Saturday, January 18, 2014

Brotha from Anotha Motha (Tradecraft)

When Games Workshop's stock price fell 25% this week, my first reaction was "Good!"

It's not a "good" that comes from hate, or glee, it's a response to a wayward sibling. It's like my brother was just arrested for narcotics possession after years of self abuse and broken trust. Maybe now he'll see the light. Maybe now he'll stop abusing himself and those who love him. You don't expect your wayward brother to become a saint, you just hope his self destructive actions will abate for a time, and perhaps he'll mature with age and time to think.

The analogy is spot on, when you think about it. If you're going to be in the game trade, if you're going to deal with these people every year for the rest of your working life, you can't slam a lot of doors. You can't say, "Games Workshop, you're a bad company and I won't ever deal with you again!" Games Workshop is your brother. The family is incredibly dysfunctional, but it's the only family you have, unless you want to sell doll houses or sporting goods. So any glee at the downfall of a fallen relative is best reserved for the hope they'll change bad behavior.

Speaking of change, here's a quote to ponder from the same day:
When you see a stock down 30% in a single day you don't necessarily rush to buy it," warns Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors. "The market is trying to tell you something and you should listen.
No, it's not Games Workshop, it's an article about Best Buy, but there's a lesson there. When your stockholders flee, they're trying to tell you something. Whatever your response is, whatever you think your problem might be, the market isn't buying what you're selling.
Granted, Best Buy's management remains confident about its strategy, as do a number of analysts. But until Best Buy can prove it is on the right track, investors should steer clear.
This is your broader family not exactly in a hurry to chip in bail money for wayward brother, who is clearly on a path to self destruction. A company with strong leadership needs to address the concerns of their stake holders, and like Best Buy, the Games Workshop restructuring is not giving those people hope they'll change. Their strategy to me sounds like rearranging the deck chairs on the Titanic, rather than avoiding hitting yet another ice berg.

I could tell you why I think Games Workshop is on a path to self destruction and it's basically pricing. They raised their prices beyond the means of their clientele, and then the next year, they raised them again to where most of our customers can no longer afford the game. That means retailers like me start clearancing out dead inventory, which reduces my sales, which eventually leads to more price increases, more clearances, and suddenly my full line 40K inventory is a more "core plus" strategy of stuff I have to have and some new things.

It's not a zero sum game though (well, actually it's exactly a zero sum game), and we've successfully transitioned our resources to my other brother up in Seattle.  I don't wish bad things on Games Workshop, but I know from experience, that brother only comes to positive realizations when he's spent some time in the slammer. Don't let the opportunity pass you by, my brother.


  1. It's a bit of a bittersweet situation for me. Games Workshop introduced me to gaming back in the 80's with HeroQuest and gave me my first real job in my late teens.

    On the other hand, the rules have gotten progressively worse, the miniatures ugly and expensive and that first real job was also utterly horrible and full of illegal silliness thanks to their inability to think outside the UK market.

    Here's hoping they turn it around, eh?

  2. They've *been* a great company in the past, so I'm hoping they come back to the light.

  3. Sadly they started the nosedive period of the downward slope at exactly the same time I was hired. Despite clever and interesting starter boxes of late they just haven't managed to draw me back in at all.

  4. Just my opinion here, but I suspect the market for 40K has generally fractured significantly in the last five years. With skirmish games appealing to the more cost-conscious (and possibly time sensitive) gamer, and other games like Dust, Infinity or Warmachine offering a less expensive but still quality "epic" (i.e. higher model) feel, I think GW has been caught out trying to straddle a divided consumer base. Sad but it's certainly true for this gaming enthusiast. :-)

  5. The threat of this fracture has been talked about for a decade, and I think it's a symptom of their deeper problems, now that it's actually happening.
    Sent from my iPad

  6. Wow, look at that Games Workshop chart:;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

    Talk about a canary in the coal mine: GW seems to peak 2-3 years before the overall market crashes. Of course,there's not a lot of data, but it will be interesting to see if it happens again.

  7. On a non GW point, love the blog, I constantly recommend it to friends and family who run small retail businesses as it is by far the most accessible discussion of the challenges facing them!

  8. Thanks! And thanks for exploring the many, many, problems facing this company. I remember in 2005 when I got on board carrying GW in my store. It required a similar dark moment for them to begin treating retailers with respect. That lasted about five years.

  9. I have watched with amazement since the 90's the way GW treated independents. But it seems to have worked up to now...

    I have every sympathy with 'getting' the online discounters, but when your sales strategy relies on human interaction with a viable network of shops and you cannot, nor indeed should, meet that with a massive retail operation of your own, the treatment of independents is sorrowful. Certainly it has (combined with price rises) in the last 5 years made returns for every £ improve, but it has undeniably caused a drop in customers, even with the churn and burn strategy.

    Perhaps finally the shrinking player base will cause another re-assessment and this time I hope independents can get some kind of medium term contractual stability with GW. Assuming of course their product is still relevant when they get round to considering this...

  10. I love GW, but yeah...they need to get a reality check. This is a game for players of all ages, not just the guys in their 40s with too much time and money on their hands, :)

  11. Jesus Christ man, that poor nail has one hell of a headache after this. Bravo.

  12. *shrug* They seem to have just skewed the core product list to include more expensive models. A single box for $78 that holds three infantry? Maaaaybe not the best move.

  13. Oh, some more numbers (we all love numbers), from GW France. From another post on a different forum...

    GW France apparently has to make their results public.

    Anyway here is the interesting part, those are GW France revenues in € from June to June each year, the second number is the profit:

    2013: Missing
    2012: 13.532.200€ / 365.600€
    2011: Missing
    2010: 14.590.000€ / 580.000€
    2009: 16.450.000€ / 1.160.000€
    2008: 17.390.000€ / 1.400.000€
    2007: 18.340.000€ / 970.000€
    2006: 21.240.000€ / 1.820.000€
    2005: 27.270.000€ / 3.290.000€
    2004: 27.650.000€ / 3.500.000€