Media giants love virtual worlds for kids

Co-written with Carleen Hawn and Wagner James Au.

Update: Hollywood and media giants have a newfound affection for virtual worlds for kids, and are willing to spend big dollars on communities like Club Penguin and Webkinz. The latest rumor floating around is the Sony is interested in buying Club Penguin for about $500 million, according to PaidContent.

We had heard a similar number last week and since then have been trying to lock down the details on this. Sony is apparently not the only company to express interest in Club Penguin. News Corp., bid $200 million on the kids virtual world but apparently that wasn’t enough.

In an effort to get some clarity on the situation, we reached out to Lane Merrifield, co-founder of New Horizon Interactive, the Kelowna, British Colombia-based company behind Club Penguin, who emailed us back with the following response:

As Club Penguin has gained popularity, we have been approached by numerous organizations. Although I can’t rule out the possibility that Club Penguin might enter into a partnership with another company at some point, I can confirm we would only pursue that sort of arrangement with an organization that shared and respected our founding principles and core values.

When asked if there were talks (previous or ongoing) with Fox and Sony, Merrifield wrote to us, ” The information you have is not correct.”

Nevertheless if the deal does happen it would be a big payday for Merrifield and co-founders Lance Priebe and Dave Krysko. Merrifield says the trio turned down earlier investment propositions from “professional money,” including venture capitalists.

Club Penguin isn’t the only company generating interest. Disney, for instance, is rumored to be interested in Woodbridge, Ontario-based Webkinz, another Canadian tween site that has been growing a break neck pace, and is a kid favorite. Business 2.0 had an excellent piece on the Kid-focused online communities, written by one of my co-authors, Carleen Hawn. Other communities like these two sites – though for different age groups – include Habbo Hotel and Gaia Online.

One of the reasons these kid-focused communities have taken off versus the more complicated communities like Second Life is that they are dead simple and highly focused.

Most of these online worlds run on Flash, so there’s no complicated client download/installation. Basic participation is free on Club Penguin, but revenue is drawn in through monthly subscriptions and sales of cyber goods to upgrade the game. Webkinz exists on a subscription model of sorts, too, only here the fee-to-play is a retail purchase of a stuffed toy in a bricks and mortar store. Ganz, Webkinz’s parent company, is one of Canada’s largest manufacturers of stuffed toys. (Now that’s clever biz dev.)

Since they’re aimed at kids and teens, these sites tend to be tightly regulated. Bad language or rough play between avatars gets kids suspended on both sites. It is the safety features of these non-combat-oriented MMOs, together with the low-cost learning opportunities that create a value proposition for parents (and investors). The draw for the kids is the thrill of participating in a dynamic virtual community. It’s just plain fun.