This is becoming an interesting debate, which PDL Capital President Lawrence Meyers takes on this morning in a vigorously argued blog post responding to Bernstein Research analyst Todd Juenger’s controversial report last week on the subject. Juenger said that the huge success of The Avengers — which has generated $1.3B in ticket sales at worldwide box offices this month — merely makes Disney’s 2009 agreement to pay $4.2B for Marvel “a good deal,” not a self-evidently great one. That’s “the silliest statement I’ve heard in years,” Meyers says. The value of Disney CEO Bob Iger’s decision “was self-evident the day the deal got made.” Juenger misses the point, Meyers says, by focusing on the probable returns from Marvel-related movies. The operation will “generate tens of billions for Disney over decades” as it comes up with new characters, and storylines to pair them. “Movies will be the flagship product, but there will be television shows (primarily animated), direct to video, and at some point in the future, they’ll just reboot each of the characters and start all over again,” Meyers says. “This literally will go on for decades. And audiences will keep paying.” They will, that is, as long as the studio doesn’t cut corners that would cheapen the productions — something that Meyers says he does not expect to happen. As a result, “Ten years from now, everyone will wonder how Disney got Marvel so cheap.”
Juenger says that may be true, but “one must question why Marvel will make ‘billions of dollars’ in the future, but hasn’t made ‘billions of dollars’ in the past.” He notes that Disney’s $4.2B price put a high value on Marvel compared to its historic earnings. And while Meyers may be right about Marvel becoming a cash machine, the problem is that the returns “come, well, in the future.” Today’s investors in Disney have to discount those potential billions to account for inflation, and the possible profits they could make by parking their cash somewhere else.
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