Disney/Marvel Acquisition Webcast Notes

Following up on the Disney acquisition of Marvel, I attended this morning’s investor call. A full transcript is supposed to be available later today; in the meantime, here are some quick notes I took. I apologize in advance if there are any glitches; I was trying to type very fast to take down statements.

The call was opened by Lowell Singer, Disney’s SVP of Investor Relations. Bob Iger, President and CEO of Disney, began with prepared remarks. Several times, Marvel’s portfolio of “over 5000 characters” was mentioned as having potential value for development. Terms like “value”, “leverage”, and “revenue synergies” were used frequently. Disney expects that “synergies over time will drive value creation”, that is, they’ll make money by being able to incorporate Marvel characters into their many distribution areas. Also said was “vertical integration removes friction” (which I read as meaning not needing to pay outside companies to do what they can do in-house in terms of movies, properties, licensing, etc.). Comparisons were made to the successful acquisition of Pixar three years ago.

The deal is expected to be complete by the end of the calendar year. I found it interested that, when talking about characters, Iron Man was listed first before Spider-Man and X-Men. Marvel was praised by Iger for showing strength in “increasing the appeal of characters not known outside fan community”. Iron Man was seen as a great example of that, making money from an unknown character who was turned into a huge property.

Iger also said something about how the popularity of Marvel characters and stories transcends gender and age, which I disagree with, but once Disney gets a hold of them, that will likely become more true. Discussion also covered the potential of international expansion to add more shareholder value.

Disney has a “proven ability to maximize value of properties across markets” which they’ll use on Marvel’s “treasure trove of content” across both “traditional and new media platforms”. They aim to “build a business stronger than the sum of the parts.

They then switched to Morton E. Handel, Chairman of Marvel’s Board of Directors, who mentioned in his prepared remarks how both companies have their roots in great storytelling and how Disney will be the perfect home for their great collection of characters and stories. They look to effectively expand their licensing businesses across many media platforms.

Thomas O. Staggs, Senior Executive Vice President and Chief Financial Officer of Disney, gave some followup on strategic value. The “fit is clear” and they find it “financially compelling” as well. They think Marvel will be more valuable as part of Disney than on a stand-alone basis because of the “many areas of synergy”.

Regarding existing agreements (such as Marvel movies), Disney felt Marvel had “attractive licensing and distribution agreements with third parties”. Disney will assume those agreements as part of this transaction. As licensing agreements conclude over time, Disney will either bring them in-house or pursue third-party agreements depending on what they feel will most create value. I think that this would also cover things like theme park agreements, deals to show the Marvel movies on TV, etc.

There was concern about Disney share dilution, so Staggs stated that Disney intends to repurchase as least as many shares as they issue in this transaction within the next year. Then came Q&A, where I lost track of who was answering which questions. Here’s just some key points I found interesting.

John Lassiter met with key Marvel executives recently to talk about the potential of combining Marvel with Pixar. Everyone was very enthusiastic. “Exciting product may come from that; sparks will fly,” said an executive.

Someone asked how this would impact the film rights of characters at other studios. Disney said they thought Marvel did a good job putting attractive deals in place, and those deals would stay in place under the terms Marvel entered into.

Several time it was reiterated that Disney trusted Marvel as a “good group of people”. They said they were not only buying properties but “buying people who know the brands, stories, characters very well, and they will be relied on in this process. No one knows their characters and stories better than the folks at Marvel.” Disney said they were impressed by both what they’ve done and what they’re doing in approach from both a creative and business perspective. They feel Marvel has managed both smartly and diligently.

Someone asked about other bidders. Disney stumbled a bit on getting started on this. They said they reached out a few months ago to get to know them better, and then, as talks continued, both sides felt this was a unique combination. They also haven’t made any real estate decisions (I think this related to Marvel Studios in Manhattan Beach).

Are there benefits towards Disney in the comic book business? “We have a robust children’s publishing business.” They look to broaden both companies’ publishing and think there are opportunities there. I was disappointed not to hear more on this; it seemed a non-specific answer to me.

“The goal is not to rebrand Marvel as Disney but to shine a spotlight on the Marvel brand.” They aim to create value over and above the purchase price by bringing Marvel into Disney. In summation, they think Marvel has great creative people and great intellectual property and Disney can enhance their value by reaching more people globally.

Note that the NY Times article on the deal (which basically rewrites the press release) does add this context:

The acquisition comes as Disney, with its vast theme park operations and television advertising business, has been struggling because of soft advertising sales at ABC and ESPN and drooping consumer spending at theme parks. Disney’s profit in the third quarter, which ended June 27, dropped 26 percent.

So maybe Disney’s looking for a jolt in the arm of new properties to jazz things up? Or maybe that’s much too superficial an analysis, and I should let the financial pros figure all this out?

19 Responses to “Disney/Marvel Acquisition Webcast Notes”

  1. Thad Says:

    I’m hoping this makes a third season of Spectacular Spider-Man on Disney more likely.

    Nice to hear Lasseter’s talking about Pixar doing some Marvel stuff — they already made a far better Fantastic Four movie than either of the actual Fantastic Four movies.

  2. DC Figures Says:

    This should make for some incredible MARVEL movies in the future!

  3. Disney Buys Marvel: What The–?! « Speed Force Says:

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  4. ~chris Says:

    “revenue synergies”
    “synergies over time will drive value creation”
    “vertical integration removes friction”


  5. majorjoe23 Says:

    “They said they were not only buying properties but “buying people who know the brands, stories, characters very wel.”

    So Disney is buying people, not properties? That’s vaguely terrifying.

  6. Opinion Prone :: Commentary News :: Spider-Man? In MY Kingdom Hearts? Says:

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  7. tone Says:

    I guess we can kiss good-bye crossovers between DC and Marvel.

  8. Johanna Says:

    Not necessarily. Roger Rabbit crossed over Disney and Warner cartoon characters. Admittedly, that was a very special event.

    The “buying people” line I took as corporate-speak for planning to keep the senior executives in place because they had faith in their decisions. Of course, everyone *says* that at the time.

  9. TechSlice Says:

    Does this mean all Marvel productions will have to be family friendly?

  10. John Says:

    Eventhough the union of these 2 giants – Disney and Marvel looks a bit off , the fact is that the 2 would merge is purely business at this stage. Marvel would definetly do better inside Disney than outside . i read Here that one of the factors was also grabbing the young male attention which is overall lacking at Disney (with shows such as Hanna Montana & the Jonas brothers.

  11. Alan Coil Says:

    In response to tone, DC has said there would be no crossovers a long as Quesada was with Marvel. Perhaps one too many references to AOL Comics?

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  13. Johanna Says:

    TechSlice, since Disney owns Miramax, I would say no, although Marvel may have to be more careful about its adult branding.

  14. Suzene Says:

    “John Lassiter met with key Marvel executives recently to talk about the potential of combining Marvel with Pixar.”

    …I am salivating at the possibilities.

  15. Stan Hosmer Says:

    what effect is this going to have on Boom! publishing Disney Comics? and forget about DC/Marvel crossovers, how about a Donald Duck and Howard the Duck Pixar movie!

  16. Johanna Says:

    Based on their comments, the Boom deal will continue through its contract period, and then they’ll see if they want to renegotiate.

    Howard the Duck and Pixar? Really? I like Howard when he’s wise-cracking and sardonic, which I don’t really associate with Pixar’s heartwarming approach.

  17. Thom Says:

    >TechSlice, since Disney owns Miramax, I would say no, although Marvel may have >to be more careful about its adult branding.

    Add to that they have produced ‘R’ fare in the past under other studio identities (such as Touchstone) and ABC is hardly a full on family affair with shows such as Lost and Desperate Housewives. I see nothing to suggest Marvel is going to be forced to be a family brand. Especially concerning Marvel’s reason for purchasing them being related to picking up a young male market.

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