Episode 26 Marvel

In episode 26 of Acquired, hosts Ben Gilbert and David Rosenthal delve into Disney's strategic 2009 acquisition of Marvel for $4.2 billion, which followed their acquisitions of Pixar and Lucasfilm. They discuss Marvel's rich history, from its founding as Timely Publications in 1939 to its emergence as a dominant force in the comic book industry, and its expansion into a multimedia powerhouse with iconic characters like Spider-Man and the X-Men. The episode highlights Marvel's financial ups and downs, including its bankruptcy and the takeover by corporate raider Carl Icahn, before its eventual renaissance through successful film adaptations. Gilbert and Rosenthal emphasize how the acquisition fits into Disney's broader strategy of leveraging its distribution and marketing prowess to maximize the value of acquired content, making Marvel an integral part of Disney's entertainment empire.

• Ben Gilbert and David Rosenthal introduce the episode's focus on Disney's acquisition of Marvel.
• They compare it to previous episodes on Disney's acquisitions of Pixar and Lucasfilm.
• The hosts suggest that these acquisitions share similar tech themes and will help understand Disney's strategy.

"Today's episode is Disney's 2009 acquisition of Marvel. It really completes the saga for us here at Acquired, where our first episode was the Disney acquisition of Pixar. Then our 6th episode was Disney's acquisition of Lucasfilm. And all three of these, I believe, will have pretty similar tech themes."

The quote explains the relevance of the Marvel acquisition episode in the context of Disney's broader acquisition strategy, as previously discussed in episodes about Pixar and Lucasfilm.

• Ben Gilbert presents a game to engage listeners with Marvel's history.
• Three statements are given about Marvel's past: an investigation involving DC Comics' president, Carl Icahn's attempt to control Marvel, and Marvel's ownership of Flir.
• The game serves as a prelude to the episode's content.

"For a brief stretch, ending. In an internal Time Warner investigation, the president of DC Comics acquired a large position in Marvel stock. Number two, famed corporate raider and comic book villain Carl icon once made a play to gain control of Marvel from bankruptcy. Number three, Marvel owned Flir, the baseball card company, and was affected in a huge way by the 1994 Major League Baseball strike, which is the lie."

The quote outlines the three statements used in the game, which are related to Marvel's history and the episode's themes.

• Marvel's origin story begins with Martin Goodman founding Timely Publications in 1939.
• Timely Publications' first comic book, Marvel Comics #1, featured the Human Torch and the Submariner.
• Marvel Comics was not the company's name until 1961, despite the first issue's title.

"We are going back to 1939, almost. What is that? Almost 80 years ago, when a fellow named Martin Goodman founded a company that he called Timely Publications in New York City."

The quote provides a historical backdrop for Marvel's beginnings, setting the stage for the company's evolution.

• Marvel, under Timely Publications, created iconic superheroes such as Captain America, the Fantastic Four, and Spider-Man.
• Stan Lee's role evolved from an office assistant to a pivotal figure in Marvel's direction.
• The Fantastic Four's introduction in 1961 marked a shift towards more humanized superheroes.

"The first comic book that timely published was called Marvel Comics number one, which came out in October 1939. And it included the Human Torch and the Submariner, which would be Marvel comic book heroes for long time to come."

The quote highlights the significance of Marvel Comics #1 and its characters in the company's history.

• Marvel was sold to Perfect Film and Chemical Corporation in 1968, which later became Cadence Industries.
• The company underwent several ownership changes, including being sold to New World Entertainment and then to Ronald Perlman.
• Perlman's vision of Marvel as a "mini Disney" foreshadowed future developments.

"In 1968, the first Marvel acquisition. Change of control happens when Goodman decides to sell out, and he sells the company to the perfect film and chemical corporation, which was later renamed Cadence Industries."

The quote marks a pivotal moment in Marvel's history, where it began to experience changes in ownership and corporate structure.

• Marvel expanded into other businesses, such as acquiring the sports trading card company Flir.
• The company faced financial difficulties in the mid-90s due to the comic book bubble and the impact of the Major League Baseball strike on Flir.
• Carl Icahn took notice and began buying Marvel's debt, leading to a takeover after Marvel filed for bankruptcy.

"In 1992, they actually buy the sports trading card company flir in 1992. And then in 1993, Marvel acquires slightly less than half of a company called Toy Biz."

The quote details Marvel's expansion efforts and foreshadows the financial challenges that would arise from these ventures.

• Carl Icahn's strategy involved buying debt and gaining control of companies through bankruptcy proceedings.
• Icahn successfully took control of Marvel in 1997 after the company filed for bankruptcy.
• Marvel's bankruptcy led to a court battle with banks and a reorganization plan involving Toy Biz.

"And in early 1997, the court rules that Carl Icahn can indeed take control of the company. And he does. So Carl Icahn, comic book villain, is now head of Marvel."

The quote captures the dramatic turn of events where Carl Icahn gained control of Marvel, likening it to a plot from a comic book.

• Isaac Perlmutter takes control of Marvel, rescuing it from Carl Icahn and creditors.
• Marvel's control is taken away from the "villain" and given to the "superhero," Isaac Perlmutter.
• Isaac Perlmutter remains the CEO of Marvel to the present day, even after Disney's acquisition.

"So control of Marvel gets wrested away from the villain. It's like the comic book happy ending, and the superhero, Isaac Perlmutter, comes in to save the day. And Isaac actually still to this day, is CEO of Marvel."

The quote explains the transition of Marvel's control from Carl Icahn to Isaac Perlmutter, likening it to a comic book narrative where Perlmutter is the hero. It also states that Perlmutter remains CEO after the acquisition, indicating stability in leadership.

• Toy Biz is folded into Marvel, becoming part of the combined company.
• Marvel now owns both the intellectual property (IP) of its characters and the merchandising division to sell toys.

"So Toy Biz gets folded into Marvel, I believe, and becomes part of the combined company."

This quote confirms the merger of Toy Biz into Marvel, integrating the toy manufacturing with Marvel's operations.

• Marvel licenses its IP to movie studios like Fox, Sony, and Time Warner.
• Successful movies based on Marvel's franchises, such as "Men in Black," "Blade," "X-Men," and "Spider-Man," are produced.
• These films are significant as they mark the beginning of Marvel's characters becoming mainstream in the film industry.

"Marvel was licensing their IP to big movie studios, to Fox, to Sony, to Time Warner, who were making these movies, big budget movies."

The quote discusses Marvel's strategy of licensing its IP to major studios, which led to the production of popular and financially successful films.

• Marvel Studios is established in 2005 with a $525 million credit facility from Merrill Lynch.
• Marvel Studios' plan involves releasing individual films for different characters and then combining them into a crossover film.
• The studio starts with characters not licensed to other studios, such as Iron Man and the Hulk.

"Marvel actually takes a really ambitious step to start Marvel Studios to make movies themselves."

The quote describes Marvel's bold move to create its own film studio, allowing for greater control and profit from film adaptations of their comics.

• Disney acquires Marvel for $4.2 billion in 2009, a 29% premium over the trading price.
• The acquisition occurs during the recession, which may have influenced the timing and valuation.
• Disney's strategy involves leveraging Marvel's IP across its extensive distribution and content network.

"Bob Iger and Walt Disney company announced that they're going to acquire Marvel for $4.2 billion."

This quote announces Disney's acquisition of Marvel, a significant event that brought Marvel's characters and franchises into Disney's portfolio.

• Disney's aggressive strategy involves acquiring valuable content, including Pixar, Lucasfilm, and Marvel.
• Bob Iger's tenure as CEO is marked by these strategic acquisitions that strengthen Disney's position in the media industry.
• Disney's acquisitions are part of a broader trend of consolidation in the media industry.

"The three other big powerhouses are Lucasfilm, Pixar, and Marvel. And went in and over, what, how many years? 2006 to 2012. So over six years. Rolled them all up."

The quote highlights Disney's strategy of acquiring major content creators over a span of six years, significantly enhancing its content library and market position.

• ESPN, though not acquired recently, is a significant part of Disney's business growth.
• Disney's ability to integrate acquired content into its existing businesses, like ESPN, contributes to its success.
• ESPN faces challenges with changing media consumption habits but remains a valuable asset.

"I think the four of those businesses together really account for a lot of the growth and the dramatic change in share price between then and today."

The quote attributes Disney's growth and increased share price to the combined success of its key businesses, including ESPN and the acquired companies.

• Marvel Studios has continued to follow their original plan since their inception in 2005.
• The pace of Marvel movies being released and planned has increased significantly since the acquisition by Disney.

"basically, they've just continued to execute on the plan that they drew up in 2005 when they launched Marvel Studios."

The quote highlights that Marvel Studios has remained consistent with their strategic plan since 2005, which has led to their success.

• Marvel's scale has grown with a substantial pipeline of movies post-acquisition by Disney.
• Marvel movies have generated almost $9 billion in box office revenue since the acquisition in 2009.
• Box office revenue is not equivalent to profit, as profits are harder to ascertain than revenue.

"And producing dramatically more like their scale now. I mean, they had, like, five or six in the pipeline when they were acquired. But I think you look at the pace of new Marvel movies coming out and new Marvel movies planned through the next few years, they're not letting up."

This quote emphasizes the growth of Marvel's movie production scale since being acquired by Disney, with a continuous stream of new movies being released and planned.

"Yes, there's much more value to be realized from the company in the future, but even since the acquisition in 2009, the Marvel movies have generated almost $9 billion in revenue, in box office revenue, which is crazy."

The quote indicates the significant box office revenue generated by Marvel movies since Disney's acquisition, underscoring the financial success of the Marvel franchise.

• Marvel's profit margins for the first eight films under Disney were estimated at 23%.
• The profits from movies alone have covered half the purchase price of Marvel by Disney.
• Additional revenue streams such as home video, merchandising, and theme parks contribute to Marvel's profitability.
• The acquisition cost of Marvel by Disney was quickly recouped through various revenue streams.

"I think Marvel estimated profit margins, at least in the first eight films released, I actually pulled the stat under Disney were about a 23% profit margin."

This quote presents an estimation of Marvel's profit margins for the initial films released under Disney, indicating strong profitability.

"One analyst said that by the time it was finished with the Avengers, Iron man three, and Captain America and Thor's sequels, Disney probably paid for the acquisition of the entire company."

The quote suggests that the revenue from key Marvel movies likely covered the entire cost of Disney's acquisition of Marvel, highlighting the acquisition's financial success.

• Marvel was acquired as a business line for movie production and an asset for its characters.
• The intellectual property of Marvel characters is seen as a perpetual asset.
• Marvel's ability to serialize its characters gives it an advantage over other franchises that may suffer from sequel fatigue.

"So I am going to foreshadow my tech themes and my conclusion a little bit here, but I think it was two things. One is a business line. They bought the business line of making the films. They were able to scale that. We talked about kind of paying back the acquisition in a shortish amount of time, the studio itself. But ultimately, they have this asset in perpetuity of the characters."

The quote explains that Marvel serves as both a business line for film production and a perpetual asset due to its characters, which can be serialized effectively.

• Marvel, Pixar, and Lucasfilm acquisitions by Disney serve different roles: business lines, products, and assets.
• Pixar's sequels are not as sustainable as Marvel's serialized characters.
• Lucasfilm's Star Wars franchise is being expanded to create serial blockbusters like Marvel.

"Well, we should delay some of this discussion until we render our final grade. All right, let's jump into category. So, as a reminder, Pixar, which was our very first episode on this show, we said it was a business line, and then Lucasfilm, we said, was a product. So what is Marvel?"

The quote sets the stage for a discussion comparing Marvel's role within Disney to that of Pixar and Lucasfilm, indicating different strategic categorizations for each acquisition.

"I'll be really interested to see not how rogue one does, because I think that there's so much pent up demand for Star wars that I want to see how the third or fourth non core Star Wars Story does and if Disney will be successful in kind of creating the sort of serial blockbuster out of Lucasfilm characters the same way they've been able to with Marvel characters."

The quote expresses curiosity about whether Disney can replicate Marvel's success with serialized storytelling in the Star Wars franchise.

• Marvel was likely to be acquired due to industry consolidation.
• Disney's acquisitions reflect a trend of distribution companies acquiring content companies.
• The shift in content creation from original films to franchises and sequels is evident over the past few decades.
• There is speculation about Disney's future acquisitions and the evolution of content creation in the digital age.

"I think Marvel was going to get acquired like we were in an era of consolidation, where distribution was buying content, and I don't know who else it would have been."

The quote reflects on the inevitability of Marvel's acquisition due to the trend of consolidation in the entertainment industry, where distribution companies seek to own content.

"Yeah, exactly. It's like all the major value in the recent stuff, is the platform on which massively democratized IP is created and distributed not actually being content powerhouse?"

The quote discusses the shift in the entertainment industry, where platforms that enable widespread content creation are becoming more valuable than traditional content powerhouses.

• The entertainment industry has seen a significant decrease in original content production in favor of franchises and sequels.
• The rise of television and digital platforms has become the new space for creativity and experimentation.

"Yeah, totally. I've got one that's based on a stat. So of the top ten grossing films in 1981, seven of them were original content...fast forward to 2011...eight sequels, two adaptations, and zero original pieces of content."

This quote highlights the dramatic shift in the film industry from original content to franchises and sequels over the past 30 years, suggesting a change in the sources of creativity and originality within the entertainment sector.

• Marvel and Disney have garnered significant admiration for their success.
• There's an existential risk if the public pushes back against the repetitive nature of sequels and superhero movies.
• The sustainability of superhero movies' popularity is questioned, similar to how fads like leisure suits faded away.
• The key concern is whether the current trend of superhero movies is a long-term cultural shift or a temporary fad.

"I think there is one really key existential risk, and that's if and when the pushback to this dynamic comes from the public."

This quote highlights the potential risk of consumer fatigue with the current trend of superhero movies and their sequels, which could impact Marvel and Disney's success.

• Technological advancements in production and distribution may have contributed to the success of expensive films.
• The capability to create films that resonate with nostalgia and generate significant revenue is linked to technological improvements.
• The cost of producing films is high, but the potential returns are substantial due to global distribution capabilities.

"Maybe the technology got good enough both in distribution and production, where it was possible to spend that much money on making a film and it was possible to earn that much from instant global distribution that we actually are seeing it come to fruition and it was only technology limited before."

This quote suggests that technological advancements have made it feasible to invest large sums in film production and still achieve profitable returns through global distribution.

• Disney takes calculated risks with its investments, especially in expensive film productions.
• Flops in big-budget movies are a concern and can lead to a more cautious approach in future investments.
• The company has had failures, which emphasizes the importance of balancing risks with potential rewards.

"You really can't afford to have too many of those flops."

This quote emphasizes the financial risk associated with producing high-cost films and the need for Disney to manage its investment strategy carefully to avoid significant losses.

• The television format is undergoing innovation and a renaissance, raising the question of whether film will experience a similar transformation.
• Independent films show innovation but lack the mass audience scale that streaming services like Netflix and Amazon provide for television.
• The film industry's ability to innovate at a scale that appeals to mass audiences is uncertain.

"Is there or will there be something similar in the film format?"

This quote questions whether the film industry will see the same level of innovation and risk-taking as the television industry, given the different scales and distribution methods.

• Global distribution has led to a more uniform taste in entertainment, with people gravitating towards widely popular content.
• The phenomenon of shared darlings and heroes is more pronounced in the current era, partly due to the ease and speed of global distribution.
• This trend is evident in both music and movies, with a few individuals or franchises dominating the cultural landscape.

"With global distribution happening so quickly and so cheaply, you have the ability to achieve much more sameness and have much more people agree on what the best thing is."

This quote highlights the impact of global distribution on cultural tastes, leading to a convergence where certain movies, music, or celebrities become universally popular.

• The ability to create and believe in fictions is argued to be a key differentiator for humans, as presented in Yuval Noah Harari's book "Sapiens."
• The concept of fictions extends to the creation and popularity of intellectual property (IP) in the form of major blockbuster franchises.
• The Internet's role in spreading communication instantly and globally has potentially contributed to the consolidation of blockbuster franchises.

"Are we seeing these major blockbuster franchises just continue to consolidate because of the power of these fictions?"

This quote connects the idea of fictions as a human trait to the consolidation of blockbuster franchises, suggesting that our attraction to shared stories and IP may be driving the success of certain films.

• Marvel's box office performance has been stronger than Pixar's, but Pixar's home video sales exceed Marvel's.
• The lasting value of serialized films like Marvel's is compared to the emotional attachment and repeat viewing associated with Pixar films.
• The discussion includes a grading of Disney's acquisitions, with Marvel receiving an A- and Pixar being rated higher due to its sustainable value creation.

"Marvel's home video sales are about 400 million and Pixar's are 1.6 billion."

This quote illustrates the difference in long-term financial performance between Marvel and Pixar, with Pixar's characters and storylines having a more enduring appeal to consumers.

• Technology companies have the potential to create immense value with relatively small teams, as seen with Instagram and Next.
• The profit margins in technology can be significantly higher than in the media industry.
• The discussion highlights the darker side of technology's efficiency, such as the potential for fewer jobs created compared to traditional industries.

"You just can't pull a lever to make the 23% profit margin from these Marvel films into something 1.5 x that."

This quote points out the limitations of the media industry in terms of scalability and profit margin compared to the technology sector, where small inputs can lead to exponential outputs.

• Spectacles have launched, and the public perceives them as cool.
• Snap Inc.'s marketing strategy for Spectacles is praised for its creativity and effectiveness.
• The discussion touches on the anticipation of Snap Inc.'s IPO and the confidence in the company's product and marketing.

"Evan Spiegel is a product marketing genius."

This quote acknowledges the successful marketing strategy employed by Snap Inc.'s CEO, Evan Spiegel, in promoting Spectacles, contributing to the product's initial popularity.

• Hightower, a startup with Seattle roots, merged with VTS in a deal valued at $300 million.
• The merger is likened to the Zillow-Trulia merger and is seen as a significant achievement for the Hightower team.

"It's a reported, estimated 300 million dollar merger with their competitor."

This quote reports the valuation of the merger between Hightower and VTS, which is a notable event in the startup community, especially for those with connections to Seattle.

• Overdrive is an app that allows users to borrow ebooks and audiobooks from local libraries.
• Westworld is an HBO show recommended for its high production value and exploration of AI and robotics themes.

"Super cool app called Overdrive, which is a way to digitally through an app and through your Kindle, connect with your local library and borrow ebooks and audiobooks from your local library and then read them on your Kindle or on your smartphone and listen to the audiobooks for free with your library membership."

This quote describes the functionality of the Overdrive app, highlighting its utility in accessing digital books through public libraries at no cost.