The future of Games Days and Games Workshop - Part 10: The End is Nigh! (1)

The Future of Games Days and Games Workshop

Part 10: The End is Nigh! (1)

Dirty Socks and Dust Bunnies Blues

When it comes to our hobby, the last few days have been some sort of weird, wild emotional roller-coaster ride for many of us. I know they have been for me. 

I woke up at 5am this morning, finding myself wondering how the recent developments surrounding Games Workshop will affect our hobby and how we could turn the whole disaster into a  win for the community. Apparently, GW keeps me awake at night. It's either that or Mr. Bumpy, who seems to find a great habitat under my bed, keeps going 'bump' in the night. 

So with the luxury of being able to analyze the recent developments from the safe distance of a a couple of days, let's have a look at the "Future of Games Days and Games Workshop". 

Today I will take a look at the big picture as it presents itself to me. Again, since it's a complex matter, there's more words in this post than pictures. I understand not everyone likes that ;)
I fear there is an extremely high likelihood that not all will be well. At least not for GW. Most likely not for the hobby itself - and certainly for you - as you are in for another epic wall of text.

Sorry, there is no other way. :D

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But first for something completely different - The Wamp 2013 Awards!

Before we get started, please allow us to take a little detour to say 'Thank you' to all of you!

We've been so busy working on our next DVD releases Season 1.2 ("Banners and Freehands" with Stephan Rath) and Season 1.3 ("Base Alchemy 1 - Earth" with Ben Komets and Matt Cexwish) that we completely forgot to activate our Bruddhahood to vote for us at the Wamp 2013 Awards. 

As a matter of fact, we were too busy to even tell you. And that makes winning 2x Bronze and 1x Gold even sweeter! :D

Best New Company 2013: Painting Buddha :)

We were nominated in three categories: Best Blog, Best Community Member and most importantly, Best New Company! 

With your help, we came in third in the categories 'Best Blog' and 'Best Community Member'. My personal favorites for both categories came in second: Our Bruddha Volomir's Blog for Best Blog and 'Goblin Aid' for Best Community Member. 

Our friends at Massive Voodoo snatched the first place for the Bloggers and Sally White took gold as Best Community Member.

Congratulations to all nominees & winners! Well deserved indeed!

The one category we really wanted to win after we got nominated was Best New Company. 

Our company goal is to strengthen the community, grow our hobby and make everyone a better painter in the process. All of this while applying our not-patented 42-42-16 rule: 42% of profits will be re-invested. 42% of profits will be invested in the community. 16% of profits will go to charity. 

And we are very proud that our company philosophy and the high quality of our products got your votes for Best New Company. 

THANK YOU ALL for your incredible support - without you, none of what we do would be possible. 

Season 1.2 and 1.3 are available for pre-order now at a special 'early beard bundle' price - and as a thank you for the Wamp Awards, we have decided to add a 'little something' to EVERY pre-order, including for the many of you who already pre-ordered ;) Again, thank you!

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But now back to the Future of Games Day and Games Workshop 

This concerns all of us. Apparently, it doesn't concern GW. Much.

Over the last 5 days, over 110,000 of you read our epic collection of walls of text about the Future of Games Days and Games Workshops. Hundreds of you sent us messages, shared & enjoyed our articles on Facebook, Google+, forums or left comments on this blog. 

Most of you, but of course not everybody, agreed with the general conclusions and the general tone of these posts. And the fact that so many of you read and commented on them proves that this is a subject that is very important to all of us. I find all of the comments to be at least as interesting as the posts themselves - thank you for your enormous feedback! 

The downfall of GW - a year in retrospective

The series started almost a year ago, on February 20th, when we first reported on some pretty hard-to-believe rumors about GW cutting back on Games Days. This came at a time when GW was generating the highest sales and the highest profits ever.

Mark Wells left Games Workshop in January 2013
That makes him look even more clever than before.

Even more significantly, these rumors started to emerge just days after Mark Wells stepped down as CEO of GW, once again leaving Tom Kirby in charge. 

Actually, Tom Kirby left himself in charge as 'acting CEO'. Even if that is against the rules.

I always wondered why a CEO as successful as Mark Wells - a guy that turned a pile of struggling, under-performing ash into a high soaring phoenix again - would leave his post.

Five years of constant growth. Five years of growing profits. Five years of happy stock holders. 

Did he know that his policies reached the end of the line (chart)? Or was he unhappy with the situation he found at Games Workshop? 

Business Lingo vs. No Bull

Well, let's play Sherlock & Watson for a moment and dissect this press release issued by GW back then: 

"For the past five years, Games Workshop has had the best CEO it has ever had. Under Mark Wells’ leadership we have become better organised, clearer thinking and commercially more robust.

The needs of the business over the last few years has meant there has been a gradual overlapping of the roles of Chairman and CEO. Recently this has become so complete that, after discussions together, Mark and Tom have agreed that the CEO’s role, as it stands, is redundant.

Tom will incorporate the role of Acting CEO into his position as Chairman and, whilst it will undoubtedly come as something of a surprise, Mark has decided to leave the business."

Political correctness and fuzzy language at its best!
Do you really think that this accurately describes what happened at GW?

Let me give you my personal, as far as I am concerned likely more accurate translation into 'no bull'. 

All of this is conjecture, of course. 

"For the past five years Games Workshop had the best CEO it ever had. Under Mark Wells' leadership we have become better organized, clearer thinking and financially more robust. We lost some fans as collateral damage, but oh well.

Over the last few years, the chairman has increasingly interfered with the area of responsibility of the CEO. Recently it has gotten so bad that, after several heated arguments, Mark slammed the door, yelling "If you think you can do this better than me, do it yourself!

Even though it is against GW's own rules and a simple Google search would have revealed that combining the role of CEO and Chairman is generally considered a pretty stoopid idea, Tom decided he knows it best. Despite his usual clairvoyance, it came to his total surprise when Mark told him to 'not call him when everything went FUBAR' as he slammed the door one last time."

Old kid on the block - the return of the Kirby.

So Mark Wells is or was great or something. 

Well, he really was great when it came to making GW profitable again and pleasing the shareholders. I wrote in Part 1 and Part 2 that GW has done pretty well - at least from a purely financial perspective. You know, the stuff that is cool with shareholders.

Unbeknownst by Games Workshop - even to this day - however, his era unfortunately also ushered in today's strategic problems for Games Workshop. Somewhere along the way, Games Workshop forgot the fans, the retailers and in general the market - or as some call it 'the customer'. By default, other miniature companies do not exist. Ooops. (see Part 3-9)

Anyways, Mark Wells made success look so easy. Cut costs drastically, and made big profits. Surely, Tom Kirby could do that even better. So almost exactly 1 year ago on this day, Tom Kirby put his rightful crown on his head again. By himself. The king is dead, long live the king. It's really good to be king!

And here we are - not even 12 months later. (You should really read this sentence twice. Well, not this, the one at the beginning of this paragraph!) Yes, not even 12 months later, Games Workshop has lost 12% of sales, 30% of profits and 24% of its market value. Kirby's fault? Of course not!

Hitting the news, Bilbo style.

A year ago, in his first half-year report as responsible CEO and chairman, Kirby emphasized that "Games Workshop's core business model remains strong. The initiatives we have implemented are designed to lead to growth whilst maintaining the hard won efficiencies" (source)

That, my most esteemed nerds, was a mere year ago. 

This year's half-year report seems somewhat less bold: 

"Our costs are well under control and margins remain strong. Cash management is good and our capital expenditure continues as planned. Following the implementation of the structural changes just announced we expect to benefit from the more focused selling operation across all channels against the background of a materially lower cost base.”

The 'No Bull' strikes again

Now let's look at these two statements again. A year ago, 'initiatives' have been implemented, 'designed to lead to growth'. 

Now, I am not entirely certain which initiatives they refer to. Was it the shutting down of 'free advertising' sites such as Faeit 212 that led to growth? Was it the great press you got from legal maneuvers like GW vs Chapterhouse? Or was it the systematic killing of community events such as Games Days that were focused on generating more sales? Are you FRAKKING kidding me? You can't be serious!

GW's glorious sales initiatives where trying to sell more product at higher prices. Because if quantity x price = sales then higher price x higher quantities = higher sales... D'oh! It's math, stupid!

Oh noes, wait! -12% sales! Why is the market not responding to basic math? DAFUQ? Let's find a culprit... Oh, cool! The half year 'highlights' list TWO, maybe even three of these suckers!

It's all the store's fault

"During the first half, the rapid transition from multi-man stores to one-man stores and the reduction of trading hours across the Group caused disruption in our retail chain."

Oh! The cost saving move to one-man-store has lead to 'disruptions' in GW's retail chain? How strange is that? This is so surprising, too! Who in a right mind would have expected that!

IS GW REALLY SAYING that opening hours of stores that only have one person working are LESS than of stores with more than one person? Are one-manager-stores really not open 7 days a week? THIS IS AN OUTRAGE! 

Is GW maybe insinuating that a one-person store may not have as much time for the customers, for test games, for making awesome gaming tables, for acquiring more customers or to make sure the inventories are in line as mayhaps a multip-person store? Maybe - and I am almost afraid to write this out loud - they might not even be as effective in selling STARTER BOXES? Oh, the KPIs! I am agawk, I am aghast! 

No, one-man-stores don't lead to increased sales. Of course not. How could they. (Yes, I understand that you can open a hand-full of stores with the saved money, I still stick to my estimation that this is not going to significantly increase sales).

Getting rid of multi-person stores has the same reason as firing your HQs worldwide. It is a solid way of lowering the highest cost of doing business: Manpower. Or personpower. Or beingpower, to be Universally correct. 

And frankly, from a pure financial perspective, I have absolutely no problems with that - even if it sounds heartless. If short term profit maximization is your goal, this is EXACTLY how you do it. I wouldn't do it this way, but as we have seen during the reign of Mark Wells, the stock markets applaud these actions. The one thing it is not is sustainable. That means it does not offer a long term perspective. Especially not for increasing sales.

Whether the scheduled 7 new stores (1.6% of 420) are able to make +12% in sales remains to be seen. One-man or not, I find this questionable at best.

It's all the HQ's fault 

Don't be fooled. Closing HQs won't increase sales. It only saves cost. And don't for a second think that we won't feel a difference - because we all will. 

With the closing of a HQ, Games Days in that country are effectively dead. Read my lips. No more Games Days. 

No more GD France, Spain, Italy or Germany. USA hangs in the balance right now. So in the grim darkness of our community's future, there is only GD UK. And if you saw our report from last year, someone will have to drag me there - because my idea of a fun event is somewhat different. Well, let's give them the chance to make it fun again.

Closing HQs means centralization. And don't get me wrong, it is a valid strategy, mostly designed to minimize cost. I am not a big fan of it, as I don't think it's fit to maximize sales. I personally believe in decentralization and in giving more autonomy to countries HQs, but what do I know. At least I can see that this is a trend GW is consistently continuing to follow. 

And on a side note - we are talking about quite a few fired people here. Many of them have been with GW for a very long time. Many of them are hardcore GW nerds, too. I feel bad for them as they were sacrificed on the altar of failed leadership. 

The only comforting news for me was that two of them told me that being let go was "actually a relief. At least we don't have to deal with that nonsense anymore. It got really old". 

It's all the stockist's fault

"We also experienced some decline in sales through independent stockists." 

I can literally visualize the surprise on some analyst's face as he got the Independent Stockist KPI in. On first and second glance, it appeared to be lower than before! 

Immediately, the analyst tried turning the report upside down, but that didn't help - it just made him dizzy. 

Then he hesitantly assembled the big shots for an emergency meeting: "Hey guys, we've been screwing the independent retailers over year after year and made sure that we make their lives as difficult as possible. We even send our Inquisition to check on their books. How the frak can sales be down? Wasn't this one of the many initiatives we implemented to increase sales growth?"

In the long run, we are all dead

As Keynes said, in the long run we are all dead. No surprise to find Games Workshop not really thinking about the long run at all. 

Let's see if they have a general problem with declining sales in their stores and with independent stockists: 

Disturbance in the force there is.

"We view these as short-term issues and expect to see growth return in both channels"

Nope. No problems here. A fluke. It's only a flesh wound!

A short term disturbance in the Force... Carry on!

GW, I sincerely hope you are right! As I have tried to show in now 10 epic walls of text posts, I beg to differ. Personally, I think you are not totally screwed at best. And that only in the short run.

GW really believes that these are short-term issues. The same way as they believed one year ago that the 'initiatives' they implemented would 'result in growth'. Problem is they didn't. 

Surely, this time their prognosis must be correct...

As correct as Keynes. In the long run we are all dead. Games Workshop, too. I have the feeling that there is a chance that some of us will live to see that day. Maybe most of us.

Supernatural powers & Crystal Balls

Well, while we are at it, let's see how Games Workshop themselves sees their prospects: 

"Our costs are well under control and margins remain strong. Cash management is good and our capital expenditure continues as planned.

The principal risks and uncertainties for the rest of the financial year relate to sales and the implementation of the structural changes we have just announced.

Whilst profit will remain under pressure during the implementation of the structural changes mentioned above, the board remains confident in the future growth and profitability of the Group"

Basically what this remark says is: "Our costs are low, everything else is sketchy, but we feel pretty good about ourselves."

Let me give you my personal 'prospect': 

A case for SUPER MANAGER!

Costs will remain low. Personnel cost will not be lower by the next full year report as terminating tons of people unfortunately also incurs a lot of cost, such as severance pay and so on. Centralizing some functions in UK will also cost a nice stash of coins. That is what GW refers to 'principal risks [relating the] implementation of structural changes'. 

Sales. That is the big one. 'The principal risks and uncertainties for the rest of the financial year relate to sales.' THAT is at the core of the half-year report and nothing else. Sales are down. And that is scary, because shareholders don't like it (as we have seen with the 24% drop at the stock market). 

Profits will remain under pressure and I expect them to go down further. But not because of the 'implementation of the structural changes mentioned above'. No. Profits will remain under pressure because sales will not recover.

At the end of the day, the yearly report for 2013-2014 will not look better than the half year report. Personally, I fear it is going to be worse. GW will remain profitable, but I would not be surprised if we saw another big chunk of GW's stock value disappear in a puff of disbelief.

Good thing I own no stock. Nor do I plan to acquire any. If I ever did, I'd buy 51% of them. And I'm sure they won't cost me 545 pence a pop :P

OH, and my final prediction, of course, is that the Board will remain confident, no matter what.

Bigger Bubble Boys

Sales broken? No shit!

With the centralization of its operation, GW is withdrawing further and further back into their bubble. It's nice and cozy inside the bubble, you don't hear the screaming fans, the crying retailers or have to actually look at and acknowledge the existence of other market players. On the inside, snow remains as black as the board remains confident.

Inside the Bubble there is only GW. And there are two buttons. One labeled 'cost' and the other one labeled 'sales'. One of them is not working and the other one becomes less and less effective.

End of part (1) of The End is Nigh 

In part 2 I will take an admittedly deep and very fuzzy glance at one of my personal crystal balls and tell you how I expect the market to develop over the next five to ten years, how this will influence our hobby (for better and unfortunately for much worse) and whether we should try to do something about it... Stay tuned!

What do you think?

I would really like to know how you all feel about this. After all, I might be the only one who feels this gloomily about GW's sales. 

So let me ask you: Given all the 'sales initiatives' that GW implements, do you expect

a) more sales

b) equal sales

c) less sales

in GW's future? Please vote and leave a comment below! 

A word from the Painting Buddha board².

We are considering to buy out Games Workshop. We estimate we need to raise about 500 million of a currently undisclosed currency to be able to buy out GW. We have put initiatives into effect that should result in us raising this amount in the short term.

Our plan involves selling 10 million copies of our new Season 1.2 and 1.3 DVD set. We apologize for the unexpected and apparent high quality and value of this product. 

The Painting Buddha board members are confident in their ability to buy out GW in the next 42 days and the board remains certain about the sanity of its bored members.

² Dear GW legal department. We don't mean this seriously. Please consider it satire. Just sayin', cause it is. 

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