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It might have ended before it really began...


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The issue with the Brexit tariff theory is GW use regional pricing. The tariffs only affect imports to the EU so they’d just up the price in the EU. It wouldn’t affect the rest of the world, or ir the tariffs raised the price too much they just wouldn’t sell it in the EU but again wouldn’t affect the rest of the world 

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NOTE: this obviously is not a real investment memo and I have no insider information on GW.  What I do have is 20+ years of experience in the investment community and thus tracking ERP implementations and thus 20+ years observing ERP implantation going wrong short-term.  So I thought it would be fun to mock up a memo as if I was explaining to the investment committee what had jus happened.

InvesmentCommittee@tga.com

RE: Cursed City & GW’s New ERP System

Since several members of the committee have forwarded me articles highlighting the poor roll out of GW’s new product Warhammer Quest: Cursed City (hereafter CC) I thought it was worth putting together a quick memo updating you on the status of our investment thesis.  As you will recall we believed CC would be a key sales driver in the second half.  Good news on that front… it sold out.  The bad news?  It looks like demand far exceeded supply and thus there was a missed opportunity here.  What we do not know yet is whether actual supply was less than intended by GW or whether demand just far exceeded their estimates.  Unfortunately we have been unable to contact GW’s investor relations to gain further insight into this.

Based on our channel checks and other inquiries though we believe the core culprit was issues related to the implementation of the company’s new enterprise resource planning (ERP) system.  While we have highlighted the long-term benefits of the ERP for the company as the product lines have dramatically over recent years we also warned that in our experience most ERP implementations have “hiccups”.  Everybody knows this but we also know that where these “hiccups” will actually show up is unpredictable.

In hindsight, CC looks like it was particularly vulnerable to such problems.  As a one off boxed game that incorporates products both from their Nottingham facility AND from China (particularly in the written materials) it required above average coordination across the ERP system.  We also know that Brexit has complicated imports making this issue even more difficult to address.  

We have heard suggestions that orders placed well in advanced were incorrect leading to too much of certain parts of the set and too little of others which were not identified until it was time to bring the box set together, by which time it was too late to address.  We have certainly seen such issues arise in past ERP implementations.  Alternatively others have pointed to an error in the order system which led retailers to believe that they would receive more box sets than should have been allocatable.  Again this is not uncommon with new ERP systems.

At least a couple of you have reached out asking me why they either didn’t learn from the Indomitus box set and/or follow the same made to order approach that followed a similar problem last year?  As we have highlighted in previous memos COVID 19 has had several major impacts on GW.  To the positive it appears to have dramatically increased demand for products.  Negatively their factories, warehouses and stores all experienced shut downs.  Broadly this has created shortages of “evergreen products” (those supposed to be available for order on a consistent basis) as our checks of availability issues on the website has regularly highlighted.  More particular to this issue though is that it has also severely impacted the new release schedule.  When Indomitus came out GW had taken steps to slow its release schedule which we believe had created an opportunistic production window for Indomitus made to order.

In contrast, this year GW had been attempting to return to a more normal release schedule leading up to CC.  Specifically AoS has been working through the Broken Realms series, which has included multiple special box sets and new models, as it leads up to a new edition.  In 40k the roll out of 9e continues , for example with the new Drukhari codex and continued releases in the very popular Sisters of Battle line.  While the CC problem has been followed by another “pause” in the release schedule simply put we don’t believe that there was any opportunistic window for a made to order follow up.

We believe the current pause is to ensure that any ERP issues surfaced by CC do not impact the AoS 3.0 release this Summer.  From a business perspective we believe this to be the best decision.  While boxed sets are an important part of the business, both in bringing new players into the game and taking more wallet share from existing customers we do not believe the profit margins on one off sets such as CC are as high as start collecting sets which have far less written materials and tend to have fewer models ( or put another way tend to have smaller discounts to the products when sold separately).  Given this, if the choice was whether to sell more CC now or risk delaying or worse, selling fewer AoS 3.0 sets this Summer we believe the decision was clear.

The outstanding question though is whether this has a long-term impact on customer or 3rd party retailer relations?  A consistent complaint has been GW’s lack of communication as orders were cancelled and supporting material was removed from the website.  Cynically one could argue that this will only increase customer’s tendency to preorder direct to improve their chances of receiving limited edition orders.  Of course the concern is that it turns customers away.  Here we do think it being a one off is helpful, again, supporting the decision to focus on the 3.0 roll out.  If that goes well even if it is not “forgiven” we believe it will largely be “forgotten”.

At least by customers.  The 3rd party channel response  may be more problematic.  We cannot be sure yet how they will respond but we are reaching out to store managers with surveys that we hope to have responses to be next week.  We will forward the collated data to the committee.

In a conclusion, while we are closely monitoring the ERP situation net-net better for it to have hit CC than 3.0.  The latter is key to avoiding a significant sales drop off as we annualized the 9e 40k rollout and the COVID 19 sales boost.  Our primary concern then remains the risk of a sales drop off in the 21/22 fiscal year as the benefit of new editions and quarantine demand fade.

As always, if investment committee members have follow up Qs please respond to this email.

Thanks,

B&P

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4 hours ago, Joseph Mackay said:

The issue with the Brexit tariff theory is GW use regional pricing. The tariffs only affect imports to the EU so they’d just up the price in the EU. It wouldn’t affect the rest of the world, or ir the tariffs raised the price too much they just wouldn’t sell it in the EU but again wouldn’t affect the rest of the world 

There are various trade agreements in place that prevent GW from picking and choosing where they sell products.  It also covers that (almost*) every single plastic product needs to be made available to third parties, even limited edition ones.

* This excludes store exclusives such as the birthday minis which are only available in store and not online

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What ever it is we have a fairly straight comparison with the launch of the new Hive War starter today. A boxed specialist game full of card, terrain and niche models (i.e more niche than Space Marines). Almost 8 hours later it's still available for preorder even in my FLGS. 

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On 5/9/2021 at 5:00 AM, zedatkinszed said:

What ever it is we have a fairly straight comparison with the launch of the new Hive War starter today. A boxed specialist game full of card, terrain and niche models (i.e more niche than Space Marines). Almost 8 hours later it's still available for preorder even in my FLGS. 

If you look around online at least, new Necromunda isn’t very popular (almost everyone complains about how they’ve released and then released the gang stats 3 or 4 times since 2017, a lot of stuff changed from previous editions people aren’t happy about etc). I don’t know how correct that view is however. Our regular group of about 10 people all like necromunda, and aside from AoS it’s the only gw game we all like.

Hive War is also the main ‘starter set’ for necromunda, a game that will live on for as long as sales allow it to. The other issue is Escher have been released in so many boxes by now that people just aren’t interested. It’s not like AoS or 40K where you can keep buying multiple boxes, necromunda roughly uses only 10-20 models (varies by gang, how long you’ve been in the campaign etc)

as for content, the plastic components make up most of the box contents, unlike Cursed City

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1 hour ago, Joseph Mackay said:

If you look around online at least, new Necromunda isn’t very popular (almost everyone complains about how they’ve released and then released the gang stats 3 or 4 times since 2017, a lot of stuff changed from previous editions people aren’t happy about etc). I don’t know how correct that view is however. Our regular group of about 10 people all like necromunda, and aside from AoS it’s the only gw game we all like.

Hive War is also the main ‘starter set’ for necromunda, a game that will live on for as long as sales allow it to. The other issue is Escher have been released in so many boxes by now that people just aren’t interested. It’s not like AoS or 40K where you can keep buying multiple boxes, necromunda roughly uses only 10-20 models (varies by gang, how long you’ve been in the campaign etc)

as for content, the plastic components make up most of the box contents, unlike Cursed City

Fair enough I was under the misapprehension that as a 40k line it'd be more popular than a niche AOS Warhammer Quest - but fair point.

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The more I think about it, the less likely a copyright ssue seems to me. They still have the website up and they are still selling the novel so there can't be any problems with the plot or characters and they have most of the races and factions covered by their own copyrights. I don't know much about copyrights though so it's always possible. Just seems odd.

My guess is good old-fashioned supply issues that extend beyond GW's control (i.e - they don't know when the problem can be fixed) and GW's deliberate aversion to open communication.

Unfortunately, GW are the only one's who know for sure and they have chosen to stay silent. Until they decide otherwise we may never know exactly.

 

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6 hours ago, zedatkinszed said:

Fair enough I was under the misapprehension that as a 40k line it'd be more popular than a niche AOS Warhammer Quest - but fair point.

 

7 hours ago, Joseph Mackay said:

If you look around online at least, new Necromunda isn’t very popular (almost everyone complains about how they’ve released and then released the gang stats 3 or 4 times since 2017, a lot of stuff changed from previous editions people aren’t happy about etc). I don’t know how correct that view is however. Our regular group of about 10 people all like necromunda, and aside from AoS it’s the only gw game we all like.

Hive War is also the main ‘starter set’ for necromunda, a game that will live on for as long as sales allow it to. The other issue is Escher have been released in so many boxes by now that people just aren’t interested. It’s not like AoS or 40K where you can keep buying multiple boxes, necromunda roughly uses only 10-20 models (varies by gang, how long you’ve been in the campaign etc)

as for content, the plastic components make up most of the box contents, unlike Cursed City

Necromunda gang boxes, however, are popular, at least when I still went to physical stores so I could ask. The release of Stargrave will also give them a bit of a resurgence, as the problem for Necromunda wasn't plastic but paper.

The rulebooks are quite shoddily written, unbalanced and way overpriced. And you need three to field your 10 strong skirmish band.

Even their strongest point, artwork, diminishes as artwork is repeated betweenbooks.

That pricing also didn't help sales numbers of the "starter set" that costed over half an AoS army. Or more than a whole one if you play BCR.

There is a reason the next one costs half what the previous one costed.

I was actually looking into Hive war. I enjoy painting Escher ladies and can then also play them with GW's rules.

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4 hours ago, CDM said:

Just makes me think it's not done forever still. Why have this unedited? Could if easily took this out before mass printing

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 A lot of games will include this statement across ranges because its how they can gage interest in future plans. However it doesn't mean anything will be coming or will not be. Treat it like a blanket statement for encouraging people who have thoughts about the product to share their thoughts. Nothing malicious or insightful I think. 

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The whole discontinuance of Cursed City sort of put of damper on me actually playing the game.  Does it have staying power or is it sort of a one and done sort of game? I only ask because I have friends to who want to try either Blackstone Fortress or Cursed City but have limited time.  As such I sort of need to pick one over the other.

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It's actually a great game. I really like it. Some of the critiscm I've saw was mostly from reviewers who tend to be expert Wargame/ board gamers and actually game to hard imo.

We ended up with radukar showing up in mission 2 and perma killing Emelda!! 

We've played through suite fat and I find it difficult. I play with my 16 and 9yo and they obviously don't optimise all their moves so i think that's adds to the suspense. 

I think not playing with serious people does help it's cause.

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