Former Disney (DIS 0.20%) CEO Bob Iger, who stepped down in 2020, was a visionary leader who expanded Disney's operations through several acquisitions. He spearheaded the purchase of animation studio Pixar in 2006 and Lucasfilm in 2012, both of which have added many moneymaking franchises to Disney's repertoire. But the premier studio he had the foresight to acquire was Marvel studios in 2009, and since then, it's become the highest-grossing film studio in the world. Here's what it's been doing for the company and why it's so great for the stock.
The perfect synthesis of characters and products
Marvel creates comic-book superhero action films, and Disney takes that a step further with theme park add-ons and consumer products. Disney acquired Marvel for $4 billion in 2009, and Marvel has released 29 films in the 13 years that Disney has owned it. Marvel releases have grossed more than $26 billion since then, more than any other film studio.
Marvel, or the Marvel cinematic universe (MCU), is important to Disney in several ways. The first, of course, is ticket sales. Marvel's first 2022 hit, Doctor Strange in the Multiverse of Madness, was released in May and has been the second-highest-grossing film of 2022 so far, with nearly $1 billion in sales. Marvel has produced the three films with the highest-grossing domestic opening weekend sales since theaters reopened, which include Doctor Strange in the Multiverse of Madness, Spider-Man: No Way Home (which was released by Sony Entertainment in a revenue-sharing arrangement with Disney), and Thor: Love and Thunder, which was released last week and has been in the No. 1 spot since. It's notable that all of these movies are parts of already existing franchises. Many of the studio's characters have been used to create more film hits, nearly no-brainer bets for the studio. When Disney bought it, it bought almost limitless potential for new films -- and more. It's been worth far more than the original purchase price.
That brings us to why these films are so important for an entertainment company like Disney. One of the things Disney is best at is milking content for all it's worth, practically defining the term "cash cow." There are four areas where Disney makes money from the MCU. Aside from ticket sales, there's streaming, parks, and products, and all of these together encompass almost the entirety of Disney's operations.
Disney was able to get Disney+ up and running quickly through its unmatched content library. Marvel's popular films are an important part of the attraction for subscribers, both in what's already there and what's to come. Production costs for these films are already accounted for in ticket sales, making them more profitable than content that goes straight to streaming.
Disney has an Avengers Campus at Disneyland in California, and it's opening one at Disneyland Paris this summer. It's also recently redesigned a hotel in that resort with a Marvel character theme. Disney is limited, though, by deals that other companies had with Marvel prior to the company's sale to Disney, which is why there are Marvel-themed rides at Comcast's Universal Studios Orlando, but not Disney World. Marvel products are the last leg of how Disney gains from owning Marvel, and Marvel characters easily lend themselves to toys, books, and licensed paraphernalia in everything from book bags to pajamas.
What Marvel does for Disney stock
Marvel is a powerful revenue-generator for Disney, providing its top films in 2021 and 2022.
Although Disney stock is down 45% this year, it's gained more than 300% since 2009, when it acquired Marvel. The important note to take out of this, though, is that there's a lot more coming. Marvel has one more movie slated for release in 2022, two more waiting for release in 2023, and at least two more in production. These are likely to be instantaneous hits and will provide ample opportunity for revenue creation for Disney in all four of the segments where it uses the MCU, and Marvel gives Disney some of its highest potential for future growth.