Marvel Is Taking Over Disney -- and That's a Good Thing

Marvel is suddenly the most important studio in Disney's portfolio, and that creates opportunities to create value for years to come.

Jan 10, 2014 at 4:04PM

When Disney (NYSE:DIS) agreed to pay $4 billion for Marvel in 2009, it was a steep price for a studio with little filmmaking experience. A few years later, the vision for Marvel predicted by Disney CEO Bob Iger is playing out and the studio is becoming the face of Disney.  

When you consider the success Marvel has had over the past few years, it's probably good that Disney is giving it such a prominent role, and it's only going to grow as Marvel's characters develop and new distribution outlets emerge.

Marvel takes over the box office
In the past two years; Marvel has come to dominate the box office for Disney. Iron Man 3 and The Avengers nearly doubled the second- and third-best performing films of the year, and both were tops at the box office overall for the year.

Disney Domestic Box Office

1st Place

2nd Place

3rd Place

2013 

Iron Man 3

$409.0 million

Frozen

$289.4 million

Monsters University

$268.5 million

2012 

Marvel's The Avengers

$623.4 million

Brave

$237.3 million

Wreck-It Ralph

$189.4 million

2011 

Pirates of the Caribbean: On Stranger Tides

$241.1 million

Cars 2

$191.5 million

Thor

$181.0 million

Source: Box Office Mojo.

What's important about this box office success is that Disney can translate it to more superhero films and TV shows in the future.

Spinoff season for Marvel
Agents of Shield is the first major Marvel spinoff to the small screen, and it has done well, ranking second behind the ever-popular NCIS on Tuesday nights on ABC, one of Disney's networks. The next spinoff from Marvel's box-office success will come on Netflix, which recently agreed to a deal that will bring series about Daredevil, Jessica Jones, Iron Fist, and Luke Cage to its streaming service.

On the big screen, besides continuing with classic heroes like Thor and Captain America, Marvel is creating new opportunities to develop characters with Guardians of the Galaxy, due out this year. As time goes on, more of these spinoffs will pop up and Disney will find ways to create more value from a world of Marvel characters across a variety of platforms.  

How to build value, Disney style
What makes Marvel a phenomenal investment for Disney is that the characters will live on for years in a variety of ways.

Dis Marvel Image

Marvel merchandise now sits alongside Disney and Pixar goods at Disney stores. 

Not only does Disney own major television networks, in the last fiscal year the company generated more than twice as much revenue and more than five times as much operating income from parks and resorts as it did from studio entertainment. That's where Disney separates itself from the competition.

The key to drawing customers to these theme parks is having rides and characters that are popular. Mickey Mouse is no longer the draw he was when Disney World opened, but Iron Man or the Hulk walking about the park or helming a themed ride creates a new draw.  

Marvel is the future of Disney
Theme parks are where Disney can create long-lasting value for shareholders and it's why the company is so well positioned for the future of media. With strong characters from Marvel, Disney gets not only box-office success but also content to distribute through existing media networks and new streaming sources, as well as at theme parks. No other media company has that kind of cash-generation cycle, and Marvel is becoming the face of all of these businesses.

How Disney wins long-term
One of the reasons Marvel is so important is for the future of media. With cable's reign over consumers coming to an end, there's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it, but that won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Netflix and Walt Disney. The Motley Fool owns shares of Netflix and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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