Disney buys Club Penguin for $700 million

Club 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, according to a report in Venture Beat. The company, based in 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.