The Array Camera for Optical to Near-IR Spectrophotometry, or ARCONS, is a camera based on Microwave Kinetic Inductance Detectors (MKIDs), a new technology that has the potential for broad application in astronomy. Using an array of MKIDs, the instrument is able to produce time-resolved imaging and low-resolution spectroscopy constructed from detections of individual photons. The arrival time and energy of each photon are recorded in a manner similar to X-ray calorimetry, but at higher photon fluxes. The technique works over a very large wavelength range, is free from fundamental read noise and dark-current limitations, and provides microsecond-level timing resolution. Since the instrument reads out all pixels continuously while exposing, there is no loss of active exposure time to readout. The technology requires a different approach to data reduction compared to conventional CCDs. We outline here the prototype data reduction pipeline developed for ARCONS, though many of the principles are also more broadly applicable to energy-resolved photon counting arrays (e.g., transition edge sensors, superconducting tunnel junctions). We describe the pipelines current status, and the algorithms and techniques employed in taking data from the arrival of photons at the MKID array to the production of images, spectra, and time-resolved light curves.