Marvel Us

Analysis: Disney's Marvel buy traps Hollywood in a Spider-Man web, putting Disney in a long-term strong position against its rivals.

Walt Disney Co., the world's biggest media company, outflanked Hollywood competitors while enhancing its film lineup with the $4 billion acquisition of comic-book pioneer Marvel Entertainment Inc.

As Marvel's new owner, Disney will collect license fees from Universal Orlando theme-park rides in Florida that include “The Amazing Adventures of Spider-Man” and “Incredible Hulk Coaster,” as well as ticket sales from the films “Iron Man 2” and “Thor,” distributed by Viacom Inc.'s Paramount Pictures.

With Marvel, Disney is buying its way into business with competitors who have had rights to super-hero films, theme-park rides and television shows for years. Disney, based in Burbank, California, gains a stake in revenue streams that have enriched its rivals — until it can take over the deals itself.

“I don't think they're going to play nice, I don't think they're going to share,” says Jamie Rizzo, an analyst with Fitch Ratings in New York. “The days of licensing any of these characters to any of the other guys or letting any of the other guys distribute any of these movies is over.”

The deal helps Disney, which struggled earlier this year at the box office while competing studios benefited from superhero fare and franchises such as Paramount's “Star Trek.”

Marvel has licensed X-Men to News Corp., Spider-Man to Sony Corp. and the Incredible Hulk to General Electric Co.'s NBC Universal Inc. Disney will get revenue from future projects involving those franchises, whose combined box-office take has totaled $4.5 billion worldwide.

“They have done a nice job with the deals they have in place,” Disney Chief Financial Officer Tom Staggs says. “When those deals expire, we'll take a look at whether to bring them in-house.”

Paramount deal
Paramount is exposed as the distributor of films made by Marvel, Michael Morris, an analyst at UBS AG in New York, says in a recent report. New York-based Marvel began making pictures on its own instead of licensing characters, starting with last year's “Iron Man,” which took in $585.1 million worldwide, according to researcher Box Office Mojo.

Paramount's deal runs out after five more Marvel movies, including two “Iron Man” sequels, “Thor,” “The First Avenger: Captain America,” and “The Avengers.”

“We look forward to continuing to work with Marvel and, with today's announcement, to working with Disney to replicate the incredible success of 'Iron Man' on all our future collaborative projects,” Paramount says statement.

Acquiring Marvel also gives Disney the right to deprive its rivals of access to more than 5,000 Marvel characters that aren't already in use, said Bob Gersh, partner and co-president of the Gersh Agency, a Los Angeles talent-representation firm.

The Marvel deal marks the second time this year that Disney Chief Executive Robert Iger has muscled in on turf occupied by rivals. Steven Spielberg's new DreamWorks studio, which split from Paramount last year, agreed in
February to release movies through Disney, after holding talks with Universal Studios.

A Disney film based on a Marvel storyline could reach theaters within two to three years, Gersh says. Disney isn't likely to interfere with Marvel's existing contracts, he says.

“Those deals will run out and then Disney will have them exclusively,” Gersh said. “You look over the last several years starting with Pixar, then the Spielberg deal and now Marvel, these are three very significant deals for Disney.”

Joining Mickey Mouse
Disney will use Marvel characters in its theme parks wherever possible, Iger told CNBC. “Marvel characters have already proven to be strong in terms of theme-park attraction, and we believe there are a lot of opportunities around the world,” he said.

Spider-Man and other Marvel characters may begin to appear alongside Mickey Mouse and Buzz Lightyear by next year at Disneyland in Anaheim, Calif. and the adjacent California Adventure, says Robert Niles, editor of ThemeParkInsider.com, an industry newsletter.

The earliest Disney could add a Marvel theme-park attraction in California would be 2013, Niles said.

Disney may be prevented from using Marvel characters at Walt Disney World near Orlando, Niles says. Universal Orlando, co-owned by Fairfield, Conn.-based GE's NBC Universal and New York-based Blackstone Group LP, has
U.S. rights east of the Mississippi River to attractions based on Marvel characters that include Spider-Man and the Incredible Hulk, he says.

To the extent Universal Orlando is successful, Disney also wins through its ownership of Marvel, Niles said.

The theme-park agreement with Marvel will stand for as long as Universal Orlando follows its terms, says NBC Universal spokeswoman Cindy Gardner. “Marvel characters are an important part of the Universal Orlando experience,” she said in the statement. “They will remain so.”

Disney plans to use Marvel characters to bolster programming on Disney XD, a cable channel targeting boys, the same audience sought by Viacom's Nickelodeon and New York-based Time Warner Inc.'s Cartoon Network, says Fitch's Rizzo.

It seems less likely that a cable channel planned by Silver Spring, Md.-based Discovery Communications Inc. and toymaker Hasbro Inc. in Pawtucket, Rhode Island, will include Marvel programming, Morris says.

Disney rose 25 cents to $26.29 at 9:53 a.m. New York time in New York Stock Exchange composite trading. Marvel advanced 4 cents to $48.41. New York-based Viacom, controlled by Chairman Sumner Redstone, gained 27 cents to $25.31.

The deal is contingent on approvals by Marvel shareholders and U.S. regulators. It will start adding to Disney's earnings in fiscal 2012, Iger says.

Disney plans to expand Marvel's biggest business, licensing its characters, Staggs says. Licensing, larger than the film or comic-book divisions, accounted for $292.8 million in Marvel's 2008 revenue and $242.3 million in operating profit, according to Bloomberg data.