If you been living under a rock let Blood of Kittens inform you that Games Workshop sales are down 4% for the last six months ending in November. This announcement most noticeably put up on BoLS caused a torrent of comments and arm-chair economics that really would have been better suit for the 3pm-4pm time slot on CNBC. As is typical with any release of financials from GW the same old cry babies appear to whine about high prices and bad corporate decisions.

So instead of beating that dead Zoat (for now) let us look at what people who don’t have a deep-seated anger about having to pay 75¢ more for a Ork Boyz box had to say.

–Charles Hall, an analyst with Peel Hunt LLP

“They have had lots of changes such as their store format and that’s been pretty disruptive, I’m not surprised to see a difficult trading period” Charles Hall, an analyst with Peel Hunt LLP said by phone today. Games Workshop is a “great long- term story because it has reduced costs in its retail chain and I expect to see sales turn around,” said Hall, who recommends buying the stock.

“The Group’s gross margin and costs remain under firm control and cash generation remains healthy,” said the company. “In addition, the outlook for royalties receivable in the current year remains good, although not as significant as in the year to May 30, 2010.”

–Julian Tolley, an analyst at HB Market

“Back in September the first-quarter update was trading in line with expectations, so the downturn has been abrupt in the second quarter and is ongoing,” said Julian Tolley, an analyst at HB Markets, who put a “sell” rating on Games Workshop shares.

Games Workshop said the outlook for royalty payments remained good, though total payments were unlikely to match the amount received last year.

–Mark Wells, GW chief executive

Mark Wells, chief executive, said the slowdown was down to staffing changes over the summer months. These are normally its peak months for recruiting new customers, who are usually teenagers on summer holidays. “A good summer leads to a good winter, and we didn’t have a good summer,” Mr Wells said.

The company is introducing a “one-man” strategy in its “hobby centres”, which are run by one person, open five days a week, and located in suburbs and smaller towns.

As a result of the staffing changes, the winter months, when the company would expect to capitalise on its new customers, were less profitable. “It wasn’t down to the economy, it was down to the actions we took,” he said, adding that “this more profitable retail format” should lead to an improvement in sales in the future.

–Charles Hall, an analyst with Peel Hunt LLP response to GW comments above.

Charles Hall, analyst with Peel Hunt, the company’s broker, said that sales would “take time to rebuild”. He added that the company had previously implemented the same strategy in its European stores and sales had recovered there.

“Sales won’t have been helped by the weather but they’re not using that as an excuse”, he said.

So judging from this if you have stock in GW it wouldn’t be terrible to sell, but long-term it still looks like a good buy. Overall the stock is still 60% over the year. This could all change once the real numbers come in for the holidays. Usually though for company to put out bad earnings concerning the quarter before the holidays means their could be major bloodletting down the pike.

Now time for some theory marketing and totally anecdotal reasoning.

How can a company has a game with a complicated rule system rely on one employ to teach and explain to every customer that comes in their store? This is not a GameStop where you simply point and ask what type of video game does your kid like and go from there. It is understandable that this profit model would work for the short-term as it seems the case in Europe, but to grow the hobby in such a way that people are hook for life this seems a little short-sighted. If Johnny drops the game after only playing for a few months the chances of him ever coming back are slim unless there is a good support network like a robust GW store or FLAG in the area, with the one employee store model this becomes much harder for one person to keep Johnny interested especially when the store is not even open everyday of the week.

This does not even go into the disruptions caused by such staff reductions and reorganization has on stores and customers, especially with a product based so much on brand loyalty.

We also should not get all crazy about 4% drop in tough economic situations, still let us have some fun at looking some of the possible reasons. The sales drop happened from May 29th to Nov 28th this comes after the Blood Angel and Tyranid releases.

So what happened between May and November…

Let me think here….

Oh yeah, Fantasy 8th edition!

If blame is laid anywhere it would have to be lumped on Fantasy 8th edition. Sadly, GW might have missed the boat on this one. Regardless if you think the rules are good or bad they sure were polarizing and flipped the Fantasy world upside down, which is never a good thing. In addition you compare the more expensive ($20 more) Fantasy rule book to the 40k rule book you begin to wonder. Island of Blood is as well nine bucks more than the current price of Black Reach which at launch was $40 bucks less still.

If Island of Blood was $60-75 bucks it would have been a reasonable investment for a 40k player to at least give it a try, but at $100 bucks you had to think is it really worth it? Not to mention, if potential players are told by half the Fantasy community that the new rules are terrible it gives you even more pause. It is possible as well that things could have been worse because by most accounts the Dark Eldar are sold very well which means without them GW would have been in an even deeper hole.

This is really not a complaint about prices in the, “how is GW gunna do me like that” It purely a marketing strategy problem, because both products are probably worth the price tag they are asking. It just seemed logical that if you want to get new players and old players to buy in, initial prices should start at least at the same price as your other flagship game? Especially when general wisdom from the community was that they were going to close to the same prices as 40k.

Think about this in terms of the video game console releases the Wii destroyed the Playstation 3  because it was not only substantially less expensive, but also because it was more accessible to a greater audience (damn you Wiimote). It is one of the reasons 5th edition 40k is so much better than 4th edition it was easier to jump into where Fantasy 8th edition at best moves you sideways. Also you are asking your now one employee stores to convince parents and kids to pick up another game system that is more expensive than before.

Talking to local (San Francisco Bay Area) independent store owners a few with strong Fantasy player base it was clear that financial Fantasy was a dud. It brought in few new players and lead to a dangerous dry spell of no Warhammer 40k releases. So how does GW respond?  Another price hike? Bet the good money on seeing more Space Marine related releases in the coming year to prop up sales as much as possible. Maybe even throw in some store closings for good measure. If Grey Knights sell well combined with gang busters sales of Space Marine the video game GW could quickly be back on track.