On GigaOM Carleen blogged that she thought that Club Penguin sold out to Disney and it might ruin Club Penguin. I think she came close on a couple points, but missed the bigger picture.

Disney is by its nature a big lumbering beast that is mired in bureaucracy. Having worked there a while I found it was unavoidable. Disney in many cases is less about the projects and more about dealing with the internal politics.

That said we should be fair, most large corporations have the same problem. To combat the bureaucracy large company’s buy small companies and grant them a degree of autonomy. That way the new unit can then at least get some things done.

The problem is that at the same time the new units want to take advantage of other verticals and other parts of the business want to get into what the new unit is doing. Instant politics. The job of senior management then becomes shielding that unit from the politics rather than integrating them into the Disney way. This will invariably mean that a large portion of managements time will be spent away from the main task of running the new unit.

I can only hope that Lane Merrifield CEO of Club Penguin and now EVP at Disney has enough experience to understand and work the system. At the EVP level you can get a bit done if you know how to work the system and keep everyone focused. As a former Disneyland employee perhaps Lane gets it. If so this is a big win for Disney and Club Penguin.

If you have been curiously watching the news around Club Penguin you may have wondered aloud, is this really worth $500-$700 million?

The answer is it depends on who you are. Certainly on its face the projected revenues by themselves don’t seam to make sense, especially as was mentioned on TechCrunch that penguins (like anything else) are only likely to be hot for so long.

Club Penguin has captured the untapped demographic of children and tweens better than any other game, and games are the driving attention force for this market. For Sony this would have been of little value since they really do not have a way to capitalize on it across their company. They are focused on Generation Y. The Wii vs. PS3 battle is delineated along the demographics that each company targets.

Disney on the other hand is directed almost singularly at the children and tween market. They add a lot of value through brand trust and the ability to market a wide array of verticals towards this demographic. What they have lacked is a good vehicle in online games. They have made some headway with games like ToonTown, but ToonTown requires a client download and is not quite as accessible.

Will Club Penguin remain hot enough to pay back the investment before penguins become pase’? Perhaps, with Disney’s marketing and investment its possible. That is only part of the equation that makes this a no-brainer.

Contrary to Bob Iger’s public statment that Club Penguin will be a standalone business, I believe that this is an important strategic move. It is about grabbing the attention of this demographic and growing it to the whole range of Disney properties. This strategic move should not be as much about making money from Club Penguin as it is about creating a new channel to sell Disney to Disney’s core market.

I think Bob has played a smart hand in buying Penguin, let’s hope it pays off.