Analyst: Disney May Wait Years for Marvel Benefits

1 Sep, 2009 By: Erik Gruenwedel

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With lawyers and regulators hashing out the details (including pre-existing contracts with other studios) on Disney’s proposed $4 billion acquisition of Marvel Entertainment, Pali Research analyst Richard Greenfield Sept. 1 said Disney investors seeking short-term fiscal synergies could be in for disappointment.

While heralding the acquisition as “strategically logical” regarding Disney’s heretofore failed attempts to attract the teenage/tween male demo, Greenfield said Marvel shrewdly licensed theatrical, home entertainment and digital rights to its most popular (i.e. commercially successful) characters to major rival studios over the next several years.

“While we do not doubt the acquisition will ultimately prove successful, it appears that Disney investors may have to wait quite awhile to see the bulk of the synergies that the Marvel acquisition may ultimately yield,” Greenfield wrote in a note.

According to the analyst, Paramount Pictures (including Paramount Home Entertainment) have the rights to Marvel’s next five theatrical releases, including Iron Man 2 in 2010, Thor and Captain America in 2011, and The Avengers and Iron Man 3 in 2012 or 2013.

In addition to the titles’ release on DVD and Blu-ray Disc, digital distribution is earmarked for the nascent pay-TV channel Epix, which is co-owned by Paramount, Lionsgate and Metro-Goldwyn-Mayer and set to launch Oct. 1.

Twentieth Century Fox Studios (including 20th Century Fox Home Entertainment) own the rights to the lucrative X-Men franchise, as well as the Fantastic Four, and Sony Pictures (and Sony Pictures Home Entertainment) reportedly has the rights to the next three Spider-Man installments.

Universal Studios (including Universal Studios Home Entertainment), which has rights to the Hulk franchise, also reportedly has the geographical rights to Marvel characters as theme park rides and attractions, including notably Orlando, Fla., home of Walt Disney World.

“We have geographical exclusivity east of the Mississippi River with regard to the specific Marvel characters we utilize,” according to a 10-K filing by Universal City Development Partners. “The license for the Marvel properties does not prohibit its assignment and is for the duration of our use of attractions themed around Marvel characters.”

Disney has said it would honor all outstanding distribution deals.

Separately, a lawyer in Pennsylvania reportedly representing select Marvel shareholders is investigating whether Marvel board members breached their fiduciary duties and other violations of state law when approving the transaction.

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