Disney Buys Club Penguin For Up to $700 Million
- by Wayne Friedman , August 2, 2007
According to Bob Iger, Disney president/CEO, Disney paid $350 million, but its founders were given incentives to gain another $350 million. Earlier this year, Disney launched a complete overhaul of Disney.com, incorporating mash-ups, personal pages, and other Web 2.0 features.
Club Penguin, which takes no advertising, has 700,000 subscribers, and according to Hitwise, was the 131st-most-visited Web site in the U.S. for June.
Traffic to the word-of-mouth sensation increased 329% from June 2006 to June 2007, Hitwise reports.
Disney financial results over-delivered on its net earning estimates, up 5% to $1.18 billion for its fiscal third-quarter period. Its media networks were a major factor in the company's earnings gains.
Looking at the upcoming year, Iger says its big broadcast network asset, the ABC network, achieved "high single-digit increases to $2.4 billion in total prime-time commitments" from advertisers during the recent upfront sales period. Iger spoke to the investment community during a conference call.
As other broadcast networks have noted, ABC upfront advertising business was stronger in other dayparts. "We had a strong upfront with double-digit CPMs [the price-per-thousand viewers] increases in morning news and daytime," says Iger. "It was a solid upfront for ABC."
Cable network ABC Family also witnessed double-digit CPM increases as well. Disney executives said ESPN and SoapNet results were also strong. Iger said ESPN's "Monday Night Football" and Nascar TV programs received some of the best advertising price increases.
For the 3Q period, Disney's media network group--which includes ABC, ESPN, ABC Family and SoapNet--witnessed a 23% gain to $1.4 billion in operating income. Revenue at the media networks climbed 6% to $3.8 billion.
Because of the success of ABC prime time, the company expects increased costs of some of its popular returning shows in future results periods. The company also said that ad revenues at ABC during the third quarter were due to higher advertising rates and higher sold inventory--partially offset by the impact of lower ratings.
The company's second-biggest income generator--Disney's parks and resorts--showed operating income up 13%. Guest spending improved by low single-digit increases, while attendance was about the same as a year ago. Considering these results were up Disneyland's 50th anniversary marketing efforts of a year ago, the company believes this was a good result. Revenue was up 6% to $2.9 billion.
Disney took a hit with its studio entertainment division--its theatrical films and TV production unit--that lost 20% in operating income. Disney's home entertainment division bore the brunt of these lower numbers.
During the third-quarter 2006, Disney sold a massive 18 million units of "The Chronicles of Narnia: The Lion, The Witch and The Wardrobe." Disney had no comparable release during this third-quarter period. Revenues for the division were 4% higher to $1.8 billion.
Consumer products had some strong results--up 12% in operating income to $118 million and 23% higher in revenue to $549 million. Products, especially from theatrical franchises "Cars" and "Pirates of the Caribbean," have been primary reasons for the big numbers.
It's not just TV properties that scored; Iger also noted that Disney Channel's "High School Musical" and "Hannah Montana" are also seeing good results.
