Big news in the entertainment industry today: Disney announced that it is acquiring Marvel Entertainment, known for such popular characters Spider-Man and the X-Men. Here are a few of my initial reactions to this deal:
1. Disney's last two major acquisitions (Pixar and Marvel) fit much more closely to its core strategy than some of the diversification attempts in the second half of Eisner's tenure (Cap Cities/ABC, hockey and baseball teams, etc.). Why do I say that? These last two major deals bring a stable of popular characters to Disney. When Disney has been very successful, it has been developing and leveraging characters across an array of businesses (films, TV, theme parks, consumer products, etc.). Some of the deals during the latter half of Eisner's tenure had very little to do with animated characters, and they stretched Disney well beyond its traditional core.
2. The price tag seems high according to some observers and analysts. However, I thought this comment by Disney's CFO was interesting: "You can't expect to pay a bargain price for premium assets," said Disney Chief Financial Officer Tom Staggs. "Marvel is worth more inside Disney than outside Disney." Of course, that final sentence proves key. Anytime a firm diversifies, particularly via acquisition, you have to ask yourself: Is this business worth more within Disney than outside of the firm? Why might Marvel be worth more within Disney than elsewhere (either independent or as part of another conglomerate)? First and foremost, Disney has the ability to unlock a tremendous amount of value from Marvel's characters, because it can leverage the characters across a wide platform of related businesses. Expect theme park attractions based on Marvel characters, new films, new consumer products, new television shows, etc.
3. We should watch how Marvel's relationships with other entertainment firms unfold in future months. One complicating factor with any deal such as this one - how will existing relationships between Marvel and some of Disney's competitors (such as Sony and Viacom) fare in the future?