Case Study #20: The Walt Disney Company Makes A Hero-Sized Investment in a Brand Built by Superheroes

On August 31st, 2009, The Walt Disney Company announces that it will acquire Marvel Entertainment, Inc. in a stock and cash transaction. Under the terms of the agreement and based on the closing price of Disney on August 28, 2009, Marvel shareholders will receive a total of $30 per share in cash plus approximately 0.745 Disney shares for each Marvel share they own. Based on the closing price of Disney stock on Friday, August 28, the transaction value is $50 per Marvel share or approximately $4 billion. Under the deal, Disney will acquire ownership of Marvel including its more than 5,000 Marvel characters.

Disney has four business segments: media networks, parks and resorts, studio entertainment and consumer products. Several brands exist within each of these business segments. Marvel Entertainment, Inc. can be successfully and creatively integrated into all four business segments. However, the cost of acquisition is expensive given the latest 2009 3Q financial performance metrics:

• Revenue for 2009 3Q is $8,596 billion (7% less than 2008 3Q). Segment operating income for 2009 3Q is $1,849 billion (20% less than 2008 3Q).
• Every business segment shows a decline in revenue and operating income from 2008 3Q. The decline is lowest for media networks and parks and resorts. And it is the highest for consumer products, interactive media and studio entertainment.
• As of June 27, 2009, Disney has a free cash flow of $2,199 billion (nine months ending), significant lower than its free cash flow during the same time in 2008 ($3,252 billion).

An investment of this magnitude must show a significant return in the near-to-long term for Disney to improve its profit and cash positions. According to the “Disney to Buy Marvel for $4 Billion” article in Businessweek, Disney acquires Marvel to “sell to teen boys, which has remained a lingering weakness for the company that sells tons of Hannah Montana clothes to preteen girls and Mickey and Minnie toys to younger children”. I strongly believe that Disney’s brand is powerful enough to generate positive associations from the teenage male segment, but there are opportunities to be more “stratelytical” with this approach.



The teenage male is more complex than the portrayal of Stifler in the first American Pie movie. There are various social, political, economic, technological and environmental factors that affect how teenage males interact with brands today versus ten or fifteen years ago.


This becomes more challenging for Disney as it has to make Marvel, a relatively established brand, relevant and appealing for today's teenage males.

Marvel starts toward the tail-end of the Great Depression and grows rapidly during the remainder of the 1930s and 1940s. The industry suffers a setback in the 1950s, but grows stronger in the 1960s as a new crop of popular characters appeal to the children of the baby boom. After another slump in the 1970s, Marvel rebounds in the 1980s, growing even larger and more popular. The company begins to diversify in the 1990s, as it seeks to reap full value from its stable of superheroes through licensing arrangements and other media outlets. Marvel counts among its characters such well-known properties as Spider-Man, the Fantastic Four, the Incredible Hulk, Thor, Iron Man, Captain America, the X-Men (notably Wolverine), and others. Most of Marvel's fictional characters operate in one single reality known as the Marvel Universe (Source of history: www.fundinguniverse.com)



Marvel achieves success during a time of economic recovery and post war boom. This makes sense as young adults growing up in that period seek inspiration and empowerment through creative, fictional representations of hope. Fast forward over sixty years later and Disney buys Marvel during the anemic recovery of the worst recession since the Great Depression. This is rather ironic. Before the integration team really huddles up to re-size and re-forecast the teenage male target market, it is imperative to start with secondary and primary qualitative research that addresses the following issues:

• Social, political, economic, technological and environmental concerns
• Current and future aspirations
• Core values and principles
• Importance of network (family, friends, peers, teachers, coaches)
• Engagement in after school activities
• Engagement in weekend activities
• Absorption of messages from multi-channel touchpoints
• Interactions with brands

This will provide the foundation of a target customer segmentation model. A significant sample presenting each of the segments can be tested via quantitative methods to understand brand relevance and purchase funnel factors. A conjoint study supplemented with a “superhero build” activity at a lab can be deployed later to help support animation, design and product experts who update existing Marvel characters. This activity may help create other Marvel characters that can be owned by Disney and licensed to other media outlets for an incremental stream of revenue.

There is an extensive amount of diligence that is done before a business arrangement is announced by a company, but a $4 billion dollar investment will pay off when the operational units are aligned to execute customer-facing tactics that not only build the acquired brand, but make it relevant and appealing to its stakeholders. This first requires resource allocation in market research and customer segmentation activities to refine volume and revenue forecasts.