.... If I ran GW
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Thread: .... If I ran GW

  1. #1

    Default .... If I ran GW

    Games Workshop currently has about $150 million in revenue and $7 million in annual profits (2009). They have just warned analysts that they are unlikely to hit their profit estimates this year (2011), sending share prices plunging about 13% to the end of the day.

    I'm not a GW insider so this is all speculation from observing adjacent industries.

    Marvel Comics has a revenue of $125 million, with an operating income of about $50 million. Both companies appear to target roughly the same market, teen to young adult males of a more geeky bent, and it is not uncommon to see game store/comic store hybrids selling both miniatures and comics side by side.

    GW, unlike Marvel comics, has a strategy of owning and operating (O & O) its own stores in locations in Europe and the USA (and some scattered attempts in the rest of the world). GW has recently announced that it is trying to turn these operations into 1 or 2 man operated stores in an effort to reduce manpower costs, and it has been anecdotally confirmed that these GW stores have so little depth and breadth of stock that they typically have to take orders from customers and order online on their behalf.

    According to their published annual reports, the strategy behind the O&Os is as much to create new customers amongst children and teens (i.e. showroom model used by some computer companies like Sony) as it is to generate retail sales.

    However, with greatly reduced staff and product, it appears that both these objectives will be greatly hampered, which begs the question, why do it? Presumably, the GW O&Os do not have to pay for stock, which means these stores are capital sinks until the stock is sold, which may explain the recent scaling back of carrying stock in stores. It is a relatively simple retail rule, if you don't have what the customer wants when he walks into the store, you will usually lose the sale; GW does not appear to have perfected the art of predicting customer demand, and the sales staff in the stores do not appear to be able to steer customer purchases. Unlike washing machines or TVs which may be somewhat fungible, due to the nature of their product with specific army lists and unit types, it would be difficult to convince a potential customer to purchase an Ork Dreadnought instead of an Ork Battlewagon when the latter is out of stock.

    Marvel comics does not have O&O stores, but instead relies on a large network of independent, typically small comic retailers to get their products into the hands of customers. This has considerable advantages; they don't pay rent, they typically have net 30 day terms which makes for predictable and efficient use of capital, they do not pay for staffing and they have limited exposure if a store location fails, for whatever reason.

    What would I do? Phase 1

    1. Close all GW 1 man locations, as a precursor to closing any location not intended to be a showroom or efficient retail generator.

    2. Decrease independent retailer margins from 40% to 30%. Eliminate 3rd party North American distributors and beef up the internal distribution division.

    3. Retrain GW store ground staff responsible for creating brand awareness and making them available to independent retailers, possibly as permanent seconded staff in large independent locations.

    What does this achieve?

    1. Decreasing retailer margins and eliminating distributors realizes a large increase in revenues without significantly impacting sales. Why? Because GW does not sell to big chain retailers but rather mostly smaller independents (even Hobby Town USA locations are independent franchise operations) that do not have set in stone ordering rules, nor great leverage in terms of negotiating prices.

    Since GW has the dominant "must have" product, they will continue to order it regardless, and in eliminating 3rd party distributors, discount operators will be less viable making the remaining brick and mortar stores more able to sell at MSRP.

    2. Closing GW locations means considerable cost savings in terms of rent and manpower. Remaining manpower can be refocussed on supporting independent stores, with largely the same effect except GW will receive a net 30 return on supplied inventory! Making use of independent retailers to finance their business would be better than paying rent to a mall and tying up capital in non-performing GW locations.

    3. Marketing goals can still be met by having semi-permanent product evangelist presence in major independent stores. There is also the added advantage that people going to a store to play Flames of War or Warmachine, for instance, will be faced with GW marketing that is stronger. The days of pretending there is no other game out there are well and truly over and GW needs to address this immediately.

    What would I do? Phase 2

    After ensuring short term profitability and rationalizing the inefficient portions of the business, I would ...

    1. Reorient the company into understanding that it is an IP company (actually a Warhammer 40,000 company), and not a miniatures company. Marvel Entertainment, the reorganized holding company of Marvel Comics, has had huge success with the Xmen movie franchise (co-produced with other film studios), and raked in almost $1.3 billion in gross revenues thus far with the wholly internally produced Iron Man franchise. Let's put it in perspective. Iron Man 1 made more money for Marvel than all the Iron Man comics, books, toys etc ever sold up till its release. In effect, the entire history of Iron Man comics was basically a marketing exercise leading up to the movie, if you view it from a business perspective.

    Continue the miniatures business as is without modification, you don't throw the baby out of the bath water.

    2. Move the corporate HQ to the USA. Currently manufacturing is already happening in Tennessee for most plastic products, but for some arcane reason all the senior management insist that the UK is the best place to run this company from. It's not. You have to go where the money is, and where movies and venture capital are concerned, that is still the USA. Without a strong corporate presence in the USA, it makes concluding a deal where a potential movie requires a budget more than your entire year's revenue that much more difficult.

    3. Pitch and close a trilogy movie deal for Warhammer 40k. Give some creative leeway with the script, and ensure that the deal is only done with a high enough budget. The 40k universe is ripe for plundering here, e.g. the Horus Heresy period.

    4. Possibly sell the company to a major media entity after the movies are produced. Marvel Entertainment was sold to Disney for over $4 billion.

    Of course, as mentioned I'm not a GW insider so I have no idea what kind of internal factors they maybe limited by or what their long term strategy is. At their current valuation of about $120 million, they seem to be ripe for a hostile takeover if any venture capital group were to realize the IP potential.
    I like it firm and fruity!

  2. #2

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    I think that it is as much a case that the time is ripe for someone in the film industry who knows anything about the 40k 'universe' (IP) to obtain the rights to produce a trilogy and GW could sit back and test the waters at someone else's expense, whilst reaping licensing fees/royalties and associates spinoff's and increase in revenue from increased sales with a new, expanded customer base...
    I imagine selling the rights would earn them an 8 digit sum surely? Then - assuming the movie company (whoever it was) produces a great film trilogy , with quality 'stars' and high calibre script and FX - then, once the trilogy was done and dusted, they could analyse the profit made by the movie company and start to ride their coat tails - so to speak - by taking over/producing further movies (unlikely, due to no major film industry experience) or further extending the licensing at greatly increased rights.
    Merchandising spinoffs would generate a fortune as well - Action figures, toys, pencil cases, school bags, caps, clothing etc.

    You are right about the fact that their IP is their most valuable asset and it is not exploited nearly enough by them for major gain. It does seem though that everything they have ever touched with regards to 'alternative (as in alternative to actual wargaming/miniature) products have been well below par, including computer games, movies etc...
    Last edited by wereweevil; 01-06-2011 at 05:27 AM. Reason: typo

  3. #3

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    As I use to work for one of the retail stores here in MD for about 4 years maybe I can help shed some light on the subject.

    O&O's GW does this to show the hobby as they intended it to be as well as to aid in recruitment and in general give some where for people to play as most hobby shops don't offer tables or do it badly. They want to foster the hobby. The only problem is in the new way they are doing things you don't have enough staff to do it >.< you can't run the hobby and the retail side by your self you will burn out fast. The reson they are going to this though is it worked well in the UK. Atlest that is what we where told. Which I could see GW is a house hold name in the UK much like milton bradly and monopaly are here. It's not offten you have someone walk in with no concept of what they are doing.

    For as long as I have been in the hobby this has been a recuring issue what works in one country will not all ways work in another. Customer's expectations and ideas are diffrent from culture to culture. They need to seperate the US and UK bussness a little more.

    As for compairing them to Marvel though it's much the same demagrafic they are very diffrent products. Comics don't need someone to explane how they work or how to use them. They are finish products that you ether want or don't and can decid this by a quick flip through. You only need someone to piont out where your fav title is or if your in a good store tell you what new ones you might like seince they put out like 20 titles for xmen alown now lol. (10 years in a comic/hobby shop) For GW to do well they really do need a store that will do all this and unfortunetly most shops are not up to this task.

    When it comes to a movie. Oh hell yes they need to start make some. But like most other things they do unless they have full creative contral they will not allow their IP to be used. Most Movie compains won't work like that. So they will have to do what most independents do and fund it them selves then try to find a distrubiter.

    Please excuse if a tended to ramble at all it's allot of thought to spit out here lol.

  4. #4

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    You know I pretty much agree with everything you have said Chern apart from store closures and moving to the USA. America has raped the UK of too much of its heritage business, just look at the sting Kraft did to Cadburys, promises made then broken whilst the ink was still wet on contracts.

    This is one thing I have admired about GW, not selling out to the US. I am sorry if I have offended some Americans, but we need to keep some things here.

    The bottom line a lot of these closure's and re locating will cost hundreds of Jobs, yeah it will create as many if not more in the US, but I'm sorry we also have a fragile economy. We are being flooded by EU citizens in a time when we should withdraw from the EU and they are taking many jobs and negotiating lower wages just to stay here, so more British born are out of work. Depression is high, and its things like moving more big companies the US that will knock the UK further down, something the press tells us that the USA want to pretty much do anyway and rule the world

  5. #5

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    Quote Originally Posted by atacam View Post
    You know I pretty much agree with everything you have said Chern apart from store closures and moving to the USA. America has raped the UK of too much of its heritage business, just look at the sting Kraft did to Cadburys, promises made then broken whilst the ink was still wet on contracts.

    This is one thing I have admired about GW, not selling out to the US. I am sorry if I have offended some Americans, but we need to keep some things here.
    And here we Americans are worried to death about all the US companies moving their headquarters (and a LOT of the manufacturing) overseas, to small island nations willing to throw the tax rules in the trash to get jobs that pay 1/10th of what they'd be if they stayed in the US.

    Wonder if the small island nations fret about companies moving back to their roots? I've heard of several companies returning to the states because of quality control issues overseas.

    Seems things are rough all over, ne?
    "Reality, she's a mathematical bitch from hell.", MaxedOutMama
    Wanna be bored? Watch me twitter. --<>-- Still have neurons? Watch my YouTube channel on painting!
    Want to know when to fry your neurons? My painting twitter will announce the videos.
    To judge how far to follow my advice, consider this: ---<>--- Slappin' paint on minis since 2006

  6. #6

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    One big issue I think you have overlooked Chern is player base fatigue. Quite simply GW is notorious for making gamers absolutely hate there product, having grabbed them at a young age they then lose them for a variety of reasons to other games systems like FoW and Warmachine. While some fatigue is natural the vast majority of players that I know of (anecdotal) that switch swear to never go back to GW mainly due to GW marketing and game development policies.

  7. #7

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    Can we vote for Chern as President?

  8. #8

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    Quote Originally Posted by supervike View Post
    Can we vote for Chern as President?
    Actually I do believe there is a spot on the ballet for a write in vote lol.

  9. #9

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    Dawn of War II actually did quite well for THQ, and they did not have too much input there apparently (best selling PC game in Feb 2009). The unfortunate reality is that most of the venture capital money is still in the US, it tends to gravitate here for some reason (apetite for risk is probably higher); c'est la vie. There is really no getting around an IP company not being here. Marvel's deal with Fox for X Men, New Line for Blade etc in the 90s as wereweevil said had little creator oversight; GW could do a "Marvel" by learning the ropes first with the initial movies then hire the people to do a proper job for future movies. The end game is to have a billion dollar company, not a relatively small one of $100 mil by world standards.

    Player base fatigue and player training etc, well that is completely unavoidable, like the comic industry's boom and bust cycles, which makes it especially important to transition fully to an IP company now before GW is crushed under the weight of its manpower and rental liabilities. One of the reasons for transitioning to a 1 man store instead of closing them completely could be due to outstanding rental agreements, which kind of leaves them stuck between a rock and a hard place until they run out (default on location or run it in an inefficient way? Which loses more money? What would shareholders think?)
    I like it firm and fruity!

  10. #10

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    i completely agreed with the main points up until moving the company to the u.s. (definately have a division there for liasons but with grants and subsidies offered to brittish born companies that keep roots in the country it seems uneccesary for them to shoot themselves in the foot by leaving)

    and the film thing...lets take a minute here and pause for thought before any flaming appears for comments i'm about to make about games workshops stories...i don't give a rats ass if you love such and such a story this is an entry level film makers perspective and it's a cut throat world

    cool on comparing marvel and GW they are fairly similar companies...except marvel have had decades longer experience in the field and have made many more mistakes before finally getting to where they are now

    everyone remembers x-men 1 it cost $75 million to produce and reaped roughly $296 million not counting other cash-in merchandise that came out to promote the film

    that was back in 2000 by the time of x-men the last stand it cost them $210 million to produce a film of similar callibre

    film is not cheap hell cameras aren't cheap actors aren't cheap and throwing lighting sound dozens of takes etc and you're racking up lots of money

    not a big deal if you have investors willing to back it fox had the x-men franchise for 6 years before x-men the movie came out...except it wasn't generation x was released in 96 the first x-men movie (albeit a tv movie and around a spin off from the x-men comics much like wolverine origins) which tested so bad the series they were planning to follow it was abandonned i don't have the exact production cost for this travesty but it was low budget by comparison

    now you can see why it took a further 4 years to get an x-men film to the big screen filming and editing doesn't take that long when you have big studio bucks to hire lots of people to get the job done but if a studio is going to put up $75 million they want to see returns and quite sizeable ones very quickly

    you'll be giving up merchandising rights as they'll want to get cash of toys tshirts thermos and underpants before the kiddies have even seen the film and there's a new problem for GW where are the cute characters that kids will want toys of little jimmy always gets into bed with his cuddly hulk in his spiderman jammies and his iron man duvet cover but i can't see him wanting to take his plush greater daemon of nurgle under his bedspread depicting the emporer encased in his golden throne

    slight demographic problem here GW have always aimed at teen and above where as marvel started at teen but went for kiddies when they realised SOME geeks grow up but new ones are born every minute

    so with a blow taken to the merchandising ability of the movie it's a blow to your production budget plus those that are willing to distribute your product

    next problem 40k started back in 87 x-men back in 63 at best 40k has a generation or two of dedicated fans (not counting those of us that have become disenfranchised with their shennanigans and refuse to feed any more money into this decaying monster) where as x-men had several so even if little jimmy wanted to see an x-men film but parents hated that shit chances were grand dad would remember the early issues and be happy to take little jimmy with 40k this wouldn't happen parents would see the trailer then just rent starship troopers or even something more dominant in this era like star wars

    everything is fighting against a successful 40k film but the major draw back the stories everyone here is saying atleast a trilogy if you went into fox's a+r offices and pitched a trilogy of 40k movies based around 20 novels with 21 main characters (with unpronouncable names) you'd be laughed at it wouldn't work not to mention the slower pace and of story telling would be torn apart if accepted to get the required action beats to keep the attention of those which aren't already fans (which is the main intention of movies of this style) and the moment you do that you've pissed off your core audience

    if GW want to make a successful film they need a good few decades before they do 40k they need to do webisodes of animations from different races focusing round special characters they need television animations of their more popular characters that can create feeder markets more than likely or a robot or fantasy persuasion than of the grim dark (let us not forget dungeons and dragons the cartoon) and to that persuasion use the money from cutting the stores to mass market in other spectrums try for live action mini-series stuff straight to video films but of their other brands don't tackle the big ones til you know you have people that can do it or you'll end up with david hasslehoff playing captain sicarius when you know it would have been better to just paint him black and get samuel l jackson

    way before the horus heresy stuff comes out we need to go back to necromunda and kal jericho we need a blood bowl cartoon on cartoon network and even a gorkamorka one on jetix build the user base and attract them from other elements

    or the alternative is immensely low budget comedy movies on par with troma....i for one can't wait to pmsl at guys in rubber ork costumes hosting gw's segment of pimp my ride

    but come on noone out there will watch a gw movie in the cinema unless you shape the audience too it i mean go watch wing commander with ryan phillipe that's what you'd get but with guys in giant suits of armour

  11. #11

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    I wouldn't care for a GW mov to the US. The strength of the IP is an ongoing thing, and as ever it's a product of its environment. It's not quite the same as the darkness of the 80's (Thatcherite Britain) when it started, when a fair number of brit artists/authors made things that in comic terms would be (and were) "suggested for mature readers". That bleakness, along with the sensibilities and particular humour continue to inject the setting.

    The RPG brand of Warhammer has already suffered from a move to the US. The second edition had some significant development and writing done by those outside the old WFRP names. Despite doing well enough on it's own merits one could see the IP being, not so well served as it could have been.
    That game's third edition has occured solely in the US. The end result is something I wouldn't touch with a bargepole. Simple things in the setting got changed. The IP was impaired.

    A larger move could well have movies and the like done. But without the sensibilities that give the IP it's rudder it could end up all at sea. Cartoons in a saturday morning vein in that US anime-lite style and disposable merchandise wouldn't support the IP but diminish that appeal the rest of it has.

    Having worked in various sizes of GW shops I'd rather they ditch the one man stores and focus on larger hobby stores The Trade Sales department could work with more smaller stores filling the gap. Always found the small stores dubious, legally. A person is allowed a certain amount of break per X amount of hours they work, and a lunch break. Can't get that in a one man store. Pretty much have to buy your lunch while banking yesterdays takings, done before the working starts incidentally and one is getting paid. Similarly with the cashing up and cleaning at the end of the day, done off the clock. However quiet the store may be one cannot consider them closed for purposes of neccesary breaks, and having to close the store for neccesary toilet breaks isn't great. In a one man store not too much a staffer could do about shoplifting either. Can't leave the shop to nab a shoplifter. So with the extra quarter hour at the start of the day (banking) and end (cashing up) and the loss of a morning and afternoon break of quarter of an hour hour each and the lunch hour a staffer is getting shafted to the tune of two hours work. All that, and the other problems leave me cold to the idea of one-man shops.
    Last edited by Wyrmypops; 01-06-2011 at 03:11 PM. Reason: shop stuff

  12. #12

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    Interesting reading, I was thinking to myself this morning that it might be nice to be a GW shareholder, and I was investigating the cost and performance of their shares!

    Perhaps thats one for the backburner now?

  13. #13

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    Quote Originally Posted by kingsmotley View Post
    Interesting reading, I was thinking to myself this morning that it might be nice to be a GW shareholder, and I was investigating the cost and performance of their shares!

    Perhaps thats one for the backburner now?
    God I hope your joking, I would rather buy enron then GW at this point, at least I know how far enron can fall (for the uneducated: not much futher).

  14. #14

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    Google LSE:GAW
    The shares took a nosedive since this thread started

  15. #15

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    The short staffing of stores is an element that needs to be addressed (whether by employing more or giving up locations). My local GW now has 2 members of staff. Toward the end of November one of them was on holiday. I found this out by going to shop on a Saturday afternoon to find a crayoned scrap of paper in the window saying back at 3:00!?! Fair enough, the guy gets his lunch break. But no holiday cover, wtf?

    Which other national, let alone international, plc with a high street presence has stores close during trading hours? On a Saturday? In the run up to sodding Christmas?

    Absolutely baffling.

    Cheers, B.
    My CMON Gallery Rank...

  16. #16

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    Quote Originally Posted by Chern Ann View Post
    At their current valuation of about $120 million, they seem to be ripe for a hostile takeover if any venture capital group were to realize the IP potential.
    OMG! I just envisioned Blizzard taking over Games Workshop! Wouldn’t that be ironic.

  17. #17

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    No real advantage for them to do that though, since they've got their own arguably better ip in Warcraft and Starcraft now.
    I like it firm and fruity!

  18. #18

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    Quote Originally Posted by Chern Ann View Post
    No real advantage for them to do that though, since they've got their own arguably better ip in Warcraft and Starcraft now.
    Spite?

    Grins?

    The joy of getting to hand each of the board members a knife and state you've only got room for half of 'em?

    I can think of lots of reasons.

    Not good ones, but they're reasons!
    "Reality, she's a mathematical bitch from hell.", MaxedOutMama
    Wanna be bored? Watch me twitter. --<>-- Still have neurons? Watch my YouTube channel on painting!
    Want to know when to fry your neurons? My painting twitter will announce the videos.
    To judge how far to follow my advice, consider this: ---<>--- Slappin' paint on minis since 2006

  19. #19

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    Quote Originally Posted by supervike View Post
    Can we vote for Chern as President?
    I wouldn't, but for State Representative... Well let's just say the thought isn't unpleasant.

    This is late, but humor me for chiming in. I'm bored.

    I think GW needs to focus more on their global presence. They have a large untapped market in emerging economies where luxury spending is increasing. There isn't a notable wargaming market that I'm aware of, and there's no reason not to introduce cultural flavor into each market. They have a product that's working reasonably well in western markets, but in eastern markets they have the opportunity to modify it and sell. The trick is going to be finding a cultural flavor that appeals to a large audience.
    Nosus decipio - We Cheat

  20. #20

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    i can't see him wanting to take his plush greater daemon of nurgle under his bedspread depicting the emporer encased in his golden throne
    A good point... the dark, fairly depressing settings of WH/WH40K can be glossed over a bit when selling a new Space Wolves army to an 11 year old(s parents). But how do you make a series of films of it without having to face the fact that the humans are, well, total Space Nazi assholes? That's never going to fly "in Peoria", as they say.

    I really don't care what GW does, because I'm barely a customer of theirs. But as it stands their IP is not really suitable for much of a mainstream breakout.

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