Disney buys Club Penguin in $700 million deal — virtual worlds have arrived?

August 1, 2007 | Eric Eldon | Comments | |

Updated

picture-16.pngClub Penguin, a virtual world for kids, has been bought by the Walt Disney Company. The deal is valued at $700 million: $350 million in cash now, and another $350 million if performance targets are met through 2009.

The company, based in remote British Columbia, has more than twelve million total users — mostly kids 6-14 in North America — and including more than 700,000 paying subscribers. It says it is completely funded through subscriptions.

Founded in March 2005, Club Penguin features avatars of animated penguins that live in an antarctic virtual world. Users can play games together, chat, and furnish virtual homes with virtual accessories.

Subscribers choose to pay between USD$5.95 per month and USD$57.95 per year to “[d]ress up your penguin, decorate your igloo, be the first to discover new areas and lots more.”

The purchase shows that Disney is hungry to get into online gaming, a market that is expected to grow significantly in the coming years. One analyst expects US spending to hit $725 million in 2008, up from $375 in 2006.

Comscore reported 217 million unique worldwide users in May, a seventeen percent growth rate from last year’s figures.

Club Penguin is one of many popular virtual worlds for kids that incorporate virtual games and goods. Another popular startup is Habbo Hotel: Instead of an antarctic theme, that site features an urban apartment theme. Another, IMVU is a small and growing startup that combines virtual games and chat with more fantastical landscapes and avatars.

Disney found the purchase appealing in part because “[i]t’s simple, it’s easy to use. It doesn’t require significant amounts of technological investment,” as noted by PaidContent.

This purchase is another step towards digitizing Disney’s family-focused entertainment empire, developing revenue streams beyond its TV-based business, and even its brand. Disney is highlighting how very strategic Club Penguin is becoming by rebranding the Disney.com homepage (screenshot below).

Club Penguin will not be moving its headquarters.

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About the Author, Eric Eldon

Eric currently covers digital media technology and business news, especially what's happening on social networks and their platforms. He also writes and edits stories about venture capital, and lots of other stuff, too. He started at VentureBeat in the spring of 2007, half a year or so after Matt Marshall left his reporting job at the San Jose Mercury News to found the site. Eric previously cofounded a startup called Writewith, that was building editorial software for newspapers and other groups of writers. The startup didn't work out, but he learned a lot.

  • Congrads to my fellow Canucks. Looks like they got double the initial rumored amount plus jobs at Disney.
  • Jenna
    o wow! penguins? omg thats good! wats next? hamsters? haha!
  • help me 9876
    some one is haking my account on club penguin and are spending my money i tried chaqnging my pass but turns out they probaly installed in cumputer plz send an email on wat to do my email is alexkerr@pacbell.net plzz soon
  • Greg
    A new gaming site for kids that is chasing the $700 million is www.Clubtuki.com and my kids love it. Kids play educational games and earn money then can win real stuff in their auction.

    Site is owned by Children's Educational Network
  • Nehal
  • Hi Im Billybob and i own Club Penguin! and i hope you like how it trand out! Thanks! Billybob !
  • Jegrezo
    While it may be true that "This purchase is another step towards digitizing Disney’s family-focused entertainment empire," as the above article states, one must question Disney's recent decision to close their extremely popular kid-safe on-line world, Virtual Magic Kingdom (VMK), in which friendships and fun have flourished every single day at www.vmk.com for the past 3 years.

    While Disney has brilliantly set up Club Penguin in a manner that allows users to select from subscription plans ranging from $5.95 per month and $57.95 (according to the above information), they completely neglected to ever offer a subscription opportunity to their already loyal VMK players, many of whom have posted on VMK-related message boards that they would happily pay a nominal monthly fee to keep their already popular virtual community (with real life people enamored with it) from its sudden proposed closure. This obvious omission has left avid-VMK players asking, "Why?!?"
    Why not offer a pay-to-play option? Why not keep their virtual-funville? Why close such a wonderful on-line community?

    Regarding the last question, Disney has only offered the seemingly-shallow explanation to its loyal VMK'ers that the game was only meant to be part of Disneyland's 50th Celebration which commenced in 2005 and therefore, has run it's course.

    Two problems with this arguement:
    1 - If this is truly the reason for VMK's looming doom, why did the entertainment giant wait a year and a half after the 50th celebrations ended to deliver the ax?

    2 - Both Disneyland's Parade of Dreams and Dream Come True Fireworks show were created to celebrate Disneyland's 50th Anniversary. However, they both continue to be part of Disneyland's Year of a Million Dreams promotion which currently runs at the Happiest Place on Earth. And yet VMK is on its way to its death bed because it was only meant to be part of the very same celebration?

    One would think Disney could have thought of adding a simple tag line to their amazing virtual community to justify its continued existence if this were the real reason. Maybe... Disney's Virtual Magic Kindom - Where Real Dreams Come True Daily.

    Sadly, unless Disney's decision-makers choose to recognize the amazing interest that their on-line world's extremely loyal participants have in keeping their Kingdom alive (as evident from the nearly 7,000 signatures at an on-line petition at www.savevmktoday.com) these daily dreams with end on May 21, 2008, the date Disney announced rather abruptly as VMK's closure.

    Of course, then VMK'ers could always turn to penguins ... until Disney decides to put Club Penguin on ice and give it the same fate VMK is currently facing.
  • I can't keep my 6 year old off Club Penguin he is addicted. I never realized Disney paid this much money for the game. Does anyone know the performance targets that are part of this deal?
  • FUCK DISNEY!
  • Limeboy
    i play this game........ its alright........... but what isnt alright is 750 mill for a lousy computer game with some 40 year old petafiles playing it for all we nkow there could be criminals playing these games................
    ......................................................................................................................................................................................................................................................................................................................................................................................................................................!
  • kat k9 1
    dit you know Luke H is the best worker in cp? cool hu
  • HANNAH
    FUCK DISNEY BITCHES I HOE THEY DIE I WANT PENGUIN CHAT