Biz Failures

What Happened To Club Penguin? Why Did It Shut Down?

Executive Summary:

Club Penguin was an online multiplayer game that allowed penguin players to create characters, chat, and adopt pets.

Club Penguin was closed due to declining interest, likely leading to a substantial decrease in revenue.

What was Club Penguin?

Club Penguin was an online multiplayer game that allowed users to play as penguins. The player could play various games, enter chat rooms, adopt puffles, or even get pets.

The game was intended for younger children, specifically those aged 6-14 years old. Older players could still access the game.

You could also customize your penguin characters. You could buy add-on clothing that would alter the appearance of a penguin.

These add-ons could be purchased via in-game currency, which can be earned by playing certain games, fulfilling jobs, or participating in competitions.

Players could also become members to gain access to certain games and clothing. To become a member of Club Penguin, users had to pay a monthly subscription fee.

Each server was limited to a certain number of players. Club Penguin restricted a server to 300 users.

Club Penguin held regular parties and events to facilitate player interaction (e.g. New Year’s Days).

The majority of the game was accessed via a web browser. Later, apps for tablets and mobile phones, both on iOS and Android, were made available.

What happened to Club Penguin?

Club Penguin was founded in 2005 by Lane Merrifield and Dave Krysko.

All three founders had extensive gaming experience prior to Club Penguin’s launch.

Lance Priebe was a particular victim of his own failures. He began working on a project called snowblasters in July 2000. It was an online snowball wargame involving penguins.

After seeing a cartoon of a penguin slipping onto a banana in a local newspaper, Priebe had the idea to include penguins. Penguins are also easy to animate, which allows for a faster development process.

Snow Blasters didn’t go anywhere, unfortunately. Instead, he started work on Experimental Penguins. He released the game a few weeks later, vis-a-vis RocketSnail Games which also employed Krysko (Priebe’s boss).

Again, Experimental Penguins never took off. Although the game was abandoned a year later, it served as inspiration for another game. RocketSnail published Penguin chat shortly after. This was essentially an extension of the Experimental Penguins games. They released Penguin Chat 2 and Penguin Chat 3 versions of the game over the next few years. The games were very popular and had over one million users in total.

All of these games had one problem: they weren’t safe enough to be played by children. Because all three founders were parents to children, the solution to safety was close to their hearts.

Particularly, many web properties, even those that were highly visited like Friendster at the time, were plagued by sketchy-looking banner advertisements (since this was often their only source of revenue).

Merrifield, who was hired in 2005, and Priebe approached Krysko to discuss the possibility of creating a spinoff company that would develop this safer version. They incorporated New Horizon Interactive a few weeks later.

2005 was the year that Club Penguin was created. It was basically an extension to Penguin Chat 3, released in April 2005 and internally known as Penguin Chat 4.

They released the beta version of the game on August 22, 2005 to test the server’s capacity. Penguin Chat had an already large following and was able to draw around 15,000 people to the testing event. They finally released Club Penguin two months later on the 24th Oct 2005.Wayback Machine

The game was a wildfire hit. Club Penguin had already attracted over 2 million users every month in November 2006, just over a year since its launch. To keep the site from being bombarded with banner ads, they rejected lucrative offers from Google.

The site’s popularity grew mainly through word-of mouth, such as parents sharing their stories with each other and children convincing friends to join. The game was also shared on which is a popular online compiler of free games. This further helped to boost adoption. The game’s growth was further supported by movies like Happy Feet.

Rumours began to circulate about potential buyers for the bootstrapped game company by May 2007. Club Penguin was, at the time of its creation, one of the most popular social media platforms in the world. It was right next to Myspace.

These rumors became reality in August, a few months later. To acquire Club Penguin’s parent company New Horizon Interactive, Disney paid $350 million cash and $350 million in earnouts tied to certain performance metrics.

The founders were fully able to bootstrap the company with their own money and split the $350m equally. Like the Club Penguin profits, 10 percent of their $35 million received went to foundations that they support.

Although the purchase price was high, it had merits. Club Penguin was a 700,000-member company with 12 million users. The acquisition price was $65 million. Profits of $35 million for 2007 would have generated $65 million.

Only thing that had changed was the rebranding of the game to Disney’s Club Penguin. This acquisition was part Disney’s larger digitalization strategy that included the acquisition, investment, and operation of various gaming platforms and social networks geared towards children.

Disney’s investment led to a flood of copycat platforms with varying degrees success. However, Club Penguin’s growth was affected by the acquisition. It remained stagnant for several months.

Two other macro trends contributed to the game’s difficulties. Many parents had to cancel their subscriptions due to financial depression. The second was the rise of mobile-based apps over traditional browser games.

Disney responded to this trend by releasing a Club Penguin version on Nintendo’s DS console, December 2008.

Club Penguin was unable to achieve its profit targets due to this. The founders were unable to reach the profit targets required to be eligible for the $350 million second payment. Krysko and Priebe left Disney in 2010 due to declining interest and lack of money.

Merrifield, who was a self-described “Disney nut”, started his career working at Disneyland’s parades. He went on to become a Senior Vice President of Disney’s Interactive Division.

The game was the victim of a very strange blunder in June 2011. The site was unavailable for several hours because Disney failed to renew its domain name.

It launched its first ever mobile app for iPhone in September 2012 at $0.99. It wasn’t the Club Penguin game, but Puffle Launch. It was very similar to Angry Birds, and it used Club Penguin’s beloved puffles (similar to the various birds from Angry Birds).

All available Club Penguin games had over 150 million registered accounts by October 2011. Disney employed around 200 content moderators to monitor the chats of the game in order to keep them safe.

Disney invested in the game by launching a Club Penguin magazine (February 2012) and digital Marvel-based penguin characters in June 2012.

Merrifield, the co-founder of the company, decided to resign as well despite the firm’s investments. He officially handed the keys over to Chris Heatherly, long-standing Disney executive, in October 2012.The Top 10 Business Podcasts

While there were 200 million registered accounts, the game’s interest began to decline. Heatherly took control of the game’s monthly traffic, which dropped from 8.5 million in December 2009 down to 3.3 million when Heatherly took it over.

Club Penguin continued to be a popular game despite the declining traffic. This was due in large part to parents’ willingness to pay monthly subscription fees. Disney added new events, such as the Star-Wars-themed one that was held in July 2013.

Disney released an app-based version for Club Penguin in December 2013. This was considered too late by many. Club Penguin was able to continue to make steady cash over the next few years.

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After Donald Trump’s election, the next time this game was on the news was November 2016. The game was re-emerged in the news when it was shown that Penguins had speech bubbles wrapped around their heads, saying things such as “My body is my choice” and “Not my President.”

Unfortunately, the increased public attention was not enough to stop the inevitable: Disney announced in January 2017 that it would close Club Penguin on March 30, 2017, and replace it with an app-based game called Club Penguin Island.

Although the game’s shutdown was sad for many long-standing fans, its developers ended it on a positive note. Players have been creating conspiracy theories for years about the iceberg in the corner. Players speculated about whether the iceberg could be turned if enough people stood on one side.

Through a trivia question, the game designers eventually showed how to tip it. Players who completed the task successfully received the following message: “Together we can build an Island, create a Community, Change the World… even tip an Iceberg.” Keep scrolling .”

Club Penguin Island, its successor to the game, didn’t last nearly as long as the original. Disney announced in September 2018 that the game would be shut down immediately.

The shutdown led to the release of several copycat games, including Club Penguin Online and Club Penguin Online. It was possible due to the fact that its developers were able to retrieve old Club Penguin data, which enabled them to release an almost identical copy.

One thing did distinguish them from the original game. Copycats did not have language filters, and they were unable to moderate content. These games weren’t even designed with safety in mind.

Club Penguin Rewritten was the victim of a data breach in August 2019 that resulted in four million accounts being exposed. An earlier hacking attack on January 2018 had resulted in the compromise of 1.7 million accounts.

Disney filed a DMCA request in May 2020. This resulted in the closing of Club Penguin Online (found here, a replicacat site with more than 8,000,000 users.

The other sites that were copied continued to thrive despite the ban. In particular, 2020 inspired millions of former gamers to return to the game by enrolling in college. Many people used it to connect with others, even though they were locked in their own homes.

Club Penguin Shutdown:

Club Penguin was closed due to declining interest, leading likely to a substantial decrease in revenue.

Club Penguin (and Disney) were unable to adapt to a mobile-first society. Many of its older players started flocking to social media platforms like Instagram and Facebook around the beginning of the decade to connect with their friends.

These platforms were also more often accessed via smartphones than computer browsers. The launch of the first iPhone, four years after Disney acquired the company, was the moment that Disney introduced the Club Penguin app.

Maintaining Club Penguin was not an easy task. There were around 200 content moderators that the company employed previously to monitor chats.

This was necessary because Disney couldn’t associate itself with a video game that would expose children and actors to potentially dangerous swearwords.

Club Penguin was created for children aged 6-14 years old. It had to constantly find new ways to improve its graphics and game mechanics. Platforms such as Roblox where users are encouraged to create games have done a better job of staying relevant.

Based on its past game releases, Disney does not have the in-house capabilities necessary to produce great games and patches.

Club Penguin to Return?

Due to the reasons outlined in the previous chapter, Club Penguin, the original Disney-owned version, will not be returning.

It seems unlikely that Disney would relaunch the game, given that it is now concentrating its efforts on Disney+.

Disney retains all rights to the game and the Club Penguin Island that was launched later.

However, several copycat versions are available. Club Penguin Rewritten is a nearly 1:1 copy of the 2010 version.

Club Penguin Rewritten creates custom content such as clothing and events to keep its players engaged.

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