« Previous post
Next post »

May 16, 2007

Club Penguin In Acquisition Talks With Sony For $500+ million

Michael Arrington

58 comments »

It’s been rumored for a while that Montgomery & Co. is representing virtual world Club Penguin in a sale transaction. It looks like the company is locked in talks, possibly exclusive, with Sony, and the price is “at least half a billion” says a source close to the deal.

We mentioned Club Penguin last month when a competitor launched from IAC called Zwinktopia. The company is killing it - projected revenues of $65 million in 2007 with $35 million in profit. Having nearly 50% bottom line margin is exceptional. The company has around 500,000 active users.

A stumbling block in the negotiations appears to be a disagreement over charitable contributions. Club Penguin donates a significant portion of profits to charity and wants this policy to continue post-acquisition. Sony reportedly isn’t hot on the idea.

Club penguin is a virtual world for young kids. Sony may see significant synergies by tying it into their Playstation platform. Other bidders that were in talks until very recently reportedly include AOL, Disney and Viacom.

This is good news for Club Penguin’s virtual world competitors as well - which broadly includes Second Life, Runescape, Gaia, Habbo Hotel, Cyworld, Neopets, Webkinz and others.

  • Sphere It

This entry was posted on Wednesday, May 16th, 2007 at 10:37 am and is filed under Company & Product Profiles. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Trackbacks/Pings (Trackback URL)

  1. Hitchhiker's Guide to 650

    May 16th, 2007 at 2:25 pm

  2. Sony + Club Penguin? « Joi Podgorny

    May 16th, 2007 at 2:30 pm

  3. brinking - nabeel hyatt

    May 16th, 2007 at 8:37 pm

  4. MyMiniLife: Your Embeddable Virtual World

    May 19th, 2007 at 7:53 pm

  5. MyMiniLife: Your Embeddable Virtual World : Forecast-Blog

    May 19th, 2007 at 8:55 pm

  6. TechJuicer » Blog Archive » MyMiniLife: Embed Your Life On Your WebSite!

    May 20th, 2007 at 1:14 pm

  7. Gedankenexperiment

    May 22nd, 2007 at 9:20 pm

  8. DataFlux Community of Experts » Blog Archive » Virtual Worlds, Real Money

    July 18th, 2007 at 5:28 am

  9. Extremely Happy Feet: Disney Acquires Club Penguin For Up To $700 million - Symballo

    August 2nd, 2007 at 12:56 pm

  10. Jay & Silent Rob

    August 2nd, 2007 at 2:38 pm

  11. Extremely Happy Feet: Disney Acquires Club Penguin For Up To $700 million | Tekjuice.com

    August 2nd, 2007 at 10:04 pm

  12. Extremely Happy Feet: Disney Acquires Club Penguin For Up To $700 million | Tekjuice.com

    August 2nd, 2007 at 10:04 pm

Comments

RSS feed for comments on this post.

  1. Adam Kalsey

    May 16th, 2007 at 10:53 am

    My kids love Club Penguin. I’m worried that Sony will destroy it.

  2. Sam Daoud

    May 16th, 2007 at 11:01 am

    Thats a valuation of about $1,000 / user. Not a bad deal…
    BTW: You are missing a “w” in the image link to http://ww.clubpenguin.com

  3. Dexter Zaf

    May 16th, 2007 at 11:12 am

    My 2 nephews visit this website very often to play games and chat with their classmates and schoolmates. I don’t think Sony will destroy it. Sony will likely add more interactive features.

  4. Michael Arrington

    May 16th, 2007 at 11:13 am

    Thanks Sam.

  5. Eric Willis

    May 16th, 2007 at 11:20 am

    Wow. Those profit margins are awesome.

  6. Jason Trout

    May 16th, 2007 at 11:49 am

    I’m chearing for Club Penguin here. I hope they either get their way or don’t sell to Sony. As you point out, they made over $30 million last year and if they are donating a percentage of that to charity then thats a lot of money. A lot of money Sony wants to take away from charity and to hell with them (pardon my french).

    But that’s just me.

  7. will

    May 16th, 2007 at 12:05 pm

    you guys know how club penguin makes majority of their revenue? Through “coins” or advertising?

  8. Mathew Ingram

    May 16th, 2007 at 12:27 pm

    Will, Club Penguin — which is based in Kelowna, B.C. — has a strict no-advertising policy.

  9. KR

    May 16th, 2007 at 12:39 pm

    can one company deliver a cradle to grave social network portfolio?

    kids begin with club penguin, graduate to playstation, progress to facebook/linked in, and then end the cycle with a seniors site.

    i am assuming that sony is looking at club penguin as a way to reach a younger audience in order that they can get them loyal to playstation. also, gives them a way to sell games/electronics to a younger demographic.

    who would have thunk that club penguin’s price tag could come close to the myspace purchase price?

  10. pallet jack

    May 16th, 2007 at 12:43 pm

    sounds like a amazing - idea - operation scheme -

    - Why do people sell? .. I mean you get this thing - 1 in a million -

    - make a lot of money - then sell ? …. n/m I guess that is the american dream

  11. Urls

    May 16th, 2007 at 12:51 pm

    I guess I’m missing out. I hadn’t even heard of club penguin before. I so thought I was in the loop too.

  12. Josh Jaffe

    May 16th, 2007 at 1:03 pm

    Montgomery Securities is dead. It must be Montgomery & Co. representing Club Penguin.

  13. Doug Mehus

    May 16th, 2007 at 1:05 pm

    Club Penguin is owned by a company called New Horizon Interactive Inc., based in Kelowna, B.C., where I live. I’ve dealt with one of the principals in the company when the company needed to rent a storage unit at Kelowna Self Storage, where I worked, for their (new) CEO’s personal belongings. If true, this would great news for New Horizon and Kelowna.

    It would be one of the largest corporate acquisitions for a Kelowna, B.C.-based company, eclipsing by a factor of 100 the buyout of educational software maker Bridges Transitions Inc. and easily beating (by market value) the buyout of privately held HRI Supply by Sysco Corp. in the ’90s. This would make it the second-largest buyout of a Kelowna company, eclipsed (possibly) only by Freightliner’s buyout of former Kelowna, B.C.-based company Western Star Trucks.

    Awesome news! :)

    Cheers,
    Doug

  14. Hanford

    May 16th, 2007 at 2:04 pm

    Michael: Your second paragraph is a bit confusing:

    “We mentioned Club Penguin last month when a competitor launched from IAC called Zwinktopia. The company is killing it - ”

    Which company is killing what? Is Zwink killing penguin? Is Zwink killing itself?

    Can you clarify that?

  15. rob

    May 16th, 2007 at 2:14 pm

    someone will have to explain to me why the buyout of a canadian company by a foreign corporation is good for the community. great for the owners, maybe but as you can see from the fight over charitable donations, not great for the region.

  16. Joi Podgorny

    May 16th, 2007 at 2:25 pm

    Club Penguin is has no ads, the majority of their revenue is earned through a monthly subscription rate that allows users to buy exclusive items in the world.

    From their parents page:
    “Instead of financing our operations through advertising as most websites do, Club Penguin relies solely on paid memberships. By remaining ad-free, we can provide our users a safe haven from marketing.”

    Will be very interesting to see if the no ads policy is kept if the Sony deal goes through.

  17. cbmeeks

    May 16th, 2007 at 3:28 pm

    Goodness. 500 million here, 2 billion there, anyone want to buy my site?

    I’ll take a measly 100 grand. Seriously.

    http://www.signaldev.com

  18. Gene Wade

    May 16th, 2007 at 3:34 pm

    What is significant about this transaction is that it validates the social networking space for younger children. It proves the proposition that parents are willing to pay for their children to engage in social networking in a safe environment. It also proves that this can be offered very profitably even with a relatively small community base of 500,000 users. Assuming this community grows anywhere near the size of the leading social networks, it will throw off a lot of cash for its investors or owners. My suspicion is that this transaction will draw others into this marketplace.

  19. Sogood

    May 16th, 2007 at 5:09 pm

    Mathew:

    They advertise, market and sell their own products.

  20. Omer

    May 16th, 2007 at 7:23 pm

    Wow that is interesting. Clearly an under served market online. Get them while they are young! Btw Club Penguin appears twice in the last para.

  21. BlogReader

    May 16th, 2007 at 8:49 pm

    Club Pengiun can still donate their profits to charity. In this case the charity is “keeping the Playstation 3 afloat”

  22. ClubPenguinDad

    May 17th, 2007 at 12:52 am

    I hope Sony continues to keep the “free” option that dads like me love ;)

    BTW, the math is not working out here - Club Penguin subscription is $6/month, and $58/year, it would need over 1MM paying users for a $65MM revenue…

    I would have thought 500K active users included 89% free users, but even we assume all are paying, CP needs to make $10/mo/user…

    Any insights?

  23. Rod Recker

    May 18th, 2007 at 12:58 am

    Club Penguin can say that they are marketing free, but they are still training the next generation of shoppers by rewarding kids with the abilty to purchase clothes, gadgets, houses, and furnishings.

    So Sony won’t necessarily need to add traditional advertising. They can do product placements. My kids buy a lot of things for their penguin homes like TVs and sound systems. Sony just needs to put their name on those things and offer other Sony products for purchase.

  24. D.M.

    May 18th, 2007 at 1:16 pm

    Club Penguin should not sell their game to Club Penguin. Sony is not going to donate money to kids in Africa to fight against AIDS.

  25. D.M.

    May 18th, 2007 at 1:34 pm

    I meant to say Sony, I apoligize.

  26. erin

    May 18th, 2007 at 2:08 pm

    clup penguin is so much fun…… and i though i knew all the cool websites!!!

  27. D.M.

    May 18th, 2007 at 2:35 pm

    So many of the users buy memberships. Also, they have other not as popular “sellers”, like their shop.

  28. S.D

    May 19th, 2007 at 5:45 am

    Club Penguin is nice, the High likliness sony will add pop-ups, ads, and so much garbage no one would not like to go on it, and Club Penguin is for kids, Club Penguin memberships would be more expensive, and Sony would make it 13+ only, which really pisses me off

  29. D.M.

    May 19th, 2007 at 10:01 am

    I just heard that someone emailed Club Penguin. Their staff says that their rumors just rumors.

  30. grant

    May 19th, 2007 at 10:36 am

    I am a fan of club penguin. I also am one of the few people who got the advantage of testing the game before it fulley started. Club penguin does not just get money from memberships. On the website (not the game) there’s a souvineir shop with toy puffles and t-shirts etc. that you can buy with real cash so you can own it in real life.

  31. D.M.

    May 19th, 2007 at 3:53 pm

    Yes that is true, but their sales aren’t really great Grant.

  32. susi 16

    May 20th, 2007 at 11:45 am

    i wanna know why the normal penguins dont have more than two puffels

  33. Alex

    May 22nd, 2007 at 2:21 pm

    Yeah, the reason Disney mentioned it is to make a show out of it. It would be good….

  34. Ninjaz 101

    May 26th, 2007 at 6:17 pm

    Don’t sell club penguin!
    If you sell it….Sony will crush it!

    Thanks,
    Ninjaz 101

    P.S
    Be sure to join http://www.clubpenguintreo.com

  35. Iffat56

    May 27th, 2007 at 9:29 am

    I have a weird tingle down my spine,because in reality(I think) most companies just want to have money rolling in their door,so if New Horizion Interactive says yes,then Sony can make it for their Playstation 3 so that more people want to buy it and Sony will be rich.So Sony + Club Penguin + Playstation 3 = money just like that (and btw,i’m a kid).

  36. DM

    May 28th, 2007 at 8:36 am

    It’s just a major rumor reported by New Horizon’s Club Penguin Staff.

  37. Penny3532

    May 28th, 2007 at 3:52 pm

    my friends and i love club penguin. it’s the most funnest game on the computer and it’s safe for kids and i meet new friends on there all over the world which is so awesome. If Club Penguin is sold to sony, then it will be destroyed. I hope that club penguin doesn’t get sold

    ~Penny3532
    owner of http://penny3532.wordpress.com

  38. Penny3532

    May 28th, 2007 at 3:55 pm

    my friend e-mailed club penguin and they replied saying that they couldn’t answer that question. oh and btw i’m a kid.

  39. sidulm abdmzcrf

    May 31st, 2007 at 2:03 pm

    ughevwjt huboe zeygd ojqbgs qrfya dfwp gbay

  40. Meowmix43

    June 1st, 2007 at 10:00 am

    noo dont let sony buy it please i love clubpenguin and if they by it they might mess it up please dont let them buy it couse clubpenguin is my life i live for club penguin

  41. this is rubbish site

    June 4th, 2007 at 9:48 am

    please dont read this it isnt anything to do about cp making money

  42. andrea abifaraj

    June 4th, 2007 at 6:08 pm

    im with clubpenguin!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
    because i love there website i always be in club penguin. my father do me a member but more than a month and clubpenguin make me member more than a month.COME ON CLUBPENGUIN COME ON LETS DO IT!!!!!!!!!!!!!!

  43. rooskie94

    June 6th, 2007 at 7:50 am

    i’m with club penguin!!!!!!!!!!

    dont let sony take over, u never know what sony will do to club penguin.
    :( so i say stop sony take over something else.
    i love club penguin so i go on it every day. and i will sue u if sony destroys
    clubpenguin.

  44. S.D

    June 6th, 2007 at 9:39 pm

    Yeah, well, IT IS A FALSE RUMOR, I asked club penguin

  45. Coolmaninsan

    June 8th, 2007 at 8:57 am

    WHAT THE FUCK IS ALL THIS ABOUT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1

  46. Dudeikoff

    June 9th, 2007 at 9:27 am

    I play Club Penguin and I’m not sure wheter it is being sold or not. Part of me wants it to because I want to see what it will be like but the other hlf likes it as it is.

« Previous post
Next post »