Monday, 4 August 2014

"Games Workshop has had a really good year." - 42% Loss In Profit, Mass Redundancies, Price Hikes And A Fleeing CEO

Truth be told I did not want to do this. 

We've covered a few articles such as this one of late. The BBC's slanderous coverage of and e-sports, and EA's attempt to deflect blame from itself onto older gamers were uploaded just last month. These are the sorts of articles I only want to do once every several years, when some speech or article really needs to be stripped down and truly analysed to show everything that went wrong. The sorts of ones which are so insulting, so poorly put together and downright blind, it needs to be dissected and taken to bits. Trust Games Workshop to deliver something which eclipses those other two.

Said letter came in the form of 2014's Chairman's Preamble, written by the company's chairman and acting CEO Tom Kirby. Having helmed the company for the last six years, Kirby has been a derisive figure to say the least. While helping to drag the company out of the slump it had fallen into, his tenure saw a never ending crisis of PR disasters, unpopular decisions and relentless price hikes. 

Few of these have gone down well with fans, and to put it simply the company has been floundering for some time now. It has been desperately trying to work out some way to keep itself afloat, while making every wrong decision possible when it came to long term survival. 

The situation itself was a time bomb, their every solution and move to keep themselves stable an act which would eventually collapse beneath them. This finally came to a head earlier this year when the company lost 25% of its stock in a single day, with this year's profits revealed to be down 42%. The panicked moves which followed have involved dissolving multiple foreign HQs, stripping down staff numbers until many stores consist of only one manager and one staff member, and a sudden jump to push out a new edition several years early.

This could have been a time to admit past mistakes, to address the company's failings, to win back the crowd and assure that they realised what was going wrong. Instead the preamble begins with this statement, setting the tone for the whole piece:

"Games Workshop has had a really good year."

Oh dear. It seems Games Workshop will not admit it to its failings even as they are staring it in the face, nor even the severity of its situation. It's now adamantly attempting to insist everything is entirely fine. Believe it or not, this gets even worse with the next line. Kirby tries to brush any immediate responses or counter arguments under the rug with arguments on how the company is viewing its successes:

"If your measure of 'good' is the current financial year's numbers, you may not agree. But if your measure is the long-term survivability of a great cash generating business that still has a lot of potential growth, then you will agree."

Let's focus upon "survivability" just for a moment shall we. The presence of that word alone shows that this has not been a good year. There is no mention of growth, development, greater stability or increasing its customer base. No, instead the company is merely focusing upon survival at this point. It has taken such a hammering that Games Workshop is less concerned with attempting to boost performance so much as ensuring it will still be around in the near future. 

This is not not an indicator for a good year, this is a sign that things are very wrong and the company is somehow trying to spin this as some big leap forwards. This announcement is wording and treating the very act of minimalising the damage of their great failure as if it is some accomplishment rather than a failing on their part. This is only made clear in the statement which follows. As it runs through the shutting down of multiple foreign HQs, redirecting most channels through to Nottingham and making countless individuals redundant, Kirby tries to chalk this up as a success. He talks about how fewer people will cost them cash and praises the effort of the IT group in restructuring the company so that they can more easily replace people. 

Everything here reeks of damage control and desperation by a maimed company, but rather than addressing this he spends time talking about how this will save the company millions. He talks about how this will save them money for the future, and treats this like some massive leap forwards, right after admitting the year's financial numbers have been far from good. This is not only stunning hypocrisy, but it insults those reading this with such a poor attempt to deflect their attention from the losses taken.

Next he moves onto addressing Games Workshop's efforts to combat those stealing from them:

"In the technological world we occupy there is constant debate over who 'innovates' and who merely copies. We have, this last year, spent an indecent amount of your money trying to stop someone stealing our ideas and images. It is a very difficult thing to do  when it is done through a legal system designed to prevent people stealing hogs from one another. Our experience has probably been typical of most – far too much money spent on far too little gain. The argument is that we have to do this or we will, bit by bit, lose everything that we hold dear, everything that keeps the business going. Our crops will wither, our children will die piteous deaths and the sun will be swept from the sky. But is it true? 

Last year I published the secret that I believe is at the heart of what makes this business great. Steve Jobs once did the same over at heavily litigating Apple. He said they ignored everything that did not lead to 'insanely great products' and that was what made them great. None of the people Apple are suing are trying to do that, so why sue? 

I said, ‘we recruit for attitude and not for skill’. It is what makes us great. It is those people who design the miniatures; those people who make them and those people who sell them; those people who transformed our business systems in five short months. I have  been deluged with two comments about that statement, neither of which was: 'you fool, you just gave away the crown jewels'.  Why doesn't everyone do it? Ask them."

Let's just ignore the fact this rambling, meandering statement tries to deflect focus however it can with comparisons to other companies. Let's instead just focus upon the obvious: This is addressing the recent scandals surrounding Games Workshop's trademark bullying and throwing its weight around. The company has been infamous for decades about how it will leap down the throat of anyone it considers to be breaking its trademark laws in some way. 

Sometimes this has been justified such as with Electronic Arts stealing vehicle designs or other problems, but many times this has served only to pettily shut down community hubs and throw their weight around. Notably a very large amount of websites supplying materials and helping to support Games Workshop's ignored licences were shut down in the two years prior to Special Games being closed down. Most likely in the hope there would be nothing left. Last year in particular saw this finally, totally backfiring upon them and showing just how vulnerable the company is.

Targeting a small ebook release, Games Workshop attempted to have Spots The Space Marine removed from Why? Because it used the term "space marine" which Games Workshop attempted to claim ownership of, despite being a general term established decades before the company's formation. While initially meeting with success, this soon backfired, turning into another big PR firestorm for Games Workshop with the company being mocked and ridiculed at every turn. It failed to even keep the ebook off of Amazon, and author M.C.A Hogarth revealed how the company had utterly refused to peacefully negotiate their way through this conflict. 

These are the sorts of incidents Kirby is referring to here along with the Pandora's Box the company opened by going after Chapter House Studios, something we'll get into in the next bit. The company has a legendary reputation for legal bullying, shutting down competition rather than dealing with them and going out of its way to cause problems. Now, in this letter, it tries to metaphorically compare finally failing to beat others down with lawyers to children dying piteous deaths. Even as it tries to mention the fact it has gone too far with spending so much cash on pursuing such claims, it's trying desperately to garner sympathy. I'm honestly not sure whether to laugh or be insulted at such pathetic behaviour.

Then there's that final paragraph there, the one which states "we recruit for attitude and not for skill’". This confused message is trying to cover everything from the model designers to the people who have helped rapidly restructure the entire company, but it's also referring to the company as a whole. It's also trying to somehow argue that this is a good thing, rather than possibly this being the very reason the company is in this mess to begin with. 

Games Workshop's attitude has been to ignore its community, ignore all advice, destroy any competition any way it can via lawyers rather than actually competing with it, shut down all presence on social media, and stick with unanimously unpopular decisions. Their level of skill meanwhile is one which immediately panics upon being confronted with a problem and reacts in the worst possible way, favours quantity over quality when it comes to its rulebooks (especially in this last edition) and has a design team which endlessly churned out models mocked by the fans. First the Stormraven, then the Centurions, then the Dreadknight, now Logan Grimnar riding a wolf-sleigh, and those are just a few space marine examples. Yet even after years of backlash culminated in this recent disaster, Kirby here is still trying to claim it was all fantastic.

Of course, this is made all the worse by the next section, which tries to address a problem the company is facing. One which may well kill it off in the next few years.

"Because no one seems able to grasp the essential simplicity of what we do there has always been the search for the Achilles heel, the one thing that Kirby and his cronies have overlooked. These are legion. I run through the list from time to time when someone says that computer games will be the death of us – they are so much more realistic now! – again. This year it is 3-D printing. Pretty soon everyone will be printing their own miniatures and where will we be then, eh? 

We know quite a lot about 3-D printers, having been at the forefront of the technology for many years. We know of what we speak. One day 3-D printers will be affordable (agreed), they are now, they will be able to produce fantastic detail (the affordable ones won't) and they will do it faster than one miniature per day (no, they won't, look it up). So we may get to the time when someone  can make a poorly detailed miniature at home and have enough for an army in less than a year. That pre-supposes that 3-D  scanning technology will be affordable and good enough (don't bet the mortgage on that one) and that everyone will be happy to  have nothing but copies of old miniatures.  

All of our great new miniatures come from Citadel. It is possible that one day we will sell them direct via 3-D printers to grateful  hobbyists around the world. That will not happen in the next few years (or, in City-speak, 'forever') but if and when it does it will just mean that we can cut yet more cost out of the supply chain and be making good margins selling Citadel 3-D printers. 

At the heart of the delusion is the notion that designing and making miniatures is easy. It isn't."

Sweet heaven, where too begin with this one. It highlights so many negative points, brings up so many reasons that Games Workshop may fold, and then immediately brushes them aside trying to pretend they've been easily dealt with.

The main point here is obviously covering the problems and issues surrounding 3-D printing, with the possibility of it rendering Games Workshop's current production model irrelevant. Given enough time it can easily produce models on par with Games Workshop's blocky human vehicles or even its basic infantry. They're understandably concerned given how piracy might skyrocket and the fact that other, smaller, companies might soon have the resources to outstrip them. The problem is that rather than truly going with the flow, they seem to be convinced that they can still beat piracy via their usual methods.

Now, the last paragraph does admit that their might be the day when Games Workshop will sell items directly via 3-D printers, but that's only left as a possibility. Instead what it tries to argue is that Games Workshop will stay ahead thanks to the higher quality of its products and little else. It tries to emphasise that the more affordable 3-D printers will not be capable of the quality of Games Workshop, possibly true, but just think of what the company has done in the past. 

For the sake of argument let's just ignore the poorly designed, often laughable, models we've seen. Instead let's focus upon one particular change which represents its commitment to quality: Finecast. Now, Finecast is a very hit and miss topic even today. Some models produced were of a fantastic quality while others were putrid disasters, filled with air bubbles, flash and massive deformities ruining each miniature. However, just think about its history for a moment. Games Workshop first tried to introduce these with massive cost cutting measures, using the same molds as they had with their pewter incarnations. The end result was the sort of poorly made abomination which should never have been put on store shelves.

Things would only become worse in the months to come, with the material itself proving to be  difficult to work with. So much so that some professional commission painters such as Arsies and FantasyGames outright banned working on them. Even when Games Workshop did finally improve and tried to perform damage control, it did so by trying to sell off repair kits to hobbyists. This is also to say nothing of Forge World's quality of models, which has seen a very surprising decline in integrity in the past few years. This reached the point where the the otherwise fantastic Fire Raptor Gunship could be snapped in half just trying to get its frequently warped sides to fit together. Both have seen improvements, but both also serve as lessons on just how low Games Workshop's standards can sink. Hardly the most encouraging sign of the company being able to out-compete others by offering higher quality services.

Even accepting that however, just look at the state today. Previously the company was trying to shoot down competitors for its games with lawsuits rather than out-competing them. The failure on Games Workshop's part in the Chapter House Studios lawsuit to achieve a real victory led to their later response, that they were willing to go so far to screw their own customers rather than truly beat them. 

For example, one of the models Chapter House Studios was offering was a Mycetic Spore Pod, effectively a tyranid drop pod, and Games Workshop had yet to produce a model for it. After the lawsuit, rather than trying to compete with the company by providing a cheaper or better made Pod, Games Workshop simply removed it from the latest edition of Codex: Tyranids. Beyond that, the company repeatedly enforced multiple embargos to try and limit the effectiveness of companies supposedly "freeloading" off of Games Workshop's success, and make them come directly to them. These are the actions of a company with the attitude and mentality of thug, winning only through sheer brute force and actively shutting down the competition. Not one which has earned its place and customer loyalty by offering a better service.

Even somehow ignoring that sort of behaviour, the sort of actions which have earned it the loathing and dislike of even die hard Warhammer fans, we need to look at the state of things today. Over the Sixth Edition, Games Workshop pressed ahead and took its usual tactics to a whole new level. Suddenly the number of codices exploded to a point we have not seen since the Second Edition, with countless new individual rulebooks, dataslates and armybooks being churned out at a time. The company pushed to include more units from Apocalypse at every turn, with the number of superheavies increasing with every list. Multiple massively expensive sets were launched at a time, with everything from the Imperial Knights to an entire chapter's worth of astartes going up for sale. The company was trying to get profit by targeting a small number of people, those few who were willing to fork over immense amounts of cash for very big shiny things. As you can imagine from the situation the company is now in, this has not gone very well and its already niche market is narrowing with every passing price hike.

Even when offered some of the highest quality items possible, people are simply no longer willing to pay Games Workshop's extreme prices. Most AAA video games on release which cost far less than any Baneblade, Lord of Skulls or Imperial Knight at any time of the year. Codex prices have skyrocketed to the point where people simply cannot afford to keep going, and those who do are limiting their spending to fewer armies, just to ensure they can keep one or two armies afloat. This is, of course, assuming they don't go looking for a cheaper option selling Warhamer miniatures for a fraction of the price.

The reason the likes of Yoymart and others exist and make a profit is because their costs are staggeringly low. Often many models they have cost less than half Games Workshop's prices to purchase with no significant dip in quality. Despite being counter-fit knock offs, these are often at least on par with the quality of Games Workshop's stuff and leave the likes of Finecast in the dust. Beyond some occasionally copious flash, there is nothing wrong with them, and they even stock miniatures Games Workshop itself has refused to keep producing. 

We're already seeing what will happen with 3-D printing here and now, as already customers are either leaving Games Workshop entirely or trying to find cheaper alternatives. Going from what this letter states and the attitude present in it, the company is already damned because it cannot offer high enough quality to justify its prices, and the prices themselves are driving most customers into finding new buyers.

The letter closes out with a statement which utterly torpedoes any faith or reason to believe a single word of this letter. Kirby announced that, despite claiming Games Workshop is doing so incredibly well, he just happens to be stepping down as its CEO and may not even remain on the governing board. They're now openly trying to recruit new people to take his position for the coming years.

Ignoring how many may have been insulted by the "attitude and not for skill’" job requirement, this is more than a little suspicious. The same man who dragged the company into the brink of disaster over the last six years is now suddenly walking away from the position as everything is crashing down, expecting someone to take his place. It's almost as if they are looking for someone else to suddenly gain a promotion, taking the blame and the fall when the company comes crashing down around them.

What's truly sad is it shows just how backwards, inept and obtuse Games Workshop truly is. The fact the company was willing to try and pull off these statements, thinking a single one sounded even remotely believable, is astonishing beyond words. It also shows just how bad the company truly is, even when compared with others deemed as the big evil of their medium.

Take for example what's happened to Microsoft and Electronic Arts in recent years. Both have suffered horribly thanks to the hubris of those running the companies, with Electronic Arts drawing a significant number of parallels with Games Workshop. All three pressed ahead with decisions which were only serving to anger their customers, push down sales and methods which were not financially viable in the slightest. 

The key difference here? Whatever else you might think of them, Microsoft and Electronic Arts are at least putting on a show of trying to change for the better. The companies have apologised for their actions, seen massive changes in leadership and Microsoft has pulled a complete one-eighty on its decisions. The follow-up messages to their disasters were apologies, admitting their errors and promising that they could improve, that they would listen and push for a better future. 
Games Workshop though? Not a single damn indicator of being remotely aware of their failings or truly apologetic. The closest they get to admitting an error is not even framed as such and it was more a play to milk sympathy than actually addressing a failing. 

This letter truly encapsulates just why Games Workshop is a failing corporation and should be held up as an example, a warning, to all companies which follow it. 

There really is little else to add. This letter is so baffling it's amazing to think that even Kirby himself thought that releasing it was somehow a great idea, that it might somehow work in the company's favour in this desperate time. If you really want to see an in-depth analysis about where this all went wrong, where this gradually snowballing problem started and became worse over the years, you can find a lengthy analysis on masterminis. The major articles there cover this problem in great detail, with the latest update addressing this letter in particular.

I personally, truly, hope that Games Workshop does climb out of the grave it has dug for itself and changes for the better. With statements like this being freely made though, it's more likely the company is zooming towards its doom and cannot hope to see a way they can change for the better. At this point the best we can probably expect is that a better company such as Mantic Games or Corvus Belli picks up the licences upon Games Workshop's demise.


  1. This is the first letter from any CEO I am saving onto my computer, and I'm going to title it "Corporate Letters: What not to do" and give it to a university professor I know to use as an example in his class.

    That letter was so wrong, on every single level. I'm re-reading it just looking for anything it did right, it isn't even written correctly, I read the article before reading the letter, and I thought it was you who added those brackets to the paragraphs, not him contradicting HIMSELF on what he just said when he's very clearly not quoting anything and has no reason to contradict himself.

    The big thing that got my jaw to actually drop was the very bottom where he says they just hired a new director (non-executive, but still a director) without reading their CV. That is, by far, one of the worst decisions I have ever seen any company ever do, and is quite possibly, the surest sign to get off that sinking ship of a company immediately. If I was that woman they hired, I would have refused the position upon not reading the CV and left. The only place it's excusable to not read a CV (or, in my case, a Resume) is if they were applying for a really bad minimum wage position, so you don't expect them to stay long.

    Fun fact about the company, in June (I think, it might have been earlier, but it was after the 24% loss) they released a financial statement that showed they actually were making a profit as far as selling miniatures goes, I remember very clearly that they had made four million more than last year at the same time, but they had doubled the cost of almost all of its miniatures from the previous year (and where it didn't double them it only put half of them in the box that used to be there) and were constantly churning out new, more expensive sets, and only achieved a gain of four million.
    So while they actually made money, they were bleeding customers, and now it's all going to start catching up with them. Increasing the costs is a diminishing return, go too far with it and you screw yourself over.

    I've mentioned before I'm not going to be too sad when (and not if) they go under, because I don't think the game will die, I'm sure somebody else will pick up the licences, preferably Mantic because I've seen (and heard) really good things from them so far.

  2. I'm just genuinely hoping the company gets picked up by someone who knows what the hell they're doing. Warhammer 40k is a lucrative brand regardless, so a company which knows that absurd price hikes and firing staff in the name of profit for the profit throne is not going to pay off in the long run would be the best thing for it right now.

    I don't want to see this game die when it's got rich potential and a reputation for quality (even with nonsense like the Dreadknight and Centurions, and the abysmal Finecast, GW still puts out some of the best models), and someone who gives a damn about something other than cash for the cash god, profit for the profit throne would do the game so much good.

    Games Workshop proved they didn't care about the happiness of the fans, just squeezing every penny out of them that they could. It's a pity because I still drop into stores every chance I get, not to buy, but just to look at what's new and chat to the staff, and I've always found friendly, helpful staff in every store. I could talk to them about my love for the universe of 40k, ask them how I could get hold of Horus Heresy novels (trying to catch up on the series having not read anything past Eisenstein is a nightmarish thing), and in general I felt like they cared about what they were doing.

    The problem's always been that the highest levels at GW didn't care about providing a hobby. It wasn't about giving people something to enjoy doing with others, it was about making money. I'm not under any delusion that GW would ever not want to make money, but this is showing what happens when that interest overwhelms everything else.

    So yeah, my big hope is that someone picks up the brand from GW and begins to repair the damage that's been done.