Disney Adds Club Penguin to Internet Group

The Walt Disney Company acquired Club Penguin, a virtual world catering to grammar school-age children. The popular pre-teen virtual world will become part of the Walt Disney Internet Group.

Club Penguin and all of Disney’s existing communities will remain free of advertising, a sensitive area for very young children, but will eventually be open for cross-promotion, licensing arrangements and franchise expansion.

Earlier this year Disney relaunched Disney.com with a handful of virtual world sites targeted at kids of different ages. While the company’s strategy is generally to build its own properties and communities, Club Penguin’s 12 million activated users and 700,000 current paid subscribers became an acquisition target.

Up front, Disney will pay $350 million for the property. The three Club Penguin founders stand to earn as much as double that figure in additional payouts if certain goals are met by year-end 2009. Club Penguin’s three founders say they and their employees remain committed to advancing the property under Disney’s flag.

“If it was about the money, we would have taken the money a long time ago,” Lane Merrifield, Club Penguin CEO and co-founder told ClickZ News. He said discussion predominantly revolved around philosophy of the site rather than valuation.

As part of Disney, Club Penguin intends to expand internationally by leveraging its new parent’s worldwide infrastructure. The community has been somewhat limited to English-speaking countries, including the U.S., U.K. and Canada. Merrifield said many kids translated elements of the storyline and playing experience into their native languages.

A 700,000-strong group of six- to 14-year-olds pay a subscription price of $5.95 monthly, or $57.95 annually, to interact with Club Penguin. Disney’s purchase of the gaming environment will extend the reach of Disney’s portfolio of virtual communities accessible through the Disney.com site, which was relaunched earlier this year. Existing virtual communities include Disney’s Toontown Online, Disney Game Kingdom, Virtual Magic Kingdom, and the upcoming Pirates of the Carabbean Online and Disneyfairies.com. Club Penguin will adopt the “Disney” name before its title.

The portfolio reaches a range of age groups and interests with content that appeals to both boys and girls. “It gives us an opportunity to deliver a portfolio of products to our audience,” said Steve Wadsworth, president of the Walt Disney Internet Group. “There is an opportunity to expose our audience to a broader range of experiences as they age and develop their use of the Internet. Club Penguin fits in very well.”

Users can spend an unlimited amount of time in the world for free; a subscription is required to conduct certain activities, such as making purchases.