Friday, July 1, 2016

Games Workshop and Chicken Little Syndrome (or not?) - Part 1

Brief background and explanation for this post.  Earlier this week I was involved in an email thread that side tracked into many different topics.  One of which was the possible implosion of Games Workshop (or not).  Then, I did some research and manipulated data and on a weekly hobby hangout I suckered punch a friend of mine with it.  So, in fairness I am going to document my work.  But a few other things need to be established before we dive in.  

Firstly, this will be a long post and just the first of 3 parts.  I am also not a business person, financial, economist, marketing, mathematician or most anything that would help the credibility of this analysis in your eyes.  What I am is an engineer and I deal with numbers every day, and often have to find creative ways to tease valuable information out of those numbers.  I like numbers and playing with numbers.

Additionally, I am not a GW fanboy:  Never have been and likely never will be.  More than likely I have spent less money on GW products retail than you.  Even factoring in what I have bought second hand, it is probably less than you.  You will eventually see through these post that I am not a hater either.  

I am going to explore the topic of GW's consumer base, nothing about the other "health" aspects of GW nor individual product lines.  I maintain a thought that if there is a healthy and stable consumer base, then things can (not saying they will) work out.

Lastly, do with this what you will.  Take it, leave it, ignore it, scream at it, poke holes in it if you want.  I don't care.  It was a thought exercise for me and I got out of it what I wanted to, something more than anecdotal evidence.  It's not perfect, far from it.  I'm sharing it because some people expressed an interest and at least one person deserves to see my homework that I sucker punched him with.

Problem:  How can we actually determine if GW has alienated it's consumer base too far to recover from?  Lately GW has made TONS of incredible moves, it seems, to "right the ship."  Some may perceive and call these desperate moves (in part 3 I will revisit "desperate").  But there is no way to know if these moves have a chance of recovering or growing their consumer base if you have no reference for what that consumer base actually is and has been.   Ie, if you've lost 50%+ of your consumer base over 2 years, then the ship is beyond saving.  20%, maybe you can save it...

There is tons of anecdotal evidence, freely offered by almost anybody in this hobby you talk to.  For instance:  "My local game store says sales have dropped from $5000 a month in GW products to less than $500 since year blah."  Yeah, ok but how much of that did he loose to online sales?  How much because he sucks at running his business?  Etc.  Obviously drawing conclusions from this is very hard before you even factor in that is just 1 data point!

Perspective drives even more anecdotal evidence.  I myself, as previously stated, do not really take part in GW stuff (consumption, gaming, hobbying, etc).  This means, I generally surround myself by like minded people and I generally do not consume information related to GW.  From this perspective, I may think GW is doing very badly because "no one I know plays Warhammer" or that I only hear the loudest voices on the internet screaming this or that sucks.  Conversely, fanboys are consuming information, playing games with fellow GW gamers, frequenting GW fan sites, etc and therefore may feel GW is doing fucking awesome.  

So, how do we derive a consumer base and get away from just anecdotal evidence?  The first thought was attendance at Grand Tournaments but it is easy to see this is not so great.  It does not capture the non-tournament contingency of consumers.  Does more attendance for the event represent a growth in the base or just a growth in the tournament?  Does a decline in attendance for the represent a decline in the base or has the GT/convention grown to offer alternative formats/games that people migrated to (ie, I wasn't forced to play 40k because it was the only game at NOVA Open...).  Attendance at Games Days?  Oh wait, yeah they went away...  Stock price has it's issues as does profits.  Revenue doesn't tell a whole lot.  Hell, even distribution numbers (if I could get them) I don't think would tell a whole lot because of direct sales and GW retail store sales...

But you know what, I think there actually is a way you can tease some insights out of revenue.  It takes some assumptions but I think you can see something, at least if you look at things relative to others.  Part 2, I'll explore this some more and actually provide some meat.


  1. As the sucker who suffered the sucker punch, I have to say this analysis is brilliant. It goes a long way towards lending some measure of rationality to all of our unsubstantiated banter and speculation. Even if the assumptions are imperfect (average per-capita consumption year-on-year should be variable, not a constant), the analysis at a very minimum tempers the conversation away from bias and emotion and more towards objective scrutiny. Bravo! Thanks for all the time to compose this series, Chris!

  2. Thanks Mike. I still stand by a average consumption being nearly constant. Personal expenditures may vary year by year, but I think when you look at it over an entire consumer base and average it year-by-year it will be much more constant.

    That being said, if you consider that the hobby expenditures are a function of disposable income, I could factor in the historical yearly change in disposable income into the average per-capita hobby consumption. It is almost linear at ~4% increase/year so I don't think it will have a huge impact. I also can't resolve if inflation impacts that number or not, esp given I have already once accounted for inflation.

    But as you said, it is rough but grounds us a bit more than all the anecdotal evidence.

  3. Ugh, there is an interesting consequence in going with a variable consumer expenditure that I just realized. Now I have to amend part 3 because it is very interesting! And I thought it was "done." LOL

    Thanks Mike. ;)