paidContent.org's Staci Kramer reported this morning that the three founders of children's virtual world Club Penguin won't be collecting on a portion of the earnout they negogiated when being acquired by Walt Disney. In August, 2007, it was announced that the two year-old Kelowna-based startup was purchased for $350 Million in cash with the possibility of another $350 Million for co-founders Lane Merrifield, Dave Krysko and Lance Priebe based on hitting earning targets.
But according to SEC filings, including the 10-Q filed Tuesday in conjunction with FYQ2 earnings, Club Penguin missed its goals for 2008. That leaves another $175 million on the table for the three but given the current economic climate, it's looking more likely that Disney will end up paying $350 million for Club Penguin—not $700 million.
Does that mean the acquisition was a failure? No. Club Penguin, now part of Disney Online and the Disney Interactive Media Group, continues to play a major role in Disney's virtual-world push and its international plans. Its most recent expansions were to France and Portugal. It's a reflection of Disney's caution in certain kinds of spending that the deal came with these strings attached—and of the difficulty projecting targets when the economy shifts like tectonic plates.
That leaves $175 Million on the table for 2009 - good luck to Merrifield, Krysko, and Priebe.