Now that The Walt Disney Company (WDC) has acquired Marvel and its characters for $4 billion (a 29% premium), the question is how will Disney impact Marvel? Both companies touted the deal as huge win. Will WDC propel the comic book powerhouse to greater success or erode its value?
The Good Of The Deal
Stan Lee, Chairman Emeritus of Marvel, supports Disney's acquisition of Marvel. Lee believes that both sides win: WDC provides expertise in building and marketing franchises for Marvel's library of over 5,000 characters. Ike Perlmutter, Marvel's CEO, contends that Disney can add value through its ability to expand content creation and license characters for items like toys, TV shoes, movies, games, clothes, and amusement park rides.
Robert Iger, President and CEO of WDC, argues that it brings to Marvel global entertainment properties and the ability to maximize value of creative works across various platforms. Because of these capabilities, the argument goes, the company will be able to help extract unrealized value from Marvel's expansive library of characters.
The Problems With The Acquisition
Consider this pessimistic view of how Disney will affect Marvel:
This is all just terrible. Disney is a soulless company that eats up younger more vibrant creative companies.
Marvel is dynamic, fun, wonderful really...and Joe Q as brought it to such fantastic heights over the last few years. The stories and movements that have been coming out of Marvel have been so daring lately.
This merger is just terrible. It will come back to bite Marvel, and the industry, over the next few years.
This is an extreme view. But it is worth pointing out that WDC's recent track record with creative company acquisitions has been less than stellar.
1. The Muppets
Muppets creator Jim Henson almost sold Jim Henson Productions to WDC in 1989. At the time of Henson's death in 1990, he was developing an attraction for the Disney theme parks called Muppetvision 3D. The initial deal was not completed, but WDC bought The Jim Henson Company in 2004.
True, the Muppets, both in terms of The Muppet Show and other more formats have not done well since Henson’s death. The Muppet Show cast has primarily used as licensing properties. For example, Disney has licensed The Muppet Show as a comic book to BOOM! Studios.
Disney has not completely abandoned the Muppets properties, but it has done little with them during the past five years. Kermit the Frog and Miss Piggy used be more well-known than either Spider-Man or Mickey Mouse. Now neither is in the top ten characters.
2. CrossGen
In the late 1990s, CrossGen was emerging in the comic book industry. CrossGen was publishing in a broad range of genres and was attracting tremendously talented artists and writers.
Moreover, CrossGen was innovative in its publishing practices. For example, it was one of the first mainstream publishers to promote “digital comics” and it published monthly “trade paperbacks” that included all of its titles for the month. Unfortunately, the ambitions of CrossGen’s owner outweighed his financial resources, and the company filed for bankruptcy in 2004.
WDC purchased the CrossGen properties in 2004 and planned to publish young adult novels based on the Abadazad property. Two books were published in the US. A third was released in the UK. Curiously, Disney has done nothing with the other CrossGen properties.
Analysis
No merger or acquisition is a slam dunk. That's true no matter how good the deal looks ex ante. One such example is AOL/Time Warner, which failed miserably and destroyed more than $200 billion of shareholder value.
It's not just the AOL/Time Warner merger that failed. A 2002 Business Week study found that buyers destroyed shareholder value in about 60% of big mergers.
Even if the house of Mouse fails miserably with Marvel, it can only destroy a couple billion dollars of value. For this deal to be successful, Disney must learn from its recent failure to properly manage and acquired characters. It certainly has the potential to leverage its considerable marketing, distribution, and licensing capabilities to create value.
In the short term, Marvel's current license arrangements may limit Disney's licensing options. In the long term, though, WDC must not let the Marvel properties stagnate. Instead, Disney should pursue an aggressive strategy of promoting and exploiting Marvel's characters.
Douglas Y. Park
Twitter: @DougYPark
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