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Disney Acquires Club Penguin; $350 Million Cash, Possible $350 Million Earnout

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imageOn a call with Disney CEO Bob Iger now while he announces the company’s acquisition of Club Penguin, which he describes as a perfect fit. It’s a cash payment of $350 million and an opportunity to earn out an additional $350 million between now and 2009.

The virtual world for kids 6-14 launched in Canada in 2005 and claims 700,000-plus paying members; subscriptions run about $6 or $58 a year. The site also makes money from virtual goods and other online merchandise sold through the site.

Founders Lane Merrifield, Dave Krysko and Lance Priebe will join Disney and remain the senior execs responsible directly for Club Penguin. Former Disneyland employee Merriefield, now the CEO, will be an EVP of the Walt Disney Internet Group reporting to WDIG president Steve Wadsworth. The founders are the only shareholders; each stands to make $115 million. More after the jump…

The combination of Disney and Club Penguin made sense all along but Disney seemed to be more inclined toward growing its own communities — Toontown (2003), Disney Fairies (launched in 2007 with a game coming in 2008), the upcoming Pirates — in house. Iger said the company is still committed to that strategy and thinks it will be successful but sees in Club Penguin a successful standalone business. With the exception of changing the name to include Disney and supporting the company, Iger promised: “Club Penguin is going to continue to exist as is. … The experience will not change at all. It will continue to evolve.” Iger added: “We really don’t intend to get in the way of that or do anything by virtue of the way we own it.”

For those of you just tuning in, we reported in May that Sony was in advanced talks to acquire the virtual world for what we were told was about $450 million, roughly a 7.5 multiple based on projected revenue of about $60 million — which struck some people then as high. But we were told then the self-funded company is already profitable and operating at about 50 percent margin

43 Responses to “Disney Acquires Club Penguin; $350 Million Cash, Possible $350 Million Earnout”

  1. Well I love Club penguin but penguins say things like they are robbers,babies (people pretending) are gross saying "I did a poopoo!",some are just mean !
    I reccomend Webkinz better for my son. I don't want him dreaming of him being a baby in a diaper saying " I need a doctor ! My pinus exploded !"

  2. A very shrewd business move by Disney. I believe Club Penguin’s success can be traced back to when it was first advertised on back in March last year. I would guess that a very large proportion of its userbase found out about it by logging on to Miniclip, where it has remained as the most played game for about a year now. Both companies will be able to prosper as a result of Disney’s investment.

    The best thing about Club Penguin is that it is fun to play for children and adults of all ages, as shown by the comments from other people here. It is incredibly safe compared to other social nextowrking sites, because you, the parent can control what your child says and/or does.

  3. club penguin is being made too safe and is like all of the other games for little kids… they disclude my age group, middle school. it use to be that one sanctuary where we could socialize w/ each other. as aaron said dont chage club penguin! too late it already sucks. and i send hate letters everyday and i've heard about sending spam so disney will quit . as soon as i figure out how to do that, i will. they make my stomach churn with regret of ever spending my own money for a membership! i hope they enjoy hatred because a lot of that is coming their way!

  4. i am a kid very intrested in this kind of subject and i was wondering in several more years from now will disney be changing this world becuse im talking as one penguin but my voice is coming from thousands do not cahnge club penguin at all it perfect im not talking about new rooms clothing catologs and ilgoo upgrades no but like the hole thing in its self just keep cp and dont take if of the web you will get thousends of hate e-mails!!!!!

    p.s yes i am just on kid but very powerful in words!!!!!!!

  5. samuel sanchez

    well guess what greg is right because iam a 12 year old kid and i dont really care about who bought clubpenguin aslong as it's going to stay fun and exciting my clubpenguin character is rock dude 95. but now that i heard about this iwant to know about the Issues like : is CP going to change in any way

  6. I am glad that these entrepreneurs hit the motherload. And having my own kids site catering to the same age group I can tell you they won't care at all about disney buying the site. These guys nailed the online world for kids faster than anyone on the web and they deserved this payday.

    Greg Writer
    Children's Educational Network

  7. Staci D. Kramer

    Thanks, Steve. No puffing involved, just transparency. We have heard from — and have read elsewhere — numerous comments from CP loyalists concerned about changing ownership, no matter who it is. You may not care, your kids may be thrilled — great. We may not see the same reaction to Disney that came when Sony was in talks. But until they are reassured by action that corporate ownership doesn't mean the kind of change they fear, if the pattern from before follows, some CP enthusiasts are likely to be concerned and will be vocal about it. That's what I was trying to get at with the question — how Disney is going to handle it.

  8. I disagree with your comment –

    "When I mentioned to Iger their expressed concerns about being owned by a corporation—Sony in the case of most we heard from or read— he said that wasn’t anything they had experienced. He may have thought I was referring to Disney ownership"

    Obviously you don't know or have read about the Club Penguin subscriber base… for the most part they are 10 year old kids… why would they care who owned the service if it remains Club Penguin. Staci it sounds more like you are puffing up making sure the readers here know you asked IGER a question…need to have more substance behind your questions…

    Oh and when I just asked my two 10 year olds if they mind that Disney owns Club Penguin their comment was "Cool".