Games Workshop: A look into the future

The 800-pound gorilla of the miniatures market has multiplied its sales in the last few years. For the first time since probably 2018, they have spare production capacity. Can they fill it?

Back in July 2018, I wrote a series of articles about Games Workshop. They are in Spanish, and nowadays you can only check them through the Wayback machine. Since then, much has changed at Nottingham's most well-known company. Back then, they had just experienced an incredible growth sprout, from only 118M £ to 219 in 2 years. Growth has slowed down but never stopped. GAW now boasts 470M £ in sales, and almost 135 in profits (60 back in 2018¹), so it is time to try to see

In the same period, the specialist hobby market grew slightly above 90% in the US (according to ICv2 estimates). GAW's sales grew by 155%, to 189.5M £ from 74M £², doing significantly better than the market which, I suspect, has happened in the rest of the countries as well.

In my old pieces, I attributed their recent success to the change in strategy around interaction with the community, a good pace and reception of new releases (although I cataloged that as a risk in case they were badly received, cuts both ways), good value in boxed sets (although at the time I focused on existing range, rather than new boxed sets) and progress in shorter games (Kill Team, Underworlds, Necromunda…) that enabled people that doesn't have 5 hours for a game to still be in the hobby.

Looking at it 5 years later, I think that was spot-on, and that GAW has executed well on those with a few caveats. Let's look at the last few years of execution, and the future perspectives of Games Workshop.

Logistical and production challenges

I haven't counted items at the online store, but the available references in the Games Workshop catalog have gone up a lot. Their pace of release is impressive compared to a few years ago. Take, for example, the last preview. This could have easily been a couple of months’ worth of releases back in the day, and now it is a week. Not all weeks are this busy, but it is not a rarity (see this from last month, or well, the new 40k edition in June).

This is happening while other long-term projects are in progress (somebody said The Old World?) and with a significant overhaul of production capabilities (production capacity has more than doubled at least in terms of injection lines, the ones used to do the plastic minis), and has been supported by a considerable increase in production and design staff.

There have been some hiccups on the production and logistical side… and it is understandable! Games Workshop has a huge challenge on the manufacturing side, which is that they don’t know their TAM… because they are the TAM. On the design side, you are -mostly- adding headcount, which is easier to unwind than new buildings and factories, but not so in this area.

And so, in 2017 the company had 267 production and warehousing staff. I estimate that in 2015 it was a bit above 200, but it was cataloged differently… well. In any case, now we are at 714, with growth only slowing down in the last year. And it was necessary growth! Remember they were selling 25% of what they are selling now! But that, together with the COVID shocks, caused a lot of new releases to go out-of-stock in ours, plus release delays, a lot of the catalog being unavailable in the US or Australia for large periods of time… well, let’s just say it has had its gaps.

Figures for production & warehousing in 2015 and 2016 are estimates, as the design and development for 2023

The problem is figuring out how big those gaps were.

As I said, GAW is its own TAM. This year, releases were not going out of stock in minutes, so it is clear that they have reached a state where production and warehousing have spare capacity (plus, they said so in the annual report). The question we need to answer is… if they had been able to reach 470M £ in sales a year ago, would they have stalled in there? My impression is that’s not the case, and that demand has been growing every year and is still at it.

The important part here is that both manufacturing and warehousing bottlenecks seem to have been solved. I also don’t think we’ll see a 4x growth in miniature selling again in a long time, so the challenges of scaling up the operation should not be that terrible, even if growth happens. That removes a blocker for growth but doesn't drive it. Let’s have a look at the drivers then.

The studio: miniature design, game systems, and, yes, fluff

The studio is I think one of the key components of both keeping sales up and potentially increasing them. The pace of releases and their quality, together with how good the game systems are, and how engaged the fans are with the changes in the fluff (that is, the stories in the different settings). So I am mixing up a bit the miniature design work, how the setting is moving forward, and the publishing branch.

Starting with the resources they have, the design & development area has gone from 167 employees in 2015 to 348 in 2022. In 2023 the number is 295, but that is because reporting changed and part of them are included in a different category now, most likely it has gone up in terms of exact functions. I use 2015 because that is when the studio ramp-up really started. By 2018, the pace of releases was already faster, translations were back in vogue (after publishing only in English for a few years) and online content was starting to ramp up. My view is that this side was managed with time and a lot of forethought. Black Library authors are not GAW’s employees, for the most part, so they are not included here.

First, Games Workshop is really excellent in terms of miniature design and quality, and they keep going up and up, as they keep renewing the old miniatures. The Abaddon redesign is one of the most striking examples, but far from the only one.

In the Fantasy/AoS setting, we also have had some fantastic changes. From Eltharion

To the Light of Eltharion

There is a world of difference in quality. New releases are keeping to this standard, and so far they are being well received. There are only so many things they can redesign, but so far not everything has been updated. More importantly, the studio has been able, so far, of designing new creatures and units, expanding the universe. In my view, this is still a factor that will help sales growth.

Talking about expanding the universe, Games Workshop has published entirely new ranges of miniatures. The lines replacing the old Dawi (or Dwarves) are much richer, nothing remotely close to the Idoneth existed, and let’s not forget about the Squats Leagues of Votann. Add to that the Primarchs, all the Horus Heresy stuff… the range is just so, so big compared to what it was, and so it caters to more tastes (and/or makes the annual expenditure per customer go up).

This has been paired with an increased focus on simplifying the rules both by having simpler games (Underworlds, Kill Team, Necromunda) and by trying to simplify the core rules of the big games. I think they were largely successful in AoS, but 40k ended up being a bit problematic (because of all the supplements that interact with each other). Let's see what 10th brings, but the focus seems to be on streamlining the gameplay, and I think that is good (although many veterans probably won't like it). I think this is part of an effort to bring in more people by making both the game and the community more accessible. And I think it is working!

That is also paired with frequent rebalancing to avoid one faction to dominate the game for a long time. Might seem an insignificant part of the work, but I think it is actually very relevant to keep frequent players engaged. While tournament players are far from the majority, they do spend a lot (since tournaments only admit official miniatures and many of them change armies according to what rules the meta today). Keeping things somewhat balanced is good to engage more players, and also driving some existing ones to do frequent purchases.

On the fluff side, the approach also started to change years ago, and it is only accelerating. The setting stayed the same for more than a decade. Now, every year there is at least a couple of “events" in the two largest settings (40k, AoS) that advance the story. Granted, relevant changes are much rarer, but they still happen. I am really surprised about this! I see this frequent changes in the fluff (used to justify also changes in models and rules too) are keeping the community really engaged, while I would have thought this pace would have induced fatigue.

Overall, I think the studio is doing a great job, and is a core factor in making potential new players interested and keeping the existing ones engaged. Not absolutely everything is good though! There is one release I am particularly interested in, and it is The Old World. I think it can be incremental because it is a different game type (rows & columns, everyone!) and increases the range from a collectibles point of view. But so far we don’t have a release date, and the timing has been a bit off. I am not sure Total War: Warhammer and Vermintide would have driven sales up by much, but it sure would have been nice to have the minis out at the same time.

How are Games Workshop and its community getting along?

As you have seen, so far I have focused on the things Games Workshop is doing to keep their customers happy. I think IP management is important, but not as important (currently and for many years) as the existing community of fans. Once someone is into it, especially into the miniatures side, they do spend quite a lot, and churn means losing a lot of sales. Games Workshop did quite poorly in the late 00s and early 10s, and that was directly related to how well they were treating its community, both in terms of studio work (which has improved a lot, as discussed above) and how they engaged with their fans.

And here there are positives and negatives. Let's start with the good stuff that Games Workshop is doing:

• Warhammer-community is the indisputable hobby center. They have control over the new information and do it really well.

• They are engaging with multiple podcasts and youtube channels, and not only in English (something they had been doing for a while, giving them previews for the rules and the like), but also the most popular in other languages as well. For example, they recently started working with La Voz de Horus in Spain. That is a popular podcast here (tens of thousands in terms of audience), and they have their Twitch and their web. Might seem like a very small audience for it to be worth it, but look… it is also the content the most engaged fans listen to, and they can help set trends locally. Keep the tren-setters happy…

• Their programs for schools, likewise, seem to be expanding. This was already common in the UK for a long time, and in the US started relatively early… but only in 2019 they started expanding to Germany and Scandinavia, 2020 in Australia and NZ, 2021 to Spain and Italy… nowadays it is available even in Asia. I think these programs are quite effective to get new customers and to increase density. As I mentioned in the CMON article, tabletop wargames are about local density. If you are interested in wargames, you will go with whatever game people in your area plays, and also the more people interested, the more there will be. That the UK represents almost as much revenue as the rest of Europe, and half that of North America when either of them is about 10 times the UK in terms of GDP is telling about the effect the dense retail network and these programs have. Historically, the UK has been growing at the same pace as Europe despite being more saturated thanks to that special attention, while the US simply skyrocketed. These programs should help improve the growth rates in Europe, Asia, Australia & New Zealand in the long run (and, to be fair, I think there are already some early results).

• They support the tournament and event scene more than ever. You can check that on the ITC website. There are 2060 ITC tournaments programmed this year for Warhammer 40k only (and more will be added to the last few months in the calendar). 3269 were registered in 2022. And ITC is not even all the tournaments! BCC listed around 400 tournaments for the first quarter of 2018, and in January of 2023 alone it listed 589. The cause is increased popularity, of course, but also more support for the organization of tournaments and more engagement by Games Workshop.

And to top it all off, they are also releasing quality products at a good speed. The hiccups with releases and out-of-stock material have caused some problems, mainly with scalpers, but that seems to be in the rearview mirror now.

Some other decisions are a bit more controversial. Prices are, of course, one, but honestly, I haven’t seen that many complaints about it of late, probably because the boxed sets are still acceptable.

IP management in the audiovisual space though…

Back in 2021, Games Workshop decided to launch their own audiovisual content, branded as Warhammer+. It is mostly a bunch of low-production-values animation shows, plus tutorials on painting, battle reports, and things like that. Very interesting for hardcore fans (and it closed in 2023 with 136,000 subscribers, up 30% from the previous year). That is actually good. A relatively minor source of revenue (that’s a 6.8M run-rate), and probably only borderline paying for itself, but increases the engagement. Maybe it would have been more useful to keep it in the open as free marketing content (I used to think like that. I don’t anymore, will explain in the licensing area) but this can also work.

But taking offline almost all the fan-made audiovisual content was a bit harsh. Sure, they actually hired the creators, and that stopped the backlash a bit. And don’t get me wrong, I don’t see it as an illegitimate move. After all, the Astartes guy was making a bunch of money out of their IP. But it did alienate a lot of people and generated some backlash. I think GAW was quick enough to announce the hiring of the creators, and the rest of the moves compensate a bit. Also, they haven’t acted against parody content (The Emperor TTS content is still up, despite the panic). But that was dangerously close to a Kirby-era move, something Games Workshop should avoid for their financial health.

Also, by locking the audiovisual behind a paywall they removed one of the main showcases for their IP. Now, I don't think this is a Transformers situation, where you can make the audiovisual side work as advertising for the toys (too niche, too expensive, and requiring too much work for that), but I think it can drive engagement up. Some of these videos had millions of views and in fact, the total number of views of Warhammer+ shows is probably below the numbers Astartes pulled by itself on YouTube. Games Workshop seems to be waking up to the fact that some free content is good, but they still offer it from Warhammer+. Honestly, I would love it if they put some of the animation shows on YouTube after a window of time.

Despite the negatives, the community is thriving. The Reddit activity is a pleasure to look at (until June, that is), and there are several creators living off Warhammer-related content (Rogue Hobbies, Auspex Tactics, Adeptus Ridiculus, and Goonhammer are the main ones that come to mind, there might be others).

Subscribers in the main substacks on Reddit. They do pretty well on activity too, with Warhammer40k being the 39th most active subreddit in terms of posts at the moment of writing this. r/minipainting is not strictly Games Workshop, but 7/10 top posts there right now are..

Games Workshop miniature runway

When most people talk about Games Workshop as an investment, they talk about the IP, video games, series… so far I have only talked about the miniatures. And you know what? I will keep doing it for now! Miniatures are the core of the business, and about 95% of revenue (and 87% of the profit, a similar percentage as in 2018). So how far can the miniature sales grow?

Well, it is extremely difficult to put a number to it. Bull case is Europe & North America get to the penetration rates of the UK, and with a bit of help from Asia you get to close to 10 times current revenue. This seems too good to be true. Then again, NA revenue has been getting closer to that, AU and NZ are growing fast, and Europe seems to be picking up after the community initiatives were extended there and translations started again. And the UK is, mindbogglingly, still growing. I think there are tailwinds for that.

Despite logistical issues in many areas, growth has still been strong. I think the RoW decrease is due to the impact of stopping sales in Russia. Interestingly enough, the US doesn’t seem to be slowing down at all.

First, the hobby channel as a whole is growing, as are board games. Second, the first wave of international Warhammer nerds are now in their 30s and have money (of course I’m one, why do you ask?) They are also parents and teachers, and while the average age at competitive events is 30+, I see enough new players and painters online and at event pictures (no, I don't go in person) to think this is not going to die off soon. Third, D&D and TTRPGs in general keep gaining popularity, and there is significant overlap.

So let's take half the UK penetration rate as the TAM maybe? That means the rest of the geographies can still grow at high double digits for a few years, especially the US. Doubling sales in the next 5 years doesn't seem far-fetched (it would be in line with the growth last year, the last one with production & warehousing restrictions), and they are improving margins too in the last half after a couple of years of hits on them. It would hit this TAM I am proposing now though (roughly), but let’s see what the picture is like then.

That, though, doesn’t need to be linear. This year, I think sales are going to be good. The launch of a new 40k edition is always a high point, and this one seems to have sold particularly well. It is also a pretty tough comparable to beat, so we need to be careful about extrapolating the growth in the first half of FY 2024 to the future.

The IP question

IP is the hottest question when talking about Games Workshop. And I get why. Everybody has been obsessing for a few years about who is going to be the next Marvel. There is also the hypothesis that good IP licenses can increase miniature sales. Let's start with that one.

First, Marvel itself is not doing that well on the publishing side. Sure, comic sales went up in 2021, but mostly in the graphic novels area, which typically is dominated by other publishers.

And then 2022 reverted, although we don't know exactly how much. But see, for the entire 2012-2020 period we had a lot of Marvel movies, and they were essentially the cultural phenomenon of the time. And that didn't drive sales up that much. Outside of this kind of outsized cultural impact… well, IDWP's sales increased 6% after Locke & Key was released on Netflix, and then publishing revenue went down.

Games Workshop actually went through this already with the LOTR license. They got the license for the greatest cultural event in those years, and it ended up amounting to about 25% of sales, over a much reduced base. Since then, there have been popular video games released in the 40k universe. Space Marine sold millions of copies in 2011, but miniature sales remained flat from 2010 to 2013.

So barring something comparable to LOTR or Marvel, miniature sales will most likely not be affected. Miniatures are a niche market, and products directed to the general public convert terribly. Most likely far worse than comics.

Now, that does not mean there is nothing in it for GAW. They got 28 M £ in 2022 and 25.4 in 2023 from licensing deals. That comes from video games, Magic the Gathering, McFarlane’s action figures, JoyToy… That tells us, first, that the take rate is not particularly excessive³ at the moment. Second, that licensing income has grown a bit less than miniatures sales (it was 10 million in 2018). But there are exciting projects in the works!

What 2022 & 2023 licensing revenue have in common is that a large percentage of it is guaranteed cash for new projects (8.1 million in 2023 & 15 in 2022, versus 4.3 in 2021), and that mostly means new videogame licenses for the next few years. We know Space Marine 2 is coming up soon, and also that there are a lot of smaller video games in progress. Let’s see what the next big one is.

The cherry on top is the live-action show that is still in development. We haven’t known much in the last few months. Henry Cavil is involved in it, and it looks like Amazon is involved in it too. But we don’t know how far the agreements have gone and what is the current state of development.

Profits from this kind of streaming are not necessarily great, even with a hit, and a hit is far from guaranteed. But it can be good promotion. Maybe not for the miniatures, but for the other licenses, and also for Black Library material.

Conclusion

Personally, I think Games Workshop still seems to have some runway to increase sales in its core business, especially now that they are applying more growth levers in historically forgotten areas and that logistical problems for areas that are growing really well (US, AUS-NZ) seem to be a thing of the past.

IP monetization and cross-media promotion, though, are still a wildcard. I don’t think Warhammer+ can be a major source of revenue, and royalties are so far lagging the actual business growth (not by much!). The company really seems to be focusing on exploring opportunities in that regard in the last few years, and they have closed interesting agreements in the collectibles area (McFarlane, JoyToy), but the main video game license (Total War) is coming to an end. The guarantees make me think there is much already planned, but well, still a wildcard.

I hope this post was informative for you! Most of the musings here are just an opinion, so if you have a different one, please let me know in the comments, the substack chat, or through Twitter X!

1. The fiscal year of GAW ends in May. Most of the references to years in the article will be to the fiscal year, especially when related to company figures

2. This number is an estimate after adding a portion of 2018's online sales, back then GAW didn't disclose the online sales breakdown.

3. The Total War series sold 2.3 million units in Sega’s 2023 fiscal year (ending in March). Say 2 million of those were of the Warhammer franchise (as they are their latest 3 big releases), and being conservative that is 45 million £ in revenue (most likely higher, since Sega sold around 580 million £ that year in non-F2P games, and the total war series is one of 4 big franchises Sega mentions as major drivers, so I don’t think they did less than 10% than that). In the fiscal year 2023, 8.1 million £ were guarantees, so that leaves roughly 17. 68% of that is supposed to come from games, so that’s 11.6, and there were several launches (Darktide, which also sold several million copies, Boltgun…), and the guarantee for TW:W3 should have been fully covered in the prior year. There is a lot of guesswork here, but I think a take rate bigger than 15% is difficult to arrive at.