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Tuesday, July 29, 2014

The Future of Games Workshop - Part 15: A Good Year...?

The Future of Games Days and Games Workshop
Part 15: "A good year": GW profit down 42%, Kirby steps down. 

A very quick post

If you have read all of our epic walls of text on the future of Games Days and Games Workshop, the phrase "ain't nobody got time for that" should ring a bell.

While Mati is still on vacation for another week, Ben has just returned from his - and we have our own plans on taking over the Universe - so we are quite busy at the moment.  

But now that the financial report 2013-2014 for GW is out - and 'black snow' has fallen on the 'bubble-boys' (really, you don't know what I am talking about? Read parts 1-14!), I just want to give you a quick update an what's what in the financials. 

The wall of text and analysis of the financial report will follow. And I am thinking of a final post/show/whatever to wrap up the rather bleak developments at Games Workshop and this epic-mini-series soon™. 

42 IS the answer - I told you so!

For about a year and a half I have been analyzing what is going on at GW, always warning the GW management not to put their hand on the hot stove. Of course they didn't listen. Again and again. So I don't really feel sorry for them. I feel sorry for everyone at GW who's not in management. Those are the good guys. 

In part 14 of our mini-series, I tried to see what the crystal ball had to say on how much profit GW would lose in this year's financials. And I estimated it to be 42%. 

Turns out that profits are down 42%. OK, some may say it was a lucky hunch, but I am gonna say: "I told you so." :D

For your own financial analysis check out GW's 2013-2014 Financial Report here.

The master-bubble-boy speaks and steps down. 

Tom Kirby, chairman and acting CEO of Games Workshop said: 
“Games Workshop has had a really good year. 
If your measure of 'good' is the current financial year's numbers, you may not agree. But if your measure is the long-term survivability of a great cash generating business that still has a lot of potential growth, then you will agree.” 

Here is what I respond to Mr. Kirby: 
"No. Nobody agrees. Not your shareholders, not your customers, not your fans, not your stores, not your traders, not your employees. GW had a horrible year.
Instead of growing your business and our community you are now talking about survivability of GW. I award you no points and may the deity of your choice have mercy on your soul. 
I recommend you all read the Financial Report and the Chairman's Preamble. You will see that (as always) not everything is black-and-white. I will follow up with a more comprehensive discussion of the financial report sometime this week, I hope. I might even have a 'professional analyst' look at the numbers for you. 

But there is a silver lining on the horizon. Tom Kirby will step down on January 1st, 2015: 
"On the first of January next year I will be stepping down as CEO of Games Workshop. I intend staying on as non-executive Chairman (if the board will have me), so those of you who want to see an end to these preambles (rhymes with rambles), don't get your hopes up just yet." 
Yeah... 'rambles'... OK, I do have something in common with him after all. :P I'll talk more about what I think needs to happen after Tom Kirby is gone in another EPIC wall of text with the full analysis of GW's good year. 

Yo, Kirby. 42! Told you. 

The End of Painting Buddha is near :D

If you have seen our BEEBLE・BABBLE #12 with Infamy Games' James Griffiths, you will not be as shocked about this heading as much - it's not what it seems! But I urge you to stay tuned to our Facebook page as we have some rather exciting and cool news this week! 

Previous Parts on "The Future of Games Days and Games Workshop"

Part 1 - Part 2 - Part 3 - Part 4 - Part 5 - Part 6 - Part 7 - Part 7.5 



  1. What about a new CEO for GW? I could see the president being the new head of GW with Ben and Mati in the board :P

    1. Hahah :) Good thing the Galactic President has two heads :D

  2. Wow that was a short read :-) I am quite curious to see what GW will have to offer when mr Kirby steps down..can it get any worse..?

    Galactic Precident Zaphod CEO of GW = Hydra..;-)

  3. This is always a fun and interesting puzzle. I, as a GW - 40K fan and hobbyist and looking at the larger picture as best I can, though Gw was headed more or less in the right direction. Survivability would to me be more important in weathering this global monetary recession we are in. Especially with the amount of inflation I am seeing. It's got to be very rough on most of these kind of companies. Maybe, Maybe not. when compared to other miniature companies, which I admit to not having done. But if 5.00 USD 10 years ago has effectively less buying power then that's part of the price problem. Regardless of who ever is running the show I hope they can use all the gains they have made to give us another 20 years. ( By gains I am referring the their business changes as I understand them. Most seem to be about their stock production and control. I imagine not having kits that aren't selling using warehouse space is saving them a lot of money and stress. But again I am looking at survivability being more important then loads of profit.)

  4. It's me...or £4 million for a new web page is excessive?It's more than 5 euro million!

    1. especially when it isn't very good. An off the peg solution would have been cheaper and worked better.

  5. So much money being left on the table for royalties...

  6. Hi Michael,

    This is off topic. Could you please check your emails regarding a order shipment problem. No replies from you for the last few days through facebook. I thought I'll try to contact you here.

    1. Hey Julien, I got you covered on Facebook ;)

  7. Always great to see your comments on the situation. I shill this series every chance I get when the GW White Knights start dismissing everything as the same old whiners who have predicted doom for the past 20 years.

    1. Normally I agree, but this article feels more like a preamble itself. I'm more interested to read the "comprehensive discussion of the financial report" that is promised. This article is really just a (well deserved) victory lap concerning the 42% drop in profits, but doesn't discuss how that stacks up versus revenue, operating costs, the cutting of middle management, etc, all of which needs to be brought into the picture if you're going to determine the long term viability of an international company such as GW.

      That's not to say that it's going to be a pretty picture or that this article is bad, but it's hardly a comment on the current situation.

  8. Thanks very much for this series. It is good to see business theory applied to our favourite hobby. I am going to cross post what I posted on Wargamerau (Australia’s biggest wargaming forum).

    Going to slip into business jargon but I think it’s important to understand what is occurring at GW.

    One business model I find very useful to understand what a company is trying to do is called Market Leadership. It contends that a company should try to pick one of the following three areas to focus its energy:

    • Product Leadership, i.e. produce the best product through innovation and speed to market so that you obsolete the competition and in fact your own products
    • Customer intimacy, i.e. personalised solutions which are bespoke and highly customisable along with really knowing your customer and maintaining a long term relationship
    • Cost Leadership, i.e. you drive cost out of all of your processes and tend to operate on a very small margin but high volume sales

    What is common is that when a company picks one of these areas it does very well, they are considered competing solutions and when companies try to exist in multiple areas then they hit trouble. The main issue is that if you are in different areas of the Market Leadership model you probably are not meeting your Customer’s Value Proposition (CVP).

    Customer values a one off solution? Then they will not go to a company that exists in the Cost Leadership space. There is a mismatch, a non-alignment of business model and customer values.

    So back to GW, it the 90’s it was a company that very much wanted to be in the Customer Intimacy Space but really existed in the Product Leadership space. Ironically Forge World has been in the Customer Intimacy space for a very long time (and why merging GW and FW is a very bad business decision).

    In the 2000s GW very much moved into the Cost Leadership space by driving cost out of its value chain. But here is the first mismatch; GW says time and time again that it is about the best product in the world, Fine Cast would like to disagree, rushed rule sets and codices (I play more 40k than WHFB) would also tend to disagree. The company moved from one business model to another but had a mismatch in rhetoric.

    Remember the CVP, gamers want great models and great games. That is they are looking for a company that exists in the Product Leadership space, GW isn’t that company anymore and when customer’s CVP and a company’s business model misalign they part company (it’s a pun but its real).

    Also after reading through it would have been nice to have an expanded discussion on price elasticity. For those of you who don’t know read this primer:

    TL:DR? you can raise prices and lose customers but still make a profit. The customers you lose are more than made up by the margin increase from the raised prices. GW did this across the mid-2000s until they over reached and went beyond the market clearing price ( i.e. went above what the market would bear. It’s not a perfect science I reckon they kept raising prices to see what would happen, a nice case study of why market research is important.

  9. Have you seen the short documentary about the Lego turn around (20 minutes, on netflix)? Its scary how many similarities there are to GW. Maybe someone in management will see that and apply some of the same principles.

  10. The miniature gaming market has exploded recently with many options to choose from. GW is no longer the only kid on the block and many other games are much cheaper to play while being better balanced. Model wise GW IMHO is only ahead by the fact their miniatures are soooo customizable. Other companies put out beautifully detailed miniatures but lack all the customization...

    Now down to pricing I want to make a view on that... GW price per miniature for many of their box sets are not that bad... especially when you factor in the ability to customize the figures. HOWEVER their value on the battlefield is less. Compound this with the most expensive rulebook in the industry and Codexes for your army that costs more/the same as their competitor's main rulebook in hardcover and there is another problem.

    However the abundance of options has helped in a way as 40k is consistantly the one miniature game you can find supported at most stores. I do wonder if Fantasy's much lower popularity is allowing competitors to leak in, and could spell further trouble for it.

    In the end Warhammer has the strength of a large playerbase, and a lot of lore (much of it I personally do not like). They have a unique style look that is definately more fantasy meets Sci Fi for many races than hard sci fi.

    I do not think GW will die unless they do something really stupid. Because their have a strong fanbase that will continue to follow them despite the abuse and poor decisions...

    Granted that is my opinion as more of a supporter or FFGs and Spartan Games than 40k (I have a small Elysian force I'm very slowly building... I do not like the more cartoony looking Cadians/Catachians).

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