Thoughts About the Wordle Acquisition (updated)

I wrote the below post in February 2022, shortly after the New York Times acquired the Wordle game. Since that time, my speculation that the Times was likely getting far more in value than it paid was borne out by its statement a few months later that the “acquisition of Wordle brought tens of millions of folks into our audience, which helped drive a lot of game subscriptions.”

There are those who are addicted to the new online word game, Wordle, and then there are those who gripe about their friends who post their Wordle scores on social media every day. This being a blog about corporate and securities law and transactions, I am not writing to opine on this question, though the fact that I’m mentioning the game at all probably tells you where I stand.

The New York Times recently agreed to acquire Wordle from its Brooklyn-based creator, Josh Wardle, as reported by the, well, New York Times. According to the newspaper/acquiror, the purchase price is “in the low seven figures.” I’m not sure whether that means a million-ish or some amount that is less than $5 million, but in any event, it is a nice payday for Mr. Wardle for a product released just a few months ago.

The New York Times is a public company and would have to promptly disclose terms of the acquisition with a greater degree of precision than “low seven figures” if the acquisition was material to the company, but the Times is of a size where this particular acquisition is not deemed material (even though it was material enough to be reported on by itself as a news item). The Times did make a material acquisition about a month prior, when it acquired the sports publication The Athletic for $550 million, which it then reported on a Form 8-K.

Because the Wordle acquisition wasn’t publicly reported via SEC filing, we don’t know any more than the vague range for the purchase price, but let’s assume for purposes of this post that the transaction was extremely simple: the Times paid Mr. Wardle the seven-figure sum in cash, and perhaps also agreed with him on some sort of short-term consulting arrangement for his help in integrating the game into the Times’ other game offerings. On one hand, I can see why he would take that deal: it’s a nice chunk of change for a few months of work, and maybe three weeks from now, game players will move on to another obsession, so he wanted to strike while the iron was hot.

However, let’s consider the other possibility, that it becomes an institution for years to come, even after the initial craze passes (something like Sudoku). In that case, letting it go for what seems like a nice cash payment won’t look so wise in retrospect, while the Times reaps many millions from it over the years. If I was advising Mr. Wardle, I would have advised him to incorporate provisions in the agreement to enable him to benefit from the blowout success scenario. (Again, I want to stress that the agreement isn’t public, so I can’t say for sure that this didn’t happen.) The agreement could incorporate milestone payments, i.e., the initial seven-figure payment up front, but then additional payments if and only if the game is a big success for the Times, and the Times would be obligated to use reasonable efforts to make that happen. Or there could be some form of royalty-type payment, where he’d share in a small percentage of the Times’ earnings from the game.

First-time sellers of companies are presented with the possibility of getting paid what seems like an unfathomably large amount, but it’s important for those in that position to take a deep breath and try to negotiate the best possible deal, or in certain circumstances, hold off on doing a deal at all.