British firm Mind Candy made a loss of £2.2m in 2013 due to falling revenues from its Moshi Monsters children’s brand, and heavier investment in the mobile apps that it hopes will secure the company’s future.
Mind Candy’s latest financial results, which were filed this week with Companies House in the UK, reveal that its revenues fell by 34.8% from £46.9m in 2012 to £30.6m in 2013.
The company swung from an £8.1m net profit in 2012 to a £2.2m loss in 2013, in what its annual accounts describes as “a year of transition and investment in the future”, including developing two mobile apps – PopJam and World of Warriors – that have launched in 2014.
But in 2013, Mind Candy’s story was governed by falling income from its subscription-based Moshi Monsters online world, and its struggle to make money from a series of mobile apps spun off from it.
“Touchscreen devices are now a much more popular way for children to consume entertainment than websites,” explains the business review section of the filing.
“We have launched multiple Moshi branded apps (Moshi Monsters Village, Talking Poppet, Moshi Karts, Moshling Rescue and the Moshi Music app) but while download numbers have been strong we have yet to find a commercial model that works at scale. Creating commercially successful mobile products in the highly competitive app store has proved extremely difficult.”
This is no surprise: former Mind Candy CEO Michael Acton Smith has been talking about these trends in a series of conference appearances during 2014.
As the financial results were filed, though, Mind Candy’s president and chief financial officer Divinia Knowles told the Guardian that the company remains optimistic about its future.
“It has been a challenging period for Mind Candy. Moshi revenues have come down, and we have not only been transitioning from web to mobile, but we’ve been in R&D mode, building our new products PopJam and World of Warriors,” she said.
PopJam is a photo-sharing social app for children, which Mind Candy launched in the UK in June. World of Warriors, meanwhile, is a game aimed at a wider audience of core gamers, which has just been released for iOS.
“It took us about two years to develop World of Warriors game, which hopefully comes through in the production quality, and we’ve been working on PopJam for just over a year,” said Knowles.
“It’s now been in soft-launch in the UK for a little while, and is starting to pick up some speed with a decent amount of downloads. We’re starting to see the fruits of our labours.”
Moshi Monsters revenues may have dropped, but it was still a £30.6m business in 2013, with sales of merchandise and an official Moshi Monsters film complementing subscription income from the website.
“Our development of content on the website has slowed as time has gone on, but there is still a business there: it’s been going six years, which is longer than many other children’s brands, but Moshi is still popular with children, who are playing it, and buying the toys and magazines,” said Knowles.
She added that the trend of falling revenues in 2013 has continued in 2014 so far. “We have continued to see a softening of the numbers, and we haven’t made any real secret of that,” she said.
“There are still kids on the web playing the game and buying the licensed products, so Moshi still continues to generate cash. And we have plans in the future to regenerate Moshi as an evergreen brand, doing some animation with it and so on.”
World of Warriors has made an encouraging start for Mind Candy, with Apple making it a global “Editor’s Choice” pick on its App Store – a big driver for first-week downloads – more than 2m downloads so far, and and more than 62,000 positive player reviews on the US App Store alone.
The game has appeared in the 50 top grossing games chart on that store, with (non Mind Candy) industry observers telling the Guardian that World of Warriors could currently be making $100k in daily revenues as a result.
“The numbers are incredibly good,” said Knowles, who added that PopJam has now been downloaded more than 100,000 times in the UK during its soft-launch period, although Mind Candy plans to continue developing its features before releasing it elsewhere in the world.
Mind Candy’s transition has another level beyond web-to-mobile: the company has also been adapting from Moshi Monsters’ parental subscriptions to the lucrative-but-controversial (for children especially) “free-to-play” model. World of Warriors’ in-app purchases go up to £69.99 at a time, for example.
“World of Warriors is free-to-play, but that doesn’t mean we’re shifting all of our games and future products to free-to-play,” said Knowles.
“The subscription model worked incredibly well for Moshi, it was incredibly loved and trusted by parents, and I feel that in the future we will go back to that model, including for PopJam, which is for children.”
She added that Mind Candy is also trying to navigate the transition from being a company focused on children to one targeting a wider audience.
“We’ve always wanted to build an entertainment company, and we’ve shifted from being a kids’ company to being more of a family company for the next generation. Warriors is aimed at a broader audience: we say ‘kids of all ages’ can play,” she said.
“We know there’ll be older, predominantly older males playing it, but also kids, who are playing games like Clash of Clans and Candy Crush Saga. Warriors matches our ambition because it’s aimed at a broader audience: we want to be broad and family-based in our entertainment going forward.”
Mind Candy is planning to launch digital and physical products for World of Warriors – the company’s financial results refer to “ongoing discussions” to create an animated series based on the game, as well as one based on Moshi Monsters.
Knowles said that PopJam will also be more than just an Instagram-for-kids in the way it fits into Mind Candy’s overall strategy in the future, suggesting that the most successful family entertainment companies don’t just create “amazing IP” but also have their own distribution platforms.
“If you look at Mind Candy, we have the success of Moshi, which is going to live on. We are creating new IP in terms of World of Warriors, but we are also building PopJam, which will be a distribution platform that sits underneath it all,” she said.
“So rather than having to be a business that has to create hit after hit after hit, it will take away some of that boom-or-bust nature of what we’re building. We intend to create more IP that really engages our audience, and then have this wonderful platform and testbed underneath it in PopJam.”
This article was written by Stuart Dredge, for theguardian.com on Thursday 13th November 2014 08.00 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010