Via financialskeptic.blogspot.com/:
Disney (NYSE:DIS)has purchased Penguin for $350 million. The creators of Penguin have scored big time. There is promise of additional payment depending on performance. After the Sony (NYSE:SNE) deal fell apart its probably a relief.
But Disney how closely did you look at the numbers or is this a strategic acquisition where math and those guys from finance are not allowed into the meetings. Penguin currently has approximately 700,000 paying subscribers and yes it is growing quickly. But it only generates gross revenues of $5.00 per subscriber which is only $3.5 million. That's only a 1% yield assuming there are no expenses.
Disney that is ridiculous. Even if the subscriber base triples how will this create accretive earnings?
The Penguin offering apparently appeals to children from 6 to 14. For those of us who have raised children your 14 year old has a different perspective on life than a 6 year old. The target metric is suspicious. Disney of all people should know that. Also as a business model children's entertainment is not an annuity. You are dealing with short time frames. Ask any elementary school teacher how quickly a child's perspective can change in very short time frames.
Disney panicked in the social networking space. For $350 million they could have developed their own properties. Penguin came out of no where in two years. That's about the same time it takes to make a feature movie from script development to release. Disney does not have confidence in its own brand's ability to be a leader.
$34.14 (08/03/07)
