Club Penguin, the subscription-based online community acquired by the Walt Disney Company in 2007, has failed to meet profit targets that were tied to $350 million in payouts to the Web site’s creators.
Disney’s purchase of Club Penguin was valued at $700 million, with half of the total paid up front and half coming in two payments based on unspecified growth thresholds. Disney disclosed in a Securities and Exchange Commission filing last May that Club Penguin had missed the first target. On Wednesday, the company confirmed that the Web site did not meet the second one.
The upshot is that a smartly structured deal prevented Disney from overpaying for a high-flying Web business that became tangled in the economic downturn. The question now is whether the site can regain its momentum as consumer spending loosens up, and by how much the targets were missed.
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