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Games Workshop Shuts Off Internet Retailing

Using Intellectual Property Rights as a Tool

Published: 04/16/2003 12:00am

Games Workshop is notifying both its direct retailer accounts and distributors that it is altering its terms of sale to prohibit the use of Games Workshop intellectual property to solicit orders over the Internet.  The calls went out on Monday, April 14th, to all retailers selling GW products on-line -- probably around 12-15 companies.  The new policy takes effect in 90 days, on July 15th. 

 

We spoke to retailer Neal Catapano of TheWarStore.com, Inc., an on-line and brick-and-mortar retailer of hobby games and miniatures in Southold, New York.  Catapano estimates that he is the largest independent on-line retailer of Games Workshop products.  He said he got the call late Monday morning from Games Workshop regional vice-president of sales John Matthews.  Matthews came right to the point, telling Catapano that later this week a letter was going out with the change in terms, and that the call was to give some advance notice.  He told Catapano that Games Workshop was concerned about the rampant abuse of its intellectual property on the Internet and was shutting down the entire Internet channel.  He also informed Catapano that Alliance and Diamond were being notified of the change in terms and being asked for their cooperation in enforcing it.  There is a buyback program for affected retailers, of which Catapano said, 'That's the right thing to do; I'll give them credit where credit's due.'

 

Catapano said that while he plans to consult his attorney first, he expects to comply with the new terms and remove Games Workshop intellectual property from his Website.  He plans to continue to take telephone orders and 'be the best mail order business we can,' but feels, 'It's a shame to take a step backward in technology.'  With the new terms, Catapano said he expects some of the on-line retailers of GW products to drop out of the picture and be unwilling or unable to continue as mail order businesses.  The immediate impact on his business has been a dramatic upturn -- he was Slashdotted (mentioned on the home page of high-traffic techie discussion site Slashdot.com) Wednesday as a result of the on-line discussion of the change in GW terms, and has been experiencing particularly high traffic and orders.  

 

Games Workshop has had a variety of policies on Internet retailing over the last few years.  When Catapano started his business in 1999, GW had a policy of only selling to retailers that had a brick and mortar location, although he believes that policy has not been as rigorously enforced since then.  Beginning in the late summer or fall of 2001, Games Workshop altered its terms of sale to prevent the online sale of its products at discounts exceeding 20% off MSRP.  Catapano said of that development, 'Personally, I was glad about it because there were a lot of guys going down to 40% off.'  Catapano sells at up to 20% off retail. 

 

We asked Catapano what he thought the impact of GW's new terms would be.  'I think the jury's out,' he said.  'I'm sure that independent retailers that do well with Games Workshop will be glad about this, but I think the jury remains out on whether this will mean a lot of independent retailers will pick up the line because discount is still a barrier' (Games Workshop cut its discount to its direct retailers last year, prompting a strong reaction from some, see 'Retailers Send Joint Statement to Games Workshop').  Catapano also speculated that other manufacturers would come under pressure to follow suit and alter their own terms to cut off Internet retailing.  'I personally feel that this will become sort of a standard,' he said, against which other game companies will be compared. 

 

Games Workshop's sales to independent retailers in the U.S. have not been growing as the company would like (see 'GW Sales to U.S. Retailers 'Challenging'').  It has been rapidly expanding its regional rep program (see 'GW Speeds Regional Rep Program') as one way to improve sales in that channel.  Whether this is a way for GW to support the independent retailer channel, to drive Internet sales to its own e-commerce operation, or simply to control more directly the use of its intellectual property on the Web (its stated reason), the effects on retail and on the climate for other game companies could be profound. 

 

Games Workshop declined to comment for this article. 
 
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