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Disney Acquires Marvel

Mickey Mouse, meet Spider-Man.

Walt Disney's $4 billion acquisition of Marvel Entertainment, the biggest in the media market this year, creates an eclectic stable of Iron Man, Mickey Mouse, Wall-E and Spider-Man at a time when the media industry is coping with cutbacks by advertisers and consumers.

But Disney CEO Robert Iger sees the union of superheroes, villains and lovable characters as a golden opportunity for the Magic Kingdom to aggressively expand its audience - especially males - through movies, TV, the Internet, comic books and other merchandise.

Under the deal, announced Monday and expected to close by the end of the year, Disney will acquire the rights to 5,000 Marvel characters. "It gives us a treasure trove of content," Iger said.

Disney approached Marvel a few months ago "to get to know them," Disney Chief Financial Officer Tom Staggs said. Discussions quickly escalated into acquisition talks between Iger and Marvel CEO Ike Perlmutter, Staggs said.

Marvel shares soared 25% to $48.37 in trading Monday. Disney shares slipped 3% to $26.04.

The accord is "doubly smart" for Disney because it picks up world-class intellectual property and eliminates one of its chief rivals, says Michael Uslan, executive producer of The Dark Knight and a comic book historian.

"It's the greatest thing that could happen to both companies," said comics icon Stan Lee, who co-created Spider-Man, the Fantastic Four, the Incredible Hulk and scores of other do-gooders. "For Disney to now have the entire catalog of Marvel characters is a dream come true."

The deal doesn't come without challenges. Declines in ad spending and DVD sales, coupled with rising production costs, have forced movie and TV studios to shed thousands of jobs the past two years. "Iger has generally done a good job in meeting the economic challenges," says Harold Vogel, an independent media analyst. "People will closely watch this deal, but it doesn't put him under the same type of pressure as the Pixar deal."

Iger says the deal will benefit Disney in many of the ways its $7.4 billion acquisition of Pixar Animation Studios in 2006 did. The studio, co-founded by Steve Jobs, has created the critically and commercially successful Toy Story, Wall-E and Up.

"The case of Pixar was a crying need for us to strengthen our animation," Iger said in a phone interview. "The acquisition of Marvel offers us an opportunity to distribute a complementary set of characters" via movies, TV and the Internet.

The agreement raises the reach of Marvel via Disney's massive global distribution network and its relationships with retailers. Disney generated $30 billion in worldwide retail sales last year, from which Disney earns licensing fees.

Another aim of the deal is to help Disney appeal to young men who have flocked to theaters in recent years to see Marvel superheroes such as Iron Man and X-Men on the big screen. Among young women, Disney's recent successes have come through light-hearted fare such as High School Musical, Hannah Montana and the Jonas Brothers, says Michael Morris, an analyst at UBS Securities.

Disney has already taken steps. This year, it rebranded cable network Toon Disney into the boy-focused Disney XD. Marvel television shows already account for 20 hours per week of programming on XD, and that is likely to increase, Iger said.

Besides bolstering Disney's standing among young males, the deal could help its movie, amusement park and merchandising properties:

Movies. @Marvel produced its first movie, Iron Man, last year. It has several deals with other studios that Disney said it will honor and re-examine upon expiration. Spider-Man 4, for example, is being made with Sony's Columbia Pictures. It is set for release in 2011. Iron Man 2, made by Marvel, will be distributed by Viacom's Paramount Pictures next year. And X-Men Origins: Wolverine 2, due in 2011, will be made and distributed by News Corp.'s 20th Century Fox. Pixar also had third-party licensing agreements that eventually expired, letting it and Disney move forward together.

Marvel earned $206 million in its last fiscal year, up 47% from a year earlier, on revenue of $676 million. It is scheduled to produce and release two movies a year, starting in 2011.

With so many Marvel characters, Disney will be tempted to find another hit franchise, analysts say. "It is possible for Disney to break out other characters, as Iron Man did on screens last year," Morris says. "It is a matter of choosing the right characters, the right story, and what you do with them."

Amusement parks.@ John Frost, who runs thedisneyblog.com, which focuses on theme parks, expects to eventually see Marvel characters at the Disney theme parks - but not at the main Disneyland in Anaheim, Calif., or Disney World's Magic Kingdom in Orlando.

"I don't think we'll see Spider-Man or Thor walking down (Disney's) Main Street, U.S.A.," he says. "Disney won't confuse any of their original animated characters with ones they acquired."

Marvel characters are currently licensed in Florida to Disney's theme park competitor, Universal (but not to Universal Hollywood), where attractions based on Marvel's Spider-Man, the Incredible Hulk and Doctor Doom are currently in operation.

Disney now has four theme parks in Orlando: Disney World's Magic Kingdom, Epcot, Hollywood Studios and Animal Kingdom. Frost could envision Disney opening a fifth, with Marvel characters, once the deal with Universal expires. "They could take some of the great Marvel villains," he says.

Toys. @ Marvel and Disney together account for billions of dollars in toy-related merchandise annually. That creates a powerful revenue stream for Disney among males, says Reyne Rice, trend analyst @for the non-profit Toy Industry Association, which represents more than 500 companies in the $21.6 billion domestic toy industry.

"There is a huge following among not just boys, but teens and older male collectors of Marvel comics, action figures and trading cards," Rice says.

Two icons united

Like a classic Marvel team-up of superheroes, the merger pairs two American media icons: Walt Disney and Lee.

"Stan Lee has proven himself to be a creative genius on the same level as Walt Disney. Certainly, one can argue that Spider-Man is just as important as Mickey Mouse," says Stephen Fishler, founder of Metropolis Collectibles&ComicConnect, the world's largest dealer of vintage comics.

In a phone interview, Lee called the deal "a perfect marriage." He now is Marvel chairman emeritus and founder of POW! Entertainment. Lee, 86, recalled his early days at Marvel Comics - then called Timely Comics - in the 1940s. "In those days, I never thought anything like this would be possible. All I hoped was that the comic books would sell, I'd keep my job and I'd be able to pay the rent."

Lee never met Walt Disney ("one of the regrets of my life") but says he was 12 when he got a copy of one of the first coffee-table books, The Art of Walt Disney. "To me, the Disney studio was the greatest entity in the world," Lee says. POW! Entertainment has development deals with Disney.

Iger dismissed any concerns that Disney would put its wholesome imprint on Marvel's darkly shaded characters. "It's not about putting the Disney name on those characters," he says. "Our general desire is to create high-quality content. That is what this deal shares with the Pixar deal."

Marvel Editor-in-Chief Joe Quesada took to Twitter on Monday to reassure fans. "Everyone relax, this is incredible news and all is well at Marvel U," he tweeted. "Everybody take a deep breath, all your favorite comics remain unchanged. If you're familiar with the Disney/Pixar relationship, then you'll understand why this is a new dawn for Marvel and the comics industry."

Lee agreed. "Knowing the people at Disney and Marvel as well as I do, I can't see any issues at all."

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