Marvel is a mine, not an IP creator – and distribution is still king

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The content versus distribution argument may be as old as the media industry. But does the Disney acquisition of Marvel for $4 billion return content to the ascendancy.

Barely a decade ago, Marvel was bankrupt. But it was rescued in a bitter battle by Isaac “Ike” Perlmutter, who stands to make over $1.4 billion from the acquisition.

Marvel’s success has less to do with comics (although it is the #8 magazine publisher in the US and reaches over 4.1 million people each month) and more to do with films. There has been a Marvel-licence blockbuster at the cinemas every year since 2000.

In essence, Perlmutter realised that CGI had advanced sufficiently to make Marvel’s superheroes look good on the silver screen. And the sale to Disney is the culmination of a decade of dealmaking and licensing that has seen Spiderman, X-Man, the Hulk and a range of other characters either on our screens or in production.

To demonstrate that, let’s look at how Marvel makes its money.

Less than 20% of its revenue comes from making comics. Yet that’s where the creative risk is being taking. Marvel’s success comes from exploiting proven franchises, all of which were tested in the cheap medium of comics first.

So which is king? Content or distribution?

The FT quotes Jay Sherwood, senior managing director of McGladrey Capital Markets, a boutique investment bank, as saying “this deal shows that content is still king.”

Mitch Lasky of Benchmark Capital has been the cheerleader for the value of distribution, particularly within the games industry. He argues that Steam may be the most unsung games asset in the world, and that new businesses should be focused on building new distribution models, not creating a brand new IP. And I agree with him.

Does the Marvel deal change that?

Not in the slightest. Marvel is a pretty unique company. It has nearly 5,000 characters in its archive. (OK, so some of them must be pretty minor. I can’t see a movie starring “petty thug #3” coming any time soon.) It is, in fact, an archive more than a IP creator.

Sure, there are new comics coming all the time. And there have to be to so Marvel can look for new hits. But Disney is paying for the recurring revenues coming from a proven back catalogue. Don’t believe me? Let’s look at the ages of the characters that have either starred in movies in the last ten years or whose movies are in production.

Did you spot the theme? Those characters are all over forty years old. Marvel is not a content creation machine: it’s a mine. A mine of gold and platinum sure, but a mine nevertheless.

The acquisition of Marvel by Disney doesn’t change anything. Distribution still matters. (In fact, one of the rationale’s behind the acquisition will be that Disney will be able to maximise the value of Marvel’s IP due to its massive distribution muscle.)

And on the content side, if you can build a vast portfolio of popular content that can be consistently re-invented for new audiences across multiple media, you’re onto a money-spinner.

But notice the key words: vast, portfolio, re-invented, multiple media. That’s not a strategy that a start-up, or even an established, games company will find easy to follow.

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