Warfare on the High Accountanseas

At long last, I bring to you the other post that nearly became last last week's Internet fight. It's especially funny to me, since I just wrapped up my Managerial accounting class last week. Quite timely, indeed. You may not find this anywhere near as funny as I do, but I really don't care, this is my Blog. It's about me me me me me.


Since I was editing this to be a fight, I'm just going to leave it more or less in that format and continue the snowmobiling that I had started.

Alpharius from Dakka Dakka started this thread about GW's announcement of price increases for the US. There he asks for people's opinions about the price hikes. That being said, this was about all he had to add to the discussion. You will find him, then, completely missing from what follows. What ensues is proof positive that GW's fans largely have no idea what running a business actually entails. It also shows that you probably shouldn't open your big fat stupid mouth if you know only enough about business analytics to show that you're a fucking idiot. Just like most other threads that I've been stumbling across lately, this one goes on for about 50 pages longer than is funny. Because of that, I'll just be showing you some of the choicest bits. We'll just assume that you all know the price increases are coming and start in medias res with this extreme bullshit:

Sixsystems- Copy, add your name to the bottom and email to GW customer service. If we get enough people in on this, maybe something will happen... ~the floor will collapse...get it, because we gamers are tubby


*My whole gaming group supports this! ~well fan-fucking-tastic for the lot of you, meanwhile this means less than nothing to the rest of us.
-Unkle Jack

To Whom it may concern:

I'm writing to let you know that I am very disappointed ~not mad, just disappointed in Games Workshop for even considering another price increase. I've been a consumer of Games Workshop products for 10 years now and have accumulated 6 fully playable armies in that time. I've not only purchased models to create these armies, but I've purchased White Dwarf magazines, paint, every codex you've created and a number of accessories to make my battlefields more realistic. All of this adds up to thousands of dollars spent. ~so you just added personal information to a petition. You are a fucking genius. I cannot in good faith sign this because I have bought GDub products for over 17 years and have spent significantly more than this ass clown has...

At this point, however, I think I am at the end of the road with regard to my relationship with Games Workshop. I was fully intending on starting a Blood Angles army (my 7th army) and when finished with that, moving on to either Inquisition or a second Chaos army- ~oh joy, more personal info but with these price increases, I won't be buying Games Workshop products anymore. In my opinion, Games Workshop is no longer interested in making a great game for people to enjoy. ~that must be why they keep releasing all of that shit that we enjoy so much. I hate when they do that. Instead, GW is only interested in squeezing the fanbase for every single bit of cash GW can get. ~if any of them try squeezing me I'm calling sexual harassment on their asses And I am simply not going to be involved with this anymore. While this letter doesn't seem very intimidating, ~yeah, it totally doesn't I want you to know that I am not alone. Below are my friends with whom I've played 40k, BFG and Apocalypse for years. ~so if I sign your crappy petition I am your friend. This is even easier than Myspace They are quitting too. And, unless you back down from this insane ~overdo it much? increase of your prices, others will follow.

Please consider what I have written. Because when I quite buying GW, I'll be selling my armies off and buying into Warmachine and possilby ~possilby they can teach you to edit your petition better? seriously anybody out there keeping track of typos in this piece of shit? Flames of War. Not only will you lose my purchases, but you'll lose sales from the people who buy my armies- they won't need to buy anything from you as my armies are complete~ly awful, no doubt. Then, to add insult to injury, other companies will be getting my dollars and the dollars of my friends- which will further erode your market share. ~oh noes, my market share. Looks like somebody has gone to the big boy business academy.

Again, stop this price increase. Seriously.

Signed,
John Doe

Sixsystems ~and a bunch of other names that I deleted, because they're not real people, just screen names. Next time I write a petition (which is likely to happen sometime around never) I'll be sure to add as many pretend and or deceased people as I can....wait, I'll practice now, with my response from GW

Dear Sixsystems,
Thank you for your concern about our forthcoming price increases. Let me assure you that you are, in fact, completely idiotic and your petition was met with resounding laughter by all that have read it. We look forward to your continued support
signed,
Jervis
Matt
Jimmy Hoffa

Kanluwen- Um yeah. That "petition" is moronic, to say the least. ~and fucking moronic to say the most


Email petitions rarely, if ever, work. Much less work with aliases rather than actual names.

So good luck with that, when in the same timeframe you could have printed out a form letter, then signed it yourself and distributed a dozen other letters to your friends--who distribute a dozen to their friends, etc. ~or started a totally boss pyramid scheme, or done the same and worked for Primerica -Zing!!

Ostrakon- I'm going to post this once and then probably leave the thread, because I don't have the patience to try and convince people to actually read the data before they jump to conclusions. (Of course if someone is actually going to be reasonable about I'd be happy to debate it)


1) Last year GW had less than a 10% profit margin. They make 6 bucks off of every Land Raider they sell. ~you may want to be WAAAAY more specific on your numbers here. what you're really talking about is net operating profit. more on that in a second This is not the mark of a 'greedy' company. (Maybe a grossly mismanaged one for not being able to handle costs better, though. ~ummm so you're about to post their annual report, in which they specifically mention the measures they are taking to reduce their operating expenses and you you accuse them of not being able to handle their costs- brilliant Never attribute to malice that which can be explained by incompetence.) It's right here on page 2: http://investor.games-workshop.com/downloads/results/results2009/gw_year_end_09.pdf

2) Let's assume for a second that they were gouging us and getting like a 50% profit margin. That doesn't make them evil either, since they're a public company. They're just a cog in an evil engine. They HAVE to do whatever they can to increase profits as much as possible, at least to the point that shareholders won't call them out on it. ~boo capitalism bad, look out for our evil system, or just shut the fuck up because nobody cares about your opinion. would you rather live in anarchy? Communism? Those have all seemed to work out pretty well... A minority shareholder lawsuit would potentially cripple the company, leading to its IP gettting sold to someone else. ~who cares, I can get their IP free all over the Internet lol Could be good, but it could also go to Hasbro. You really want that?

3) If you can afford to play and disagree with GW's practices and simply choose to no longer to support them, that's fine. I can respect that. But if you're going to quit because this price increase means you can no longer afford to play (I don't mean in a "not worth it" kind of way, I mean a literal "I can't afford to play this because I have to buy groceries instead" level of broke), then you shouldn't have been wasting money on plastic figures to begin with. ~haha, suck it poor people

tl;dr version: GW is stupid and run by short-sighted asshats, but they aren't evil. ~and you are a myopic asshat who fails at being able to interpret basic financial data

asmith- You are sort of misrepresenting the situation by saying they make $6 off a land raider. their gross margin is almost 72% so for a $60 land raider they are actually making about $43.~you'd have a great point if you didn't also fail at interpreting data. You're arguing about 2 entirely different things. Product gross margin on a land raider (72%) and the final margin Ostrawhatever mentioned which is based off of the more important net operating profit after taxes, or the amount of money that GW makes after every single bill is paid. I'm also assuming that your "cost" figure is based off of materials only and not all of the other stuff that actually goes into product cost unfortunately they are then spending the difference on who knows what. ~who knows what? well maybe things like new product development, advertising, their retail operations, licensing fees, legal fees, sales support staff, expansion, health benefits, etc etc Same basic point, I guess, but it sort of throws some light on exactly how incompetently they are run. ~and you would know they are incompetent how? just because they don't realize a huge profit at the end of the day doesn't mean they're incompetent. Granted I'm sure that they have some fat to trim (which they are doing...1 man retail stores anyone?), but that doesn't meant they're incompetent. There are a tons of hugely successful companies that wish they could run a 10% profit. doesn't gross incompetence cross over into evil at some point? ~NO


Edit: Actually they make about half their income from selling to distributors (@ a 50% discount) so if you pay the full $60 at a GW store they are making about $47 off of you. It's late... someone better check my math, I think it might actually be more than that. ~well you've solved the riddle of where some of their money is going. they make less money off of 3rd party sales than direct sales or their own retail outlets.

Ostrakon- Where are you getting the 72% figure from? I can't find it in the report.


Also, I'm not doubting that at all. Nobody can really argue they spend their revenue very well. In all likelihood they COULD charge 30 bucks for a land raider AND get a higher profit margin than what they do now,~charging less = more margin? please pass me your crack pipe, you've had enough for today. They may increase their net margin through higher sales volumes, but their product gross margin will drop significantly (ie their product margin %, which is what you're actually talking about) but god knows what they're spending all this money on.

asmith- yeah they didn't explicitly list it in this report

gross margin = (revenue-cost of sales)/revenue =gross oversimplificationedit: *100% of course

My guess is they spend most of it on stores and employees who run the stores. I think this model is killing them (in the states at least). ~hence they are changing it and adapting. Their rents are too high in mall spaces. they are ditching those when their leases are up. sales labor is too high. thy are cutting staff. Not sure if this would come under the heading of cost of sales or not. I don't think so but I'm no accountant. ~these are indirect overhead and indirect labor charges classified as selling and administrative expense. these figures will change based on how the products are sold.

Ostrakon- Oh, I didn't see their cost of sales. It's in their summary on the last few pages.


Well, that means they spent roughly 80 million on things not directly related to generating profit. Payroll and rent are probably a huge chunk of that, considering their business model. Not to mention their IP lawyers, sadly.

80 million sounds like a lot, but I dunno how many facilities they have, how many GW storefronts they have, and how much it costs to maintain them. Not to mention how much they spent on payroll.

I guess it's conceivable that it should be a lot lower, but how much of that 45 bucks per land raider (and that's just direct sales) goes to paying employees physically keeping their storefronts open? Anyone have an idea what the rent is like in a reasonably populated mall or commercial district? ~a lot. that's why they're moving to cheaper strip malls
Yeah, cost of sales really only refers to the direct costs of materials, making/designing the minis, and shipping them. Money spent advertising and selling them fall under operating expenses. ~nothing in your last post made me violently ill. you admitted that you don't know what's up, asked some relevant questions, and didn't make an ass of yourself. good job

Mr. Burning- All we can do is see how the price rises will affect GW when they release their financial statements next year.


I don't think that there will be a dramatic negative impact.

New gamers are still coming into the GW hobby. ~well somewhere in their financial statement it's mentioned that their growth in number of customers is slowing. stupid kids with their video games and rap music....(although I read a news article last week that stated that video game sales have pretty much imploded recently...what are the kids spending their money on, meth?)

Collectors will still be buying.

Veterans will also still be tempted by new minis, must have units, and new rules.

I would think that any veteran who has 4 or more playable armies would be considered by GW to have 'spent up' anyway. ~or not, most businesses (or the ones who want to stay in business at any rate) analyze the lifetime value of their customers. customer retention is as important if not more important than new customer acquisition. I guarantee that GW has a huge database of customer data on you if you've ever bought directly from them (in store or on-line) and they are using it to figure out how to get you to shop more often, buy more per visit, and keep you loyal

The fact is that whilst I may not be spending my disposable income on GW products my two kids are spending their pocket money/birthday money/christmas money at the local GW.

Chibi Bodge-Battle- They are in the process of restructuring the stores system and are going to expand the number of one person operations.


The 10% profit margin figure is, on its own, fairly meaningless. ~I think I like you. Let's get together and calculate meaningful things together like EPS, EVA, Cap turns, and so on. Not enough acronyms for you? SCUBA. LASER. NOPAT

If that is a regular annual figure then fair enough.

There are other factors which it does not take into account such as investment in new production in Nottingham and a new facility in America. Plus a resin cell in Shanghai. ~so you're saying expansion costs money in the short term. why didn't anybody else realise this?

These have been put in place to make production more efficient and reduce production costs. ~so they aren't mismanaging the company into the ground then. They're getting bigger and more efficient, how ever will they survive if they're going to keep adapting? ps that last sentence was sarcastic

The switch to plastic figures according to the report is to mitigate potential volatility in the metals market. While plastics are oil based they are not as prone to fluctuations as one might suspect. This is stated in GW's report.

Usually such measures at greater efficiency are implemented to make a company more competitive, which usually benefits the consumer with lower prices.

GW effectively has no competitor. ~I will disagree with you here. There are several game systems that are gaining momentum and I would argue that if you expand the definition of competition, the video game industry is their biggest competitor, competing for the same market share of basically the same demographics Hence they can put into effect the cost saving measures whilst at the same time imposing price increases on the fanbase which is mainly loyal and has a seemingly bottomless pit of parental resources. ~or put another way their product has an incredibly inelastic demand. I would assume that's the case.

GW can do what they want as far as I am concerned. I won't pay £17.50 for a slim volume, half of which is pretty pics promoting product. The codices are ever increasingly becoming swanky advertising brochures as they are army code books. There is no justification for that price, as it seems very unlikely that the print runs are small, which would increase unit costs. ~I bet you'd be surprised by how small the print runs are. the fan base for GW is smaller than you might think. also, printing costs have gone up a lot in the past few years. whether or not GW's price increases are outstriping this, I cannot say.

The same goes for the plastics, which are already costing more than limited run plastic injection moulded construction kits.

The problem partly lies with the fanbase who come into the hobby possibly with little experience of comparative products and accept the level of cost without question. ~interesting theory, I'd like to discuss that further

I feel for those who play the tourneys and need to by GW product to compete. I will get as little as I need from GW and continue buying 2nd hand. ~glad this sentence had anything to do with the rest of this post. way to go out on a high note

LunaHound- The more expensive they price the models , the less amount people will buy ( this is true. Instead of buying extras, now they'll only spend on the necessities ) ~this is sort of true. Since the demand for luxury goods is usually highly inelastic, price changes (even large ones) don't effect demand very much. If price is increased by 1, demand will decrease by between 0 and 1, and I'm guessing that with GW that is much closer to the 0 than the 1.


The less people make the purchase , the less GW will be able to make back the production cost of the new molds. ~unless they are making more gross profit at their elevate price point. Pro-tip, I bet they ran the numbers and figured out that they will be

Then soon everything will suffer the gold sword syndrome. ~que?

DruidODurham- I'd just like to point out the fact that price increases in any industry are inevitable in the long run. The economies of the U.S. and the U.K. are both being affected by inflation. Thus, for any amount of time a company doesn't raise prices, they are effectively discounting their merchandise as the value of the currency decreases in terms of the real goods it can purchase. ~this has much less to do with inflation than it has to do with increasing costs of materials and operating expenses, although inflation may play into some of the material costs at a basic level


Now, if we could only get our bosses to steadily increase our pay in line with this inflation, especially for us vastly underemployed people working for just a bit more than minimum wage.

agnosto- I don't know about the U.K. but the U.S. Consumer Price Index (CPI) is much lower currently than in 2009... I think we're at .1 and we were at .2 in 2009.


In general, most consumer goods cost less now than they did a year before. ~but luxury items like GW's deviate wildly from the cost and price behaviors of most consumer goods
By raising prices, GW is taking a calculated risk that the disposable income of consumers in it's niche market will be able to bear the increase. I, personally, am sceptical as worldwide economic uncertainty abounds and unemployment remains high. Unemployed people generally don't purchase leisure items. ~haha I sure as hell do. Your tax dollars at work, bitches....

Time will tell how this decision will affect their bottom line as far as sales go.
Current U.S. inflation is 2.3%....

vitki- GW has put in a lot of effort to be the face of miniature gaming. ~which costs a shitload People new to the hobby will not know of smaller companies and so will not know that there are products just as good for less money. ~have you seen some of those "other companies' shit?" Most of it is garbage. Even Privateer's stuff has been pretty bad lately (those plastics are a fucking joke), and with them you don't get poseability or extra parts. sometimes you really do get what you pay for if you care about quality I don't know how many people the higher price for the boxed set will turn off. New people don't have the context to know it is higher priced and GW has stated they don't give a skaven's backside about the established gamer.


On the other hand $100 isn't too far off the mark for getting a basic setup with two sides and a rulebook. Look at Warmachine; a rulebook and two battle boxes runs you $130. ~yeah and look at how much more you get with the GW package. It's a little hazy, but I think I paid $60 or more in 1992 for the Fantasy starter set, which had less models, but more shitty cardboard buildings and wyverns. I think a price increase was inevitable, and I imagine they're still losing money or greaking even on the AoBR set. Still a fraction of the cost of any video game system with one game, and infinitely more hours of entertainment to be had Granted others are cheaper, but in my experience these two are the biggest use of shelf space in any hobby store I go into.

Kanluwen- Not true. Just because they're "smaller" companies does not equal products "just as good for less money". Most of the companies you're referring to are producing absolute ass products or limited to just single-pose plastics, resin models, metal models, or prepaints. ~I concur

As for cost?

You spend just as much on a Warmachine force with infantry+warjacks+all the possible warcasters you need as a 40k army. ~well not exactly, I think BoLS did a post on this this week. PP came out way cheaper than GW, but that doesn't change the fact that PP sucks dick

You can spend just as much on an AT-43 force, Secrets of the Third Reich, etc.

There is no property that really matches Games Workshop's in terms of player base and the specific games themselves. For all the holes in the rules or gaps in the model lines, you're not paying just for the models or the rules.

You're paying for what is, at the moment, the most dominant of all the tabletop game companies. The one you're most likely to be able to find something in the line-up that interests you, whether you're wanting a force similar to the Covenant from Halo or an Elf army themed around the Dalish from Dragon Age: Origins. ~those are terrible ideas The one where you can almost be guaranteed to find a gaming group to play regularly, tournaments to play in, and be assured that your investment in an army will actually be able to make something of a return in terms of you getting to play with the army.

I think this seems like a good place to end it. I would like to add one thing that nobody ever brought up, surprisingly enough and that is closing the retail arm of GW to cut costs. Might seem like a good idea to many people, but it would hurt the company big time. Say what you will about salespeople at GW stores being pushy and not super knowledgeable but they beat they sales skills of your average FLGS owner hands down. For starters GW appears to have minimum grooming standars, lol. But seriously if you are looking to get new customers, which is largely the mission of the GW storefront, having helpful, accessible staff is a key. Try and get they comic book guy who owns the game store you go to to get off his stool and you'll see the difference. It also doesn't hurt that attentive sales staff typically add extra units and $$s to transactions that they're involved in. You think the staff is being nice when they ask if you need paint or glue, think again, they are trying to get you to spend more by purchasing accessories. You'll see the same thing if you try and buy a TV or a car. Good thing for you is, if they don't mention some of this stuf in the sale, you may not have bought something that you need. Ever had that Christmas present that didn't come with batteries and you're all out? Sucks doesn't it?