Tim Beyers is a fan of Marvel (NYSE: MVL ) . I'm a fan of Disney (NYSE: DIS ) . It's only natural that we pit the two character farms against one another in this week's Dueling Fools segment.
The timing of the bout may not be in my favor this time. Disney is coming off a quarter in which revenue fell by 7%, with pre-charge profitability tanking by 26%. Free cash flow took an even harder 40% tumble.
Marvel, on the other hand, posted a small dip in earnings on a head-turning 75% top-line surge. It looks impressive, but Marvel's results are always lumpy. It's a hit-driven business, with more jagged peaks and valleys than an Arizona horizon.
Guess who is going to live happily ever after?
M-I-See into the future
Comparing notes on the quarterly reports that the entertainment giants posted last month may lead you to believe that Marvel is this year's hottie.
Sorry. For all of 2009, analysts see Marvel's net income falling by nearly 50% on a 29% plunge in revenue. Disney won't get smacked as hard, with revenue projected to fall a more modest 6%.
So, even if you try to smooth out the volatility by looking at a year -- instead of a quarter -- Marvel still has the potential to break your heart. It's like buying into DreamWorks Animation (NYSE: DWA ) after a Shrek sequel or Take-Two Interactive (Nasdaq: TTWO ) when a new Grand Theft Auto comes out. The near-term results will be juiced, but the subsequent lulls can be brutal. Disney is the company that offers the more dependable performance.
It could be Disney's cable business, delivering the consistent flow of subscription revenue from channels like ESPN and Disney Channel. It could be the broadcasting power of having the ABC network in its arsenal. On the leisure end, you have theme parks and cruise ships that operate year round. Disney knows how to milk a hit when its movie studio cranks one out -- just like Marvel -- but it's not as if Disney will collapse if the multiplex goes dark.
Simply Marvel us
Marvel is exclusively at the mercy of the popularity of its characters in theatrical releases. If its characters hit a bad streak of cinematic duds, or if superhero action flicks fall out of favor -- and don't laugh, because it can and has happened -- Marvel's in for some serious pain (especially now that the company is bankrolling some of its releases).
You can say goodbye to its share of the box office receipts and the subsequent DVD release. All of its licensing deals -- from the THQ (Nasdaq: THQI ) video games to the Crocs (Nasdaq: CROX ) footwear -- come undone if Marvel's storytelling wizardry on the big screen becomes the next World Wrestling Entertainment (NYSE: WWE ) .
Disney doesn't have to worry about that. Sure, it's great that Up was a monster hit last week, but it's not going to stop someone from tuning in to watch the Yankees taking on the Red Sox on ESPN or checking out a Jonas Brothers flick on Disney Channel.
It takes more than just characters
I went to Marvel Superhero Adventure City on the Canadian side of Niagara Falls two years ago. It was a modest attraction, complete with a glowing Hulk miniature golf course and a lame Spider-Man laser-shooting dark ride. I believe it recently closed down.
I live in Florida, so I've been to Marvel Superhero Island in Orlando's Islands of Adventure several times. It's neat, but I don't know if Marvel has enough firepower to fill up more than an indoor arcade or a single land in a park, whereas Disney has fleshed out four entire theme parks just 15 minutes away. Dubai is getting a Marvel-themed park, but parks get doled out there like Oprah Winfrey hands out Pontiacs.
You get a park! You get a park! Everybody gets a park!
Sorry Marvel, but even DreamWorks Animation is getting its own theme park in Dubai. This doesn't mean that the parks won't work. As a theme park enthusiast, I want to make it out there in a few years, badly. However, it's just proof that Marvel is still not the complete entertainment company that Disney has become with decades of cultivated seasoning.
Marvel has a good story to tell, but Disney is the one that is going to be telling its story the longest.
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