Business Breakdowns
· Todd Wenning, Matt Reustle
So if you're thinking about the Tolkien world, or the Game of Thrones world where they just keep adding new context to the backstory, it's very similar. So it can go very deep. Games Workshop actually owns their own publishing arm called the Black Library that produces a lot of this narrative. They are actually vertically integrated all the way from paint to publishing. They manufacture the miniatures, they make the paint – Citadel, the publishing, they do the distribution, they do the stores. They own it top to tail. It's a very fascinating business in terms of how they control all of it and the allure of their IP, and how beloved it is with their fans. [00:00:00] S0: I'm curious, you don't often hear about the origins being in the distribution and then evolving into the creation of a world and a game and narrative around it. Were those original founders still very much a part of that storyline into the '80s as they took off with the homegrown IP? Did they play a major role there or was it someone else coming into the fold that helped them evolve that side of things?
· Matt Reustle, Todd Wenning
[00:00:00] S0: I'm curious, you don't often hear about the origins being in the distribution and then evolving into the creation of a world and a game and narrative around it. Were those original founders still very much a part of that storyline into the '80s as they took off with the homegrown IP? Did they play a major role there or was it someone else coming into the fold that helped them evolve that side of things? [00:00:00] S1: One of the three decided that he wanted to just go back to what they were doing before, working on wooden games. The other two really got into this fantasy world and narratives, and tabletop gaming. They brought in other people. So there were a couple of major outsiders that came in and helped them develop this game, and it spawned into this subculture of people who just really loved the narrative and dove into it, and wanted to play it, engage with it, and connect with other people, which is a big part of the story today. [00:00:00] S0: You alluded to this. It sounds like the evolution of that story takes place both in publishing, whether it's books, graphic novels, whatever it might be, in addition to the miniatures. Is it fair to call them figurines? [00:00:00] S1: Gotta be careful here, Matt. I think the way it's framed is they are miniature war games. They're not figurines. They are tabletop gaming pieces. They are things that we engage with and use to achieve our mission in the game. So we got to be careful what we say.
· Todd Wenning, Matt Reustle
[00:00:00] S1: Gotta be careful here, Matt. I think the way it's framed is they are miniature war games. They're not figurines. They are tabletop gaming pieces. They are things that we engage with and use to achieve our mission in the game. So we got to be careful what we say. [00:00:00] S0: It's an important distinction in terms of how they're used, and, I maybe didn't appreciate the definition of figurine to begin with. So, I’ve learned something way beyond businesses on this show. In terms of the brick-and-mortar concepts, there are Warhammer stores. Are they distributing, obviously, Warhammer-related IP products? But is there also still third-party product that gets distributed through those stores as well?
· Todd Wenning
[00:00:00] S1: No. So, they have their own retail stores, as you mentioned. They have about 575 around the world. And about 55% of those are in Europe and the UK. About 35% are in North America, and 10% in Australasia. And you probably don't even know that they have a store in your town. If you live in a semi-major city in the US, you probably have what's called a Warhammer store. So, if you go to Google and type in "Warhammer store near me", you probably have one. I don't know this for sure, but we have one in Cincinnati. There might be one in Pittsburgh. There might be one in Cleveland. A lot of these stores are run by enthusiasts. About 75% of their stores are single-staff stores. So these are just enthusiasts who thought, I get together with my friends anyway to play this game. And, I might as well have a store and have everything set up there and make some sales and make a little money while I'm doing it. So a lot of them are in strip malls. The stores are fairly small, but they're stacked to the gills with just Games Workshop materials. They do not distribute any third party. That's about 20% of the revenue comes from the retail channel. 60% of the revenue goes through the trade channel, which is the third-party. And so that's where they might be in hobby stores, or I'm not sure if they're in Walmart, but they might be in like a Walmart store somewhere. These are all distributed to third-party independent sellers.
· Matt Reustle, Todd Wenning
[00:00:00] S0: I looked to understand the concept of a Warhammer store and found there was one just a 20-minute drive from me. So, I can attest to that being the truth. Just to have some context about this market, I think it is very enthusiast driven, but it continuously amazes me, the level of enthusiasm. I think you can even look at something like Marvel movies, and the real appreciation and diehard nature of some of the fans of the origin stories back to the Stan Lee days, and what that generated for that IP over time. Do you have any way of contextualizing the size of this type of market, and Games Workshop revenue is one data point, but I'm curious about that. [00:00:00] S1: It's a lot bigger than you probably think. There are 790,000 people around the world who've signed up for the "My Warhammer" emails. Free, regular emails that go out to people who are interested in Warhammer. About 248,000 people are subscribed to Warhammer Plus, which is a $50 a year subscription. Now this number is up from 115,000 three years ago. It has doubled over the past three years, in terms of people who are willing to not only subscribe to the emails, but also pay for the unique interactions they have with the company. So this is bigger than you might expect and growing very rapidly. [00:00:00] S0: When you mentioned the origins, was there demographic concentration or geographical concentration where this was really material in Europe first before expanding outwards? How key is Europe to the story? You mentioned the 55% number earlier, but I'm curious about that as well.
· Todd Wenning
[00:00:00] S1: It started in the UK. It feels like a very British company. They're based in Nottingham. The World of Warhammer, the big showcase store is next to their headquarters in Nottingham. They're actually building a new World of Warhammer in Washington, D.C., that comes out in 2027. So that's another part of the story. But it's a big cultural thing in the UK. A lot of young men in particular – it's not always men, but it tends to trend towards young men who get really into this game. Henry Cavill, who I'm sure we'll talk about in a minute because he's producing the Warhammer series for Amazon. He's a big fan, so he'll get on talk shows and talk about it. And a lot of people grew up playing Warhammer. Maybe a similar way to you and I might have collected baseball cards and gone to baseball card shows. So it's a very hobby-driven type of business. Management talks about the "hobby gene," that a lot of their customers have the hobby gene. Not everybody has that. That's a big part of the people who buy it. In terms of age, it tends to be young men between the ages of 10 and say, 18. And then a lot of times they fall away from the hobby because it's an expensive hobby. The starter box that I bought was about $70, to give you an idea. So, it's roughly video game type level and it can go much, much higher. So you can get individual units that cost hundreds of dollars if not more, depending on what you're doing. So it's a very expensive hobby. And so a lot of times young players are supported by their parents when it comes to buying Christmas gifts, birthday gifts, things like this. A lot of times what happens is they discover the opposite sex or they discover someone who they want to partner with, and they just get distracted for 10 years or so. Then in their 30s and maybe in their 40s, they come back to it. That tends to be the trend of the ages and the interest in Warhammer.