Lane Merrifield is co-founder and general manager of Kelowna, B.C.–based Club Penguin, an online community where kids create penguin avatars to play and interact. Launched in 2005, Club Penguin eschews advertising, and bases its business on fees collected for memberships, which bestow privileges. The site impressed Disney enough to convince the media giant to buy it for up to US$700 million last August, when Club Penguin had 700,000 paid subscribers and more than 12 million users. Alberta-born Merrifield spoke with Upfront editor Alex Mlynek about the move to Disney and what the future holds for the penguins.
To what do you attribute Club Penguin’s success?
We found a need, and it turned out to be a bigger need than even we imagined. We created Club Penguin because we couldn’t find what we were looking for, for our own kids, when they started to get to that age where they were playing computer games. We wanted something that had some social components but was safe, and not just marketed as safe. When we couldn’t find it, we said, “Well, let’s build it and see how it goes.”
Kids can be pretty fickle. How do you keep them on the site?
We’re able to add new content and create new elements within the world on a weekly basis. So, from a kid’s perspective, the value is that much stronger because they’re gaining that much more quality entertainment out of it.
Can you tell me about the day you signed with Disney?
It was a bit of a blur. It was something we’d been working really hard on for a long time. Not so much in that the negotiations took a long time — it was just a process of soul-searching, and saying, “Are we at that point where we’re going to start limiting ourselves by our size, and limiting ourselves in terms of what we can do creatively by our infrastructure?” One of the coolest things was when we told the staff, because they knew we were in some kind of process, they knew we couldn’t talk publicly about it. There were all sorts of rumours flying around, most of which were completely untrue. When we finally announced to them that we were now part of the Walt Disney Co., there was so much excitement. We were really concernedbecause the last thing we wanted to do was alienate our staff. We hoped they would understand the process, and they did. It turned what could have been a bit of anxiety into a celebration.
I’ve read most of the negotiations with Disney were spent discussing philosophies and approach to business. Is that true?
That’s completely true. Most of the financial elements we left to the lawyers and bankers to work out, because we didn’t want to muddle it with what we felt really mattered, which was making sure those philosophical points were there. And it’s been encouraging to see that not only did they echo and agree to those, but they’ve modified some of their games, and some of their virtual worlds, to reflect the kind of methods we had been passionate about.
Do you spend all of your time working on Club Penguin now?
There are opportunities to provide input into other parts of Disney, but I’m trying to maintain my focus with Club Penguin.
How has the transition from working for yourself to working for Disney been going?
There are minor challenges here and there, but Disney’s worked very hard to insulate us to some extent and keep us thinking entrepreneurially. So it really has been the best of both worlds for us. We get to keep doing what we love — we just have a lot of new tools to work with now.
What’s the main lesson you’ve learned from this transition?
Don’t lose the entrepreneurial spirit.
What’s in store for Club Penguin?
One of the things that makes Club Penguin unique is kids are really able to take ownership of it. It gets difficult for a child — let’s say from the U.K. — to take ownership of something where they’re celebrating holidays they’ve never heard of, for instance. So we’re really excited about being able to launch in several countries this year, and several more next year.
You had kids translating for their friends, right?
Yeah, it was crazy. Our little newspaper that gets launched within the world each week is already being translated into about three or four different languages by kids. It’s pretty amazing to see the newspaper in Polish, for instance, and see there’s a demand there.