Sunday, May 29, 2011
Opinions and musings on Pricing
DFK! back again.
Ok, so I imagine everybody out there over the age of 12 has heard the truism regarding Opinions and Assholes. Well, luckily, DFK!'s fecal contributions don't stink (this is blatantly untrue) and therefore neither does my opinion (this is possibly true). With that in mind, I find decided to make a post about the recent change in pricing of everybody's favorite (or at least the global leader) miniatures company: Games Workshop. The bad news is that I like to type, and I haven't in a while, so this post may get lengthy. Sorry! (TL:DR summary at the bottom)
If you haven't heard about it, I think you may be deafer than Helen Keller (it also means you skipped Drkmorals earlier post about this issue, and for that I say Shame on You). The bottom line is that, GW, like most companies, makes price adjustments to their products. GW happens to do this on a vaguely annual schedule and, for the second year in a row, has made 10-20% increases of the majority of their product line.
Additionally, GW is attempted to rebrand their metal miniatures in the face of a move to cheaper raw materials, a sort of plastic/resin hybrid. This reduction in materials, so I'm told, will drastically reduce cost and variance of materials pricing; yet, GW is increasing the cost of most of the re-released models as much as 50%, from what I've seen.
"DFK!, we know all this and you're retarded for repeating it." I'm not retarded, but I think these things bear repeating as a preamble to my actual opinion here. In the past, I've defended the price changes year-on-year from GW. For one, the executives at GW are not responsible to the gamers, despite what the wailing of the Intertubez would tell you. They are responsible to the shareholders... more on that in a minute. Also, until this most recent increase, I've been quick to point out that previously GW pricing has actually been in many areas "solidly" under inflation-adjusted prices from the late 90's, while they've simultaneously increased quality substantially.
What does all this mean for you as a gamer? What does it mean for the hobby? And what is the answer to all the "why would they do this, are they stoooopid?" internet questions? Three things come to mind:
1) At a glance then, without any real math, I think GW has finally caught up or exceeded inflation-based price changes. This is probably bad for gamers but good for the company. It is also neither here nor there and probably doesn't need explaining unless you don't understand inflation, in which case you should write me an email so I can take advantage of you.
2) This is a sound business decision. There, I said it. Granted, it's only sound if the company analysts are correct, but let's pretend they are. Why is it sound? Any company that believes it has a relatively firm rate of demand, such as a company that makes little miniatures that most people sort of create a "routine" budget for, can adjust prices without dramatically adjusting demand.
As an example, let's say I spend about $100 every three months on GW miniatures. With a price change, it is unlikely (in the minds of GW) that I'm going to suddenly spend fewer than $100 every three months. What is more likely is that my $100 will buy me smaller amounts of product. This sucks, as a consumer. As a company, this is great. I get the same amount coming through the door, but less investment in terms of material, development, and marketing dollars going out the door.
Now, unlike in the example, the demand isn't likely to stay 100% flat. Some people may not buy as much or as often, others may quit in "protest." Overall though, the analysts who work for GW corporate have a number in their heads for how much demand is going to go down, and as long as it isn't a lot higher than that, this is a good business decision. Time will tell how it really plays out.
3) I think that this price change is a bad move in terms of new player attraction. This is because buy-in for a new army is now quite high. It is pretty well impossible to get started for under $100 and even difficult under $150. How many teens do you see forking out that much cash for an unproven product they may have just heard about from a friend? Not a lot, not in my mind.
Overall though, a more profitable GW is good news for gamers, even if your money doesn't go quite as far. Higher margin helps their long term viability. Higher margin gives them more to throw into R&D. Higher margin helps them explore new business lines such as print media, videos and movies, and other potential new products. So before we all go stomping off to Warmachine because it is so much "cheaper," consider this relatively bad analogy: did you stop buying media because Blu-ray was 33% more expensive than DVD? Or did you go, "wow this is a better product?" (please don't point out that these are largely the same models at higher cost, I pointed out myself it's a bad analogy.) Comfort yourself with the knowledge that these changes will hopefully allow GW to continue to make its product better and better, year after year.
TL;DR:The bottom line is that GW's bottom line is what matters to the company. Do I fault them for looking after their bottom line? No. Do I think it will impact the hobby? Yes. Should we all quit in anger? Definitely not.