The Economics Of Games Workshop and How They Persist

Brief Description and history
Games Workshop (GW) began in England in 1975. They started as game board producers for Chess, Backgammon, and Go, and then eventually began importing Dungeons and Dragons from the US. They eventually began writing and producing their own tabletop games, rules, and miniatures as well as gaining rights to republish Dungeons and Dragons for sale in the UK. This, in conjunction with a lot of conventions and public activity led to their rapid growth. They are now an international company that is publicly traded in the UK, with ownership over several large Intellectual properties (IP’s) including Lord of the Rings.
Tabletop Games refers to several types of games played on a table, requiring no electricity, but instead simply requiring some friends and a working knowledge of rules.  These games consist of playing pieces such as plastic models, paper maps, printed rulebooks, and other various small pieces needed to play depending on the game. The different types can be defined as follows: Board Games, Card Games, Role Playing Games, and Miniature Games. For the purposes of this essay, I will focus on a miniature game company Games Workshop, and how they are successful in an entertainment market dominated by video games. GW produces pewter, resin, and plastic models, as well as rulebooks and some cards.
Stock price over last 6 months
             Over the last 6 months the stock had peaked in October and began to descend through to present. This is due to a loss of momentum in public releases to get consumers excited. Both the firm and consumers are likely affected by the holiday season at the end of December, with the firm holding back its biggest releases, and consumers waiting to buy.
Reasons for stock price increase or decrease
Over the last 6 months the stock had peaked in October and began to descend through to present. This is due to a loss of momentum in public releases to get consumers excited. Both the firm and consumers are likely affected by the holiday season at the end of December, with the firm holding back its biggest releases, and consumers waiting to buy.
Market Description
The Tabletop Game market can be divided into four submarkets: Card Games, Board Games, Role Playing Games, and Miniature Games. These four markets are too differentiated by consumers to be considered substitutes, and should be treated as compliments. Looking only into the Miniature Gaming market (sometimes called wargaming), GW is by far the largest firm in the market, followed by Privateer Press and Corvus Belli which are both less than half GW’s size. These top firms form an Oligopolistic market, often strategizing against each other. They even execute dominant strategies for events and consumer interaction that will usually be copied by the other big firms on a bi-quarterly basis. Below these “big dogs” are dozens of small firms that behave in a far more monopolistic market. These can only exist due to the low barrier to entry to the market, and low input costs. The “small dogs” are extremely competitive, and will typically go further to differentiate their product through superior rules and community interaction. However, these small dogs are prone to short business lives if they cannot reach a large enough economy of scale with a loyal consumer base to sustain them. In this way, the small dogs constantly try to undercut the big dogs with better product at lower prices, but are weak to consumers changing preferences and selling out to go to the big dogs’ products.
The Competition
So a common initial question is, how do miniature games succeed in a modern entertainment marketplace full of popular technology such as video games, virtual reality, and internet based shows, and movies? I think the best place to look is at the costs and benefits for the consumer in either case of entertainment choice.
            The benefits of digital entertainment relies heavily on the level of immersion. When seeing a movie or playing a videogame, consumers want to be surrounded by the fantasy being shown to consumers, hence the desire for large screens, surround sound, and ever more interactive digital environments. There is certainly an attraction to the imaginative possibilities, and this offers a wide range of utility to consumers looking for entertainment. However, we should also look at the unique benefits of miniature gaming, though these benefits may be generalized to tabletop gaming.
            Compared to digital media, tabletop games do not have a digital aspect to present to consumers. Instead, they require the consumer to be aware of the fiction and rules and apply their own respective imagination to create a sense of immersion. Additionally, Tabletop games are far more reliant on other consumers also being in the same marketplace available to play games with. Dependent on taste and preferences, some consumers will find this face to face community element as a great benefit, and it will keep them coming back for more. Yet another benefit is that unlike digital media, tabletop gaming media does not expire very quickly. In fact, their concepts are so well self-contained in a box or book, that any tabletop game is playable after long time delays and technology changes. Digital media by comparison becomes far more quickly dated and only a very limited quantity of it is defined as being “Classic”.
            Now I know what the next question is; Given there are social aspects to video games as well, why doesn’t this give the advantage to video games over tabletop games in the marketplace? This is where we can observe some downsides to videogames. Many video games do have social aspects via a network, whether it be for competitive or cooperative game purposes. This is very popular, but I think it brings a hidden weakness to video games, the breaking of immersion. For example, let’s say consumers are playing a World War II simulation game with other players online each taking control of a member of a squad. The world is extremely detailed and engaging, using visual the sound design to create an ambiance and even an emotional impact. Yet, this socialization of the gameplay allows a common interruption, another player, sometimes children, screaming complaints into microphones directly into the consumer’s ear. Suddenly immersion is broken, and while the gameplay may still be fun, something else is certainly lost. Meanwhile, tabletop games rely on unspoken social contracts to create communities of like-minded consumers to play games they enjoy together. While not as technically immersive, it can be more imaginatively consistent, which is reflected by more consistent utility for consumers. This in turn makes tabletop game consumers more loyal to the games they enjoy.
            Looking at some negative aspects for consumers who choose tabletop games for entertainment, tabletop games seem to have higher barriers to entry due to the necessity to paint and build the models before playing, and the time it takes to learn the rules. Generally players will teach each other the rules, as it is much more difficult to learn the rules without game experience and someone to learn with. When no other players, or people operating store fronts, are available the barrier to entry is exceptionally high, and only those finding high utility learning a new game on their own will likely pursue the product. Because of this the market for miniature games in the community relies on a relative minimum size of player base so that games can be supported. Video games don’t really suffer from this drawback, as most have in-game tutorials that consumers can learn from on their own.
Additionally, both choices of entertainment are relatively expensive, to be expected of an entertainment market. Video games require a relatively continuous upkeep cost to buy new game content, new games, and occasionally larger costs for new consoles, computers, screens, and other accessories. Video gaming equipment is generally replaced every 2-3 years. Tabletop games are by no means inexpensive, but the upkeep cost is generally lower. A consumer in a miniature game market will typically buy a number of miniatures sufficient to muster a playable force in the size of game normally played at the competitive level. According to an article in The Economist, “Warhammer may be an expensive hobby for most, but not for workers like him who are used to spending £150 on a night out”. While this initial investment may be $300-900, the reset period for utility is usually several years later, upon which time many consumers may resell their old investment to subsidize new products. Additionally, miniature gamers usually need to assemble and paint miniatures themselves, which can be seen as more positive or negative utility depending on the consumer’s own individual preference. The only recurring costs are keeping up with rules updates for those interested in competitive play, which is very inexpensive at $10-15 a month on average.
What type of demand curve does the firm face?
GW faces a relatively elastic demand curve that is highly influenced by community perception of the product quality. This quality being reflected in rule editions, model details, and level of positive community interaction. Since GW models are so expensive, and the company’s IP’s have existed for over two decades, many consumers see the switching cost as very high. This high switching cost contributes to the demand curve’s inelasticity.
How has the firm dealt with adversity:
Games Workshop’s business model is publically available to help inform investors. As they describe it on their webpage, they build high quality models and supply them with games (rules) around the globe. In conjunction with this they have storefronts to promote the games, give people a place to play, and teach new players how to play the games. They also actively attain IP licenses, such as Lord of the Rings, as well as expand their own IP’s Warhammer 40,000 and Warhammer Age of Sigmar. They explicitly state that investment in product quality acts as a Barrier to Entry for other competitors, and that having store locations for consumers to go to is a second service-based barrier to entry that other new competitors cannot easily provide.
They also touch on a “virtuous cycle” in which they the claim that with an increased consumer base, they can continue to provide more exciting miniatures and rules, open more storefronts for community outreach, and thus be able to again continue to attract more consumers. Assuming this works, it would exemplify economies of scale as they grow. Other smaller competitors in the marketplace already struggle to meet the quality of product output by Games Workshop (“Our Business Model”).
First let’s look at Games Workshop’s production plan. Essentially they use pewter, resin, or plastic injected into molds to quickly produce models on “sprues” to be boxed and sold to consumers. While all the molding material is cheap, the molds themselves are expensive to produce and are specifically designed for a particular material. Molds designed for pewter are cheapest while molds for plastic are the most expensive. The firm usually engages in projected sales analysis before deciding to make a model’s mold type for plastic, resin, or pewter. Simply, if they predict a model to be sold in greater quantity, the higher quality mold they will use. Once packaged into a boxed form, the main cost is shipping through a massive distribution network worldwide. The upgrade from pewter to resin was aimed as being an increase in model detail and quality, but consumers largely rejected it as being too fragile. Since that backlash, the company has been moving forward with almost exclusively plastic model production for all new or recent releases. There are still some older model lines in pewter and resin. In addition to these things, GW also sells paints, tools, and rulebooks.
            So GW tries to produce high quality products, and also stated a desire for community outreach via their stores. This outreach also extends to conventions, and the greater community online. While in the past year GW has made phenomenal growth, prior to that was a sort of “dark age” for consumers in which the 7th edition of their flagship game saw consumers selling out of the IP entirely. It proves challenging for such a socially driven company to also operate in a simple profit driven way, since consumers are very sensitive to the firm’s behavior.
            For an individual consumer, there is a basic utility in collecting models. Once enough models are collected to reach a competitively playable amount, the utility of more models begins to quickly fall off. Then, the firm will release rules updates and changes that effect what models do within the game, effecting those particular models’ utility. This will effect consumer taste and preference on which models to buy, and which models to use when playing competitively. There is some differentiation in consumer behavior however, since some who enjoy painting the models more than playing may have a utility that does not respond to rules changes, whereas competitive players are constantly looking for an edge in competitive play using the newest models with the newest rules.
            Essentially the firm can use rules as a huge motivator for consumers to buy models. There is a delicate balance to changing rules and releasing new models however. If rules changes are too extreme, players will feel the game is not balanced and rewarding to play. If changes are not frequent enough, players will become bored with game mechanics from rules they have seen every iteration and combination of. If changes are too frequent, a massive barrier to entry will arise in learning and keeping up with the most current rules, and relative switching cost will decrease in the perception of consumers comparing the current rule system to rule systems of other games by competing firms that are easier to get into. When these things happen, the rules changes and updates will actually drive consumers away from GW properties altogether. So there is a place of balance where the firm can incentivize with interesting rules, without breaking the game and making the consumer base feel betrayed. During 7th Edition of Warhammer 40,000, the game was very unbalanced and even described as “pay-to-win”, which hurt GW sales dramatically and lead to the growth of competitors taking some of their market share. GW’s recent success demonstrated in the 8th edition of Warhammer 40,000 has been namely due to improved rules balance in both of their flagship games, and a massive effort to engage the community on rules updates. This makes for a win-win relationship for both where the consumer should get a better product and the firm should have reliable sales. As a for-profit publically traded firm however, there are massive incentives to please shareholders by going back to extreme rule changing tactics for quick money. If GW can continue to resist this under its current leadership, it will likely continue to make long term profits.

            When players do leave GW, as is what happened with the 7th edition rules era of Warhammer 40,000, it is usually due to the high cost of models in conjunction with broken rules making consumers feel they paid a high cost for very little relative utility. This is further frustrated by GW having model pricing typically 3-4 times that of other firms. When the game is unbalanced, players will compare these costs to utility, and if the Switching cost to sell out and buy into another firm’s game system looks promising, many consumers will. However the high model value lost when reselling GW models when switching creates very large barrier to exiting GW’s market for greener pastures.
            While GW is the big dog on the block, they have some disadvantages when trying to keep their competitors out. Firstly, once consumers set the unique IP’s aside, other firms can easily produce model molds (though usually not plastic) and write interesting rules. GW by its large nature is slow to respond to changes in consumer preferences compared to many small firms, and because of this many successful substitute miniature game companies have arisen and persist in the market. They have also been able to run very long periods of beta testing rules, which GW is reluctant to do. This leads to competition to creating clever and interesting rulesets with low barrier to entry. However, several of these small firms have been corrupted by their own success, lost sight of their relationship with consumers, pushed out bad rules and collapsed. The advent of 3D printers, and crowdfunding has also led to the ability for like-minded entrepreneurs to band together even over normally prohibitive distances to create games and firms that compete with the gaps of the miniature game market GW can’t cover.
            In spite of this, even during the downturn time periods, GW still has a massive loyal consumer base that will stick it out through bad rulesets. This is proven by the fact that while the firm can have massive downturns, they retain a massive foundation to spring back up from with their most loyal customers. Part of this is due to GW being both the biggest and oldest miniature game firm in the market with almost 50 years of development of their IP, which has a very massive and deep lore composed of hundreds of novels and rulebooks. For GW to succeed further, they need to maintain a positive relationship with customers through the rules supporting their models. In this way, consistent rules will contribute to the perceived long term value of the models, which will be reflected in consumer trust and loyalty long term.
            Miniature games compete successfully with video games due to their actual differences as a product. They are not perfect substitutes so consumers face distinctive tradeoffs when selecting which entertainment route to go. In the Youtube video “The Warhammer 40k License – A Total Change of Strategy – Extra Credits” the team at the Extra Credits channel describe how  GW has looked at the massive video game market with an interest to attain a share of the market, yet while they own many licenses, they have no real stock in the success of video games or pre-existing market presence. They also do not have an in-house video game development team, which has led to some interesting licensing behavior. They openly give licenses to use their IP’s to almost any video game development firm. This has led to them funding over 20 different firms to produce video games for their IP in the video game marketplace. Due to this, most game developers fail to use the IP effectively but the few good games using the IP rise to the top. The Extra Credits team expounds that GW likes this because it takes little investment but has massive returns on occasion, and helps get notoriety in the video game market for their IP. This publicity will hopefully lead some gamers to investigate tabletop games.  Additionally in the video game market memory is very short when a game has a poorly received release, which means games that do poorly don’t greatly tarnish GW’s IP’s. Really only successful and well received video games remain in the community psyche, creating a win-win advertising scenario for GW(“The Warhammer 40k License”). Also, while generally video games and tabletop games are substitutes due to consumer’s time and budget limitations for entertainment, I think in one regard they can be considered compliments. For example, if a consumer becomes interested or motivated by the IP, they will pursue the IP in both the video game and tabletop game market. In this way, the video games and tabletop games can be compliments via a shared IP. This is just icing on the cake for GW’s wild and free license behavior.
 Pricing and Resale Maintenance
GW also has had to contend with storefronts selling their products way under MSRP online. This has led to GW issuing very strict minimum pricing with anyone they deal with. Many an ebay seller who undercut the MSRP of the market were shutdown. This was intended to help local store sellers, which are really necessary to the market for people to have a place to participate in games.
As for their actual pricing, which is generally regarded as quite high, I found some interesting anecdotal evidence. Certainly, their input costs are mostly based on the quality of the mold they produce, in order to manufacture the models. Other inputs such as the plastic, shipping, and rules are all so cheap they are far less significant costs to GW. So the theory goes, GW prices models based on how much it would take for them to make their money back and the high price of the metal molds. This is why single character models are priced so high, but things they expect to sell more quantity of can be priced lower, since they will get more money for the mileage out of the mold. This makes a lot of sense, as pricing doesn't seem to correspond to weight of the model kit, size of the model, or function in game mechanics.

Thanks for reading!

Works Cited
 “Britons Are Increasingly Turning to Tabletop Games for Entertainment.” Games Workshop Investor Relations, 4 Oct. 2018,
Credits, Extra. The Warhammer 40k License - A Total Change of Strategy - Extra Credits.
            YouTube, YouTube, 8 June 2016,
Group PLC, Games Workshop. “Games Workshop Group PLC.” 20 Jobs That Will Be Replaced
by Technology, 2018,
Group PLC, Games Workshop. “Our Business Model.” Games Workshop Investor Relations,


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