Felt bad for the old man

The old man went to jail after the playground incident, and as we never see him again, the presumption is that he stayed there.

Isn't that a little harsh?

He was strange and insensitive (i.e. he tells the little boy, "We're going to kill your dad."). However this old man had several revealing traits:

1). As he says, the old man kept the clown suit instead of burying it or tossing it in the ocean because he didn't want someone to find it. The old man is, therefore, caring and responsible.

2). The old man expresses concern when he discovers that the father is wearing the clown suit. For example, the old man tries to kill the father at the start, and he later helps the mother track him down. The reason is that the old man wants to stop the demon from killing people. Thereby, the old man again shows that he cares about society.

3). The old man saves the mother by killing the dog.

4). The old man tells the mother that the only means of stopping the demon is incapacitation. If the old man didn't tell her, then she would have never known how to stop the demon at the end.

The old man, overall, is a redeeming character who should have enjoyed a better fate.