Disney Falls for Club Penguin

While writing an article about how Club Penguin is now passé, I didn’t even get a chance to post it before Disney announced that it had bought the super-cute kids’ casual gaming world for $350 million (up to $700 million if certain targets are met). So, who’ll get the last laugh?

First of all, why is Club Penguin passé? That’s on the evidence of my 8-year-old daughter and a group of her friends, who happily let their paid subscriptions lapse and are now addicted to another kids site. For about six months (and $36 of my paid dues), my daughter could not get enough of CP. See my post from November 2006. But even with the new features and content, eventually, the site lost its appeal. Oh, the fickleness of youth…  Moving on to the next great thing…

Which happened to be Webkinz, also a super-cute “world” focused around virtual pets, for which access can only be gained by buying a $12.99+ plush stuffed toy in select retailers.  Every store near our house was sold out, so we had to buy one on eBay.  Webkinz is hot enough that eBay now highlights those products on their homepage.  Anyway, the only thing better than a virtual pet is one you can cuddle up and sleep with (apparently).  Ganz has bridged the virtual-real world.  Amazingly, there are no subscription fees nor advertising on the Webkinz site.  But to keep your access active, you have to keep buying more stuffed animals.

Now, did Disney buy the cat in the bag with Club Penguin? $350 million CASH for 700,000 paid subscribers is a rich $500 per subscriber.  If a typical subscriber lasts six months, generating $6/month in revenue, it looks like a losing proposition. Note there is NO advertising on Club Penguin, making their current 12 million total registered users a “meaningless” number, in terms of online advertising value.

Unless you’re Disney, who figure that they not only can multiply paid subscriptions by many times, but can also develop Club Penguin movies, plush toys, board games, pajamas, thrill rides and everything else that comes out of the Disney merchandising machine.  Disney’s forte is in extracting maximum concrete value out of a given virtual brand – witness Toy Story, Finding Nemo, etc. etc.  They calculated that Penguin had enough traction and momentum that it would be “easy” to leverage it much larger.

But will Club Penguin have the staying power of a Toy Story or Monsters Inc.? Not according to my 8-year-old. Is it truly more cost effective for Disney to pay $350-$700m for a new character idea than develop it in-house? Perhaps they don’t have a choice or the skill (see the Pixar acquisition). All I know is, I should be buying stock in Webkinz…. And prepare to be bombarded with Club Penguin merchandise this holiday season.

L.A. Times, August 2, 2007 “Disney Buying Club Penguin Website”

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One Response to Disney Falls for Club Penguin

  1. John Boucard says:

    Disney has a much bigger vision for Club Penguin. Having met the founders I can tell you that they are a extremely smart bunch and are grounded in exceptional technology, content, and software systems far superior to webkins. You’ll see.

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