Jan 2023: GW Half-Yearly Financial Report, I had made a mistake, HH 2.0 overestimated

[skylerboodie]

4 hours ago, Joe said:

Until Nottingham City Council get their act together there's very little Games Workshop can do beyond possibly up-rooting certain facilities and moving them around the country, although I imagine they'll be incredibly reluctant to do so; the benefit to remaining in Nottingham is easy access to the wider wargaming industry and the talent therein, coupled with keeping design, production and distribution all relatively close-by for ease of communication.

 

Can you clarify for non-locals what impact Nottingham City Council is having on GW's facilities? Are they holding up development of land they own or something? Thanks

[Joe]

NCC have been holding up property expansion for industrial businesses in Nottingham for a while now ("we want to be a university city"). Coupled with a lack of investment into the local grid (which has an impact on GWs production, electricity and all that limiting what they can do and preventing them from selling back to the grid what they generate from solar) and the city council about to declare bankruptcy it's just a never ending stretch of frustration.

[N1SB]

8 hours ago, Scribe said:

 

Will this be able to be definitively determined in the data offered? I have to agree that the impression I get is they have reached the peak of their throughput of product.

 

I was in my FLGS the other day, chatting with the boys and the owner, and its simply not possible to get some things, sometimes for months on end. Thats not an ideal situation for growth.

 

Man, what a great question.  What a great line of thinking.  The rest of the world is talking about Amazon TV, but this is the real bottleneck.

 

I'll give you 2 perspectives.  The 1st is mine.  The 2nd is my friend Timperial Guard's.  I think his take is the better one.

 

 

1st, the N1SB view

 

 

See, I reckon I know where you're coming from.  You know I'll say the Property, Plant and Equipment line item.  But does that MEAN anything?

 

(Even though it's like an official document, Financial Reports have all these numbers, NOT ALL of them are equally meaningful.  For example, there is a literally line item called "Goodwill" and it might as well be called "Miscellaneous"; it includes so many abstract items.  It's like...donations, brand value, yet also included until recently software licenses.  Software is important for work, but those men in grey suits had no idea where to put their costs...so they shoved into Goodwill.

 

(To compare, you know Codices back in 8th and 9th?  Official rules and stuff.  But you know how Power Levels in them meant very little?  Like that.)

 

GW lists that Property, Plant and Equipment line every year and what we can compare it to are...previous year's Property, Plant and Equipment.  But it's just a money number, it doesn't exactly capture advances in technology.  A cheaper mould injection machine might produce faster than an expensive one 10 years ago.  And the number itself represents old equipment phasing out and new ones being brought in, etc.

 

To compare...I'm looking at my PC right now.  Built my own Desktop rig (Techpriest, right) more than a decade ago, but I've been upgrading it, mainly the graphics card.  GPU-wise, it's MUCH more powerful, but if I were to price it on the sum of its parts, it's still around the same as when I built it.  So you see how it's misleading?  What you CAN tell is, I still only got that 1 PC.  So you see, Property, Plant and Equipment is still a meaningful, useful number.

 

(My mum a.k.a. Mum1SB just bought me a new phone, it's got more RAM than my PC, btw.)

What's a really real number?  Salaries.  People are real.  We get paid for our labour (except when I'm here, I'm providing consulting for free, Goodwill, right?) If a company is paying someone a salary and not firing them, that means it considers them as valuable, pay them fair wages to keep them creating value.  You know how quick companies are to lay off people.  I would look for those numbers in "Operating Expenditures", the running costs of a business.

 

IF you accept what I said about salaries, Property, Plant and Equipment is the flipside of that.  If it wasn't necessary, a company wouldn't buy it.

 

GW already said it doesn't plan on adding more this fiscal year (so until next May), but maybe they'll say "we're waiting for Interest Rates to drop."

 

 

2nd, here's Timperial Guard's take

 

 

So my friend Timperial Guard, who is a British expat, returned home after Covid and did his pilgrimage to Warhammer World.

 

He is the head of his department teaching Design & Technology right now, but once upon a time, he had real experience in manufacturing, specifically plastic mould injection.  His job was to be the go-between of designers and engineers.  A designer designs his design, some avant-garde stuff, then an engineer looks at it and says "there's no way you can make this, it's against the laws of physics."  Timperial Guard had to manage that gap.

 

So Timperial Guard is a very practical guy.  Finance figures are a bit fluffy, but he SAW the plant at Nottingham and his reaction was:

 

"There's no way that warehouse can produce that much (now about HALF A BILLION £'s worth annually of) product."

 

He went on to mention like there's just not enough room in there for that many machines, unless it's like the TARDIS from Dr. Who where the inside is bigger than the outside.  His job wasn't just to make the impossible possible, but to make the impossible cost-efficient, and he's like "even I can't fit enough equipment in there."

 

He's real practical, like he's thinking 3 full 8-hour shifts with X number of mentions and Y staff of engineers and packers...but still.

 

 

I also like Brother Joe's take

 

 

Not at all being political or anti-flag waving, just acknowledging the UK has its own complications right now.  I grew up in London, which admittedly its own little bubble a little bit detached from reality, I realise that now as I'm older and wiser just older, but then just within Nottingham.  Another dimension of complication.

 

I have been thinking about this and I now agree, GW just seems to work this way.  So maybe you really can't uproot its production facility, but I do think they just gotta add another one somewhere else.  Maybe these other facilities can just make Starter Sets for 40k, AoS, take some burden off Nottingham.  I dunno.

 

Or until they turn the Nottingham plant into TARDIS...which also I guess let's them manipulate time, so...oh my cog, Imma stop now.

[Focslain]

Kind of hope/wish they plan to open a plant here in the states. We used to do the old blister/metal kits over here until they moved the US HQ. Put a few mold machines and help in production and already across the pond (and in their biggest market).

 

I know the logistics would be nightmarish at the start. But worth the investment? Maybe.

[Joe]

I would rather they kept production in the UK entirely, as frustrating as that may sound. Tigher quality control (and the practical side of production, assembly and distribution all being handled in one country), and you don't have to worry about the inevitable culture clash.

[N1SB]

Brothers, however it shakes out, don't take it as either for or against any given country, because it'll be for boring, mundane reasons, like:

 

• What's the electricity bill (they THINK) will be like, in the UK compared to the US?
• How often do GW's custom injection mould machines break down?  They're quite modded, I've been told, so it's some GW enginseer that knows how to repair it, he might not be able to fly back and forth so easily, there's downtime

 

I know it sounds like the Godfather, it's not personal it's just business.  No fancy financial engineering, not marketing, just good ol' operations.

[Marshal Rohr]

A significant amount of GW stuff isn’t made in the UK. The solution seems to be offloading all non-essential production anywhere but Nottingham. The Painting Phase talks about the printers being a big one. Bases are made in China. Terrain is made in China. If they did move those starter set and launch box operations offshore it might prevent the Leviathan bottleneck in three years. 

[Focslain]

1 hour ago, N1SB said:

Brothers, however it shakes out, don't take it as either for or against any given country, because it'll be for boring, mundane reasons, like:

 

• What's the electricity bill (they THINK) will be like, in the UK compared to the US?
• How often do GW's custom injection mould machines break down?  They're quite modded, I've been told, so it's some GW enginseer that knows how to repair it, he might not be able to fly back and forth so easily, there's downtime

 

I know it sounds like the Godfather, it's not personal it's just business.  No fancy financial engineering, not marketing, just good ol' operations.

It's all good. And now I know just that much more that I didn't this morning. Your second bulletpoint explains why we didn't have an injector in the states when we were doing the metal spinning locally. We did box up the sprues, but they still were produced and shipped to the packing plant/warehouse for us to piece the stuff together. 

 

Now I know why.

[Kastor Krieg]

3 hours ago, Marshal Rohr said:

Bases are made in China. Terrain is made in China. If they did move those starter set and launch box operations offshore it might prevent the Leviathan bottleneck in three years. 

Or not, because, for obvious Real Life Politics / Warfare reasons, the Red Sea / Suez Canal, et al, are closed off to mass transport traffic and all this traffic has to go around Africa now to get to EU/UK. Which adds a 4-6 week swing, depending on other factors.

This kind of delay and unpredictability will throw any system in a loop - not to mention one where GW seems to still be tinkering and dealing with growing pains with their new ERP system.

 

 

Edited December 22, 2023 by Kastor Krieg

[Noserenda]

They are never going to send production for such an important product to China, its just got far too many problems with leaks, shipping and knock offs. Most importantly it means sending the moulds to China and that exposes them to considerably more extra danger they are going to be leery of (And that goes for any other production place) id heard a bunch of metal moulds got written off just being moved around in the Uk by van and theyve been cautious since. 

Further, previous attempts at overseas production seem to have ended badly as often as not and i think its telling that they dont currently make any terrain or other models anywhere but Nottingham despite the obvious savings and production efficiencies. Theyve done it, and now they dont. (Possibly aside from bases, not heard anything about that)

[Joe]

At least, not again; after bringing cardstock and book production back to the UK from China in 2019/20 they had to send it back to China on short notice after their UK partner went bankrupt (Westdale Press, end of 2020), they then immediately ran into difficulties with their Chinese partner leading to disruption to a major release (Cursed City 2021), which ultimately led to them finding another UK partner to work with.

 

Bases and terrain aren't as much of a concern, as they generally seem to be swimming in bases. I suspect in the long term they may aim to bring those back over to the UK entirely when / if other production issues are entirely ironed out.

[Marshal Rohr]

1 hour ago, Kastor Krieg said:

Or not, because, for obvious Real Life Politics / Warfare reasons, the Red Sea / Suez Canal, et al, are closed off to mass transport traffic and all this traffic has to go around Africa now to get to EU/UK. Which adds a 4-6 week swing, depending on other factors.

This kind of delay and unpredictability will throw any system in a loop - not to mention one where GW seems to still be tinkering and dealing with growing pains with their new ERPG system.

Well, yes. I’m no businessman but I would’ve assumed my suggestion wasn’t interpreted to mean set up production somewhere impacted by conflict. Canada is close to the UK, stable, no imminent threat of invasion. I’d be surprised if making bases and card stock in Canada would be more expensive than needing to ship from China. 

[Kastor Krieg]

1 hour ago, Marshal Rohr said:

I’d be surprised if making bases and card stock in Canada would be more expensive than needing to ship from China.

https://www.indexbox.io/search/paper-and-paperboard-price-canada/

Paper / paperboard seems to be 2-3 times more expensive in Canada / US than in China (~$4-6k per ton compared to $2.5k in China). That alone precludes this being feasible.

[Noserenda]

Yeah there is a reason lots of companies manufacture in China despite the shipping and many issues, it was super cheap, still pretty cheap.

[Brother Raul]

Surely COVID was a massive spike in sales thats skewed a lot of data. Overlap this with Primaris release and that skewes the data a hell of a lot.

 

They are no chance to pull even close to 70% GP otherwise. Clogging up their supply chains with the bloated marines index is just dump. No one uses half the units and that's 0 GP% but cost shipping, handling and storage.

 

And how many new retailer's have jumped on GW products? You'd be nuts to try and stock their products.

 

Warhammer+ is a hard metric to measure as popularity. Subscription services are always hit and miss and I am not sure they tried after the Amazon prime deal.

 

That comment that 80% of Warhammer fans are already hardcore is spot on. Also does anyone else feel that it's hugely ironic that GW makes a fair chunk of revenue from IP now?

[Scribe]

10 minutes ago, Brother Raul said:

That comment that 80% of Warhammer fans are already hardcore is spot on. Also does anyone else feel that it's hugely ironic that GW makes a fair chunk of revenue from IP now?

 

None of this is ironic to me. If GW depended on the game, AoS v1, and 8th-10th, would have killed the company.

[Noserenda]

I think game editions can raise the high tide mark for sales, but there is always a limit to how low they will go, plenty of folks have no interest in the games already and a lot of gamers just switch over to that metric if they dont enjoy the game or a particular force right now, only to return later when things (Or they) change, but usually keep buying or hobbying in the meantimes. 

Even people who lapse entirely often buy licensed stuff like books or computer games :D 

[Marshal Rohr]

New Editions of things can also cause the same effect as video games releasing patch and DLC announcements, where someone looking to buy it will hold off. There’s a fair amount of anecdotal stories in Horus Heresy groups of people waiting for Armor Marks, Plastic Robots, or FAQs/Updates before they jump in. 

[The Praetorian of Inwit]

I wonder how well GW is doing at actually getting new people into the hobby? I imagine the prices are a turn off but when kids are getting iphones at five years old and enslaved to instant gratification amongst other things it must be hard for GW to pull youngsters into something that requires hours and hours and hours of effort to achieve just basic results and finished units. 

 

I'd also be interested to know how well GW does at retaining new customers. How many people get into the hobby but leave after one or two years?  

 

I really hope the HH does well.

Edited December 31, 2023 by Tyriks
incendiary

[Tyriks]

=][=

 

Be constructive. People can like or dislike whatever they want, but do not be disparaging.

 

=][=

[N1SB]

6 hours ago, The Praetorian of Inwit said:

I wonder how well GW is doing at actually getting new people into the hobby? I imagine the prices are a turn off but when kids are getting iphones at five years old and enslaved to instant gratification amongst other things it must be hard for GW to pull youngsters into something that requires hours and hours and hours of effort to achieve just basic results and finished units. 

 

I'd also be interested to know how well GW does at retaining new customers. How many people get into the hobby but leave after one or two years?  

 

I 100% share your thoughts.  True story time.

 

 

So a Shanghainese Woman Walked Into a Warhammer Store

 

 

I know it sounds like the setup to a joke.  And I guess it is.  We were trying to explain Warhammer to her, but she understood it better than us.

 

You ever try to explain Warhammer to your family and friends, like to your mum or to an auntie, to your grandma or to a niece?  It's hard imho.

 

Now imagine trying to explain it in Mandarin.  Btw, depending on your accent, Warhammer sounds like Playhammer in Chinese (玩rhammer).

 

So this Shanghainese lady comes in the Hong Kong Warhammer Store, looks around.  Politely looks at the game boxes, the minis, me and the Warhammer Store just hanging out.  It was at a time when not much was going on (those days are gone now, I can't even get a pick-up game anymore, I gotta book in advance it's so busy).

 

She just starts asking, but for some reason, she really wants to talk to me.  And they're real basic...but the fundamental questions a mum asks:

 

• "So you play these games with other people?"
• "What age did you start playing?  At this store?  Oh, in London...but it's like this store."
• "You buy these 'chess pieces' (the Chinese for chess piece is the same as mini), and you paint them yourself?"
• "Are you saying you play here, in this very store, with other people?"
• "Can anyone go to any of these stores and play, with other people?"

 

I'm like, "Lady, I'm trying to explain the Horus Heresy to you," but she just keeps going back to "right, this Horus...is he other people?"

 

The whole thing was she has a son, who spends all his time in his room, playing on his phone or computer...not with other people.

 

 

Warhammer's undisputed number one selling point to parents

 

 

After this exercise in Chinese, I found how Games Workshop can sell to any parent in 3 words in any language: Alternative To Screens.

 

Warhammer is way to wean kids off phones, PCs, video games.  Not replacement, we gotta download them Balance Dataslates, but alternative.

 

You play...not against a game AI...but against other people, REAL HUMAN BEANS, actual meatbags, in the physical world OUTSIDE The Matrix.

 

Brother Praetorian, I hear what you're saying, I 100% agree, not putting a spin on it.  It's a problem...and that's exactly how I can sell a solution.

 

The only difference between us is where you see an impenetrable wilderness, I see virgin fields.  So what happened with this Shanghai mum?

 

Both the Warhammer Store manager and I tried to convince her to visit the Shanghai Warhammer Store.  She's a petite woman, she's on a business trip, the manager is already in the top tier of sales and he's actually trying to steer business to his Shanghai colleague, we don't want her having to lug the Grandmaster edition home.

 

Cannot stop her.  In her mind, a box of Warhammer = time away from phone.  The more Warhammer she buys, the less her son will be on his phone.

 

We convinced her just to buy a box of Warhammer: Underworld (the AoS game with the nice minis and playing cards), as it's the smallest box.

 

I'm going to leave the rest to our Brothers here who served as Warhammer Store Red Shirts (thank you for your service).  I don't have the insider view, but my instincts tell me when a mom walks in with her son, the kid is the easy part, he's already sold.  The mom's the bottleneck.  Whisper sweetly in her ear: alternative to screens.

[phandaal]

55 minutes ago, N1SB said:

Warhammer's undisputed number one selling point to parents

 

 

After this exercise in Chinese, I found how Games Workshop can sell to any parent in 3 words in any language: Alternative To Screens.

 

Hell, this is one of the top selling points for me, an adult. One of the biggest selling points for any tabletop wargames or RPGs - you interact with other real live people.

 

Even for an introvert, sometimes you just want to get out and be around people. What better way to do it than by simulating a battle between your little dudes?

[Doghouse]

8 hours ago, N1SB said:

 

ISo a Shanghainese Woman Walked Into a Warhammer Store

 

 

I've experienced this exact same scenario, she wasn't concerned with the cost she just wanted her little boy to make friends. I think a lot of parents have no idea what it's all about hence GW changing the stores to the culturally more well known Warhammer to bring in more people.

Fortunately for kids these days nerd culture is a lot more accepted and I personally think all the list building, simple maths, construction and artistic expression are an excellent foundation for basic life skills for them. It's also something a parent can get involved with them.

[alfred_the_great]

And the (potentially apocryphal) statement that GW’s largest market is women in their 40s and 50s. 
 

what’s not apocryphal is the fact that GW’s business model is based on selling starter sets once to an individual, and accepting they may only be in the hobby for 12-18 months. People deep into the hobby funnel are not GW’s primary market. Source: Tom Hibberd

[Rain]

8 hours ago, phandaal said:

Even for an introvert, sometimes you just want to get out and be around people. 

Heresy!