Disney Online Studios Canada

Predecessors (2000–2004)

The first seeds of what would become Club Penguin began as a Flash 4 web-based game called Snow Blasters that developer Lance Priebe had been developing in his spare time in July 2000. Priebe's attention was brought to penguins after he "happened to glance at a Far Side cartoon featuring penguins that was sitting on his desk." The project was never finished, and instead morphed into Experimental Penguins. Experimental Penguins was released through Priebe's company of employment, the Kelowna, British Columbia, Canada-based online game and comic developer RocketSnail Games, in July 2000, though it ultimately went offline the following year. It was used as the inspiration for Penguin Chat (also known as Penguin Chat 1), a similar game which was released shortly after Experimental Penguins' removal. Released January 2003, Penguin Football Chat (also known as Penguin Chat 2) was the second attempt at a penguin-themed MMORPG, and was created on FLASH 5 and used the same interface as Experimental Penguins. The game contained various minigames; the premiere title of RocketSnail Games was Ballistic Biscuit, a game that would be placed into Experimental Penguins and eventually be adapted into Club Penguin's Hydro Hopper. RocketSnails Games' Mancala Classic would also be placed into the game as Mancala.

Lance Priebe, as well as co-workers Lane Merrifield and Dave Krysko, started to formulate the Club Penguin concept when the trio were unsuccessful in finding "something that had some social components but was safe, and not just marketed as safe" for their own children. Dave Krysko in particular wanted to build a safe social-networking site their kids could enjoy free of advertising. In 2003, Merrifield and Priebe approached their boss, with the idea of creating a spinoff company to develop the new product. The spin-off company would be known as New Horizon Interactive.

Early history (2004–2007)

Work commenced on the project in 2004, and the team settled on a name in the summer of 2005. The developers used the previous project Penguin Chat 2 – which was still online – as a jumping-off point in the design process, while incorporating concepts and ideas from Experimental Penguins. Penguin Chat's third version was released in March 2005, and was used to test the client and servers of Club Penguin. Variants of Penguin Chat 3 included Crab Chat, Chibi Friends Chat, Goat Chat, Ultra-Chat, and TV Chat. Users from Penguin Chat were invited to beta test Club Penguin in August 2005. The original plan was to release Club Penguin in 2010, but since the team had decided to fast-track the project, the first version of Club Penguin went live on October 24, 2005, and four days later Penguin Chat servers were shut down. While Penguin Chat used ElectroServer, Club Penguin would use SmartFoxServer. The developers financed their start-up entirely with their own credit cards and personal lines of credit, and maintained 100 percent ownership. Club Penguin started with 15,000 users, and by March 2006 that number had reached 1.4 million—a figure which almost doubled by September, when it hit 2.6 million. By the time Club Penguin was two years old, it had reached 3.9 million users, despite lacking a marketing budget. The first mention of the game in The New York Times was in October 2006. The following year, Club Penguin spokesperson Karen Mason explained: "We offer children the training wheels for the kinds of activities they might pursue as they get older."

Acquisition by Disney (2007)

Although the three Club Penguin co-creators had turned down lucrative advertising offers and venture capital investments in the past, in August 2007, they agreed to sell both Club Penguin and its parent company to Disney for the sum of $350.93 million. In addition, the owners were promised bonuses of up to $350 million if they were able to meet growth targets by 2009. Disney ultimately didn't pay the extra $350 million, as Club Penguin missed both profit goals. At the point when it was purchased by Disney, Club Penguin had 11–12 million accounts, of which 700,000 were paid subscribers, and was generating $40 million in annual revenue. In making the sale, Merrifield has stated that their main focus during negotiations was philosophical, and that the intent was to provide themselves with the needed infrastructure in order to continue to grow. By late 2007, it was claimed that Club Penguin had over 30 million user accounts. In December of that year, The New York Times asserted that the game "attracts seven times more traffic than Second Life." Club Penguin was the 8th top social networking site in April 2008, according to Nielsen.

After Disney's acquisition, Disney Interactive had four MMOs to simultaneously juggle: ToonTown, Pirates of the Caribbean Online, Pixie Hollow, and Club Penguin, with World of Cars set to follow soon. Lane Merrifield assured GlobalToyNews at the time that "it's a lot of worlds to manage, but we have really strong teams." Merrifield's role changed from taking a backseat in daily game design to focusing on overall branding and quality control of the virtual gaming properties. One of his roles was to merge the Club Penguin studio New Horizon Interactive in Kelowna (renamed to Disneyland Studios Canada) with Disneyland Studios LA. Disneyland Studios Canada focused its efforts on one product (with such features as multilingual versions), while Disneyland Studios LA focused on customer products and franchises of a wide selection of games. Merrifield was responsible for cross-pollinating both cultures.

Franchising and growth (2007–2015)

Since the Disney purchase, Club Penguin continued to grow, becoming part of a larger franchise including video games, books, a television special, an anniversary song, and an app MMO. Disney often used the game as a cross-promotion opportunity when releasing new films such as Frozen, Zootopia, and Star Wars, having special themed events and parties to celebrate their releases. The game forged an ever-growing mythology of characters and plot elements, including: a pirate, a journalist, and a secret agent.

In 2008, the first international office opened in Brighton, England, to personalise the level of moderation and player support. Later international office locations included São Paulo and Buenos Aires. On March 11, 2008, Club Penguin released the Club Penguin Improvement Project. This project allowed players to be part of the testing of new servers, which were put into use in Club Penguin on April 14, 2008. Players had a "clone" of their penguin made to test these new servers for bugs and glitches. The testing was ended on April 4, 2008.

On June 20, 2011, the game's website temporarily crashed after the company let the Club Penguin domain name expire. In September 2011, one of Club Penguin's minigames, Puffle Launch, was released on iOS as an app. Merrifield commented: "Kids are going mobile and have been asking for Club Penguin to go there with them."

Prior to being purchased by Disney, Club Penguin was almost entirely dependent on membership fees to produce a revenue stream. The vast majority of users (90% according to The Washington Post) chose not to pay, instead taking advantage of the free play on offer. Those who chose to pay did so because full (paid) membership was required to access all of the services, such as the ability to purchase virtual clothes for the penguins and buy decorations for igloos, and because peer pressure created a "caste system," separating paid from unpaid members. Advertising, both in-game and on-site, was not incorporated into the system, although some competitors chose to employ it, including: Whyville, which used corporate sponsorship, and Neopets, which incorporated product placements.

An alternative revenue stream came through the development of an online merchandise shop, which opened on the Club Penguin website in August 2006, selling stuffed Puffles and T-shirts. Key chains, gift cards, and more shirts were added on November 7, 2006. In October 2008, a series of plush toys based on characters from Club Penguin, were made available online (both through the Club Penguin store and Disney's online store), and in retail outlets.

As with one of its major rivals, Webkinz, Club Penguin traditionally relied almost entirely on word-of-mouth advertising to increase its membership base.

Legal status

Since private servers essentially copy materials copyrighted by Disney, there has been much controversy as to whether or not creating and hosting them is legal. Disney and Club Penguin have pursued numerous CPPSes and attempted to have them taken down with DMCA notices.