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Mindscape: how to survive an IT crash and look good in 2011

Mindscape: how to survive an IT crash and look good in 2011

Once it was SoftKey International and sold for $US3.6bn

Mindscape in Australia has had a long and convoluted history. It started out as SoftKey International – a business started by of one man, Kevin O’Leary, and is very much the ‘from the basement to superstardom’ story. O’Leary took a $10,000 investment from his mother and turned it into a billion-dollar company by 1994 that had acquired over 60 companies – including the likes of SSI games, Brøderbund and The Learning Company (which the group later took the name of).

These lofty heights crashed following a $US3.6 billion acquisition by Mattel in 1999. It was a ‘mistake,’ according to 15-year Mindscape Australia veteran, sales and marketing general manager, Tonia Valasco. The integration between the two companies went poorly and with little synergy, Mattel creaked under the weight of the investment.

Just a year later the entire Mattel interactive division was sold to Irish corporation Gores Technology Group, and in 2002 the international division of The Learning Company was bought by Jean-Pierre Nordman and rebranded as Mindscape.

Fast forward to October 2010, Mindscape Asia-Pacific subsidiary was sold to three Australian private investors. As an independent entity, it’s now a team of eight sales and marketing specialists, with three major product categories: kids and learning, games, and productivity.

Within those segments, its major vendors now include Acronis, Encyclopedia Britannica, Endemol, Konami, PopCap, PlayFirst, Nuance and Universal Music.

And, although it faces a number of challenges from a market in transition, it’s a company that is a proud survivor, Valasco said, even as its competitors fall to the wayside; perhaps most visible of which was the demise of Manaccom earlier this year.

“We’re still very traditional in what we represent, and we’re the sole survivor in offering multiple product lines and having expertise – that’s our point of difference,” Valasco said.

It’s a strategy that is working to the company’s benefit. It remains a strong retail presence across all of its product categories, and it picked up the Acronis business from Manaccom, which it hopes will gain additional traction in the reseller channel.

It also has a Website eStore now, selling direct to customers – a potentially problematic move for a channel company, but one necessary to combat the rise of online sales and digital distribution platforms.

“It is a nice revenue stream, but we’re competing with out own partners in the online space,” Valasco said. “Digital distribution is having a definite impact on the retail space. Years ago there was only one way to buy products. Now our publishing partners have an ecommerce division to their business.

“As a result the retail space is not what it used to be, because of that migration of consumers going online to source product.”

INSIGHT: “Digital distribution is having a definite impact on the retail space. Years ago there was only one way to buy products. Now our publishing partners have an ecommerce division to their business” - Mindscape’s Tonia Valasco

Another solution? Find innovative or niche product sets that allow it to take advantage of growth markets. Mindscape formed a partnership with Rovio to distribute a little black box that allows gamers to record footage of their games, and engage with social networks such as YouTube and Facebook. It’s not something that can be downloaded, but it’s very relevant to Mindscape’s retail partners and the demands of modern gamers.

“Multimedia software is a big one for us,” Valasco said. “Because of the access to digital cameras, there are more people being creative with their digital content and uploading it to YouTube. We’re looking for innovative products that complement that online space.”

It also formed a partnership with PopCap Games, and the success it saw in retail with that publisher – despite PopCap games being delivered primarily through digital distribution – is a strong advocate for the need to offer multiple purchase options.

“Not everyone wants to go online and there’s so many Websites to choose from that the process can be more convoluted than buying in a shop,” Valasco said.

Mindscape is confident that it will continue to find relevancy in the market. It’s in discussions with additional potential vendor partners, and looking at a growth strategy that will see it bring on additional staff. For a company whose business does involve games software, that diversity is critical for long term success: games distribution in itself is a very hot-and-cold kind of risk.

“Your success, especially if you’re in the gaming segment is dependent on your last big game,” Mindscape Chief Financial Officer, Christopher Thiel, said. “For us to remain as a leader in the publishing industry we need to keep a number of different people producing games as our suppliers.”

And then there’s the business side of Mindscape. Products such as Acronis and software such as TurboCAD have a more evergreen value to keep the numbers ticking over. In turn, building the reseller channel will be a key component to Mindscape’s future success.

“Quite a few years ago we used Ingram Micro – or Tech Pacific – to look after our reseller channel,” Valasco said. “Then we ceased that relationship and lost the reseller based a little bit. Companies like Acronis will help in growing that again.”

And as a final resource, Mindscape has its own brand name to rest on. A company that has been around for some 20 years, headed up by a very experienced veteran, the company never felt the need to rebrand after the private investors acquired it.

“We’re trying to maintain the reputation we’ve built over the years which is the branding and everything so people know us and how we operate, so keeping the same branding is really important to us,” Thiel said.

Mindscape doesn’t have any illusions of reaching the same lofty heights that saw it part of a multi-billion dollar valued company. However, by remaining lean and mean, outsourcing logistics and building a varied product line, the distributor will rcontinue to be a strong presence in the software space.


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