Monday morning in Boston. I hardly had time to brush away the blues when I read about the Disney buyout of Marvel Entertainment for $4billion. Heck, that’s 0.5% of the $800B stimulus package. But, I digress. This tie-up is one of the largest corporate deals this summer and signals the coming-of-age of Marvel’s entertainment business. Originally, a comic book company, Marvel declared bankruptcy in the mid- nineties as it faced a slump in comic book sales.
Interestingly, this deal is a merger of two companies with similar business models. Both companies commercialize the popularity of their characters who are very popular in a variety of customer segments. They promote these characters on a variety of media platforms as well as through third-party licensing deals all around the world.
According to Disney’s chief executive, Bob Iger, Marvel had a “treasure trove” of intellectual property that transcended gender, age, culture and geographical barriers. Very true.
Marvel has only just begun to capitalize on the success of its characters. Apart from comics, graphic novels, television and its successful foray into Hollywood, there’s a treasure trove of superheroes who are making the executives at Disney salivate at the potential revenue that these superhero brands represent. Iron Man 2, Thor and Deadpool are scheduled for production with Iron Man being nearly complete. Captain America, the Avengers movie, another Spiderman movie, Magneto, Cable, another Wolverine movie, Nick Fury, Doctor Strange… these are just a few of the 5000 characters that Marvel (and now Disney) can capitalize over the long-term. Talk about buying a revenue stream for the future.
This is an interesting boy-meets-girl marriage. Marvel brings its various superhero brands to the table along with a chunky male demographic in tow while Disney has an array of businesses to execute the strategy with its global sales and distribution infrastructure, its theme parks, its video game and merchandising businesses and its cable and broadcast TV networks.
This also means that Disney now has broadened its market from the Hannah Montana and princess product lines aimed at its mostly young female demographic to an edgier mix of testosterone-fueled characters aimed at a young male demographic.
The transition will be challenging. Disney’s prominent brands are very young female centric. Marvel is tough as bolts and its roster of products are different from Disney’s as Mars is from Venus. The biggest mistake that Disney could do is act hastily and slap its brand all across the Marvel lineup. This may not stand well with the angst-ridden male demographic that they’d like to entice. It’s important that both brands maintain a distinct distance in some forms of media. For e.g. it wont make sense to have a Wolverine and Mickey Mouse movie or Electra meets the Snow White. Ditto with other promotions on online social media, print and even merchandising in some cases. Even so, there is tremendous opportunity for merchandise expansion, integration within theme parks, stand-alone movies and other promotional avenues.
From this article in the Guardian, last year, Marvel had sales of $676m but employed just 300 people. Disney had sales of $37.8bn and employed 150K people at businesses varying from its Hollywood film studios to ABC television, theme parks on three continents and a high-street chain of Disney merchandise stores. Perhaps, Disney will now learn some streamlining lessons from Marvel.
Another reason why this deal is so interesting is that very few good deals like this have happened in recent memory and it’s good to see a genuine business deal take place because of the intrinsic value of a business and its brands as opposed to the flurry of takeovers that we’ve seen, particularly in the financial sector as takeovers were mostly a result of propping up hollow companies with fairy tale assets. Disney and Marvel’s businesses may deal in fantasy, but their reasonably strong business fundamentals are a not-so-bitter dose of reality.
