Monday, August 6, 2007

Did Club Penguin Sell-Up or Sell-Out?

I’m just as impressed as everyone else by Disney’s announcement
Wednesday that it will pay as much as $700 million for the “tween”
social networking site, Club Penguin.
Impressed, because it’s a huge amount of money – $200 million more than
what Sony and News Corp. were rumored to be bidding for the barely
two-year-old Canadian company back in May.

Impressed, but not surprised. We’ve written previously about the market value of Club Penguin, and for an earlier story in Business2.0,
I got to hear from a ton of kids about why they are addicted to the
game. I even picked out my own waddling avatar and played the game
myself for a while.

While the notion of a virtual world
based on a bunch of costumed, flightless birds and their sculpting
feats with snow might sound silly (’how long will Penguins be hip, anyway?’ critics have asked),
beneath Club Penguin’s hokey animation are some wildly creative and
surprisingly dynamic narratives, stimulating enough even for adults
despite being so juvenile (not unlike Harry Potter).

Moreover, Club Penguin’s G-rated charm has been a nice alternative to the death-and-destruction universe of other MMOs.
It turns out parents were only too happy to pony up $60 a year in
subscription fees to know their kids could be online and protected from
smut, violence, and commercial hucksterism.

Which raises the first of two reasons why I’m worried about this acquisition, sorry, “partnership,” with Disney.

One: In the first of two conference calls with reporters Wednesday,
Club Penguin co-founder Lane Merrifield (he is one of three) insisted
that Club Penguin would remain ad-free, in keeping with the site’s

I happened to check out during the break. Not
surprisingly, Club Penguin was all over the home page – but so were
ads, including one for a Disney-branded “introductory 0% interest rate”
credit card from Visa.

Now, as the 28-year-old Merrifield explained, one big reason for
“partnering” with Disney is to scale Club Penguin’s user base. Speaking
about “new revenue streams” and “subscriber growth” Merrifield said:
“We’ve not done marketing … and still won’t … so the home page will bring awareness.”

But given that does shill for third parties, when my turn
came, I asked Lane how it is that kids who find their way to Club
Penguin through won’t be beset with ads. There was
an awkward moment before the president of Disney’s Internet Group,
Steve Wadsworth, (Merrifield’s new boss) jumped in to explain:

“Disney com is a place where people go to be entertained
for sure, with a broad range of media, in a range of environments, as
well as to be informed. So there is advertising on
— I see a Disney visa credit card ad [there]. But in virtual world
environments—having watched Club Penguin carefully and learning from
them—in those immersive environments that are clearly targeted at a
younger kids, like Club Penguin, Disney Fairies or Toontown, those will
be ad-free … so once kids get immersed, they’re pretty clean.”

Once kids get “immersed” in Club Penguin, they’ll be protected by
the same quality controls that distinguished the site from the
beginning. That is nice – and I don’t doubt that Club Penguin’s three
founders worked hard to make this a sticking point in the deal that
could likely make them each centi-millionaires. (Club Penguin took no
venture capital. Cofounder Dave Krysko primarily funded it, with
smaller stakes from Merrifield and a third founder, Lance Priebe, who
invented the game.) But I’m not sure it matters that Club Penguin’s
site will stay “clean” if, en route from 9-yr-olds get
hawked cheap credit.

Two: I think it’s admirable that Disney, the supposed “#1 site for
kids and families” (despite having botched Toontown) is now “learning
from Club Penguin,” but this rather confirms my suspicion that the
House of Walt is no longer a house of creativity.

Having invented animation, the company had to buy Pixar to stay
competitive in it for goodness sake. The single exception might be the
Pirates of the Caribbean movie franchise – but that’s a derivative
product line anyway, and we all know it will be remembered for its box
office records, not its wan contribution to artistic invention.

So I’m not sure who wins here. Disney is revved by the acquisition
for sure, but looks slow just the same. Club Penguin’s founders are
rich, but look a bit like sell-outs. It remains to be seen if the kids
benefit, at all.

Carleen Hawn is the editor of
Prior to editing Found|READ, she was an Associate Editor with Forbes,
and a Senior Writer and West Coast Bureau Chief for Fast Company.

Article Link

No comments: