The Hulk and 4,999 Other Characters for $4 Billion

(By: NY Times)

In a deal that redraws Hollywood’s architecture, the Walt Disney Company said on Monday that it would acquire Spider-Man and his Marvel Entertainment cohort for $4 billion.

The Incredible Hulk and Iron Man, two of Marvel Comics’ stable of characters, loom over attendees at the Comic-Con 2008 convention in San Diego.

Disney will pay about 60 percent cash and 40 percent stock to acquire Marvel, the comic book giant whose stable of 5,000 characters includes some of the world’s best-known superheroes: Iron Man, the X-Men, the Fantastic Four, Captain America and Thor.

Marvel has aggressively exploited its most popular characters through motion pictures, video games and consumer products. But Disney sees an opportunity to plug Marvel into its vaunted marketing and distribution system.

Almost immediately, for instance, Marvel characters will pop up at Disney’s theme parks in Paris, Hong Kong and Orlando, Fla. Disney’s cable television channels will showcase Marvel, while consumer products could be an enormous area of growth, particularly overseas where the comics company has struggled to make inroads.

“Marvel’s brand and its treasure trove of content will now benefit from our extraordinary reach,” Robert A. Iger, Disney’s chief executive, said in an interview. “We paid a price that reflects the value they’ve created and the value we can create as one company. It’s a full price, but a fair price.”

The surprise acquisition points to the film industry’s biggest issue at the moment: access to capital. Those who have it are finding opportunity; those who do not may be left behind.

Marvel had tried to finance its films with the help of $525 million in slate financing, but found it impossible on “Iron Man” and “Hulk” to meet a condition that required it to raise a third of its cash by selling overseas distribution rights. To get around the requirement, Marvel told investors in May that it would self-finance a third of each film — something that would be much easier with Disney’s muscle behind it.

The deal instantly makes Disney a partner with Paramount Pictures, Sony Pictures Entertainment and 20th Century Fox, all of which have long-term deals to make or distribute movies based on Marvel characters. Coming are new entries in Sony’s “Spider-Man” franchise and Fox’s “X-Men” series.

Over the long haul, Paramount has the most to lose, as Disney works Marvel into its system. Only last September, Paramount, a unit of Viacom, announced an agreement to distribute five Marvel films, including two “Iron Man” sequels, over several years.

Disney said it would honor Marvel’s studio contracts, but the goal was clearly to bring “Iron Man” and others in-house over time.

“We believe Viacom is unlikely to retain distribution rights to Marvel films after the agreement,” Michael C. Morris, a UBS analyst, wrote in a research note.

A Paramount’s spokeswoman had no immediate comment, other than to point toward Mr. Iger’s assurances that he would honor its terms. A spokesman for Fox did not immediately respond to a query. A Sony spokesman said, “Our deal is not affected.”

Marvel’s traditionally strong contractual position on its various projects will probably give Disney considerable ability to affect progress on and timing of various films, creating a potential headaches for studios for years to come; rivals will be trying to build schedules around movies on which Disney now has input.

As Disney’s own live-action film schedule becomes more robust, the studio may find its new partnerships and agendas bumping into each other. Only last month, Disney’s new partners from DreamWorks found themselves assuring the company that plans to develop a film based on Michael Crichton’s novel “Pirate Latitudes” would steer clear of any conflict with Disney’s plans for a fourth “Pirates of the Caribbean” movie.

Marvel’s intellectual property tends to be more popular with boys — an area where Disney could use help. While the likes of “Hannah Montana” and the blockbuster Princesses merchandising line have solidified Disney’s hold on little girls, franchises for boys have been harder to come by.

Disney XD, a new cable channel aimed at boys, already licenses 20 hours of programming a week from Marvel. As Disney seeks to expand that channel, particularly overseas, Marvel will play an even greater role.

The acquisition, which has been approved by the boards of both companies but still must be approved by Marvel shareholders, got mixed marks on Wall Street. While most analysts applauded the move as bold and strategically sound, some analysts questioned the price as too steep. Disney shares fell 3 percent in afternoon trading. Marvel shares were up 25 percent.

One question is whether Marvel’s lesser-known characters can be developed into blockbusters — à la Iron Man — and how much movie muscle the library’s most valuable assets — like Spider-Man and the X-Men — have left. The declining DVD market is also a concern.

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