Disney adds fantasy lands
Dawn C. Chmielewski and Alex Pham
Los Angeles Times
January 28, 2008
Walt Disney Co. is no stranger to fantasy worlds,
transporting audiences -- whether to a cottage in the
woods with a young princess in "Snow White and the Seven
Dwarfs" or to the Great Barrier Reef aboard the Finding
Nemo Submarine Voyage ride at Disneyland.
Now, Disney is spinning its tales in the newest mass
medium -- online virtual worlds, where children adopt
cartoonish avatars and play games.
Disney and other entertainment companies are rushing to
capitalize on the latest Internet phenomenon: the rise
of virtual worlds for kids. Online haunts for grown-ups,
such as Second Life, grab the attention of corporate
marketers. But digital playgrounds for the juice-box set
-- such as Disney's Club Penguin and Ganz Inc.'s Webkinz
-- are drawing bigger crowds.
As many as 20 million children and teens will visit
virtual worlds by 2011, up from 8.2 million in 2007,
according to research firm EMarketer Inc.
"You're seeing a more than doubling in projected growth,
between 2007 and 2011, in the number of kids and teens
visiting these worlds," EMarketer analyst Debra Aho
Williamson said. "That's why you're seeing Disney making
so many investments. . . . All the major media companies
are making virtual worlds a big focus of their
activities going forward."
Some parents and advocates worry about the commercial
aspects of these sites, which either charge a monthly
subscription fee, serve up advertising or both. Several
sites, including "Pirates of the Caribbean Online,"
offer a basic game for free but require payment for more
advanced play.
"It's sweet-tasting candy that kids are going to want to
have," said Warren Buckleitner, editor of the Children's
Technology Review. "Give a free sample. Once you get
started, it's hard to stop."
Online games that invite multiple players into virtual
worlds have been around for more than a decade. What's
new is the increasingly younger audience. Disney's
Toontown Online was among the first to target tots, but
since then, Mattel Inc.'s BarbieGirls.com, Nickelodeon's
Nicktropolis and others have popped up, attracting
children as young as 3.
Disney plans to spend $5 million to $10 million apiece
to develop as many as 10 virtual worlds built around
familiar Disney characters and franchises.
"We're creating virtual theme parks, but much more
accessible," said Steve Wadsworth, president of Walt
Disney Internet Group. "You don't have to get in a car
or a plane."
Worlds of revenue
Disney's acquisition of Club Penguin in August for as
much as $700 million accelerated the online strategy.
Club Penguin attracted nearly 7.9 million visitors in
December, according to ComScore Media Metrix, ranking it
second in popularity among children's virtual world
sites only to Webkinz.
And unlike social networks for grown-ups, such as
Facebook.com, Club Penguin has no trouble finding a
business model. For a monthly fee of $5.95, kids can
waddle to their hearts delight in the snowy world, play
games and earn coins that enable them to buy clothes or
furnishings for their igloo. At the time of the
acquisition, Disney said Club Penguin had about 700,000
subscribers. That would represent about $50 million in
annual revenue.
It is just this kind of lucrative subscription-based
revenue stream that is luring investors and developers,
said analyst Billy Pidgeon of technology research firm
IDC. But what they often underestimate are the costs of
keeping these virtual worlds running smoothly. "World of
Warcraft," for example, requires more than 1,700
full-time customer service employees to maintain the
site.
"People just have unrealistically high expectations for
these models and don't consider the expenses of
maintaining these games," Pidgeon said.
Paul Yanover, executive vice president of Walt Disney
Internet Group, acknowledged that "virtual worlds are
more elaborate than running a traditional website." But
Disney, he said, because of five years of experience
from Disney Toontown Online, also understands "the costs
of operation and maintenance" and is assured there are
"really healthy businesses in online entertainment for
kids and families."
Kids at least appear to have a healthy appetite to play
online. Eight-year-old Madison Magursky of Irvine said
she plays Club Penguin for 10 minutes every day after
school, once she's done her homework. She even asked her
mother to subscribe for her.
"I told her I wanted to be a member, because you get to
buy fantastic gifts and decorations for your house and
stuff," Madison said. "And you can do certain things . .
. that other people who aren't a member can't."
"But she said 'no.' "