The Hulk vs. Hannah Montana? – Disney buys Marvel for $4 Billion

In a move that has shocked the Entertainment Industry around the world, news emerged on Monday that the Walt Disney has made a $4.2 Billion (£2.4 Billion) bid to purchase Marvel Entertainment which will see iconic worldwide brands such as Spider-Man, the Hulk and Iron Man under the same corporate roof as Mickey Mouse, High School Musical and Hannah Montana.

The Walt Disney Company needs little introduction as the world’s biggest Media and Entertainment business. Marvel, on the other hand, has been referred to by the Financial Times as “one of Hollywood’s last remaining Intellectual Property powerhouses”. In 1989, its previous chairman referred to it as a “mini-Disney in terms of Intellectual Property – Disney’s got much more highly recognised characters whereas our characters are themed action heroes. But at Marvel we are now in the business of the creation and marketing of characters.” Marvel is America’s biggest comic book publisher and has seen many of its characters become cultural icons through multimedia properties such as the “Spider-Man”, “X-Men” and “Iron Man” film franchises, hugely successful video games such as “Ultimate Alliance” and toy lines.

The deal has been approved by both companies’ Boards of Directors and is expected to be finalised shortly. The reason for the deal in a time where comparatively few are being struck in the world of Entertainment is fairly straightforward – Disney will add Marvel’s huge portfolio of Intellectual Property and brands to its business and take advantage of Disney’s proven business model to develop characters such as Spider-Man, Captain America, Thor, Iron Man and the X-Men with an even bigger audience.

The price paid for Marvel was more than Disney paid for Pixar Animation, the makers of Toy Story, Finding Nemo, Cars and The Incredibles only a few years ago and the feeling is that although the price is high, Disney’s strong relationships with retailers will only help to further build the Marvel brand; in fact Marvel’s share price has already shot up.

It would be very easy to see this as one of the first “green shoots” in the Entertainment Economy, which like the rest of the business world has seen fewer and fewer corporate deals done since the advent of the credit crunch. However, it’s not that straightforward.

This is a huge sum of money for Disney to pay, but Marvel are in an enviable position right now, being the biggest comic publisher in the United States with an enviable portfolio of multimedia properties including Video Games, Cartoon Series and most notably a number of movie franchises, including the hugely successful “Spider-Man” and “X-Men” movies as well as newer releases such as “Hulk” and “Iron Man”, to be joined over the course of the next couple of years by high-profile summer blockbusters “Captain America – The First Avenger”, “Thor” and “The Avengers”.

What makes the latter so interesting is that, although the rights to make “Spider-Man” and “X-Men” movies are currently owned by Sony and 20th Century Fox respectively, “Hulk”, “Iron Man” and ”Captain America” are being made independently by Marvel Studios after a huge refinancing deal with Merrill Lynch which allowed the company to make their Movies without help from Hollywood and only involve studios such as Paramount and Universal to distribute the final product.

“The Avengers” in particular has a huge amount of potential, being a team-up story involving the latter characters and will have an extremely impressive cast who have been locked in for a number of sequels including Robert Downey Jr., Edward Norton, Scarlett Johansson and Samuel L. Jackson. Making “the Avengers” was only possible once the movie rights to the individual characters all came under the same roof.

Marvel was actually insolvent around 10 years ago when the Comics Industry entered its last major slump and has seen its fair share of financial crises; their lack of funds was what led to the movie rights to their various characters being sold to different studios in the 80s and 90s after their sale to New World Entertainment in 1986 failed to launch their most popular titles as film franchises. Their biggest rival, DC Comics, has never really had this problem given that they were purchased by Warner Bros. in 1969 and always had a studio that was willing to make movies for them. The success of “Batman Begins”, “Superman Returns”, “Watchmen” and “The Dark Knight” has led to a number of other DC characters now being actively developed into movie series over the course of the next 5 years or so, starting with “Green Lantern” in Christmas 2010.

One of the key issues coming out of the announcement of the Disney-Marvel deal is that their existing distribution arrangements with Sony, Fox and Paramount will remain unaffected until the related contracts expire. This will mean that some of the more promising and high-profile releases such as next year’s “Iron Man 2” will not be produced and distributed by Disney and that the more well-known franchises will not be Disney movies for some time yet.

However, Disney will now have access to Marvel’s library of over 5000 comic characters, and can begin work any projects which aren’t already under development at other studios. They could look to draw on Pixar’s expertise to launch lesser-known properties; after all, Pixar’s “Incredibles” was loosely based on Marvel’s “Fantastic Four” and there’s no reason why other titles wouldn’t benefit from their particular sense of humour and attention to detail. The question is, however, whether or not the bubble will have burst on Superhero movies by that point. For every “Dark Knight”, we’ve seen a “Punisher”.

The point to take out of this from a legal perspective is that the deal was done almost entirely on the basis of Marvel’s Intellectual Property. Marvel has a huge number of characters and brands and is no stranger to leveraging their IP into merchandising, but even they are put to shame by Disney. It’s worth noting that, although Marvel’s sales figure was something around $700 million last year, Disney’s was $37.8 billion. Disney can turn Marvel’s characters into movies, theme park rides with built-in audiences at the various Disney World resorts around the world, video games, toys and a thousand other products which could flood the marketplace in a similar way to phenomenally popular Disney brands such as High School Musical and Hannah Montana.

Although Disney won’t be able to use the biggest toys in the box just yet, they’ll be working with a company that uses a very similar business model (which saw Marvel buy out an animation studio in the early ‘80s to launch their characters on the small screen and led to the launch of the “Transformers” cartoon in the 1980s as essentially an advertisement for the toy line) with a huge library of characters which are recognised the world over. Provided that Disney can get past the initial view of Marvel’s core audience; that the deal will lead to the repositioning of some of its more edgy characters to suit a family audience, then this could secure Marvel’s future for many years to come. The naysayers should bear in mind, however, that Disney was the company that launched Quentin Tarantino’s career and that the current management team will stay in place.

The Entertainment industry has suffered over the past few years due to the credit crunch; the impact of illegal downloading and the growth of counterfeit merchandising. This could be a sign that other media businesses will look to team up in a similar way over the next few years. It’ll be a few years before we can really tell whether or not this was a wise move for either company but in the short term, it’s hard to see how this can be seen as anything but a win/win situation. In any event, it’s a “whole new world” for Marvel.

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