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.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Disney acquires Club Penguin for $350M
Cigar tax proposal threatens US retailers, Latin American countries
WASHINGTON (Thomson Financial) – US specialty tobacco shops are worried that a proposed increase in federal taxes on cigars will drive thousands of small retailers out of business, and could also lead to substantial job losses in Latin American countries that produce and export most cigars sold in the US.
At issue is a bill approved last week by the House tax writing committee that would dramatically increase taxes on cigars, cigarettes and other tobacco products in order to pay for increased funding for a nation-wide children’s health insurance program.
The House Ways and Means Committee approved a bill Thursday that would more than double taxes on large cigars, most of which are premium cigars, to 44.6 pct, up from the current level of 20.7 pct.
The House bill was approved in committee a week after the Senate indicated it could support a 53 pct tax on large cigars.
Chris McCalla, legislative director for the Retail Tobacco Dealers of America, said the taxes being considered could force premium cigar prices in the US to double or even triple, since the tax would apply every time a cigar changes hands at the import, distribution and retail levels. As one example, he said a 4 usd cigar could cost as much as 12 usd under the new tax.
McCalla said the tax would likely drive a large percentage of the 3,600 specialty tobacco retailers in the US out of business, since he does not expect consumers to pay this steep price.
‘If this happens, expect a great number of these family-owned cigar shops to close,’ he said of the legislation. McCalla’s group includes about 2,000 small retailers as members.
Another potential problem is that the Senate bill would require the new tax to be assessed immediately on all cigar inventories maintained by tobacco shops once the law takes effect, leading to a huge one-time charge that could prompt some stores to close before taking the tax hit.
Internationally, industry sources said they expect a shrinking number of US tobacco retail outlets to lead to reduced US imports of cigars from Latin American countries.
‘This would have a devastating impact on Nicaragua, Honduras and the Dominican Republic, which have tens of thousands of people working in the tobacco industry,’ said Norman Sharp, president of the Cigar Association of America.
Ironically, Ways and Means Committee Chairman Charles Rangel of New York supports the bill, even though he has previously championed efforts to ensure Latin American countries have fair access to the US market. Rangel indicated last week that he was reluctant to support the tax hike, but the bill was approved by his committee nevertheless.
‘I have a history of opposition to excise taxes, but in light of the heavy financial weight smokers place on Medicare expenditures and the overwhelming proof linking the increase in cost of tobacco products with a decrease in youngsters buying cigarettes, I am very pleased to have worked with my colleagues on the bill we are reviewing today,’ he said.
The House bill as approved would also more than double taxes on cigarettes and other products like chewing tobacco. Taxes on cigarettes would account for most of the revenues generated by the tobacco tax hike.
Cigarette producer RJ Reynolds has already publicly called on Congress to reject a tax hike on cigarettes, while other companies such as Philip Morris USA and Loews Corporation are also known to oppose the tax hike. One industry source said it is widely expected that a tax increase on tobacco would reduce consumption of cigarettes in the US.
‘Between federal, state, and local taxes and tobacco settlement payments, government entities raked in more than 33 bln usd from smokers in 2006,’ according to a notice on RJ Reynolds’ website. ‘Why should 20 pct of the adult population be forced to pay even more?’
pete.kasperowicz@thomson.com
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Labor undeterred by Drummond verdict
BIRMINGHAM, Ala. (AP) – After more than a decade of trying to use an archaic law to punish U.S. corporations for alleged wrongdoing overseas, organized labor lost the first such case ever to go before a jury.
But union attorneys say they won’t be deterred by the outcome of the case against Drummond Ltd., and lawyers for both labor and corporate interests say rulings on appeals stemming from the trial may be more important in the long run than the verdict itself.
A jury on Thursday rejected claims that Alabama-based Drummond coal was to blame for the killing of three union leaders in Colombia in 2001. Families of the dead men and their union alleged the company was behind the gunshot killings by paramilitary forces.
Jurors sided with Alabama-based Drummond, which denied any involvement with the killings or with militia forces.
The case was the first one against a U.S. corporation to make it to trial under the Alien Torts Claims Act, which lets foreigners file suit in U.S. courts for alleged wrongdoing overseas.
An attorney involved in another suit said the Drummond case showed the ‘serious problems’ created by using U.S. courts to review conduct in foreign countries.
‘Hopefully this outcome will cause others to realize it’s not enough to make wild, unsubstantiated allegations and hope juries will be swayed,’ said Robert A. Mittelstaedt of Jones Day in San Francisco.
Mittelstaedt’s firm represents Chevron Corp., which is being sued over alleged abuses in Nigeria.
Here, the plaintiffs attorney, Terry Collingsworth, promised an appeal of the Drummond verdict. He said he disagreed that the jury decision would endanger other, similar cases filed under the more than 200-year-old law.
‘The facts in this case were the facts,’ said Collingsworth. ‘But it doesn’t affect any other case because the law is still letting them go forward.’
Collingsworth is executive director of the International Labor Rights Fund, which represented families and the union of the dead men in the case against Drummond.
Drummond attorney Bill Jeffress said the jury’s decision showed the folly of groups trying to use the law to pursue U.S. multinationals and ‘might discourage overuse of this statute.’
Eventual appellate rulings from the Drummond case will likely help determine the course of future cases under law, according to Jeffress and Collingsworth.
The law was originally passed in 1789 as a way to combat piracy.
For the families to win in the Drummond case, a judge told jurors they had to believe Drummond committed a war crime in Colombia by knowingly assisting gunmen who shot the union leaders to death in 2001.
The panel rejected the claim, ruling that neither Drummond nor its Colombian president were liable for the slayings.
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Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Hungary officials raid Microsoft office
BUDAPEST, Hungary (AP) – Hungary’s state Competition Authority raided the offices of Microsoft Corp.’s local subsidiary as part of a probe into the company’s relationship with large software distributors.
The unannounced raid took place July 19 at the offices of Microsoft Magyarorszag Kft., according to a notice posted on the authority’s Web site.
According to the statement, Microsoft used sales conditions and offered software distributors incentives — described as ‘loyalty discounts’ — so they wouldn’t offer clients anything but Microsoft Office products.
Such behavior could lead to the exclusion of competitive products from the market and violate European Union rules, according to the authority known as the GVH.
‘During the raid, the GVH gathered evidence supporting these suspicions,’ the authority said, adding that the probe did not mean Microsoft had broken the law.
Microsoft spokesman Guy Esnouf said the software company was cooperating with Hungarian authorities.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
New group lobbies against Internet fraud
WASHINGTON (AP) – Well-known companies such as Dell Inc., Yahoo Inc. and Marriott International Inc. are lobbying Congress for tougher laws targeting online scammers who profit from their brand names.United as the Coalition Against Domain Name Abuse, 10 companies have hired the law firm Alston and Bird LLP to persuade federal lawmakers of the need to crack down against those who claim Web addresses, or domain names, that include — or even resemble — a legitimate company’s trademark.The coalition estimates that so-called cybersquatting costs companies worldwide more than $1 billion annually in diverted customer sales and enforcement expenses.In the past, Internet speculators claimed famous-sounding or popular domain names in the hopes of selling them to corporations for thousands or millions of dollars. They also purchased Web domain names that sounded like a popular company as a way to quickly generate traffic and sell online advertising.But the coalition says scammers increasingly employ cybersquatting to sell counterfeit goods, secretly install malicious software on computers or dupe customers into providing personal data through, hurting both companies and their customers.Cybersquatting enables ‘phishing’ scams, said Paul Martino, a former counsel to the Senate Commerce Committee from 2001 to 2005 on Internet issues and now a lobbyist for the coalition.Phishers attempt to lure Internet users via e-mails to counterfeit Web sites disguised as trusted companies in order to get sensitive data, such as credit cards.’The bigger the brand name, the more lucrative it is to cybersquat the brand,’ Martino said.Both the Federal Trade Commission and the FBI’s cyber division said that under existing laws cybersquatting, in and of itself, is not necessarily a crime.’If the intent of the (Web) site is to defraud or to commit some other illegal act, then it’s a crime and we can possibly step in,’ FBI spokeswoman Cathy Milhoan said.Dell says it sees 500 new infringements of its brand name each month. Citing a report by MarkMonitor, a brand-protection firm, the group said cybersquatting grew by 248 percent in the past year.Fighting cybersquatting has become more difficult, companies said.Many scammers now use automated technology to buy a domain name, test its profitability and then drop it for a refund within an accepted 5-day grace period, tactics referred to as ‘tasting’ and ‘kiting.’About 2 million domain names daily are tasted and kited this way by exploiting the grace period, originally designed to rectify legitimate mistakes such as mistyping a domain name.Susan Crane, Wyndham Worldwide Corp.’s group vice president of intellectual property, said this makes it almost impossible to find the true identities of cybersquatters, who also provide false information on registration forms.’You can never catch who has it because the ball keeps bouncing around,’ she said.However, a fear among domain name holders who use their sites for legitimate purposes is that deep-pocketed corporations could unfairly target them as cybersquatters and try to take away their Web addresses.Josh Bourne, the coalition’s president, said a 1999 federal consumer protection law against cybersquatting isn’t deterring the practice and civil penalties — which now range from $1,000 to $100,000 — aren’t enough, he added.He said the 5-day grace period should also be eliminated, which would require the Internet Corporation for Assigned Names and Numbers, the Internet’s key oversight agency, to change its policy. The group will also seek an international treaty on cybersquatting..Bourne would not divulge the group’s budget or how much they plan spend lobbying, but said: ‘Money isn’t an issue.’In addition to Martino, the firm’s other registered lobbyists include Naotaka Matsukata, who was director of policy planning for former U.S. Trade Representative Robert Zoellick and Eric Shimp, who handled trade and investment issues also at the U.S. Trade Representative’s office.The coalition’s members also include: Verizon Communications Inc., Hilton Hotels Corp., American International Group Inc., HSBC Holdings Plc., Eli Lilly & Co. and Swiss-based Compagnie Financiere Richemont SA, which makes Cartier jewelry.–Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Synthes has setback in FDA panel backing of Medtronic spinal disk – report
ZURICH (Thomson Financial) – Synthes Inc has had a small setback in the US after a Food and Drug Administration advisory panel recommended approval for Medtronic Inc’s Bryan Disk, a product competing with Synthes’s ProDisc, said a report in Swiss bi-weekly Finanz und Wirtschaft.
The Bryan Disk, a polyurethane and titanium implant to replace worn-out spinal disks, could be on the market by the beginning of 2008, said the report.
Medtronic is expected to see sales of around 200 mln usd by 2010, the report added.
On Monday, Medtronic won FDA approval for Prestige, a steel version of the disk.
Medtronic now has a headstart on Synthes, as FDA approval for Synthes’ Prodisc is not expected before the end of 2007 or beginning of 2008.
sarah.fenwick@thomson.com
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N.M.: Company fined in fireworks case
ALBUQUERQUE (AP) – A federal judge has fined a Sandia Park company $7,500 for violating a law against selling chemicals and components used to make illegal fireworks.
U.S. Magistrate Lorenzo Garcia on Friday also placed United Nuclear Scientific Equipment and Supplies on probation for three years, the U.S. Consumer Product Safety Commission said.
The agency, in a news release announcing the end of the case, said the company pleaded guilty to three counts of introducing into interstate commerce and aiding and abetting the introduction into interstate commerce of banned hazardous substances.
United Nuclear, its founder Bob Lazar and accountant Joy White also entered into a consent degree that permanently limits the amount of fireworks-related chemicals the firm can sell in the future; prohibits sales of any fuses, tubes and end caps; and requires United Nuclear to destroy remaining inventory of components and specified chemicals.
Lazar could not be reached for comment at his business, which is closed on Fridays.
The company sold components and chemicals used to make such illegal fireworks as M-80s and quarter sticks, which are banned by federal law and product safety commission regulations, the commission said.
The commission’s acting chairwoman, Nancy Nord, said the court ruling was a victory for consumer safety.
United Nuclear also sells polonium-210 in invisibly tiny amounts exempt from federal licensing restrictions. That’s the radioactive isotope blamed in the death of Kremlin critic and former KGB spy Alexander Litvinenko in London last Nov. 23.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Pfizer ends trials of PF-3512676 as lung cancer treatment UPDATE
LONDON (Thomson Financial) – Pfizer Inc said it has ended trials of PF-3512676 in combination with cytotoxic chemotherapy as a treatment for lung cancer.The company said this includes two Phase 3 and two Phase 2 clinical trials.Pfizer said an interim analysis of the Phase 3 trials by an independent data safety monitoring committee (DSMC) showed there was no evidence that PF-3512676 produced additional clinical efficacy over that achieved with the standard cytotoxic chemotherapy regimen alone.’The DSMC concluded that the risk-benefit profile did not justify continuation of the trials,’ the company said.Pfizer said it licensed PF-3512676 from Coley Pharmaceutical Group Inc in 2005.tf.TFN-Europe_newsdesk@thomson.comwjCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
News Corp. reaches deal to buy Dow Jones
NEW YORK (AP) – Rupert Murdoch’s News Corp. has reached a tentative agreement to buy Dow Jones & Co., publisher of The Wall Street Journal, the Journal reported on its Web site.
Negotiators from the two companies on Monday reached an agreement in principle for the original $5 billion that Murdoch had offered, and it will go to Dow Jones’ board Tuesday for its approval, the Journal said, citing unnamed people familiar with the situation.
The deal would still need approval from Dow Jones’ controlling shareholders, the Bancroft family, which has been divided on a sale to News Corp. because of concerns over whether the Journal would maintain its editorial independence.
Christopher Bancroft, a Dow Jones director, recently has been approaching major stockholders in an attempt to buy enough shares of Dow Jones to block a sale.
Michael B. Elefante, the Bancroft family’s lead trustee, has scheduled a meeting for Thursday to present the agreement to the family and is expected to give the family members several days to make a decision, the Journal reported.
Representatives of Dow Jones and News Corp. did not immediately return telephone messages seeking comment.
Murdoch, News Corp.’s chairman, resisted pressure from Dow Jones to raise his initial $60 a share offer, which represented a premium of about 65 percent over the mid-$30s level that Dow Jones stock was trading at before the proposal became public in early May.
Dow Jones shares fell 54 cents to $56.95 Monday.
Murdoch has long wanted to own the Journal, which has tremendous clout in the business world and wins many prizes for editorial excellence. Murdoch has said he would invest in the Journal’s online and overseas operations, and tap its resources to help build a business-themed cable news channel that would rival General Electric Co.’s highly profitable CNBC network.
A union representing Journal reporters and other Dow Jones employees has objected to Murdoch’s bid, saying he would downgrade the quality of the paper’s coverage and tilt its stories to suit his business interests.
The Bancrofts originally rebuffed Murdoch’s approach but then reversed themselves and agreed to meet with him in early June to discuss their concerns about keeping the Journal’s coverage free from corporate interference. The talks led to an agreement to create a committee that would have to approve the hiring or firing of top editors at the Journal.
Dow Jones directors have been searching for rivals to Murdoch’s $5 billion bid, but it seemed unlikely that anyone would top it.
A committee of Dow Jones directors, including a representative of the Bancroft family, met last week with supermarket billionaire Ron Burkle and Web entrepreneur Brad Greenspan to explore a competing deal, but it wasn’t clear whether a solid alternative to Murdoch’s offer would emerge.
Besides the Journal, Dow Jones also owns Dow Jones Newswires, the Factiva news database, Barron’s, a group of community newspapers and several well-known stock market indicators including the Dow Jones industrial average.
News Corp. owns the Fox broadcast network, Fox News Channel, newspapers in the United Kingdom, Murdoch’s native Australia and the New York Post, the Twentieth Century Fox movie and TV studio and MySpace, the online social hangout site.
The Bancroft clan trace their ownership of Dow Jones to Clarence Barron, a Dow Jones correspondent who bought control of the company in 1902. Over the years, their ties to Dow Jones have become more remote, and currently none of them works in the company’s day-to-day operations, but they control the company through a special class of shares that has powerful voting rights. Despite owning just 25 percent of the company, they exercise 64 percent of the shareholder vote.
Other newspaper publishers also have two classes of stock that allow families to retain control, including The New York Times Co. and The Washington Post Co., but in those two cases the families have greater involvement in day-to-day affairs.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
O2 to dump i-mode mobile internet service – report
LONDON (Thomson Financial) – O2, the mobile phone company owned by Spanish telecoms giant Telefonica, is understood to be dumping its i-mode mobile internet service in the UK, due to low take-up and a lack of attractive handsets, says the Guardian, without citing sources.
Telefonica has spent 10 mln stg on the product, but it has brought just 260,000 users in the UK. However, the service has performed well in Ireland, the paper says, where it will continue to be run.
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