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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.

6 comments:

  1. I do not fault a company for making a profit. GW produce some good figures. There annual report though shows volume of sales going down.

    Some players have enough spare cash that they will not care. Others, like myself, will buy more from other sources like Mantic or ebay.

    In March I picked up a 1000 point Lizardman army for £20 rather that £100 new from GW. The only thing I see myelg getting new is one army book/codex a year and a couple of sets as birthday/x-mas presents. The rest of my budget will go on other manufactures.

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  2. I agree with what Lyracian said, you can't fault them for wanting to make a profit, at the end of the day there a business.

    And also he is right about the other options in Mantic of eBay. I use eBay myself for stuff, if you can get the right stuff for the game and you can't afford there prices it's a good route. You'd be amazed at what people get rid of.

    Also then I think but then the company needs money to keep going but somebody obviously bought that stuff in the first place so they still made money.

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  3. First we all need to remember the structure of GW: Large fixed overhead(stores, employees, corporate); Small Production Cost (~10% of revenue). Decreasing volume requires the spreading of the high fixed cost around fewer and fewer kits hence the continued price rises. The price rise 3 years ago netted them more revenue, the one 2 years ago netted them the same revenue, last years based on half year report netted them less revenue, so I would not be surprised if this next one continues the trend to less revenue.

    GW cost of entry has become problematic for a company that believes it makes most of its money on new players(I am not saying this is true it is just what they believe). 100 dollar starter boxes or 75 dollar rulebooks plus 30 dollar codexes mean that you are often out 100+ dollars just to check out the game with essentially no army. The standard tourney level armies are now between 350-500 dollars retail (which is what GW needs you to pay if they are going to keep all those stores open).

    Everyone who is not paying retail(which is increased with each price rise) is essentially just adding to GW's need to raise prices since they are having a harder time supporting their stores which they believe they need.

    They are caught in a bad cycle that if they do not correct themselves with new direction or management will lead to 100 dollar land raiders in 5 years even if inflation stays low and household income remains flat like it has for the last 10-15 years.

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  4. It should be noted that GW's increased profitability has many come from cutting staff or replacing high paid veteran staff with new staff at the retail level (since that is were 75-80%% of the staff is). This essential undermines there whole reason for having retail as a recruitment center offering premium help and service since one guy cannot stock, watch for shrinkage, give painting tips, run intro games, set up events, talk up new products, and mind the register at once.

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  5. Definitely a mixed bag overall, I agree.

    I know that I'll slow down purchases, personally. For example, in the past I'd buy a unit to practice with it, rather than proxy. If I didn't like it, I could convert it to other uses or something. Now I'll proxy a lot more to be sure of my purchase before I make it.

    And as you said eriochrome (something Drkmorals and I IM chatted about extensively) the buy-in costs are where I think the GW analysts may not have thought it all out.

    Thanks for the comments.

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  6. The new player "entry fee" is a big issue that DFK and I have ranting to each other about several times. Its a huge topic all in itself.

    The fact that GW views this as more of a hobby than a game.

    The fact that most people have a extra army to sell a buddy cheap or let them borrow while they slowly build up.

    Then what I call the Parent Factor lmao. The kids or people who come over from Playing DOW and the parents are so happy they are interested in something that isn't a video game they are more than willing to throw money at it to get them started. =P

    All these things distract from the solid buy in. I would think that if you could get in around 100 dollars it would be ideal. The assault on Black reach is the best deal they got really for a new player since two of you can play a small game after you buy it.

    Its sad that if you want something besides orks or marines to start.. its slowly getting more and more out of reach. Which as Eriochrome said seems odd for a company that thinks the new players make it so much money?

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