The Big Deal: Marvel is Disney’s new family brand

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Any doubts about Bob Iger’s willingness to belly up to the table and roll the dice were blown away by today’s surprise announcement that Disney spent $4 billion to acquire the comic-book giant Marvel Entertainment. The deal gives Disney access to Marvel’s voluminous library of super heroes, which include Spider-Man, Iron Man, the X-Men, Captain America, Thor and the Fantastic Four and about 4,995 other comic-book characters.

But Disney isn’t just buying into the Marvel business. It’s reinventing its future, which has become increasingly cloudy as family entertainment, especially in the movie end of the business, has been inexorably evolving from old-fashioned squeaky-clean Disney fare to the edgier, more unsettling PG-13 universe populated by Marvel’s potent arsenal of comic superheroes.

The Marvel purchase, like the $7.4-billion deal Iger negotiated in 2006 to bring Pixar into the Disney fold, is another sign that Disney’s top brass realizes that the company’s reign as an original creative engine for mass entertainment is over. Once an idea factory full of brilliant animators and imagineers, Disney is now a mass merchandising machine in search of exploitable product, whether it comes from Marvel, Pixar or DreamWorks, which will be releasing its upcoming slate through Disney as well.

The signals of Disney distress have all been visible for some time. The Pixar deal was a frank admission that Disney’s venerable animation factory had run out of gas. Not long after Disney bought Pixar, John Lasseter gave an especially revealing interview to Fortune magazine, where he told of Iger experiencing a remarkable epiphany when attending an opening-day parade at the ceremonial launch of Hong Kong Disneyland. As Lasseter recalled: ‘[Bob] was watching all the classic Disney characters go by, and it hit him that there was not one character that Disney had created in the past ten years. Not one. All the new characters were invented by Pixar.’

Iger clearly had a similar moment of brutal corporate clarity when he made an unusually frank admission to media analysts this year when attempting to explain why Disney had such an abysmal quarter with its theatrical releases when the other studios were enjoying near-record box-office returns. ‘It’s about choice of films and the execution of the films that have been chosen for production,’ Iger confessed. ‘We’ve had a rough year. So in that case, it’s not the marketplace. It’s our slate.’

While Pixar is now around to bolster the animation side of the business, the live-action end has been in the doldrums. In fact, since the studio’s lucrative ‘Pirates of the Caribbean’ series premiered in 2003, Disney hasn’t been able to launch another broad-appeal international franchise. That would be a huge gaping wound for any studio but especially for Disney, which needs new mass appeal product to feed its real profit centers -- its merchandising division, theme parks and TV channel.

What went wrong? And can Disney fix it? Keep reading:

The studio’s biggest failures in the past year showed Disney’s inability to reach the new family audience that has supplanted Disney’s traditional customers. Last Christmas, Disney thought it had a big winner with ‘Bedtime Stories,’ which attempted to broaden the studio’s traditional family brand by marrying a kid-friendly concept to the young male appeal of Adam Sandler. The studio tried a similar strategy recently with ‘G Force,’ another kid-friendly computer-animated/live-action film produced by Jerry Bruckheimer in a bid to connect Bruckheimer’s broader-edged brand to the traditional Disney animated audience.

Despite spending millions in TV advertising reaching out to the older-skewing (Disney-owned) ESPN sports audience, the movie failed to reach an older audience. As with ‘Bedtime Stories,’ Disney found itself unable to age up its films.

Iger goes to the movies, so he must have realized what was happening. The sweet-natured vibe of older Disney films is losing its appeal. In recent years, parents have become comfortable with a new, more intense level of violence and action. And of course, it is Marvel more than any other film producer that has tapped into that new sensibility with its ‘Spider-Man,’ ‘Iron Man’ and ‘X-Men’ franchises.

‘The real difference maker with Marvel,’ says one rival studio chief, ‘is that it makes movies where the parents are just as excited to see the film as their kids. That’s the difference between a movie barely making $100 million -- like a lot of Disney’s homegrown products -- and a movie making $300 or $400 million. It’s a whole different playing field.’

The purchase of Marvel allows Disney to broaden its brand. It can now be the studio that encompasses every niche of family entertainment, from ‘High School Musical’ to ‘Pirates of the Caribbean’ to ‘Toy Story’ to ‘Spider-Man.’ For years, everyone has tried to take all of the risk out of the movie business. For Disney, this latest purchase is a way to take all of the unbranded -- meaning risky, obscure or experimental -- material out of its wheelhouse. The studio is now a giant collection of familiar, easily accessible brands -- Marvel, Pixar, Spielberg and Bruckheimer -- all under one large, even more familiar umbrella brand: Disney. It is a media conglomerate that will probably someday look a lot more like Procter & Gamble than a movie studio.

Change doesn’t happen overnight. While Disney won’t get to distribute Marvel’s movies until 2013 (when Marvel’s distribution deal with Paramount comes to an end after Paramount releases an ‘Iron Man’ sequel in 2010, ‘Thor’ and ‘First Avenger: Captain America’ in 2011 and ‘The Avengers’ in 2012), it will enjoy most of the proceeds from those films. And Disney will immediately start tapping into the merchandising revenues from those releases as it figures out how to exploit the titles via its other businesses.

But what the Marvel deal really means is that Disney is radically restructuring its creative aspirations. Once a company that drew inspiration from within, it is now paying top dollar to buy mature businesses -- first Pixar and now Marvel -- to feed its merchandising assembly lines. It will be years before anyone can say whether Disney overpaid for access to all this outside creative energy. Let’s just say that once it was on the open market, Marvel was clearly worth more to Disney than it was to Fox, Sony, Viacom or any other possible suitors.

There will be plenty of bumps in the road, since Disney will eventually have to make room in its movie-release calendar for an increasingly wide range of product and brands, including Pixar, Bruckheimer, Marvel and DreamWorks. Iger and his studio lieutenant Dick Cook will have to referee all sorts of release-date disputes as well as prickly creative autonomy issues.

But with one bold move, Disney has accepted an uncomfortable reality, that the foundation of the family entertainment business has shifted under its feet. If the studio wants to stay at the front of the pack, it will have to change with the times. In many ways, Marvel is the modern-era version of Disney, the repository of adolescent dreams and fantasies that has helped shape today’s pop culture. It will be Disney’s challenge not just to absorb all of Marvel’s unruly superheroes but to understand why they have as strong of a hold on today’s young audiences as any of Disney’s own creations.