Disney acquires Club Penguin for $350M

NEW YORK (AP) – Club Penguin, an online hangout that has quickly become a rage among preteens despite limited marketing and advertising efforts, has been purchased by the Walt Disney Co. for at least $350 million, the companies announced Wednesday.
Payments could double to as much as $700 million if profits grow, Disney Chief Financial Officer Thomas O. Staggs said.
The acquisition by Disney gives Club Penguin more resources with which to grow. According to comScore Media Metrix, the site nearly tripled in usage over the past year to 4.7 million unique U.S. visitors in June. Executives hope to expand to additional markets abroad and gain even more customers through promotions on Disney-branded sites.
‘We have been actively searching for an organization that not only shares our values and concerns for children, but also has the ability and desire to help us bring Club Penguin to more children throughout the world,’ said Club Penguin co-founder Lane Merrifield said in a statement. ‘We have found that partner in Disney.’
Club Penguin, from Canada’s New Horizon Interactive Ltd., offers a mix of games and chatting tools targeting the kids ages 6-14, who appear onscreen as plump cartoon penguins.
Kids win gold coins by playing games such as sled racing and, with a paid membership costing about $5 a month, buy virtual items like clothing for their penguins and furniture for their online persona’s igloos. Kids can attend parties and make friends by adding other penguins to their buddy lists.
Although sites like Club Penguin and its rival, Webkinz, are forcing parents to grapple with how young kids should be roaming about and chatting with friends online, many Internet safety experts believe these social-networking precursors are far safer than News Corp.’s MySpace, Facebook and other hangouts for older users.
Parents, for instance, can choose an ‘ultimate safe’ mode, meaning chat messages sent and received are limited to prewritten phrases, such as ‘How are you today?’
In the standard mode, kids can type messages freely, but filters look for foul language and even innocent-sounding words such as ‘mom’ — to prevent someone from asking, ‘Is your mom home?’
‘Club Penguin embodies principles that are of the utmost importance to Disney — providing high-quality family entertainment and fostering parental trust,’ Bob Iger, Disney’s president and chief executive, said in a statement. ‘The founders have woven together new technologies and creativity to build an incredibly compelling, immersive entertainment experience for kids and families.’
Other than renaming the service ‘Disney’s Club Penguin,’ Disney said it has no immediate plans to change Club Penguin’s operations, which will continue to run from Kelowna, Canada.
‘Club Penguin is going to continue to exist as is,’ Iger said during the company’s conference call to report quarterly earnings. ‘The experience will not change at all. We don’t intend to get in the way of that or do anything that would in any way have a negative impact on their business.’
Iger said Disney planned to integrate Club Penguin into other Disney businesses, promoting it on the Disney.com site and the Disney Channel, Radio Disney and the company’s theme parks.
Disney already operates the virtual game ‘Toontown’ and is developing a similar virtual world around its ‘Pirates of the Caribbean’ characters. Iger hinted that Disney also was working on a virtual world based on ‘Cars,’ an animated movie created by Disney-owned Pixar.
Iger said the acquisition of Club Penguin would give Disney the expertise to grow those properties more quickly.
Club Penguin says it has more than 700,000 paying subscribers and 12 million registered users, mostly in the United States and Canada.
Associated Press Business Writer Gary Gentile contributed to this report from Los Angeles.
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