It's dog eat dog -- or mouse eat spider -- in the entertainment industry.
Disney diehards and Marvel maniacs will disagree, but they're wrong.
The family entertainment titan isn't overpaying because it has the resources to milk Marvel's character library better than Marvel ever could on its own. And by "milk" I don't mean brand-deflating moves like having an "X-Men Babies" series on Disney Channel or turning The Fantastic Four into a teen vocal group. Give Disney a little more credit, folks.
Marvel also isn't selling itself on the cheap. The comic book giant's financials will always be lumpy, so cut your 2008 growth projections short. Analysts expect earnings this year to clock in at roughly half of last year's profitability. Disney could have -- quite possibly -- waited a few months and paid less.
Marvel is a $3 billion company on its own, or a $5 billion company in Disney's trained hands. So $4 billion is a win-win price that both sides will learn to live with.
Why is this company worth more under Disney's watch? Let's go over a few of the reasons.
1. Disney is smart enough to let Marvel be Marvel
As a Pixar investor when Disney came calling three years ago, I can sympathize with Marvel shareholders who feel that they are trading long-term wealth for short-term gains. However, I have no tears for the worrywarts who feel that Disney will somehow Disney-fy Marvel.
This isn't Disney's first acquisition. It won't be its last. Let's go over how Disney has been able to keep a "hands-off" approach when it comes to guiding purchased entertainment companies.
- The prize jewel in its 1996 purchase of Capital Cities/ABC is ESPN. I have yet to see a pinstriped Goofy suit up as a referee or an official in any televised sporting event.
- Disney's deal to acquire Pixar was more desperate and expensive than this week's Marvel coup, and the Pixar campus has continued to raise the bar in computer animation with little interference.
- Smaller content-widening deals including Jim Henson Productions and Baby Einstein haven't steered the franchises awry.
Letting Marvel be Marvel isn't enough to justify a buyout, naturally. There have to be strategic fits and synergies to justify the market premium.
2. Marvel fills Disney's young, male void
If you're a kid, Disney has it all. There are fairies and princesses for young girls. Young boys can take heart in pirates and computer-rendered racing cars. For the preteen set, it's more of a girl's world. There's the Jonas Brothers as well as Disney's prowess as a teen-actress factory, with Hilary Duff and Lindsay Lohan passing the baton to Miley Cyrus, who in turn is now moving on to let Selena Gomez and Demi Lovato steal the show.
Disney knows that it will win back teen boys once they become young fathers, but there's a lost decade in there that Disney would love to get back.
Its theme parks lack the monster thrills you'll find at regional chains Six Flags and Cedar Fair
Marvel seriously ramps up the cool points in a juicy and jaded demographic segment that Disney would love to get to know a little better.
3. Disney gives Marvel room to fail
There was a lot riding on Iron Man as Marvel's first self-financed feature. In inking its complicated $525 million credit facility with Bank of America's
Iron Man panned out, of course, but what if it had been another Elektra? Disney won't need to tap that credit line. It can give Marvel the freedom to ramp up its production slate and the wiggle room to fail from time to time.
4. Let's play some games
Disney has been making a serious push into online gaming since acquiring Club Penguin. It has also ramped up its in-house software development. Marvel is perfect, since it gives Disney a 5,000-character easel to begin carving out opportunities on both fronts.
Disney is no Activision Blizzard
5. There's more room to park
One of the oldest cyberspace rumors is that Disney's fifth park in Florida will be an edgy attraction themed to Disney's villains. It would be Disney's way to win the thrill-seeking teens that have temporarily outgrown Disney's family-friendly charms.
The villains scenario is just fanboy drivel, it seems, but Marvel now gives Disney the ammo to open up a high-octane park that can match Cedar Fair and Six Flags, coaster for coaster.
There's a problem, though. If you leave Disney's Florida parks and go northeast on I-4, you will bump into Universal Orlando's Islands of Adventure a dozen miles later. The high-tech park features a whole land devoted to Marvel superheroes.
Something has to give. According to the Orlando Sentinel, Universal can retain the rights to its Marvel-themed attractions -- including the signature Spider-Man dark ride and iconic Hulk coaster -- as long as it adheres to the agreement terms.
Disney can open rides based on the licensed characters, but only west of the Mississippi. In other words, California's Disneyland can add new rides themed to Spider-Man and X-Men, but its hands are tied in incorporating marquee characters in its larger Florida resort.
This will be a game of chicken. How long can Universal Orlando -- a theme park complex owned by Blackstone
Neither party will flinch, so expect a Disney buyout at some point. If not, expect Disney to still do something at its parks with the hotter Marvel characters that it can mine for theme park content.
Either way, the mouse just keeps getting richer.
M-I-C. See these other headlines:
- Roundtable: Is the Disney-Marvel Deal a Winner?
- Read Tim Beyers' original Marvel argument when he and I pitted Disney against Marvel in June.
- Read my original Disney argument.