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| (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.
