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Disney Acquired Playdom for Up to $763.2 Million—but the Full Amount Was Not Guaranteed

Disney’s Playdom deal combined $563.2 million in announced consideration with a possible $200 million earn-out. The $763.2 million headline was a maximum, not a confirmed payment.
From TheFinanceBase Team2 min to read
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Disney announced a deal to acquire social-game company Playdom on July 27, 2010, for $563.2 million in consideration, subject to conditions, plus a possible performance-based earn-out of up to $200 million. The $763.2 million figure is the maximum implied by adding those amounts—not evidence that Disney paid the full sum.

What did Disney agree to pay for Playdom?

Disney’s July 2010 announcement separated the deal into two parts:

Part of the deal Amount What it meant
Announced consideration $563.2 million Subject to conditions, according to Disney’s July 27, 2010 announcement.
Performance-linked earn-out Up to $200 million Additional payment contingent on Playdom meeting specified results; Disney’s fiscal 2011 Form 10-K tied it to predefined revenue and earnings targets for calendar year 2012.
Maximum implied total Up to $763.2 million The sum of the announced consideration and the maximum earn-out. It is a ceiling, not a confirmed payment.

Disney’s later fiscal 2011 Form 10-K reported approximately $563 million in total consideration, subject to conditions and adjustments. That rounded figure is consistent with the announcement’s more precise $563.2 million; the two documents simply state the amount at different levels of precision. The filing also notes that some consideration was subject to vesting conditions and recognized as post-close compensation expense.

When did Disney complete the acquisition?

Disney announced the agreement on July 27, 2010, and reported in its fiscal 2011 Form 10-K that the acquisition closed on August 27, 2010. The earn-out’s specified performance period was calendar year 2012.

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Was the $200 million earn-out paid?

The available announcement and filing establish the earn-out’s maximum and its performance conditions, but do not establish the final amount paid. It would therefore be inaccurate to report $763.2 million as the confirmed purchase price or to say Disney paid the full earn-out.

Why did Disney buy Playdom?

Disney said the acquisition was intended to strengthen its digital gaming portfolio, add Playdom’s management team, and give consumers new ways to interact with Disney on social networks such as Facebook and MySpace. Disney’s fiscal 2011 filing likewise described the purchase as a way to strengthen its digital games business and reach a new customer base. These statements describe Disney’s rationale, not proof that the deal achieved those aims.

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At the time of the announcement, Disney identified Playdom games including Social City, Sorority Life, Market Street, and Bola. Disney estimated that Playdom had 42 million monthly active players in 2010; that was a company estimate at the time, not an audited count or a current audience figure.

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