Mind Candy Slims Down Ahead Of Major New Mobile Push

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Mind Candy, the company behind the Moshi Monsters web game for kids, has in the past been considered one of the breakout successes of the UK startup and gaming world. But while it continues to extend its life as a licensing gangbuster — with every incarnation of possible merchandise — it is clearly going through the bumpy ride of shifting toward the mobile future. TechCrunch has learned that Mind Candy has laid off 30 staff in recent weeks, bringing total numbers to just over 100 — down from 200 in 2012. The downsizing comes as Mind Candy prepares to launch World of Warriors, its biggest game in years.

Can Mind Candy, which has already defied a defeat in its earliest days, pull it all off again? In an exclusive interview, founder Michael Acton Smith says it can, and has major plans going forward.

In 2012 Mind Candy, at the height of the Moshi Monsters craze, had a staff of around 200 people. But that number has been slowly whittled down as the company changes direction.

TechCrunch understands a significant number — up to 30 staff — were laid off in a round of redundancies lasting between last week and this week. As of this week, it now has just over 100 staff as the company shifts towards new mobile products, and hires new skills in that area.

Founder Michael Acton Smith told us: “It’s been bumpy. There have been layoffs. It’s not ideal, I wish it wasn’t so. But we’re still hiring and very well capitalised. Like all fast growing businesses you have to make adjustments from time to time. In the highly competitive mobile market where ‘In-App Purchase’ rules, it is extremely difficult to build magical, safe and commercially successful products for kids. Mind Candy is not the only family entertainment company grappling with this big challenge.”

He denied the claims of our sources that said that the bulk of these layoffs were among the Moshi Monsters team: “No, the whole of the Moshi web team did not go. Last year we moved some people off the web team onto our new mobile projects. There were a small number of redundancies at that time.

“We passionately believe in Moshi Monsters and will continue to build it out as an evergreen brand. As with any business, it’s important to ensure the core team is the right size and of the right expertise. This is why we have had to rethink the structure of the company to focus on the future with our new brands in mind.”

He went on: “We were a one product company for a number of years. There are 1.3 million apps on the Apple Store alone. Many kids now play apps aimed at grown-ups, which is a challenge for kids games. That said, we’re very optimistic about the future and very excited.”

To the charge that the Moshi Monsters game is in decline and has suffered through the lack of a tablet product, Acton Smith said: “Kids products go through life cycles. Moshi has been a huge hit for many years but it is less popular now than it was at its peak.”

“The website has always been the heart of the brand but over the last few years children have rapidly migrated to touchscreen devices. We launched our first app in 2010 and now have 7 Moshi mobile apps for android and iOS. They are loved by our fans and get healthy download numbers but none come close to generating the commercial returns we need for the investments we have made,” he said.

The layoffs have come as revenue has declined from the main Moshi Monsters game, which has never appeared in full-blown form on tablets and smartphones. It’s clear that it’s missing out on growing among its tablet-obsessed young audience, and Mind Candy has yet to launch its next major title on mobile.

This is the kind of thing that has happened to every major game company from Zynga to Rovio so is not exactly uncommon. The flip side to the story, however, is that Mind Candy has cash in the bank, new products are clearly emerging from the studio and more are expected.

Revenue

In Mind Candy’s yearly accounts at UK’s Companies House for 2012, the last published year (2013 are due to be published at the end of September this year), it reported total revenues of £46.9 million ($80.3 million), up over 60 percent on a year before, on pre-tax profit of £10 million (£17 million).

However, traffic to moshimonsters.com has decreased markedly in the last year. In August 2013 it had 796,000 U.S. unique visitors, but as of August this year it had 366,000, according to Comscore. Unfortunately, a game losing this much traffic in a year is not good, no matter now many licensing deals you have to sell fluffy toys.

As with Rovio, Mind Candy has licensed it’s Moshi brand to toys, a film and TV shows. In 2013, Moshi Monsters claimed it had over 80 million registered users.

Acton Smith said revenue had been affected. “Revenue was down in 2013 on 2012 but that was the first year revenue has declined.”

New Products Coming

However, Mind Candy is coming out fighting.

Acton Smith said the new World of Warriors game is projected to be out in November: “Our studio in Brighton is building the game but the whole company is involved in building the brand (licensing partnerships, marketing, animation etc).” He said: “It’s an epic multi-platform universe that will be sparked to life on mobile.” TechCrunch understands Mind Candy is already in talks with major toy brands in connection with the game.

The Moshi-Monsters related Moshi Karts racing game launched and is in the App Store. In addition, Popjam, Mind Candy’s ‘social network for kids,’ which is reminiscent of a photo app, is now live and Acton Smith told us “We think it has tremendous potential.”

He said the company will launch a new feature next week allowing kids to customise their photos and artwork with animated stickers.

We reported in July that the company had raised another round of funding, but the company has declined to go into detail. Mind Candy, which launched in 2004, has raised a total of $21.5 million, from Index Ventures, Accel and Spark Ventures between 2006 and 2011.

Last July founder Acton-Smith stepped sideways out of the CEO role to head up the creative side of the business and power its new products going forward.

This was billed as a “Silicon Valley move” by investor Saul Klein, who joined the board with the switch around. Silicon Valley startups often see founders take other roles after the initial growth phase of a company.

Divinia Knowles, former COO, then becomes president of the company, which planned to look for a new CEO, although no new CEO has been appointed yet.

Whatever happens next in the life of Mind Candy, you can be sure it’s experienced tougher times. Acton Smith is a fighter who, when his original idea of a game called Purplex City totally failed, sat in a Battersea cafe and sketched out the first Moshi Monster on the back of a napkin.

That gave rise to a licensing juggernaut, accumulating deep experience of games, licensing, media extensions and branding. It now faces the challenge of remaking itself once again.