'CoComelon' Is in Trouble

It's been a bad year for kids' TV—First, Disney announced it was cutting costs after losing almost $400 million in 2023, and now, the studio behind one of the most popular children's shows has reportedly fallen on hard times.

During the height of the COVID-19 pandemic, CoComelon was the world's second-most-viewed YouTube channel. It also broke records on Netflix, remaining in the streamer's "Top 10" list for 62 days—the first show to ever do so.

Even claims that the cartoon caused behavioral issues and speech delays didn't deter parents, but in 2023, CoComelon is cutting back.

Moonbug Entertainment, the studio responsible for CoComelon—as well as hits Blippi and Arpo—has experienced a surge in growth in recent years, largely due to the runaway success of its flagship show.

The musical animation teaches pre-schoolers letters numbers and more, set to both traditional nursery rhymes and original tunes. However, Moonbug is undergoing a restructuring, which includes employee layoffs and scaling back production.

Although the company hasn't confirmed the number of staff cuts, the London-based studio laid off "a shade under 30 people"—roughly 5 percent of its payroll—in October, according to Bloomberg. This reportedly included the majority of the cartoon's writing and design team, such as story editor Alan Denton and staff writers Nabeel Arshad and Kyra Peters.

Newsweek has reached out to Moonbug Entertainment for comment via email.

Moonbug previously canceled a number of shows, including Buster the School Bus, T-Rex Ranch and Lellobee City Farm, to focus on CoComelon and Blippi.

The company has progressively been outsourcing CoComelon to international studios, laying off roughly a dozen team members in January, Bloomberg reported.

Moonbug claimed this was a strategic measure, as opposed to a cost-cutting exercise, but also began creating episodes with fewer props, characters and backdrops to boost output while lowering expenses. However, staff reportedly then had to spend a significant amount of time fixing errors on these budget episodes, canceling out any money saved.

According to Bloomberg, staff reportedly voiced frustration at the increased workload, with Moonbug reducing the number of episodes in 2024, along with decreasing production on its spinoff shows. The company purportedly told employees it would be experimenting with AI and other new technology in its storytelling.

"We've decided to make a little less content," Andy Yeatman, head of Moonbug's Los Angeles team, told the publication. Moonbug will still be investing in CoComelon, but will also be focusing on new areas, such as music and video games.

Despite the cuts, Moonbug CEO René Rechtman said the business is "incredibly well positioned for the future," with its YouTube viewership rising 12 percent in 2024.

According to Marc DeBevoise—CEO of video-hosting and streaming platform Brightcove—entertainment companies are struggling to rationalize the costs of streaming services following the post-pandemic decline in viewers.

"Wall Street was rewarding them for subscriber and ad growth for a number of years," DeBevoise told Newsweek.

"But that effectively changed in 2022 when the market shifted to demand that these services mature, especially as the other core business of these companies, cable and broadcast TV, headed into secular decline."

The less-profitable companies are struggling the most, but competition—even for juggernauts like CoComelon—is stiff, with providers fighting for a smaller, overlapping audience.

"Some very much over-invested in larger content slates of content that was hard to market and justify," DeBevoise said. "Cutting costs and staff members will definitely help these businesses towards a profitable future.

"It is possible to run profitable streaming services at a lower scale, but it takes a very thoughtful content and marketing strategies."

Created by Jay Jeon and his wife in 2006, CoComelon began as a family run YouTube channel, designed with the couple's children in mind. By 2020, their YouTube channel had 92 million subscribers—making it the most-subscribed channel in the U.S.

Moonbug purchased CoComelon in July 2020, and has steadily bought up a range of educational children's programming. Although figures vary, in 2021, The Wall Street Journal reported that CoComelon was making approximately $120 million a year.

While Moonbug is still expanding, its profit was 30 percent below the forecasts for 2023. Moonbug's parent company, Candle Media, also took a hit, earning 50 percent less than expected this year.

Other entertainment companies are scaling back ahead of 2024. According to the U.S. Bureau of Labor Statistics, the industry has decreased by 26 percent this year, with 44,000 job losses between May and October.

Big names like Netflix, CBS and Amazon are laying off staff and reducing production, while companies such as Discovery, Paramount and Lionsgate are reporting losses.

Update 12/22/23, 07:37 a.m. ET: This story has been updated with comment from Marc DeBevoise.