Movie giant Disney’s acquisiti

Movie giant Disney’s acquisition of Marvel proves analysts wrong, but problems may lie ahead.

Summer means one thing in Hollywood: big, blockbuster movies. But in 2012 a single superhero film ‘ka-powed’ all others with $1.5 bn (€1.12 bn, £0.9 bn) global ticket sales, becoming the third-highest grossing title of all time. The Avengers, from Disney’s Marvel unit, stormed the box office, bringing Iron Man, The Incredible Hulk and Thor together. Its success largely overturned analysts’ criticisms of Disney’s 2009 $4 bn purchase of Marvel, as overpayment. On paper, the acquisition looked a perfect fit. Disney was rethinking its entire approach to film making in response to a contracting home entertainment market and falling DVD sales as every studio in Hollywood was under pressure to cut costs. Ready to move to a franchise-led strategy, producing films and brands that could generate sequels and spin-offs, Disney acquired Pixar in 2006, and then Marvel, a brand that could deliver movies with stories that appealed to teenage boys – a demographic Disney found elusive. The acquisition was not only about movies. Disney planned to use Marvel’s vast library of superhero characters throughout its business, from theme parks to television shows and consumer products, adding Incredible Hulk underpants and Iron Man lunch boxes to Disney’s staple inventory of Mickey Mouse merchandise. In addition the deal retained Marvel’s CEO, Isaac ‘Ike’ Perlmutter. His hard-driving approach to gain a ‘big bang for each buck’ appealed to Disney: ‘Marvel could make a great-looking movie for a fraction of the price of a Jerry Bruckheimer ( Pirates of the Caribbean producer) movie.’

However, the deal also added dramatic tension to the family-orientated company based in Burbank, California – largely, it appears, because of Ike’s management style. As Marvel’s largest shareholder before Disney, he took much of his $1.5 bn payment in Disney shares, giving him a seat at the decision-making table. Since then he has become a force within Disney. He is a skilled cost cutter and has been described as obsessive about saving money. ‘He used to do this thing in our office that people would laugh at. If there was some used paper lying around he would rip it into eight pieces and would have a new memo pad.’ But Ike’s strong opinions and cost-cutting capabilities often put him at odds with colleagues. His interest in merchandising and toy licensing has shaken things up throughout Disney’s consumer products division (DCP) – one of Disney’s smaller divisions but accounting for 10 per cent of all group profits (2011). The head of DCP had repeated conflicts with Ike over the direction of the division and left in 2012 along with the heads of communications, publishing, HR, Disney stores, and the toys business. Three female executives hired a lawyer to seek individual financial settlements and another filed an internal complaint alleging Ike threatened her. DCP has now been reorganised around Disney’s big TV and film franchises rather than individual product categories.

The box office and commercial successes Marvel has produced for Disney have won Ike admirers inside and outside the group. With sequels to Thor, Captain America and The Avengers in the works, analysts are speaking about the upside of the deal. But some former Disney employees warn of culture collisions ahead: ‘You would think that Disney, with all its heritage and culture, would prevail, but the common question in the hallways [at DCP] was: remind me who bought who here?’

Questions

1 Why did Disney acquire Marvel?

2 Critically assess how well these companies fit together in (i) strategic and (ii) organisational terms.

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