Club Penguin is, as you probably (or really should) know by now, a great example of a true second-generation MMOG. It's cute, cuddly, great for kids, and plays right in the browser (no dynamically mapped shadows in sight). It uses a combination of free play, subscription ($6/month), and item-based sales to generate revenue. Oh and there's no download, no retail, no spattered blood, blue elves, or female cat things overflowing their strangely armored bustiers.
Supposedly, New Horizon Interactive, the company that developed and runs Club Penguin from sunny Kelowna, BC, Canada, has turned down investment funding thus far -- with their approximately 50% gross margin, they just don't need the money. And, according to Paid Content, the company spurned an acquisition offer by News Corp for $200M. According to that site, they're now being courted by none other than Sony for (reportedly) $450M.
That's a lot of penguins.
As PaidContent points out, $450M is about 7.5x CP's projected 2007 revenues of $60M, so it's not a stratospheric price from that point of view. But, if this is at all accurate, it's a clear indication that the true commercial legitimacy and monetary value of MMOGs and virtual worlds -- those that make money anyway -- is beginning to be understood.
What does this mean for the future of MMOGs? Are behemoth 3D role-playing games going the way of the brontosaurus or is Club Penguin itself an anomaly?
Personally, I think it's extremely heartening to see a game like this so clearly rewarded. The market is changing, and this is primary evidence for it: The audience demographic is broadening; the gameplay is breaking out of "kill monster, get gold;" graphics are moving beyond ponderous if ever-more realistic 3D; and development methods are finally moving beyond mis-applied rough extensions of what's (sort of) worked in single-player games. I don't think mainline/first-generation MMOGs are dead, but I do think this sort of value-recognition in Club Penguin is more of a bellwether than an anomaly. The dinosaurs aren't gone, but the small mammals (or well-dressed flightless birds, as the case may be) are starting to claim their due.
The browser-based aspect has to be a big factor in expanding the user base.
Posted by: Dmitri Williams | May 17, 2007 at 21:16
According to the TechCrunch post, a stumbling block for the proprietors of CP is that they donate a lot of their profits to charity and resist in-game advertising, and seem to worry that potential suitors may not be compatible with their values.
Don't these people know that we're in a boom? They're supposed to be building properties expressly for the purpose of attracting buyers, not to protect their communities and their personal visions! Sheesh. Of course, when you're making as much money as CP, it's probably a little easier to take a stand on these sorts of things.
Posted by: joshlee | May 17, 2007 at 22:34
/agrees w/ Mike very much.
Not that blue elves are bad, mind you, but I think we could do for as much healthy investment & competition in the cute & light MMO space as we have in the whack-a-rat EQ/WoW space. There's a very solid ROI here so I would hope investors are paying attention.
And, btw, lest anyone think CP doesn't give rise to fun virtual property-based social disputes, see this from Wired recently. :-)
Posted by: greg | May 18, 2007 at 00:51
Haha, that is a lot for a The Palace / Habbo remake.
Posted by: Ola Fosheim Grøstad | May 18, 2007 at 02:58
Anyone who has talked to me or seen me at a conference lately knows that I don't consider this a fluke at all.
Club Penguin.
Gaia.
Webkinz.
BarbieGirls (and Girlz and BeBratz soon)
Habbo.
Runescape.
I could go on and on. LOTRO and the like are tiny in comparison. In fact, most all MMOs are tiny is comparison. And on a territory-by-territory basis, these worlds are in the same league as WoW.
Heck, ToonTown, once seen as that neat experiment with the few tens of thousands, now counts MILLIONS of active users. All quite under the radar of the mainstream industry.
Posted by: Raph | May 18, 2007 at 22:13
Millions of active users for Toontown, Raph? Are you falling into the trap of counting the (nearly meaningless) registration numbers as active users? Last I heard, ToonTown was doing well in the high tens of thousands of active users.
I'm not trying to take away anything from their success or significance, but we hit this here in early 2006 in "The Numbers Game": the (then) 40M members claimed by Habbo aren't the same as active users, much less paying users. I know you know this, but measuring "uniques" -- much less registrations -- for virtual world products that rely on recurring revenue of one sort or another can really bloat their apparent commercial success.
This is one reason why Sony is (rightly, IMO) concerned with churn in Club Penguin. Smaller MMOs don't need the huge numbers that higher-budget (first-generation) games do, but they do need to either hold on to customers/players for some time, or continually replenish their stock of players as existing ones rotate off. We haven't yet seen the sort of boom-and-bust cycle in MMOs that we have in social networking sites (e.g., Friendster, SixApart, Orkut, Multiply, and others that I've no doubt forgotten) but we could well begin to see this as the new generation matures, if they are unable to maintain customer loyalty in an increasingly crowded field.
Posted by: Mike Sellers | May 18, 2007 at 23:27
No, I am not using registered users. I am using the monthly active uniques figure they gave out a few months ago.
I wrote at length about how to measure MMOs, if you recall -- I quite agree that registrations is not a useful figure.
Posted by: Raph | May 19, 2007 at 00:22