Games Workshop: Monopoly serving “Middle Class Nerds”

May 23, 2025 8 min read

Florian

“Company culture is the backbone of any successful organization”

– Ben Horowitz, entrepreneur and author of “hard things about hard things“

arvy’s teaser: A monopoly built on orcs, elves, and obsession. Games Workshop turned “middle class nerds” into a global cult — and prints Hermès-level margins doing it. Culture, control, and compounding: fantasy never looked so profitable.

Hobby miniatures.

Ever considered that might be a great business?

Let’s give it a thought. Miniatures are used in all kinds of games — from tabletop battles like Warhammer 40,000 and Lord of the Rings, to pen-and-paper role-playing games like Dungeons & Dragons, even classic board games like chess. The more you think about it… not bad, right? Well, 30 years ago, three game enthusiasts thought so too. From their homes in London, they started selling handcrafted wooden games. Turns out: there was real demand. And as you might guess, the appeal is niche — but loyal.

Enter the company that defines its target audience as “middle class nerds.”

Games Workshop.

Chart 1: Our arvy team visits the Warhammer store in the heart of Zurich (including a photo with mascot Nigel)

Source: arvy

Monopoly Position Leads to High Profitability

Games Workshop has a simple and easy-to-understand business model.

The British company is the global leader in the world of hobby miniatures. At the heart of its business: customizable miniature figures based on fantasy characters, designed to be collected, painted, battled, or proudly displayed.

Two major brands define the universe:

Warhammer (Age of Sigmar): Fantasy, medieval-inspired, with magic and mythic battles. Simpler rules, heroic tone.
Warhammer 40,000: Sci-fi, futuristic, with grimdark themes and complex warfare. More tactical depth, dystopian tone.

They also hold the license for The Lord of the Rings / The Hobbit tabletop battle game — among others.

Sales come through a tightly controlled distribution network: over 500 Warhammer-branded retail stores and more than 4,000 third-party hobby, game, and toy shops worldwide.

Yes — there’s even a Warhammer store in Zurich on Uraniastrasse 32, just by the former Jelmoli. We paid a visit. Highly recommend it (Chart 1 😊)!

Games Workshop has been the unchallenged champion of fantasy miniatures for more than two decades — and that dominance shows no signs of fading.

In essence: no real competition.

They operate a monopoly.

And with monopolies come two features that define a “Good Story”: high profitability and excellent reinvestment opportunities at high returns (Chart 2).

Over the last five years, management has delivered an average return on invested capital of 68%, while gross margins averaged 71% and net income margins stood at 31%.

Let that sink in — those are Hermès-level profitability metrics.

Yes. Hermès.

And the secret sauce? Not just high margins or market dominance — but loyalty. Loyal customers. Loyal fanbase. Loyal recurring revenues.

This is mirrored in their main clientele: “middle class nerds” who have the deep pockets to easily pay $20 to $100 for miniature sets and buy them again and again.

But here’s the kicker: it’s not just the fans that are loyal.

Chart 2: ROIC, Gross and Net Income Margins of Games Workshop

Source: Finchat

Corporate Culture: The Backbone of Any Successful Organization

Let’s rewind to the two most important tasks of a CEO and their management team:

Capital allocation, reflected in high returns on invested capital (ROIC).
Hiring the right people and shaping the corporate culture.

With Games Workshop, box number one is clearly checked. The fundamentals speak for themselves. But what about number two — hiring the right people?

As you can imagine, working at Games Workshop isn’t just a job. It’s something else. Something deeper. You feel it the moment you walk into the shop in Zürich.

Kudos to Kris – awesome guy!

Passion. Knowledge. A love for the lore and the worlds they create. And above all — the mission.

This isn’t just anecdotal — it’s built into the company’s DNA. Their 2023 annual report puts it plainly:

“Culture: Companies are run by people. Games Workshop is run by people. How our people get on with the task of running Games Workshop and how they get on with one another is vital. How we behave does matter. Therefore, what we are like does matter…”

Yes, culture is a soft factor. It’s hard to measure, hard to quantify.

But research consistently shows that companies recognized for strong culture, great workplace climate, or those labeled “best place to work” tend to outperform (chart 3).

Cynics will argue, “Of course they outperform. Everything’s going well, momentum is high, and people are happy because they’re making money, maybe even cashing in on stock plans. That’s why it’s a great place to work.”

But I see it differently. I believe it’s the other way around.

When you have the right people — with the right mindset and the right attitude — performance follows. Culture isn’t a byproduct of success. It’s the cause.

A strong culture is the foundation. The stock price comes after.

And Games Workshop is the best proof.

Chart 3: Companies that are ranked “Best Places to Work” outperform

Source: Glassdoor Economic Research

Compounding Powerhouse

Games Workshop — a GBP 5bn market cap company — compounded at an astonishing annual rate of 47% over the last ten years (chart 4).

A GBP 10’000 investment turned into GBP 471’000.

A true compounding powerhouse.

That’s simply amazing.

As you know, at arvy, we firmly believe that past winners are likely to be future winners too — our investment credo remains: winners keep winning.

And yet, despite the “Good Chart” and an undeniable “Good Story,” there’s one thing that gives me pause. The size of the underlying market.

It is — and likely always will be — a niche.

And how big can this niche realistically get? Especially with Games Workshop now playing in the big leagues. Let’s not forget: its market cap was just GBP 150 million ten years ago.

One thing is certain — the days of 47% annual returns are behind us. But that doesn’t mean growth is over. A 10–15% range still seems entirely achievable.

Apply the Rule of 72 (divide 72 by the annual return to estimate the years needed to double), and we’re looking at a market cap doubling in 4.8 to 7.2 years — reaching GBP 10bn.

Sounds plausible. But I must admit — for a niche, that still feels… ambitious.

Happy to be proven wrong.

Chart 4: Games Workshop over the last ten years