Even if it was a tangential reference in an entirely other post, we have mentioned Disney's $700 million purchase in 2007 of Club Penguin, an online subscription game world for kids, started by four dads, before. Mostly, because it was a four-year-old company that netted its four founders $700 million dollars.
Well, that turns out to be entirely wrong. Or only half right, depending. Because fully $350 million of the Club Penguin acquisition was keyed to some "unspecified growth targets," which Penguin missed last year, and again this year.
So for nearly three years, the way the company was run--with significant investments to expand into different markets, and to build out spin-off virtual world platforms for cars and pirates and fairies and whatnot--almost certainly assured that profits would not expand in time. So the growth targets must have been in basic subscription numbers. Which the founders--who have exerted an uncommonly strong degree of control over the company--insist is growing. And yet, with all those new worlds, they didn't hit their targets.
So either the targets were really aggressive, and these guys didn't really expect to hit them, and so in their minds, the deal was always the $350 million in the hand. And Disney happily let the online virtual pet world market believe they'd paid 2x what they actually did, perhaps for competitive reasons. Or they were kind of aggressive, but reachable, and they've blown it.
Either way, Disney got to keep $350 million and four guys lost it. I find that endlessly entertaining
