Disney Is Going Virtual

Just when you thought that Disney couldn’t possibly advance anymore they come up with something that shocks the world. Disney is taking it’s great adventures to the newest mass medium — online virtual worlds, where children adopt cartoonish avatars and play games.

At present entertainment companies are all rushing to capitalize on this phenomenon. In the future you will begin to see the rise of online virtual worlds for children.

As many as 20 million children and teenagers 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," said eMarketer analyst Debra Aho Williamson.

"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."

Although I am excited about the prospects of this new technology, as I parent I find myself being a little concerned. I am a little worried about the commercial aspects of these sites, which charge a monthly subscription fee, serve up advertising or both. Currently sites such as, “Pirates of the Caribbean”, 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."

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's Planning To Spend Big

"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."

Disney's acquisition of Club Penguin in August 2007 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 adults, 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 igloos.

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.

However, 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.

High Maintenance Costs

"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 with 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."

Pay, or face a meltdown

In October, Disney launched "Pirates of the Caribbean Online," a game that lets players live out their swashbuckling fantasies. Players take on the identity of a pirate and interact with characters from the film, including Jack Sparrow and Davy Jones.

Pint-size pirates are enticed to pay a $9.95 subscription fee to get access to more weapons, better ships or special islands.

Buckleitner of Children's Technology Review extols "Pirates" as an engaging, mainstream game. His daughters "can't wait to get their homework done and start playing."

However, he grew concerned when his daughter, 12, ambushed him for his credit card to subscribe. "Either I pay and keep my child happy or I deal with a meltdown," Buckleitner said.