Playing Monopoly

(Monopoly is a Parker Brother game. Image from worldofmonopoly.com)

As gamers we’ve all busted out that board before, scrambled to get the token we want before anyone else grabbed it, and even had arguments whether there should be a pot of cash associated with Free Parking (there shouldn’t, you damn heretics), but we’re not here to chat about the game that is the epitome of Ameri-trash gaming and the Objectivists' ideal of the American Economy. We’re gonna talk about the Evil Empire. Big Brother. The game company we all love to hate: Games Workshop.
And we’re going to consider it from a strictly economic point of view. 

Caveat: I am not an economist. I like economic theory. There are folks who get paid relatively well to be economists and they can probably explore and expound on the points I’m touching on here in much greater detail. The goal of this article is to provide a soupçon of information and have fun doing it. 

So, from a microeconomics point of view, GW’s business model (at least until very recently) was almost a perfectly pure monopoly. Consider the characteristics of a monopoly:

• One seller of a good without a close substitute
• High barriers to entry
• Significant market power

Taking a look at these individually reveals just how close to a monopoly GW’s business model is.

One Seller of a Good without a Close Substitute

This is the one that skews the curve a bit. While they distribute through game stores, via their own retail spaces, and though their own web store, products for Games Workshop games are only produced by GW itself which meets the criteria for a monopoly. 

There are close substitutes (alternate models from Mantic, MaxMini, Kromlech, etc.) and other games you can play (Malifaux, Warmachine, Flames of War, etc.), which is why back in the day GW had the thou shalt have no other models in your 40k army than GW models commandment in place at tournaments and in their stores. Why would you even give another company a chance to steal your customers? You wouldn’t. It’s just not good business.

And I believe we’ve all seen GW make the argument that there is no close substitute for the GW Hobby Experience™. Again, this is a way to protect their share of the market and reinforce the message that the best GW fans only play with GW products.

High Barriers to Entry

This doesn’t refer to the prices we have to pay to pick up a new set of space marines, it refers to the challenge a new company has if they wanted to start production at the same scale as GW. Over the past decade we’ve seen upstart companies (Privateer Press, Wyrd, Battlefront, and others) begin to cut into GW’s market share, but they’ve done it by starting small and slowly building their business.

Again, there is a bit of a technicality in that someone with sufficiently deep pockets could swoop in and set up a competing company, but the investment would be pretty large and probably privately financed as getting shareholders to invest would be difficult (but not impossible).

Significant Market Power

This is where GW really looks like a monopoly. The only way to buy their product on the internet is via their web store (caveat: and eBay where they have no control at all, but eBay is kinda the wild west of retail anyway).
As a brick and mortar independent retailer there are really only two ways to carry GW product:

• Through a rather egregious GW trade agreement that limits what you can actually stock.
• Purchase GW product through a distributor at less of a discount.

God forbid if, as one of their trade accounts, you don’t play ball the way that they want you to, you’ll be cut off tout de suite.

GW also sets and controls the market price on products by releasing a limited amount of product (special releases, limited editions, etc.) ensuring that the customer must deal directly with them for certain product. The only organizations that fit the standards of a monopoly better than Games Workshop are OPEC and De Beers, and GW should only wish that the aftermarket for its product was as drastic as the resale value of diamonds (which typically drop in value by 50% the second you step out of the store and are usually only reach a resale value of 35% at best).  (Marketplace, 2013)

“The next time you look at a diamond, consider this. Nearly every American marriage begins with a diamond because a bunch of rich white men in the 1940s convinced everyone that its size determines your self worth. (sic) They created this convention - that unless a man purchases (an intrinsically useless) diamond, his life is a failure - while sitting in a room, racking their brains on how to sell diamonds that no one wanted.” (Dhar, 2013)

Sound like anyone we know?

So What Can We Do?

As the consumer, there’s not a lot we can do with regard to GW’s business practices that we’re not already doing: voting with our feet and our dollar. Some hobbyist and gamers find that other games like Warmachine, Hordes, or Malifaux scratches the wargaming itch just fine. Others cut back on their purchases, or seek out substitute miniatures for their GW armies. 

Other game companies are also cutting into the pie that is wargames spending as well. Many wargamers have started playing games like X-Wing and Attack Wing, and while some wargaming purists don’t consider X-Wing or Attack Wing a miniature wargame, I would challenge you to find a group playing either that isn’t interacting in the same manner as a deep game of Warhammer or 40k.

Additionally, you can keep playing GW games and making your weekly purchases knowing that you contribute in some small way to their business model. 

In the end, the best action you can take is to follow the basic assumption of all economic principles: being an informed and intelligent consumer.  

References:

Dhar, R. (19 Mar, 2013). Diamonds are bullshit. priceonomics.com. [Web page]. Retrieved from http://blog.priceonomics.com/post/45768546804/diamonds-are-bullshit.

Marketplace. (22 Feb, 2013). Diamonds are not a jewel of investment. [Web page]. Retrieved from http://www.marketplace.org/topics/business/diamonds-are-not-jewel-investment.