used the term 'player base shrinks with every price increase'.

If we bring GW plc 2004 turn over forward into todays money.(Increase turn over at the average rate of inflation in the uk.)
Its £177m.(I may be a smidge out+/- 2%)
Last years turn over was £123M.

So you just picked the high point of the LOTR bubble, and added 3% from each from there? When I've posted, more than few times now, that we are dealing with extremely vague analysis by games hobbyists and not financial analysts... this is exactly what I'm talking about.

LOTR sales were always going to decline, there's just no two ways about it. You can't determine how a company ought to have performed and base it around the sales height of a product that was always a short term item.

[Sean_OBrien]

So you just picked the high point of the LOTR bubble, and added 3% from each from there? When I've posted, more than few times now, that we are dealing with extremely vague analysis by games hobbyists and not financial analysts... this is exactly what I'm talking about.

LOTR sales were always going to decline, there's just no two ways about it. You can't determine how a company ought to have performed and base it around the sales height of a product that was always a short term item.

So...lets go back a bit then.

http://web.archive.org/web/200212240...2/fiveyear.htm

If you look at the 2001 (before LotR was released) numbers you will see that the year ended with £92,634,000 in total revenue. If you go over here:

http://www.bankofengland.co.uk/educa...h/default.aspx

You can drop that in to the official UK inflation calculator and see that that same sales revenue is the equivalent of £125,706,925 today. That is a net loss over inflation of £2 million or so.