Club Penguin Fails On Full Earnout, Possibly Able To Make $175 Million

Posted May 11, 2009

In August 2007, The Walt Disney Company acquired Club Penguin for $350 million.  Before Disney bought Club Penguin, Sony was rumored to be considering buying the kids social network for $450 million.  Club Penguin earned $350 million in cash up front and had the chance to earn another $350 million if they met expectations.

The Club Penguin co-founders Lane Merrifield, Dave Krysko, and Lance Priebe had to make sure that Club Penguin made more money from premium subscriptions, and sold a certain amount of virtual items.  According to a 10-Q that was filed last Tuesday, Club Penguin did not meet the goals for the full earnout.  They still have a chance to earn the $175 million out of that extra $350 million.

Here is an excerpt from the 10-Q:
“On August 1, 2007, the Company acquired all of the outstanding shares of Club Penguin Entertainment, Inc. (Club Penguin), a Canadian company that operates, an online virtual world for children. The purchase price included upfront cash consideration of approximately $350 million and additional consideration of up to $350 million payable if Club Penguin achieved predefined earnings targets in calendar years 2008 and 2009. There have been no additional payments of consideration for Club Penguin and remaining additional consideration of $175 million is potentially payable based on calendar year 2009 results.”

[via paidContent]