Episode 26: Marvel

[0] All right, listeners, to start the show today, we are going to play a little game of two truths and a lie.

[1] Today's episode will be covering the Marvel Acquisition by Disney, and we are going to throw out the two truths and a lie right now, and we will tell you which one is a lie at the end of acquisition history and facts.

[2] So get ready to predict.

[3] Number one, for a brief stretch ending in an internal Time Warner investigation, the president of DC Comics acquired a large position.

[4] in Marvel stock.

[5] Number two, famed corporate raider and comic book villain Carl Icahn once made a play to gain control of Marvel from bankruptcy.

[6] Number three, Marvel owned Fleer, the baseball card company, and was affected in a huge way by the 1994 Major League Baseball Strike, which is the lie, you be the judge.

[7] is it you?

[8] Is it you?

[9] Is it you?

[10] Sit me down.

[11] Say it straight.

[12] Another story.

[13] Welcome back to episode 26 of Acquired, the podcast about technology acquisitions.

[14] I'm Ben Gilbert.

[15] I'm David Resenthal.

[16] And we are your hosts.

[17] Today's episode is Disney's 2009 acquisition of Marvel.

[18] It really completes the saga for us here at Acquired, where our first episode was the Disney acquisition of Pixar, then our sixth episode was Disney's acquisition of Lucasfilm.

[19] And all three of these, I believe, will have pretty similar tech themes.

[20] And David, I think, will really be able to kind of understand Disney's strategy and what their portfolio looks like these days.

[21] Yeah, this is, I feel like I always say this, but this will be a fun one.

[22] Yeah, no kidding.

[23] And kind of a fun one here going into the holidays.

[24] It's a nice one to tie up the year.

[25] Totally.

[26] And speaking of, Disney's triumvirate of IP acquisitions.

[27] I am pretty excited about Rogue One.

[28] Yeah, I thought you'd bring that up.

[29] So I rewatch the trailer right before we started recording.

[30] Awesome.

[31] Awesome.

[32] I can't wait.

[33] Yeah, I mean neither.

[34] For listeners who, if you're wondering, I'm not sure if it actually will sound any different, but this is the first time David and I are recording remotely.

[35] David's in California right now.

[36] In the heart of Silicon Valley.

[37] Indeed.

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[53] and when you get in touch, just tell them Ben and David sent you.

[54] Thanks, service now.

[55] All right, well, we don't really have too much before the show.

[56] Do you want to just dive right in?

[57] Yeah, let's jump in.

[58] So this, I can't remember we've done so many of these episodes now, but this might be the earliest back in time that we're starting our acquisition history and facts.

[59] Oh, yeah, I think so.

[60] Yeah, I think it is.

[61] We are going back to 1939, almost.

[62] what is that, almost 80 years ago, when a fellow named Martin Goodman founded a company that he called Timely Publications in New York City, very timely.

[63] Goodman was a pulp magazine publisher and he wanted to get on the gravy train of the fast, burgeoning comic book industry that was starting to take off.

[64] And so he started timely publications as part of his publishing empire.

[65] And the first comic book that timely published was called Marvel Comics No. 1, which came out in October 1939.

[66] And it included the Human Torch and the Submariner, which would be Marvel comic book heroes for a long time to come.

[67] Yeah, the Submariner is a little.

[68] a little bit more of a deep one.

[69] Yeah, that's, that's, that's, I see what you're doing there.

[70] It's, it's, it's pretty cool that it's, uh, that the very first issue was called Marvel comics.

[71] Yeah, I think that, you know, through a, uh, you know, the, uh, crazy history that we're about to hear of, of, uh, all sorts of different ownership structures and consolidations and unbundling and re bundling keeps the same name.

[72] Yeah.

[73] Well, uh, interesting though, they didn't actually change the name of the company to, uh, Marvel Comics until 1961, so 22 years later.

[74] But the very first comic book that they published was called Marvel Comics.

[75] And apparently it was a big success.

[76] It sold almost a million copies, which I think is a lot for a comic book, probably especially a lot for a comic book in 1939.

[77] But the company, timely, would go on to do quite well.

[78] create many of the iconic comic book superheroes and villains that we all know and think of today.

[79] Captain America was the first really big one that they created in 1941, which was, well, I guess World War II was going on at that point in time, but the U .S. either hadn't entered yet or was just about to enter World War II.

[80] The Fantastic Four, Spider -Man, the X -Men, Iron Man, Thor, the whole, many, many others.

[81] There's lots of, basically, as a, I love superheroes, but I'm not a huge comic book aficionado.

[82] So as a, like, casual comic book fan, like, everybody I know kind of except Superman and Batman came from Marvel.

[83] And who got like Wonder Woman?

[84] Yeah, Wonder Woman, too.

[85] Yep.

[86] That was also DC Comics.

[87] it's pretty much the whole crew yeah it's like DC had you know the big Superman Batman Wonder Woman and then everything else is Marvel and so they they go on they create many of these many of these characters and then in 1961 like we said they actually changed the name of the company to Marvel Comics also in 1961 the editor of Marvel who was a man named Stan Lee, who actually started at the company as an office assistant.

[88] He was apparently Martin Goodman's wife's cousin and started at the company in the early days as an office assistant and became sort of the spiritual head of the direction of Marble and the comics.

[89] And very briefly, actually, the president of the studio, right?

[90] Yep, yep.

[91] It's like one, one or two years in there?

[92] Yeah.

[93] A towering figure in Marvel history, he decides to kind of push the company in a new direction in 1961.

[94] And that was to make comics that were aimed at slightly older audiences, so not just young children.

[95] And that was, the first of those was the Fantastic Four, which they launched in November 1961 and was the first time that comic book heroes were sort of you know they'd always been like the Superman sort of like perfect image of uh you know masculinity often and and uh um you know heroism and the fantastic four were sort of like they'd squabble with each other and they were kind of you know anti heroes in a way right more human more much more you know even though they had superhuman power is much more human than the Superman of the DC franchise and that really kind of set the tone and Marvel became much more it really sort of expanded the market for what they were doing and what comic books as a whole as an industry was and that was their namesake and so Spider -Man was sort of like the quintessential like teenage angsty you know Teenage, angsty superhero.

[96] Did we ever see that in Spider -Man 2?

[97] Oh, man, yeah.

[98] The Sam Ramey one with Toby McGuire.

[99] That was like, I should remember that one scene where he's like emo.

[100] He's got his hair dyed black and it's like over one eye and he's, yeah, just like almost felt like jumping the shark already, even though I didn't really think it jumped the shark till Spider -Man 3, but.

[101] Yeah, totally.

[102] He was ahead of his time.

[103] so that's a big success for Marvel and then and then later in the 60s in 1968 the first Marvel acquisition change of control happens when Goodman decides to sell out and he sells the company to the perfect film and chemical corporation which was later renamed Cadence Industries and Marvel then became one of their subsidiaries or underneath one of their subsidiaries called the magazine management company very uh very generic yeah very generic um honestly when i was reading through some of this it felt like a laundry list of incredibly generic conglomerate names well i guess that's the thing when you're looking at a company that goes back like almost 80 years right um and uh in a in a fun uh twist of foreshadowing uh in the 1970s when when marvel's owned by um by cadence uh they actually strike a licensing deal with Lucasfilm and they published the Star Wars comic books in the 70s and 80s.

[104] Wow, that's wild.

[105] Because to me, like, we've got a trilogy going on here.

[106] And Pixar was actually owned by Lucasfilm in the early days.

[107] And Lucasfilm and Marvel had a licensing agreement in the early days.

[108] And it's like, it's kind of amazing they all ended up under one roof and had this kind of joined history along the way.

[109] Yeah.

[110] If only Steve Jobs were somehow involved, that should have been a lie.

[111] That's right.

[112] That would have been fun.

[113] So listeners, you know that Steve Jobs was not involved in Marvel.

[114] And so in 1986, Marvel changes hands again, and Cadence sells the company to New World Entertainment, the media company.

[115] And then New World undergoes some struggles and ends up selling it again shortly later to the billionaire Ronald Perlman.

[116] in 1989 for 82 and a half million.

[117] And in another fun bit of foreshadowing of what's to come, Perlman gives a quote at the time.

[118] He says, it being Marvel, is a quote, mini Disney in terms of intellectual property.

[119] Disney's got much more highly recognized characters and softer characters, whereas our characters are termed action heroes.

[120] But at Marvel, we are now in the business of the creation and marketing of characters.

[121] Boy, does that sound familiar.

[122] Sounds super familiar.

[123] So, Perlman's pretty ambitious, and he shortly thereafter actually ends up taking Marvel public, and it becomes a public company, and then he starts expanding.

[124] And so he took it public in 1991, and then in 1992, they actually buy the sports trading card company Fleer in 1992.

[125] And then in 1993, Marvel acquires slightly less than half of a company called Toy Biz, which was a toy company that they also had a licensing deal with to create action figures for all the Marvel superheroes and villains.

[126] And that comes...

[127] It's really interesting.

[128] They keep vertically integrating and then unbundling and vertically integrating and then unbundling.

[129] And it's interesting how like they kind of fluidly move throughout partnerships and ownership of, you know, their core asset being the characters and then moving in out of publishing and distribution and merchandising and all those different...

[130] adjacent or in the case of baseball cards, not so adjacent businesses.

[131] Yeah, I would love to see the prospectus on that, on that picture.

[132] up.

[133] Yeah, what the rationale.

[134] Well, and that was in the middle of the baseball card bubble, which we will come back to again in one sec. But toy biz also will be important in the future.

[135] So they don't buy all of toy biz.

[136] They just buy a slightly less than half a share of the company.

[137] And so things go along and then a couple of years later in kind of 95, 96 timeframe, things aren't looking so good for Marvel.

[138] So they've expanded a lot.

[139] The core comic book business, Actually, there was a big bubble in comic books in the mid -90s, which, doing the research for the show, I kind of like vaguely remembered.

[140] But even more so in 1994, Major League Baseball went on strike.

[141] And this was like a huge thing.

[142] And, you know, people thought this was that, you know, the death of baseball, but it, and it wasn't happily for baseball, but it was definitely the beginning of the death of the baseball card industry.

[143] And Fleer, Fleer suffered huge losses when, when this happened.

[144] Yeah, I mean, I remember that was the, so I'm an Indians fan grew up in Cleveland.

[145] That was the first year Jacob's Field was open and they didn't get a full season in there.

[146] Oh, wow.

[147] I didn't realize that, man, yeah.

[148] I remember that strike so vivid.

[149] And wasn't, I remember, you know, and obviously being, you know, a Seattle podcast, I was a huge, even though I didn't live in Seattle at the time, huge Ken Griffey Jr. fan.

[150] and I think I remember he was on pace to like shatter the home run record that year and then the strike was that's right by the strike yeah I'm pretty sure you're right because I think I remember that the Indians were really good too and we were in the world series the next year and sort of growing up I was thought like well it's weird that like the Indians had this new ballpark in 94 and I think we actually played 95 in the ALCS or the division series is when we played the Mariners, and Griffey was obviously instrumental in that.

[151] But I remember thinking, like, how did we have a new ballpark in 94, but get into the World Series in 95?

[152] And it didn't really occur to me until I was later, you know, like, later in the 90s, like, oh, duh, there was no playoffs in 94.

[153] Yeah.

[154] Like, can you, can you imagine, like, if that happened with the NFL now, like, oh, yeah, there's no Super Bowl.

[155] Yeah, totally.

[156] It was, it was terrible.

[157] And, like, I was such a huge baseball fan growing up.

[158] and it was it was really a black mark on the on the sport um yeah so uh marvel's not doing so good uh people are speculating you know the company's in trouble maybe it'll end up filing for bankruptcy uh do you know why there was a comic book bubble like what were the other than the whole like fleer thing what were the externalities creating the struggle for marvel i don't know um i didn't do enough research on this i wonder if it was related to just the whole you know, the baseball card bubble, which is probably even bigger of a bubble.

[159] I mean, I was a huge baseball card collector, as were so many of my friends at that point in time.

[160] And still in my parents' basement, have boxes and boxes full of baseball cards that are now worthless.

[161] Yep, me too.

[162] The market just got flooded.

[163] And I wonder if a similar dynamic was playing out in the comic book industry.

[164] I can see that.

[165] Yeah.

[166] So there's all this speculation about the future of Marvel.

[167] and comic book villain, as Ben referred to him in the intro, Carl Eichen takes notice and he and his firm start buying up some of the debt that Marvel had with public company, even with private companies.

[168] If you have debt that often trades, other people, not the people who loaned you the money, can then sell the debt to other people.

[169] And folks like Carl Lichen, this was, this is a big part of their playbook, is they buy debt in companies that they think are troubled.

[170] And with the hopes that they're hoping that the company ends up filing for bankruptcy, and then in court, as debtors, they can end up taking control of the company.

[171] The not so charitable term for this in the industry is loan to own.

[172] Or comic book villain.

[173] Yeah, or being a comic book villain.

[174] So this all starts playing out in the press And then at the end of 1996 in December Marvel does end up filing for bankruptcy And so this all goes to court And in early 1997 The court rules that Carl Eichen can indeed Take control of the company and he does So Carl Eichen, comic book villain Is now head of Marvel It's honestly sounds like a Lex Luthor move.

[175] It totally does.

[176] The only thing that would make this better is if Carl E .K. And we're also CEO of D .C. comics.

[177] That's true.

[178] But alas, this is probably a good time to, our listeners are, I'm sure they figured out by now.

[179] Carl Eichon is true.

[180] The Fleer thing is true.

[181] The CEO of D .C. owning a large number of shares in Marvel is false.

[182] That is false.

[183] So Carl Eiken now has control of Marvel, but there's just one problem.

[184] Carl Eiken didn't own all the debt.

[185] There are actually big Wall Street banks that had also loaned Marvel a lot of money, and they still wanted their money back.

[186] So the court case wasn't over, and the company still needed to officially reorganize and exit bankruptcy.

[187] So this is where Toy Biz ends up coming back into the picture, this toy action figure company, and turns out it was owned by this guy named Isaac Perlmutter, who was an Israeli -American.

[188] And he ends up proposing a new plan to the creditors of Marvel that involves toy biz putting up money and paying back the creditors and then taking control of the company away from Carl Eiken.

[189] And the creditors and the courts actually decide to go along with this plan.

[190] So control of Marvel gets rested away from from the villain.

[191] It's like the comic book, you know, happy ending.

[192] And the superhero Isaac Perlmutter comes in to save the day.

[193] And Isaac actually still to this day is CEO of Marvel.

[194] Oh, that's a great story.

[195] Even post acquisition.

[196] All right.

[197] So what happens to Toy Biz then?

[198] How does that?

[199] So Toy Biz gets folded into Marvel, I believe.

[200] and becomes part of the combined company.

[201] So then at this point, Marvel owns the IP to the characters and has a merchandising division to actually sell the toys themselves?

[202] Yep.

[203] I believe that's right.

[204] But it's still not like a, you know, it's not a Disney scale consumer products division.

[205] Right.

[206] So in the meantime, something even more important for the future of Marvel happens.

[207] And that's, that's, I believe for a long time they'd been making different, various types of films and movies about the franchises.

[208] But films based on Marvel franchises actually start to kind of catch on with the public and become pretty big movies.

[209] And it actually starts.

[210] I did not realize this in 1997 that year when Men in Black comes out.

[211] Men in Black apparently was a Marvel franchise.

[212] I had no idea.

[213] Oh, no way.

[214] Because I knew there were comic books, but I always assumed it was one of those, like, after the movie comics.

[215] No, it was a Marvel franchise.

[216] Wow.

[217] And then, again, I watched that movie so many times when I was a kid.

[218] Will Smith and Tommy Lee Jones was great.

[219] Absolutely.

[220] Heroes.

[221] So Men in Black comes out in the first Men in Black comes out in 1997.

[222] And this was before Marvel Studios, right?

[223] This was Marvel IP being.

[224] is exactly.

[225] Marvel was licensing their IP to big movie studios, you know, to Fox, to Sony, to Time Warner, who were making these movies, big budget movies.

[226] Blade, 1998, and then the first really big one, X -Men in the year 2000.

[227] That's right.

[228] Spider -Man in 2002.

[229] So again, Marvel's not making them these movies themselves, but obviously is noticing that, you know, collectively, these movies are making billions of dollars.

[230] Really starting to take off.

[231] Yeah.

[232] And it was, it's, it's interesting to think about, like, there had been superhero movies for decades, right?

[233] I mean, we had a whole franchise of Batman movies.

[234] It's not like, Superman movies.

[235] That's right.

[236] Oh, yeah.

[237] Christopher Reef, who can forget.

[238] It's, it's not like we were new to this, but, you know, like, in, in the world today of, like, you know, the, or even 2009, Iron Man gross $580 million dollars within Marvel Studios.

[239] it wasn't, wasn't that scale yet.

[240] It wasn't like every single blockbuster at the box office is going to be a superhero film.

[241] So it's interesting to think about like what, what changed that like all of a sudden caused these superhero movies to become more and more of a sure thing for the studios to make?

[242] Yeah.

[243] I don't know.

[244] And it also kind of coincided.

[245] Well, I think the Superman and the Batman movies were always, at least I remember kind of growing up thinking about like, oh yeah, like I remember the Batman movies when I was a kid.

[246] But I think it was just those.

[247] two were like the big franchises, the DC franchises.

[248] And DC, I believe not always, but for certainly through all of these decades, was owned by Time Warner and still is.

[249] So they were part of a big major media company and had the resources to make these, you know, big budget movies.

[250] Whereas Marvel, I don't think ever did until, until this era.

[251] And so you see these superhero franchises that had been obviously had huge followings but weren't like the mainstream you know um to the extent that superman and batman were right now get these big film slates i think the other thing that was happening is this is sort of the dawn and i don't know how much one led to the other um sort of the dawn of like the sequelitis in in hollywood um and it's and superhero movies of course uh franchises lend themselves so well to sequels Yep, yep, very true.

[252] I mean, as ever since, you know, 1939, every single one of these, these comic book franchises has issue after issue after issue.

[253] They're serials.

[254] Yep.

[255] So it's perfect for, you know, in a world where Hollywood needs dependable franchises to make sequels, you know, what better place to look to than comic books.

[256] Yep, yep.

[257] So in 2005, after, you know, a few of these huge successful movies, basically.

[258] on Marvel IP have come out from other studios, Marvel actually takes a really ambitious step to start Marvel Studios to make movies themselves.

[259] And so they raise 525 million in debt in a credit facility from Merrill Lynch.

[260] Ironically, like right before Merrill Lynch went bankrupt in the in the in the recession.

[261] But they they get a film financing vehicle from from Merrill and create the really the first kind of major independent Hollywood studio since kind of the DreamWorks era.

[262] This was a pretty big deal.

[263] Yeah.

[264] And it's interesting to think that, you know, that this was something they just sort of started and ultimately became like very quickly the largest part of their business.

[265] Absolutely.

[266] Yeah.

[267] So the, and also interesting, you know, they sort of, when they announced this, This was in 2005, 2006, when they were getting this set up.

[268] They announced that the plan was that they were going to release individual films of going to, you know, individual franchises, Iron Man and the Hulk, which were the first two movies that they end up releasing, create these franchises.

[269] And then they were going to tie them all together into a crossover film.

[270] So, which obviously they did under Disney.

[271] Yes, exactly.

[272] But that was the plan all along.

[273] and interesting that Disney really, you know, has been hands off and let them, let them operate that plan.

[274] Yeah, yeah.

[275] And thinking about, so in making this move, in starting the studio, they'd already licensed out so many of their characters to other studios for, to make films and distribute.

[276] And so when you think about, like, they're really their top tier characters.

[277] Right, right.

[278] So I'll list the characters that were no longer eligible for Marvel to make their own.

[279] films around.

[280] Spider -Man, the Fantastic Four, Silver Surfer, Wolverine, the rest of the X -Men, Deadpool, yeah, there's others, but when you think about like, wow, okay, so all those are off limits.

[281] And what they've got is sort of like the second tier at the time.

[282] Like, we don't think of them now because they're huge, you know, gigantic blockbuster wins, but like Thor, Hulk, Iron Man. Like, that's who they're left to work with.

[283] And then that's what they create the studio around.

[284] Yep, totally.

[285] And an Iron Man was really, that was really the best that they had available.

[286] And that was the first film that they made.

[287] And it came out in early 2008.

[288] And it ended up being, I mean, tour de force from Robert Downey Jr. I remember seeing it in theaters.

[289] Such a great movie, the original Iron Man. Absolutely.

[290] And actually the year before, I think that was 09.

[291] And in 2008, they had the Hulk, which, which, uh, um, was about half of, of what that film grows.

[292] Um, they actually both came out in 2008.

[293] Uh, and, uh, they came out like, uh, they made them concurrently.

[294] Uh, Iron Man actually came out a couple months before Hulk.

[295] Um, I believe, uh, at least according to Wikipedia.

[296] Um, and, uh, which is always right.

[297] And, uh, yeah, Ironman made, uh, 585 million at the box office, so almost 600 million, which is, uh, uh, compared to films like the Avengers and, well, Iron Man 3 and Frozen and other Disney movies and certainly the Force Awakens that make a billion or even close to 2 billion, that doesn't sound like a lot.

[298] But at the time, that was a huge amount, even though it was only a few years ago.

[299] That's the beginning of an era.

[300] Beginning, really beginning of the superhero blockbuster era.

[301] That's right.

[302] And it sort of signals to like any potential buyer of Marvel stock.

[303] like there's a new way to value this company and it's based on these numbers and does nothing to do with any of the other lines of business they're in.

[304] Yep.

[305] So as you mentioned, the Hulk comes out shortly thereafter and isn't the huge success that Iron Man is, but it's a pretty, pretty successful movie.

[306] Makes just under 300 million and is very successful and kind of proves that audiences are interested in this kind of content and will come out even for, you know, non -top -tier characters if you can make good movies.

[307] So the next year in 2009, before, I believe there were, I believe they were intended to be five films on the slate that Marvel did with Merrill Lynch, but before any of the following ones can come out, August 31st, 2009, Blockbuster Deal, Bob Eager, and Walt, Walt Disney company announced that they're going to acquire Marvel for $4 .2 billion, which was quite a lot when you think back to when Pearlman bought Disney, granted it was in the late 80s, but it was a bankruptcy corp. No, no, Pearlman bought it from in the late 80s from New World Entertainment.

[308] It was less than 100 million.

[309] So here we are sort of 20 years later, and we're talking 4 .2 billion.

[310] Yep.

[311] Yep.

[312] And it's interesting that, like, um, it's, there's, there was not a single new piece of intellectual property that mattered between those years.

[313] Yeah.

[314] Like all those characters had already been created and it was really all about a new way to leverage that same intellectual property that made it, what, 40 times, 40 plus times more valuable over that span of time.

[315] Yeah.

[316] Super interesting.

[317] I mean, it really was, it really was the films.

[318] Yeah, yeah.

[319] And to place a, to kind of like, for listeners out there, a 29 % premium was what was paid for Marvel above what it was currently trading at.

[320] So while there was some scrutiny, like, oh my God, that's a huge, you know, $4 .24 billion.

[321] That's a huge ridiculous acquisition.

[322] It's not that much more than what the public markets were valuing it at.

[323] And it actually is pretty much in line with other public companies.

[324] acquisitions that we've covered on this show.

[325] And another thing that's important to think about about this deal that I think other folks who've written about it now and talked about it, it kind of lose context of a little bit.

[326] This was in the middle of the recession.

[327] And so this was like perfect timing by, by Iger and Disney to buy Marvel because people were worried at this point, like, you know, and we were talking about box office numbers a minute ago, they were certainly depressed by the fact that we were in the middle of the recession and people didn't have nearly as much disposable income as they were used to having earlier in the decade.

[328] That's right.

[329] And for even more perspective, it was just over half the price that they paid three years before for Pixar.

[330] So if you kind of look at this trend, they hadn't yet acquired Lucasfilm, but let's simplify Disney to a content and distribution company.

[331] and they're basically out buying content.

[332] You know, the part two of their, the second big pickup that they made here, you know, they signaled that they were going to do this before.

[333] This was Iger's strategy.

[334] And it clearly had been working with Pixar.

[335] Yeah.

[336] And I mean, the Pixar, you know, famously Bob Iger's first board meeting as CEO, which was, like, his like second day on the job, he proposed to the board that he wanted to buy Pixar.

[337] And this was clearly how he kind of set the tone.

[338] for his 10 -year -as CEO, and he's, you know, certainly hard to argue with his execution across the three of these companies.

[339] Right, right.

[340] And it's, it's, it's, it's, if you're Disney and you're looking around and it's, you know, 2005, like all the valuable content that you don't own, that's like some of it's in universal and some of it's like, there's little pieces in pockets elsewhere, but the three other big powerhouses are Lucasfilm, Pixar, and, uh, and Marvel.

[341] And, you know, when, went in and over.

[342] what, how many years?

[343] 2006 or 2012.

[344] So over six years rolled them all up.

[345] Well, and also, you know, in keeping with the theme of the show, or half of the theme of the show now in acquisitions, you know, Iger took over as CEO of Disney right after there had been this hostile takeover attempt of Disney that actually Comcast, right before Iger became CEO, launched a hostile takeover attempt to try and buy Disney and of course later you know five or six years later they would end up acquiring NBC but this was like I have to imagine that living through that the Disney board and Bob Iger and kind of entering his tenure thinking about seeing consolidation in the media industry coming and decided very actively deciding to be a consolidator as opposed to a consolidate T and looking around to see what they could buy Yeah, and you look at what that aggressive strategy helped them do.

[346] I mean, who was competing with Disney in 2005 and who's even close to competing with them now?

[347] I mean, I think that that just totally worked.

[348] Yeah.

[349] And interestingly, I actually said in kind of the press quote at the time of the Marvel deal, you said Marvel's brand and its treasure trove of content will now benefit from our extraordinary reach, we paid a price that reflects the value they've created and the value we can create as one company.

[350] It's a full price, but a fair price.

[351] And absolutely, you know, we talked about this in the Pixar episode and especially in the Lucas film episode, but, you know, Disney's core competency and what they have that the other media companies don't have is that flywheel that, you know, that Walt Disney drew, you know, back in the early days of the company.

[352] company, which is the ability to take great IP franchises like Star Wars, like Pixar, like Marvel, and pump them through the flywheel and realize much more value out of it than they could on their own.

[353] That's right.

[354] And old school Disney was creating it, but New School Disney has pretty efficiently figured out how to bring in content they don't create into that flywheel, too.

[355] Yep.

[356] And I think the fourth piece of this stool that we haven't talked about yet because it wasn't an acquisition is the tremendous growth of the ESPN business inside of Disney.

[357] And I think the four of those businesses together really account for a lot of the growth and the dramatic change in share price between then and today.

[358] Yeah, and it's interesting, too.

[359] I mean, I hadn't thought about ESPN in this context, but you bringing it up in the context of the flywheel.

[360] I guess actually Disney was an acquisition.

[361] It was just a long time ago.

[362] Or, yes, ESPN, yep.

[363] It was through a pretty complicated history.

[364] That might be a fun show to do sometime.

[365] ESPN is a super interesting corporate history.

[366] But the core ESPN business, I think in a lot of ways, I mean, it was totally the golden egg for many, many years for Disney.

[367] But I think is much more challenged today than it was a few years ago with cord cutting and linear television watching being much less of a thing.

[368] And obviously, sports center is still popular.

[369] among many people, but I used to watch SportsCenter every day, probably multiple times a day, and I haven't watched it in years now, even though I still watch clips on Snapchat.

[370] But you see this strategy, and especially around film, with ESPN2 now, with 30 for 30, and some of the investments they're making there.

[371] I think about the OJ documentary and how great and ambitious that was.

[372] Oh, yeah, you're totally getting into my tech themes.

[373] All right, well, we'll stop now.

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[392] And you want to move on to acquisition category?

[393] Yeah, let's do.

[394] But first, just to wrap up quickly on the aftermath of the acquisition.

[395] So as we mentioned, Perlmutter remains the CEO of the company.

[396] The company stays in New York.

[397] So it's a fully autonomous subsidiary within Disney.

[398] And like we said, basically, they've just continued to execute on the plan that they drew up in 2005 when they launched Marvel Studios.

[399] And producing dramatically more.

[400] Like, their scale now, I mean, they had like five or six in the pipeline when they were acquired.

[401] I mean, I think you look at the pace of new Marvel movies coming out and new Marvel movies planned through the next few years.

[402] Like, they're not letting up.

[403] Yep.

[404] And even, you know, so there's much more value to be realized from the company in the future.

[405] But even since the acquisition in 2009, the Marvel movies have generated almost $9 billion in box office revenue, which is crazy.

[406] Now, that doesn't necessarily equal, certainly doesn't equal profits.

[407] And profits for movies are harder to get to, um, than pure revenue.

[408] We can get that data.

[409] Yeah, I think Marvel estimated profit margins, at least in the first eight films released, I actually pulled the stat under Disney, we're about a 23 % profit margin.

[410] Okay.

[411] So, you know, you call roughly sort of $2 billion -ish, slightly more than $2 billion in profit so far from the movies.

[412] So that's half the purchase price right there.

[413] And that's just the box office.

[414] Uh, you know, not the, not the home video, not the merchandising, not the theme parks, you know, all that stuff.

[415] So, uh, totally.

[416] And I even, I grabbed another stat.

[417] I think this is, um, I think this is from, yeah, fortune article in 2015.

[418] One analyst said that by the time it was finished with the Avengers, Iron Man three and Captain America and Thor's sequels, Disney probably paid, uh, for the acquisition of the entire company.

[419] So I think it's, it's, uh, pretty quick payback period there.

[420] And, uh, I think looking at that 22 % profit margin and you look at the price tag of production now on these films pretty expensive to make these huge blockbusters.

[421] Yeah.

[422] Well, you need 200 million, 150 million.

[423] Yeah, you need, well, well, we should delay some of the discussion until we render our final grade.

[424] But all right, all right.

[425] Let's jump into a category.

[426] So as a reminder, Pixar, which was our very first episode on this show, we actually, we said it was a business line.

[427] and then Lucasfilm, we said, it was a product.

[428] So what is Marvel?

[429] Yeah, so I am going to foreshadow my tech themes and my conclusion a little bit here, but I think it was two things.

[430] One is a business line.

[431] They bought the business line of making the films.

[432] They were able to scale that.

[433] We talked about kind of paying back the acquisition in a shortish amount of time.

[434] the studio itself.

[435] But ultimately, they have this asset in perpetuity of the characters.

[436] And unlike, in my opinion, the reason why we didn't call, well, we didn't have asset yet in this categorization for Pixar.

[437] But Pixar sequels don't hold up as well as the serialization that comic book characters lend themselves to.

[438] So unlike a lot of sequels, which fatigue very often, there's these like few in the world.

[439] the James Bond's of the world, that don't get tired because they're able to kind of keep reinventing it, or the stories are okay being formulaic.

[440] So you kind of can keep experiencing the same tight plot line over and over again.

[441] Superheroes let themselves do that.

[442] And the intellectual property that I'm calling separate from the business line, the intellectual property that is these characters are, you know, they're a true asset in perpetuity.

[443] Yeah, interesting.

[444] Huh, foreshadowing one of my tech themes a little bit too, but I was going to be lazy on this one and say, oh yeah, totally a product, just like Lucasfilm and being, you know, I think we called Lucasfilm the sort of juice that gets pumped through the pipeline of the flywheel.

[445] And I thought that this is too.

[446] And I still think it is.

[447] But it's an interesting insight on the serial, serializability of superheroes and the assets of superheroes versus a Pixar, which as great as Pixar is.

[448] I'm not excited for another toy story.

[449] Yeah, exactly.

[450] Like, there's, it's kind of a harder business in a lot of ways because you're, you're betting on the capability of the team to keep producing new original great stuff.

[451] Right.

[452] It's like your assets depreciate faster.

[453] Yeah.

[454] Or, yeah, well, or there is.

[455] No, I mean, they do do sequels at Pixar, but, um, but that's not the core of what it is.

[456] It's like you have to keep generating new, keep pushing the rock up the hill each time.

[457] Right.

[458] And actually, it's funny if you look at the, uh, I was about to make the point that, um, um, it is more expensive to create a, a Pixar film, uh, because you don't have the same reusability that you do from the, you know, superhero film, um, it actually is, uh, the, the, the, the profit margin on, on Pixar films are higher.

[459] So to kind of combat the point I just made, 23 % profit margins for Marvel, 27 % profit margins for Pixar.

[460] And, you know, render farms and illustrators are expensive, but not as expensive as flying helicopters into buildings.

[461] Yeah.

[462] And, well, not that Pixar pays actors a lot, too, for their voice.

[463] But I would imagine probably in aggregate in terms of money paid to actors, Pixar movies, I would happen to imagine, are less than a Marvel movie.

[464] Yeah.

[465] Yeah, I would think.

[466] Interesting.

[467] Yeah, I like the asset categorization.

[468] I mean, I think it is definitely also used to pump through Disney's flywheel.

[469] Totally.

[470] But it is a different kind of asset than certainly Pixar.

[471] And I think in a lot of ways, Star Wars, too.

[472] Star Wars is kind of like, or tellingly, I called it Star Wars, Lucasfilm.

[473] You can just call it Star Wars.

[474] Yeah, but it is Star Wars, right?

[475] Whereas Marvel is many of these franchises.

[476] Right, right, right.

[477] Oh, yeah.

[478] I mean, that's a great point.

[479] It's like if you look at the $4 billion price tag for Lucasfilm and the $4 .2 billion price tag for Marvel, like think how many more characters, it's like 800 plus characters or I think 500 plus at the time of acquisition in the Marvel universe and maybe the 50 of which are recognizable by the American public.

[480] And you look at Star Wars, and I don't think Lucasfilm was sort of looking, valuing themselves based on all those deep characters.

[481] And what we're seeing with the Disney powerhouses, they're sort of trying to make the Star Wars universe more serializable and more kind of disparate with all these different stories that they're trying to tell that aren't with our favorite characters.

[482] And I'll be really interested to see.

[483] Not how Rogue One does, because I think that that's going to be, there's so much pent -up demand for Star Wars that, like, I want to see how the third or fourth non -core Star Wars story does.

[484] And if Disney will be successful in kind of creating this sort of serial blockbuster out of Lucasfilm characters the same way they've been able to with Marvel characters.

[485] Yeah, it's interesting to think about, to think about these three acquisitions, which are obviously all fall within the same, you know, broad theme.

[486] for Disney, but on a kind of spectrum from Pixar where there it's so much about the people and the creative process and creating individual new creative works to then kind of Lucasfilm sort of in the middle where it's about the one franchise of Star Wars and the cadence around that is, well, before the acquisition was very long cycles between any sort of new Star Wars content that would come out and it's much faster now.

[487] Right, right.

[488] Multiple decades.

[489] Yep.

[490] And Lucasfilm is sort of about the people, you know, I mean, obviously there's George Lucas and some great leadership at Lucasfilm.

[491] But also, you know, about the franchise.

[492] And then you've got Marvel at the other end of the spectrum.

[493] which has had great business leadership, especially under Isaac Perlmutter, but, you know, all of the, all of the talent that comes into the making the movies and even the artists of the comic books, like it's all third parties, you know, it's not, it's not like, it's kind of very, it's very different from Pixar.

[494] Yeah, great point.

[495] All right.

[496] Should you move on to what would it happen otherwise?

[497] Yeah.

[498] So I think Marvel was going to get acquired.

[499] Like we were in an era of consolidation where distribution was buying content.

[500] And I don't know who else it would have been.

[501] 20th Century Fox, Sony.

[502] It seems like actually there's a lot of places they could have landed.

[503] It's kind of shocking to me that with, the Pixar pickup in 2006 that someone else didn't see this coming and try to make a play for it sooner.

[504] Did maybe other people, other studios or I guess...

[505] Well, especially the other...

[506] Well, I wonder if the other studios maybe were a little bit lazy in their thinking because they were kind of having their cake and eating it too, right?

[507] In that they were getting Marvel movies in Spider -Man and in X -Men without having to...

[508] actually buy the company, and it was only when Marvel started making movies on their own, that it became a really valuable company as itself.

[509] Yeah, that's true.

[510] And it really hadn't been long since Marvel Studios was around.

[511] The shocking thing is like, how did no one else, I mean, oh, actually, here's kind of an interesting question.

[512] If you're 20th century Fox or if you are Sony pictures and you see, let's say you can see the future and know that Disney was going to do this.

[513] Do you try to do it sooner?

[514] Like, did people, A, not think Disney was going to do it or B, not care that Disney was going to do it?

[515] Yeah.

[516] Well, here's an interesting thing that we haven't talked about yet so far, but on the surface, this actually wasn't the most natural fit with Disney, which actually I think is one of the reasons why Bob Eager and Disney really wanted to do this acquisition.

[517] But Disney was always, you know, kind of like princesses and animated movies and then Pixar, which definitely fit into that mold.

[518] And, you know, in terms of their strategy with children, you know, super gender stereotypes here.

[519] But I think this is the way a lot of, at least historically a lot of people at Disney have thought about this and in the media media industry that Disney like owned little girls you know but they didn't you know and little boys too but like they didn't have as much lesser extent but to a much lesser extent and that this was Disney's play for for little boys too I mean what's what's more attractive to little boys than superheroes in total old school gender stereotyped ways speaking as a massive frozen fan myself.

[520] Right, right.

[521] You know, I still haven't seen it.

[522] Oh, you got to change that.

[523] It's so good.

[524] I know.

[525] I know.

[526] As an admitted Pixar fanboy, I really should.

[527] Not that it's Pixar, but like, you know, to see how that's entered the rest of the Disney umbrella.

[528] Yeah.

[529] And it's interesting to think, too, I can't imagine this had that much impact on Pearl Mudder and Marvel because it was.

[530] They were much more business executives than sort of founder creative types.

[531] But Iger and Disney have developed this reputation now with these three acquisitions as like excellent stewards of, of franchises.

[532] They're kind of like the Warren Buffets of creative of creative content and businesses.

[533] Right, right.

[534] When, yeah, in the, in the, um, Pixar animation, we, or the, uh, I think it was the Pixar on a, uh, no, In the Lucas Film Acquisition, we compared it to Facebook that Disney was really good at leaving their sort of disparate brands that they acquire on their own.

[535] Which, again, a little bit was why it didn't, on the surface, it was like, wow, Disney buying, you know, Marvel.

[536] Like, Marvel is much edgier than Disney, but they've let it be totally separate.

[537] But this was, you know, in the Lucasfilm acquisition, you know, George Lucas said to Bob Eager before he sold, like, if I'm going to sell it, I would only sell this to you and to Disney.

[538] And, and Steve Jobs too, right?

[539] Like, it's hard to imagine Pixar and jobs selling to anybody except Disney.

[540] Right, right.

[541] Yeah, so two other questions here then for you that I would pose.

[542] One, is there a fourth?

[543] Like, will we see Disney make a play for another large piece of content?

[544] And I've been sort of racking my brain to think who that could be, or who is the content that we don't think of as the big content yet as the up -and -comer.

[545] And then two, while you're sort of noodling on that, I generalize this to a distribution, combined distribution content company buying more content and pumping it through their distribution.

[546] Do we see that in other verticals?

[547] Like, are we seeing that in tech outside of entertainment or any other forms of content being bought by distribution plus content companies?

[548] Hmm.

[549] Interesting questions.

[550] Well, on the second, I mean, to a certain extent, I think we see it a little bit with Facebook and on Instagram.

[551] I mean, it's very different.

[552] Like, I think Instagram would have grown hugely on its own.

[553] But no question that on the ad sales side of the house, being able to just plug in Facebook ad sales into Instagram was hugely valuable there.

[554] On the first question, you know, I'm not close enough to have a super.

[555] super informed opinion on that front, but one thing that just popped into my mind, especially because the company is struggling a bit now, what about Nintendo?

[556] Boy, that's like the, you're right, that that is like the, the, another huge treasure trove of IP that, as we saw with, with Pokemon Go, I mean, you, you, you take an existing piece of technology or relatively existing with the Niantic, um, and, uh, and slap, highly valuable IP like Nintendo's on top of it, and you can create something that the world goes crazy for.

[557] We can have a debate on how lasting that is.

[558] Yep.

[559] But certainly the IP that Nintendo has in Mario and Zelda and so, you know, even, I mean, they're in a lot of ways, like the parallels to Marvel are very similar.

[560] You know, you've got lesser known stuff like Kid Icarus and, you know, and then you've got Pokemon, obviously, which is super well -known.

[561] Man, what would, if all of that IP were liberated from the challenged business model of, like, gaming console hardware sales.

[562] Right, right.

[563] Yeah, what could you do with it?

[564] And what, this is interesting, like almost all this, probably excluding Pixar, but at this point, Pixar is a little, kind of an older company too.

[565] Like, what IP is super valuable and a major part of the American consciousness and new?

[566] because all this is like, you know, buying the Star Wars stuff from 77 and buying the Marvel stuff from the 40s and 50s and buy Nintendo from the 80s.

[567] Like, where is, you know, like, where's 2010's Mario?

[568] And like, does that exist in the era of the internet and short attention spans and social media where individuals are their own content creators and content is short -lived?

[569] Yeah.

[570] Well, maybe it lives on Facebook.

[571] yeah and it's like it's funny like one you know and all the rumors of maybe disney buying twitter yeah um and then that sort of fell through probably because of pricing issues uh like none of these platforms own the IP there's like shared licenses between the the tweet and the um between Twitter and the originator of the content but like there it's hard to think of new intellectual property that everyone cares about.

[572] Like everyone cares about their little filter bubble of content.

[573] I think about, or like Twitch too, right?

[574] Like, um, all the big, um, big entertainment franchises of the last five years, certainly, uh, I think you would, you know, they're, they're, they're not, they're not IP themselves.

[575] They're platforms.

[576] Yeah, yeah, exactly.

[577] It's like all the, all the major value in the recent stuff is the platform on which massively distributed, democratized IP is created and distributed, not actually being in content powerhouse.

[578] yeah other than you know actually we are seeing this with netflix right netflix amazon um they they have the distribution and we're previously licensing the content and now we're creating content in -house and that's a pretty good allegory for sort of question number two there of who else is um is uh is doing this these days outside of disney and i guess netflix isn't necessarily buying up other companies that have content but we are seeing heavy investment by the people that have the pipes in creating their own content.

[579] Yep.

[580] Well, actually, you know, there are plenty of IP franchises out there being created and great ones.

[581] I should have thought of this.

[582] Jenny and I, with my parents, over Thanksgiving weekend, went to see fantastic beasts and where to find them, which we loved.

[583] But yeah, Harry Potter, of course.

[584] Yeah, totally.

[585] And that's the last couple decades or a decade and a half.

[586] Or at least younger than some of these other franchise.

[587] that Disney's been buying.

[588] Yeah, yeah.

[589] Maybe that's not a fair.

[590] But also, you know, that was really created not pre -social media, but certainly pre -social media.

[591] And, you know, the first Harry Potter, I don't think J .K. Rowling or Harry could have, you know, peered into the future and seen the world that we'd live in today.

[592] Yeah, absolutely not.

[593] In fact, you know, but like Ben and I both got iPhone 7.

[594] Evans recently, and one of the, I don't use it a ton, but just one of the sort of delightful features on it that I enjoyed discovering is the live photos, you know, the Harry Potter photos.

[595] Yeah, right.

[596] It's kind of, uh, for those of us who are on the off cycle, I guess the on cycle and didn't have the six, I, I just discovered live photos too.

[597] And you're like, whoa, these are, uh, these are weird when I send them to people and they can get me too much context.

[598] Yeah, totally.

[599] Um, all right.

[600] Should we move into tech theme?

[601] yeah totally so uh the one i've got one that's based on a stat so of the top ten grossing films in 1981 seven of them were original content raiders of the lost arc arthur stripes cannonball run chariots of fire four seasons time bandits you've got one that's an adaptation on golden pond and then you have two sequels superman two and two and for your eyes only.

[602] Fast forward to 2011, so three decades later.

[603] I'll read you the top ten grossing films.

[604] Harry Potter 8, Transformers 3, Twilight Saga 4, Hangover Part 2, Pirates of the Caribbean, 4, Fast 5, Cars 2, Rise of the Planet of the Apes, Thor, Captain America.

[605] So that is 8 sequels, two adaptations and zero original pieces of content.

[606] Yeah, all of them franchises.

[607] Yeah, and it's fascinating to see the shift of the playground that is the movie studio, the movie theater, the whole, all of Hollywood as a feature film production, the creativity and originality is, it's not happening there anymore.

[608] It's happening elsewhere.

[609] And we're in this era right now simultaneously.

[610] of a great TV renaissance there's every every season there's like brilliant dramas on with you know Hollywood acclaimed actors and and best in class writing and um uh you know there was madmen there was the sopranos like we're leading up to this and i'll i'll say if there's one i'm watching that's my car about that i don't want i mentioned yet but like we're all of the experimentation has moved to cheaper things um tv or you know youtube or or social media and i'll and the Hollywood is the way to go and make a billion dollars off of sure things, because if you're going to go pour a couple hundred million in, you want to get big, big money out, and you're not willing to take a chance.

[611] Yep.

[612] It's interesting.

[613] I think the question for me that that begs that I've been thinking about, he was starting to do the research, and as we've been doing the episode, for all the, the justifiable admiration, deserve it admiration that I think we're keeping on on Marvel and Disney here, I think there is one really key existential risk.

[614] And that's, you know, if and when the pushback to this dynamic comes from the public, you know, how many sequel, and people have been asking this for years.

[615] And so maybe it'll never come.

[616] But how many sequels can we take, you know, how long are superhero movies, is going to be in vogue.

[617] You know, is this just a very extended fad cycle that we've been living?

[618] Like, in 10, 20, 30 years, where we look back on this and feel like, man, that was like leisure suits.

[619] Like, remember the superhero movie days, you know?

[620] Yeah.

[621] And I just wonder, you know, like, I don't know.

[622] I don't have a good answer to it.

[623] Well, yeah, and if it's, I guess it's interesting that, like, if this is like a permanent thing, what changed in the world?

[624] that, um, like what piece of technology or what societal norm shift or something changed that made it so that, um, we were, well, maybe it's this.

[625] Maybe it's, we're actually capable of, of creating something that resonates so strongly with, with, uh, people's nostalgia.

[626] And we're actually capable of creating multiple billions of dollars of revenue on a single film.

[627] Therefore, we're going to spend all the money to produce.

[628] that thing, therefore we're not going to take chances.

[629] Yeah, and producing those films costs hundreds of millions of dollars.

[630] Right.

[631] So it's like maybe the technology got good enough, both in distribution and production, where it was possible to spend that much money on making a film.

[632] And it was possible to earn that much from instant global distribution that, you know, we actually are seeing it come to fruition.

[633] And it was only technology limited before.

[634] Yeah.

[635] And the flywheel like Disney of, you know, consumer products and theme parks.

[636] And, you know, when you're investing in an IP as something, as an entity like Disney, like, that is a huge investment.

[637] You really can't.

[638] And they do take risks and, you know, have failed on stuff like, what was that one?

[639] They had a couple live action movies that were total flops, like right around the time that they bought Marvel.

[640] Tomorrowland was one of them.

[641] They're taking big risks, but they're flopping.

[642] Yeah, right, right.

[643] But you can't afford to have too many of those flops.

[644] Right.

[645] And I wonder if, like, you know, you get a few of those that are big risks that are flopping, and then you just get scared away from doing it.

[646] Yeah.

[647] And you start pushing all your, you're effectively prototyping down into cheaper distribution mediums.

[648] Yeah, it's interesting, though.

[649] I mean, like, where, you know, as you said, so much, there's so much innovation and a renaissance going on in the television format right now.

[650] Is there or will there be something similar in the, you know, film format?

[651] I mean, obviously there's independent film and there's lots of innovation going on.

[652] But, but, but not at the, not at the, you know, kind of mass audience scale that something like Netflix and Amazon has allowed risks to be taken in television and still have the ability to, you know, a channel to distribute that to a mass audience.

[653] Yeah, it's interesting.

[654] I think sort of the same thing has happened with music, where there's like a psychological thing where we love the things that other people love, and we all love having the same darling and the same heroes, and like, the same sort of music feels good to us, that feels good to the other people around us.

[655] And with global distribution happening so quickly and so cheaply, um you you have the ability to achieve much more sameness and have much more people agree on what the best thing is and at least we like to think that we have independent taste but a lot of the time we're sort of just like looking to hear from people like oh what's the best you know who's the taylor swift right now yeah and that's why we're getting so many fewer it's like there didn't, except for like the Beatles, like there was never like the Beyonce, the Taylor Swift.

[656] They were much more distributed.

[657] And there were many more people that could make it big.

[658] And now there's like this echelon of people that you can count on one hand who are like these super phenomenon, phenomena.

[659] And I think the same thing is sort of happening in movies.

[660] Yep.

[661] Well, and this totally leads super well into my tech theme, which is something I've been thinking about.

[662] I've been reading this great book.

[663] It came out last year, I think, or a couple of years ago, called Sapiens by this guy, Yuval, Noah, Harari.

[664] And it's a great book, and it's about, it's sort of a biological time history of homo sapiens and how, you know, our species came to take over the world, basically.

[665] Even though there were, there are no longer, but there were other species of the genus Homo, Neanderthals and many others, but Homo sapiens sort of quote unquote won, and you could argue now are destroying the planet, but certainly have taken over the planet.

[666] What, like, actually differentiates us from other Homo species and from the rest of the Animal Kingdom.

[667] And he argues that the primary thing is our ability to create and believe in fictions, he calls it, which are like, you know, a reality is like there is a lion over there, run, you know, but a fiction is like there is a company and there is a story and, you know, this, we are, you know, the internet is a fiction, right?

[668] But, like, it's not that it's not real.

[669] It's very real.

[670] But it's not something that any other species could comprehend.

[671] And so that kind of makes me think about, like, IP and exactly what we were just talking about.

[672] Like, as the Internet has spread communication instantly and globally, you know, are we seeing these major blockbuster franchises just continue to consolidate because of the power of these fictions?

[673] yeah yeah yeah it's a great point heady stuff for Marvel I highly recommend the book not my carve out for the week but because I'm not done with it yet but great book cool cool you want to grade it let's do it so an interesting stat that I found when I was looking through all this if you look at the first eight films from Marvel post acquisition and the first eight from Pixar post acquisition Marvel made about $6 billion, gross.

[674] Pixar made about four and a half.

[675] Costs of creating them are fairly similar.

[676] The box office profit from Marvel is about $1 .2 billion versus $600 million.

[677] So there's like this interesting thing where Marvel does phenomenally better at the box office.

[678] But over the long term, Marvel's home video sales are about $400 million, and Pixar's are 1 .6 billion.

[679] And there's an interesting thing that happens where with Pixar films, like, people get attached to that one character and that one storyline, and they just continue to watch and buy that film forever.

[680] And when you look at the Marvel movies, like, even just me thinking about, like, what would I rather watch, Toy Story 3, which, like, even though that's a sequel, like, that has its own storyline that I can remember and I'm emotionally attached to, or, like, do I care about owning or even like, you know, buying and watching again on, on a streaming service or from Amazon, like Iron Man 2.

[681] And you can sort of see like that these serialization films don't have lasting value or nearly as much as the Pixar ones do.

[682] And so I went back and listened and, you know, I have an A, not an A plus for Pixar.

[683] And I think that it's fair for me to say Disney, great acquisition, almost a necessary one.

[684] We'd be sitting here saying, like, you are fools not to buy Marvel, but it's an A -minus to me. It's not as good as the Pixar acquisition.

[685] And I think the characters are brilliant IP for a long time.

[686] I think they've basically already recouped the cost of that $4 billion outlay.

[687] And we'll see what they can do with the character intellectual property, because unlike Pixar, that those already created assets on a shelf will just keep creating value for them with the assets that they have from Marvel, from these characters and this intellectual property, they're going to have to keep pouring cash in to get cash out.

[688] Yep.

[689] I think we found that same infographic that I was, I had it copied in my notes and I was looking at it too.

[690] Yeah, it's interesting, too, to think about our grading benchmark throughout this, throughout the life of this show.

[691] What, you mean Instagram?

[692] Yeah, well, we start, well, no, I was going to, not particularly the evolution of our benchmark.

[693] Oh, yeah.

[694] You know, I think Instagram is still one of, if not the top on the benchmark.

[695] But I keep thinking about to next.

[696] And, you know, I don't think you can argue that that's not the greatest acquisition of all time.

[697] You know, when you create a trillion dollars.

[698] there's a value.

[699] It's hard to top that.

[700] But also makes me think a little bit about like the as cool as as much as we love, you know, IP in these fictions and what we're, what I was just talking about in media and movies and these franchises, the value that you can create in technology is so much more.

[701] Like the leverage is so much higher than you can get from the media industry or really any other industry.

[702] You know, this is why technology.

[703] This is why technology.

[704] companies are so valuable.

[705] You know, 13 people at Instagram can create many, many billions of value.

[706] You can't make, you can't make Iron Man 3 with 13 people or the Iron Man theme park.

[707] And reiterating something we talked about last episode, last quarter, Facebook's operating margin went from 32 % to 45 % on the incredibly large revenues that they have as a mature company, like technology.

[708] That is why technology companies are worth so much.

[709] And you just can't pull a lever to make the 23 % profit margin from, uh, from these Marvel films into something, you know, 1 .5x that.

[710] Yep.

[711] Yep.

[712] Um, and of course there's a dark side to that too, as we also talked about on the Facebook, you know, episode like, um, you know, you don't create nearly as many jobs when you're pulling that technology lever.

[713] Uh, but anyway, we're getting off track here.

[714] Um, I agree on a minus and I think about it in terms of, lasting impact to Disney and sustainable value creation within Disney and thinking about these three franchise, these three companies that they acquired, Pixar, you know, Marvel Lucasfilm, I think in a lot of ways there is the most risks to the future value of Marvel.

[715] And it's it's in, you know, Will, superhero, because it's a portfolio of superhero franchise, will superhero franchises continue to be as popular?

[716] You know, I think so.

[717] They've been popular for 100 years, but how popular will they be?

[718] You're totally indexed to that.

[719] Lucasfilm is all about Star Wars.

[720] You know, and Star Wars, you could argue you have even more risk indexed to that.

[721] However, you could probably also argue it is one of, if not the single most beloved franchise in the entire world of all time.

[722] so they were buying something very specific there but then Pixar really was you know they were buying a process and a you know both a people and a process that they've applied to their whole film and creative business so I think for both the reasons you said Ben and and those reasons I think Pixar needs to be rated higher than than Marvel in this Disney any trilogy.

[723] So I'm going to go, I'm going to go A -minus for Marvel.

[724] Cool.

[725] Cool, cool.

[726] All right.

[727] Follow -ups.

[728] One real quick follow -up.

[729] Spectacles have launched, and people think they're cool.

[730] People do.

[731] Snap ink.

[732] We'd love, if any listeners have them, would love to hear your your comments in Slack or email us at Acquiredfm at gmail .com.

[733] We haven't made it a vending machine yet.

[734] No, no. And my God, Evan Spiegel is a product marketing genius.

[735] I think launching them what in a custom vending machine in L .A. And then that going away and of course selling out immediately and having a huge line.

[736] And then popping one up, where was the one in the kind of like Great Plains area?

[737] Like Tulsa, I think.

[738] And then on the Grand Canyon, And then once people are saying, where is it going to be next?

[739] Then having a store in New York City that just has the vending machine in the back of the store.

[740] And, like, I just wonder what's next.

[741] And maybe there's even something before this show goes live.

[742] But, um, spectacles in space.

[743] Yeah, like doing, doing everything right.

[744] Like, you could totally see other companies being like, okay, we have to work with retailers to make sure there's enough of these things available.

[745] And it's, it's totally just like.

[746] demand generation at its finest and brand building and also the fact that like from all accounts the product is right and has like a good use case and people like enjoy using it and say it's good like talk about controlling the message and really giving people confidence that that they're onto something when they're about to go on this IPO road show yeah super cool I can't wait to try them um all right hot takes uh this is less of a hot take and more of a more of a congratulation to friends, but Hightower announced very, very recently, if not today, as we're recording this, which is a startup in New York with lots of Seattle routes, that they are merging with VTS in a deal valued at 300 million.

[747] Yeah, huge congratulations to Donald DeSantis and that whole team.

[748] Really like a really cool story.

[749] Startup Weekend guys got together actually to gel as a team at a startup weekend, moved to New York when it was very clear that to be in commercial real estate, they should be in New York, really just nailed product market fit quickly, built a great team.

[750] And, you know, this is not the end.

[751] It's a reported, estimated $300 million merger with their competitor.

[752] And the Wall Street Journal article that will link to likens it kind of to the Zillow truly.

[753] Julia merger.

[754] But awesome, awesome, awesome to see it happen for that company.

[755] Yeah.

[756] And great to have a startup weekend alum.

[757] Startup weekends played as an organization and events, such a huge role in Ben in my lives and careers.

[758] And whether it's Rover .com getting started at Startup Weekend or been leading media, well, leading indirectly to us.

[759] meeting and our careers and PSL and PSL and Medrona.

[760] I've got a really gushing blog post about how awesome startup weekend is on my blog at some point if anybody actually wants to check that out.

[761] Should we move on to carve outs?

[762] All right, carve outs.

[763] Cool.

[764] So there's going to be some people who are like, I knew this is what he was going to say earlier on when I was hinting at this, but I am so into Westworld.

[765] It's a HBO show.

[766] based on a Michael Crichton book, which then got turned into a movie in the 70s with Y 'L Brenner as a cowboy.

[767] And I don't want to say too much about it now.

[768] But if you like the concept of where is AI and robotics going and you like really high production value entertainment, it's created by JJ Abrams and Jonathan Nolan, who of course worked on all the recent Batman films and the prestige and, And, uh, uh, yeah, a bunch of great films.

[769] Um, you got to watch it.

[770] It's so good.

[771] And, um, I just signed up for HBO now and it's like trivially cheap and you get a month free.

[772] So, um, highly recommend it.

[773] Technology.

[774] Technology and superheroes.

[775] All in one.

[776] Yep.

[777] Um, my carve out for the week, uh, real quick.

[778] Uh, I don't think I've done this before, uh, on this show.

[779] Um, but I should have because I love it.

[780] Um, super cool app called Overdrive.

[781] which is a way to digitally through an app and through your Kindle connect with your local library and borrow books, borrow ebooks and audiobooks from your local library.

[782] And then read them on your Kind of on your smartphone and listen to the audiobooks for free with your library membership.

[783] And I actually had started using this a few years ago, kind of forgot about it, and picked it up again earlier this year.

[784] And it's just like removing that little bit of friction to, you know, not that ebooks are very expensive, but audiobooks are.

[785] Yeah, I'm reading like four or five times as many books as I used to because of it.

[786] So highly recommend it.

[787] Go sign up at your local library, support your libraries, and use Overdrive.

[788] True that.

[789] Our sponsor for this episode is a brand new one for us.

[790] Statsig.

[791] So many of you reached out to them after hearing their CEO, Vijay, on ACQ2 that we are partnering with them as a sponsor of Acquired.

[792] Yeah, for those of you who haven't listened, VJ's story is amazing.

[793] Before founding Statsig, VJ spent 10 years at Facebook where he led the development of their mobile app ad product, which, as you all know, went on to become a huge part of their business.

[794] He also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world.

[795] Yep.

[796] So now Statsig is the modern version of that promise and available to all companies building great products.

[797] Statsig is a feature management and experimentation platform that helps product teams ship faster, automate A -B testing, and see the impact every feature is having on the core business metrics.

[798] The tool gives visualizations backed by a powerful stats engine unlocking real -time product observability.

[799] So what does that actually mean?

[800] It lets you tie a new feature that you just shipped to a core metric in your business and then instantly know if it made a difference or not in how your customers use your product.

[801] It's super cool.

[802] Statsig lets you make actual data -driven decisions about product changes, test them with different user groups around the world, and get statistically accurate reporting on the impact.

[803] Customers include Notion, Brex, OpenAI, FlipCart, Figma, Microsoft, and Cruise Automation.

[804] There are like so many more that we could.

[805] name.

[806] I mean, I'm looking at the list, Plex and Versel, friends of the show at Rec Room, Vanta.

[807] They like literally have hundreds of customers now.

[808] Also, Statsig is a great platform for rolling out and testing AI product features.

[809] So for anyone who's used Notion's awesome, generative AI features and watched how fast that product has evolved, all of that was managed with Statsig.

[810] Yep.

[811] If you're experimenting with new AI features for your product and you want to know if it's really making a difference for your KPI's stat sig is awesome for that.

[812] They can now ingest data from data warehouses.

[813] So it works with your company's data wherever it's stored so you can quickly get started no matter how your feature flagging is set up today.

[814] You don't even have to migrate from any current solution you might have.

[815] We're pumped to be working with them.

[816] You can click the link in the show notes or go on over to stat sig .com to get started.

[817] And when you do, just tell them that you heard about them from Ben and David here on Acquired.

[818] All right.

[819] That's all we've got.

[820] If you weren't subscribed and you want to hear more, you can subscribe from your favorite podcast client now.

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[824] we will hear you next time.

[825] We'll see you next time.

[826] Who got the truth?

[827] Is it you?

[828] Is it you?

[829] Is it you?

[830] Who got the truth now?

[831] Huh?