With Marvel, Disney looks to reach a previously untapped demographic
It doesn't take much to realize that looking at Disney's track record, they have certainly done a good job reinventing themselves over the course of their career as a company. What started as a small media company back in 1923 making animated cartoons has grown to be a conglomerate giant netting 8,445 (in the millions) with an annual gross of 37,843. However, even with all of that revenue there is one particular demographic that has always been difficult for Disney to target: a generation of young boys that have been raised on violent video games and cartoons. Don't deny it, you're probably one of them! This is why the acquisition of Marvel Entertainment was the most logical move on Bob Iger's part. Iger, Disney's Chief Executive Officer has been "on a spending spree" since he joined the company back in 1996.
Iger, who came to Disney in 1996 as part of the company’s $19 billion purchase of Capital Cities/ABC Inc., has proved to be a serial acquirer. Three months after taking the helm as CEO, he agreed to pay $7.4 billion for Pixar, which was co-founded by Jobs, to improve Disney’s flagging animation pipeline. In all, the CEO has snapped up 28 companies in whole or part, according to data compiled by Bloomberg.
While Iger's reign as the head of the Walt Disney Company has been successful overall, between the purchase of Pixar and the ownership of ESPN, Iger's DIsney has been very successful up until 2009 when Disney's net income "fell 25 percent to $3.3 billion," the lowest point of Iger's tenure. So when things go south, what do major companies tend to do? Spend more money! At the end of 2009 Disney finalized their acquisition of Marvel comics for $4.3 billion dollars in hopes of reaching this previously untapped demographic of teenage boys. And while Disney's stock has reached all time highs, beating S & P 500 Index gain recently after bottoming at %15.59 back in May of 2007 during the credit crisis, will they be able to afford all of their recent upgrades?
The total price tag for all of the upgrades through 2014: more than $12.3 billion, according to New York-based Soleil Securities Corp. analyst Alan Gould, a 59 percent increase over the prior five years...Investors give mixed reviews of Iger’s moves to refresh the entertainment giant, which was founded as a cartoon studio by Walt Disney and his brother Roy Disney in 1923.
Iger has the right idea. There is a reason why he has seen so much success during his tenure. The only way to survive is to reinvent yourself, particularly in these times. Last I checked Disney hadn't made a really great film (not counting Pixar) in a long time, and the acquisition of a company like Marvel Entertainment gives Disney a tremendous opportunity to expand.
“What we look for is a company that is constantly refreshing its operations, improving and continuing to build a business, and that’s true of Disney,” says Michael Cuggino, president of San Francisco-based Permanent Portfolio Family of Funds Inc., which owns 720,000 Disney shares...Disney is going to be basically doubling what they are spending,” says James Tarkenton, a managing director at Lateef Investment Management. Greenbrae, California-based Lateef has sold all of the 149,984 Disney shares it held in April 2009.
The fact of the matter is, if you want to make a little bit of money, generally in any well oiled economy you have to spend a little first. Disney wants to reinvent itself so it seems logical to spend money on Marvel, and it's a good thing. Look what they did for Pixar? As for the fact that licenses like Spidey and the X-Men are presently at other studios, if Disney can hold out a couple of years I have a feeling it will all be worth it since those contracts expire in about three years.
Good things come to those who wait, and I trust Iger's decisions, what about you? Check out the Marvel/Disney corporate mash-up courtesy of Kirk Manly which will be published in Fast Company Magazine this March.
[Currently, Disney] can’t yet rely on several of Marvel’s most popular comic-book characters. They’re tied up in licensing deals: News Corp. has the rights to the X-Men, Sony Corp. controls Spider-Man and Universal Studios Inc. claims several Marvel characters for exclusive use in its Orlando theme parks...Ross has to mine the likes of Captain America, Thor and lesser-known figures like Ant-Man until the bigger superhero licenses expire beginning in 2013. The licensing deals soured some analysts on the Marvel purchase.