Moshi Monsters - The Movie

Mind Candy, the London start-up behind hit children’s game Moshi Monsters, has revealed the extent of its struggle to adapt to the consumer shift from desktop to mobile and the advent of free-to-play games.

The company swung from a profit of £8.1m in 2012 to a loss of £2.2m last year, with revenues down by a third to £30.6m according to data filed this week with Companies House. The company’s net cash from operations fell from £10.65m in 2012 to just £420,000.

Divinia Knowles, president and chief financial officer, said: “2012 was the real heat of Moshi and over time the numbers have come down. We’ve gone from building web products to mobile products, and we’ve had to change the DNA of the business to accommodate that. And we’ve gone from being a one-product company to a multi-product company.”

Ms Knowles has been in a caretaker role since July when Michael Acton Smith, the company founder and former chief executive, stepped down. Since then, the business has also reduced its workforce by half from its 2012 peak, and employs slightly more than 100 people. Revenues have also declined throughout 2014, Ms Knowles said.

The six-year-old company doubled its investment in research and development to £6m and is pinning its hopes on new developments, including PopJam, a photo-sharing and social media network for children that was launched in July. Ms Knowles said it would allow the company to escape the “hit-based” games’ model by enabling it to trial new ideas before deciding whether to fully develop them.

Mind Candy also launched World of Warriors, a new game in the UK. Unlike Moshi Monsters, which made money from subscriptions, World of Warriors’ users can play for free but buy upgrades in the app. Ms Knowles said it was bringing in more than $100,000 a day.

After its launch, Moshi Monsters enjoyed rapid growth, jumping from 55m registered users in 2011 to 70m a year later. But the pace slowed in 2013, reaching 80m. Ms Knowles confirmed that the number of active users was smaller, but declined to comment on how that was changing over time.

More than 40 per cent of Mind Candy’s revenues come from subscriptions, with the rest from licensing for toys and other products.

Other gaming groups that have had early success have found it difficult to scale into a broader business. Rovio, the Finnish company behind Angry Birds, was an early leader in mobile games but was forced to slash its workforce in October. King, maker of the Candy Crush game, has also reported declining revenues, and its share price has sunk by a third this year.

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