Disney adds networking site to stable
Moving to increase its online presence among children, Walt Disney Co. said Wednesday that it was buying the Club Penguin virtual community in a $350-million deal that could eventually be worth as much as $700 million.
The purchase gives the Burbank-based media giant an immediate foothold in social networking, a fast-growing business that big media companies have been increasingly drawn to in the wake of News Corp.’s 2005 acquisition of MySpace.com.
Disney said it would pay $350 million in cash for the website aimed at 6-to-14-year-old kids. As much as $350 million more will be added if the Canadian company’s founders reach profit targets through 2009.
“This is exactly what Disney should be doing: looking for ways to leverage its strong balance sheet into areas where it doesn’t have the expertise it needs to maximize the opportunities,” said Richard Greenfield, analyst at Pali Research in New York.
The announcement came on the same day Disney said it had exceeded Wall Street expectations with its fiscal third-quarter earnings. Net income rose 5% to $1.2 billion, or 57 cents a share, in the period ended June 30.
Excluding one-time costs, profit totaled 58 cents a share, versus a consensus estimate of 55 cents among Wall Street analysts.
Growth was robust at the company’s TV and radio networks, including ESPN, and at its consumer product and theme park divisions.
Strong international syndication sales for the ABC hits “Lost,” “Desperate Housewives” and “Ugly Betty” also boosted revenue, the company said.
The film division was hurt, however, by the lack of a blockbuster DVD title on the scale of 2006’s “The Chronicles of Narnia: The Lion, the Witch and the Wardrobe.”
In the earnings conference call, Disney Chief Executive Bob Iger said the company would rename its newest acquisition Disney’s Club Penguin and market it across its entertainment outlets.
“Club Penguin embodies principles that are of the utmost importance to Disney -- providing high-quality family entertainment and fostering parental trust,” Iger said.
Some of the larger networking sites such as MySpace.com and Facebook.com have been dealing with parental concerns about sexual predators potentially using them to track teenagers and younger children.
Launched in October 2005, Club Penguin has more than 700,000 paid subscribers and 12 million registered users, most of them in the United States and Canada. Visitors can adopt, name, feed and clothe virtual penguins, and they can chat and play games with other users.
Iger said Club Penguin had mushroomed largely through word of mouth and could grow further with the help of Disney’s marketing muscle, especially in untapped areas overseas.
Traffic at ClubPenguin.com rocketed 329% in June from a year earlier, according to the research service Hitwise. It was the 131st-most-visited site in the U.S.
Club Penguin fits with Disney’s family-friendly name and its general strategy of relatively small acquisitions, said Tuna Amobi, an analyst at Standard & Poor’s.
“It’s another asset that can complement the Internet initiative,” he said.
Amobi said the website was already profitable and, although its cash flow wouldn’t materially affect Disney’s bottom line right away, in the long run it was likely to become an important piece of the company’s online strategy.
In trading Wednesday before the earnings and acquisition announcements, Disney shares rose 83 cents to $33.83.
--
The biggest entertainment stories
Get our big stories about Hollywood, film, television, music, arts, culture and more right in your inbox as soon as they publish.
You may occasionally receive promotional content from the Los Angeles Times.
