Posted by Jawaballs at 9:43 AM
Image Credit: http://ordinaire-ecriture.blogspot.com/
A club member posted this link up on our boards and I thought I would share and discuss it here.
It pretty much says that sales are down but profits are up.
Lets analyze. First of all, of course profits are up. GW raised the prices on all of their products, as much as 50%. Or even 100%, and in some cases, 500%. Take a look at THIS ARTICLE for some info on a recent eye gouging price increase. Also, I bought a Brother Corbulo model in 2007 for 8.00. Now, without looking at the GW site because it is blocked from my work, I believe it is checking in at what... 16.00? That is DOUBLE! I understand inflation and all and I understand raising prices to reflect the cost of manufacturing, but the cost of making Brother Corbulo did NOT double.
This is problem number one. GW profits are up because they have punched each of their loyal customers in the gutt by raising prices on their models. They know they can charge 50% more for a model than they were charging a few years ago because we are stupid and will buy it.
In addition to raising prices, they have slashed costs. They have closed stores, fired employees and reduced the creative think tank. An excellent example of where GW has taken a notable plummet is in their RPG stuff. I understand that Fantasy Flight is now handling their stuff. And since they have taken over the reigns, it has improved, but before that, their published work was simply dreadful compared to what it was in the 80s and early 90s. The Reikland series of adventures, "There's Something Rotten in Kieslev" for example, are without a doubt some of the best written roleplaying supplements for any game, any genre, ever. They were chock full of handouts, intrigue, story and fun. They set the bar for other RPGs to try to follow. DnD could only fail in comparison.
The more recent stuff... simply does not do itself justice.
This is a result of years of cost cutting and neglect. GW made a well deserved outstanding name for themselves based on providing superior product at prices that while were not cheap, were not killing us. Then they started selling inferior stuff, at higher prices. See the trend? (I hate to say it but I just bought the new Warhammer Fantasy Roleplay released by Fantasy Flight, for a LOT of money, and I am very much less than impressed. More on that in another article.)
Let me reign myself in. GW doubled it's profits for last fiscal year. They did so by raising prices, (Double the cost of Corbulo), and cutting costs with crap development of new product. (Warhammer Fantasy Roleplay, Tyranid Codex.) Need to stay on point!
This is great for GW on the short turn. Some one says "We need more profit!". Some one else says "Ok, lets make more profit, what is the easiest way to do so?" (Raise the price of super glue to 40.00 an ounce.) Promotions are handed out, some short term exec pads his bank account before planning his retirement and we bear the brunt of it.
But that brings me to the next issue. GW sales are down. In trying to increase profits, they are not only kicking us all in the balls, they are discouraging vital newcomers from entering the hobby. Loyal buyers will always exist. We will always buy their product, and they can always count on our money. They know that they are not significantly going to increase profit off us except by raising profit. Which they did.
What they are not taking into consideration is the Loss and Gain effect, as I call it. Over time, the hobby loses people and gains people. Guys become disenchanted with the game. (Necron players?) They lose their jobs and have to make changes. (Brother Captain James) So forth. They leave the game. This creates a dip in GW sales. Normally, this is compensated for by people like me. I started playing the game a few years ago and am a new player relatively. Fresh blood. Blood for the Blood god! Dollars for the Dollar God!!! But when I started playing 40k I was paying 2.50 a pot for paint. Corbulo cost 8.00 US. A predator was under 30.00. On and on and on.
Here comes the point...
Wait for it...
Cutting costs is producing inferior product and chasing away loyal customers. Raising prices is also chasing them away. But the problem is that the combination of those two factors is chasing away the fresh blood. Blammo! Profit is up but they are selling less. Less new people are joining the hobby. More people are leaving it. More people are leaving the hobby than joining it. Less people are buying new stuff. Sales are down.
Know what I call this?
Know what else I call it?
Will this kill GW? No. I doubt it. The company will continue. Changes will occur of course. Customers will come and go. Creative types will be run out of the business by greedy financial types. (Dave Taylor we love you.) The fanatical core will always be here. The show will go on.
But at what cost?
Growth. Improvement. Progress.
Don't get me wrong, I am not griping about rising prices. The cost of business has increased for every one. I support GW raising prices to off set their costs. But it does not take an MBA to know that doubling profit while losing sales is not a good thing. Or is it? What do you think?