If you look back at the history of studio acquisitions made by The Walt Disney Company (NYSE:DIS), they have been positively brilliant. The House of Mouse acquired Pixar in 2006 for $7.4 billion, and later purchased Marvel and Lucasfilm for $4 billion each. In making these acquisitions, the company added to its treasure trove of intellectual property and laid the groundwork for a string of box-office hits for more than a decade and counting.
Now, the press is ripe with rumors that Disney is closing in on the next big addition to its fold. Early last month, CNBC reported that Disney was in talks with Twenty-First Century Fox, Inc. (NASDAQ:FOX) (NASDAQ:FOXA) to acquire the bulk of the company's movie studios and TV-production assets, and more recent reports suggest that a deal could be announced as early as next week. While there would be much to gain from such a deal, the greatest beneficiary would be Marvel Studios.
Hindsight is 20/20
These acquisitions were prescient in hindsight, but at the time of each purchase, investors and analysts invariably asked the same question, "Is Disney paying too much?" This was particularly true in the case of the Marvel buyout, as investors wondered if there would be any remaining value to be had, with other companies retaining the rights to many of Marvel's most iconic characters.
Sony (NYSE:SNE) Pictures owned the film rights to all the characters in the Spider-Man comics, while Fox controlled the movie and television rights to X-Men, The Fantastic Four, and Deadpool. The Marvel Cinematic Universe (MCU) has gone on to generate more than $5 billion in ticket sales and has flourished, despite not having access to all its characters. This goes to show you can never underestimate the power of Disney.
A deal with Sony in 2015 brought Spider-Man to the MCU. The agreement resulted in an appearance by Spider-Man in Captain America: Civil War, and laid the groundwork for Spider-Man: Homecoming. The movies generated more than $2 billion in combined worldwide box office, and became the fourth and fifth best-performing movies of all the Marvel productions.
Fans are positively giddy over the prospect of any deal that could bring its remaining Marvel characters back into the fold. This could lead to a vast expansion of the MCU, as many of the comic storylines involving the Avengers included characters from both the X-Men and The Fantastic Four. Bringing those characters home would allow Marvel to weave them into larger story arcs, similar to what the studio has done so successfully with Spider-Man.
More to be gained
There are other potential benefits to be had from the combination. Disney has announced that it will debut two over-the-top streaming services. The first will be home to ESPN programming, which will debut in 2018, and the second will feature characters from the Disney, Marvel, Pixar, and Lucasfilm studios, set to begin in 2019. Fox owns a number of well-known franchises including X-Files, The Simpsons, Avatar, and Alien, so under such a deal, Disney could acquire additional programming to augment its own for the new streaming service.
The deal could also increase Disney's stake in Hulu, doubling its current 30% ownership and giving it a controlling interest in the streaming service.
There's no deal... yet
It's important to note that neither company has confirmed the talks. Even if Disney and Fox discuss a deal, that doesn't mean one will come to fruition. Still, any combination would present intriguing possibilities for both Disney investors and Marvel fans.
Danny Vena owns shares of Walt Disney and has the following options: long January 2018 $80 calls on Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.