Marvel

Topics covered include: Marvel’s corporate origins as "Timely Publications”, created in 1939 by pulp magazine publisher Martin Goodman in NYC, with the publication of Marvel Comics #1 http://marvel.com/comics/issue/10008/marvel_comics_1939_1Creation of enduring characters such as Captain America, the Fantastic 4, Spider Man, The X-Men, Iron Man, Thor, The Hulk and moreAdoption in 1961 of the "Marvel Comics” brand, and writer-editor Stan Lee https://en.wikipedia.org/wiki/Stan_Lee’s transition of the company towards focusing on edgier characters and stories targeted at older audiences Marvel’s first sale in 1968 to the Perfect Film and Chemical Corporation (later Cadence Industries)The company’s “turbulent” corporate history through the 1980’s and associated mergers, acquisitions and lawsuitsMarvel’s reinvention as a film-focused media company in the late 1990’s and early 2000’s with the launch of Marvel Studios https://en.wikipedia.org/wiki/Marvel_StudiosDisney’s ultimate acquisition of the company http://www.nytimes.com/2009/09/01/business/media/01disney.html for $4.2 billion in August 2009, during the depth of the great recession Marvel's—and in particular Marvel Studios’—performance since the acquisition http://www.newsarama.com/24999-disney-s-4-billion-marvel-buy-was-it-worth-it.html Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26Followups: People like Spectacles! http://www.nytimes.com/2016/11/30/technology/personaltech/trying-snaps-spectacles-live-with-the-look-enjoy-the-view.html?_r=0 Hot Takes: Shoutout to Hightower & VTS merging http://www.wsj.com/articles/tech-advisers-to-real-estate-industry-to-join-forces-1480431601 The Carve Out: Ben: Westworld http://www.hbo.com/westworldDavid: Overdrive http://app.overdrive.com More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  All right, listeners. To start the show today, we are going to play a little game of two truths and a lie. 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. So get ready to predict. Number one, for a brief stretch ending in an internal Time Warner investigation, the president of DC Comics acquired a large position in Marvel stock. Number two, famed corporate raider and comic book villain Carl Icahn once made a play to gain control of Marvel from bankruptcy.

• 0:41Speaker 00

  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.

• 1:09Speaker 00

  Welcome back to episode 26 of Acquired, the podcast about technology acquisitions. I'm Ben Gilbert.

• 1:17David Rosenthal?

  I'm David Rosenthal.

• 1:18Speaker 00

  And we are your hosts. Today's episode is Disney's 2009 acquisition of Marvel. 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. And all three of these, I believe, will have pretty similar tech themes, and David, I think, will really be able to kind of understand Disney's strategy and what their portfolio looks like these days.

• 1:47David Rosenthal?

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

• 1:53Speaker 00

  Yeah, no kidding. And kind of a fun one here, here going into the holidays. It's a, it's a nice one to tie up the year.

• 1:59David Rosenthal?

  Totally. And speaking of Disney's triumvirate of IP acquisitions, I am pretty excited about Rogue One.

• 2:10Speaker 00

  Yeah, I thought you'd bring that up, so I rewatched the trailer right before we started recording.

• 2:14David Rosenthal?

  Awesome. Awesome. I can't wait.

• 2:17Speaker 00

  Yeah, me neither. 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. David's in California right now.

• 2:27David Rosenthal?

  In the, in the heart of Silicon Valley.

• 2:30Speaker 00

  Indeed.

• 2:31Ben Gilbert?

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• 2:50David Rosenthal?

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• 3:11Ben Gilbert?

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• 3:33David Rosenthal?

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• 3:51Ben Gilbert?

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• 4:19Speaker 00

  All right, well, um, we don't really have too much before the show. Do you want us to dive right in?

• 4:23David Rosenthal?

  Yeah, let's jump in. So, uh, this, uh, 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.

• 4:37Speaker 00

  Oh, yeah, I think so.

• 4:38David Rosenthal?

  Yeah, I think it is. We are going back to 1939, almost, uh, 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. Uh, Goodman, um, 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. And so he started Timely Publications as part of his publishing empire.

• 5:20David Rosenthal?

  And the first comic book that Timely published was called Marvel Comics Number One, which came out in October 1939, and it included The Human Torch and The Submariner, which would be Marvel comic book heroes for a long time to come. And

• 5:42Speaker 00

  Yeah, The Submariner is a little, uh, a little bit more of a deep one.

• 5:46David Rosenthal?

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

• 5:53Speaker 00

  It's, it's pretty cool that it's, uh, that the very first issue was called Marvel Comics.

• 5:58David Rosenthal?

  Yeah.

• 5:58Speaker 00

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

• 6:10David Rosenthal?

  Yeah, well, interesting though, they didn't actually change the name of the company to Marvel Comics until 1961. So, um, 22 years later, uh, but the very first, uh, comic book that they published was called Marvel Comics. And apparently it was a big success. Uh, it sold almost a million copies, uh, which, um, I think is a lot for a comic book, probably especially a lot for a comic book in 1939.

• 6:39David Rosenthal?

  But uh, but the company Timely would uh, go on to do quite well. Create, you know, many of the iconic comic book superheroes and villains that we all know and think of today. Captain America was the first really big one that they created in nineteen forty-one. Which was, uh, well, I guess World War Two was going on at that point in time, but um, the US either hadn't entered yet, or was just about to enter World War Two. The Fantastic Four, Spider-Man, um, the X-Men, Iron Man, Thor, the whole, many, many others, lots of uh,

• 7:20David Rosenthal?

  basically, uh, as a, um, I love superheroes, but not a, I'm not a huge comic book aficionado. So as a like casual comic book fan, like everybody I know kind of except Superman and Batman, uh, came from Marvel.

• 7:36Speaker 00

  And who like Wonder Woman?

• 7:37David Rosenthal?

  Yeah, Wonder Woman too, yep. That was also DC Comics.

• 7:40Speaker 00

  It's pretty much the whole crew.

• 7:42David Rosenthal?

  Yeah, it's like DC had, you know, the big Superman, Batman, Wonder Woman, and then everything else is Marvel.

• 7:50David Rosenthal?

  And uh, so they, they go on, they create many of these, uh, many of these characters. And then in nineteen sixty-one, like we said, they actually changed the name of the company to Marvel Comics. Also, in nineteen sixty-one, uh, the editor of Marvel, uh, who was a man named Stan Lee, who actually started at the company as an office assistant. He was apparently, he was apparently Martin Goodman's uh, wife's cousin. And uh, started at the company in the early days as an office assistant and became um, sort of the,

• 8:29David Rosenthal?

  the, the spiritual head of uh, the direction of, of Marvel and, and the comics.

• 8:35Speaker 00

  And very briefly, actually, the, the president of the studio, right?

• 8:38David Rosenthal?

  Yep, yep.

• 8:39Speaker 00

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

• 8:40David Rosenthal?

  Yeah, um. A towering figure in Marvel history. He decides to kind of push the company in a new direction in 1961. And that was to make comics that were aimed at slightly older audiences. So not just young children. And that was, the first of those was the Fantastic Four, which they launched in November 1961. And was the first time that like comic book heroes were sort of, you know, they'd always been like the Superman sort of like perfect image of, you know, masculinity often and, you know, heroism.

• 9:24David Rosenthal?

  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.

• 9:31Speaker 00

  Right, more human.

• 9:32David Rosenthal?

  More, much more, you know, even though they had superhuman powers, 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, that was their namesake. And so, you know, Spider-Man was sort of like the quintessential, like teenaged, angsty, you know, teenaged, angsty superhero.

• 10:06Speaker 00

  Did we ever see that in Spider-Man 2?

• 10:08David Rosenthal?

  Oh, man, yeah.

• 10:09Speaker 00

  The Sam Raimi one with Tobey Maguire. And that was like, I should remember that one scene where he's like emo. He's got his hair dyed black and it's like over one eye and he's, yeah, just, it 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.

• 10:30David Rosenthal?

  Yeah, totally. He was ahead of his time.

• 10:36David Rosenthal?

  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

• 11:06Speaker 00

  Very generic.

• 11:08David Rosenthal?

  Yeah, very generic.

• 11:10Speaker 00

  Honestly, when I was reading through some of this, it felt like a laundry list of incredibly generic conglomerate names.

• 11:15David Rosenthal?

  Well, I guess that's the thing when you're looking at a company that goes back like almost 80 years.

• 11:19Speaker 00

  Right.

• 11:21David Rosenthal?

  And in a, in a fun twist of foreshadowing, in the 1970s, when Marvel's owned by Cadence, they actually strike a licensing deal with Lucasfilm and they published the Star Wars comic books in the 70s and 80s.

• 11:40Speaker 00

  Wow, that's wild because to me, like, we've got a trilogy going on here and Pixar was actually owned by Lucasfilm in the early days and Lucasfilm and Marvel had a licensing agreement in the early days. It's like, it's kind of amazing. They all ended up under one roof and had this kind of joint history along the way.

• 11:59David Rosenthal?

  Yeah. If only, if only Steve Jobs were somehow involved. That should have been our lie.

• 12:05Speaker 00

  That's right.

• 12:05David Rosenthal?

  That would have been fun. So listeners, you know that Steve Jobs was not involved at Marvel. And so in 1986, Marvel changes hands again and Cadence sells the company to New World Entertainment, the media company. And then New World undergoes some struggles and ends up selling it again shortly later to the billionaire Ronald Perlman in 1989 for 82 and a half million. And in another fun bit of foreshadowing of what's to come, Perlman gives a quote at the time, he says, "It," it being Marvel, "is a quote mini Disney

• 12:49David Rosenthal?

  in terms of intellectual property. Disney's got much more highly recognized characters and softer characters, whereas our characters are termed action heroes. But at Marvel, we are now in the business of the creation and marketing of characters."

• 13:06Speaker 00

  Boy, does that sound familiar?

• 13:08David Rosenthal?

  Sounds super familiar.

• 13:12David Rosenthal?

  So Pearlman's pretty ambitious and he shortly thereafter actually ends up taking Marvel public and it becomes a public company and then he starts expanding. And so he took it public in 1991 and then in 1992, they actually buy the, the sports trading card company Fleer in 1992. 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

• 13:57David Rosenthal?

  for, for all the Marvel superheroes and villains.

• 14:01Speaker 00

  But it's really interesting. They keep like vertically integrating and then unbundling and vertically integrating and then unbundling. And it's, it's interesting how like they kind of fluidly move throughout partnerships and ownership of, you know, their, their core asset being the characters and then moving in and out of publishing and distribution and merchandising and all those different, different.

• 14:21David Rosenthal?

  Adjacent or in the case of baseball cards, not so adjacent businesses.

• 14:26Speaker 00

  Yeah, I would love to see the prospectus on that, on that pickup.

• 14:29David Rosenthal?

  Yeah, what the rationale? Well, now is in the middle of the baseball card bubble, which we will come back to again in one sec, but, but Toy Biz also will be important in the future. So they don't buy all of Toy Biz. They just buy a slightly less than, than half a share of the company.

• 14:46David Rosenthal?

  And so things go along and then a couple of years later in kind of 95, 96 time, timeframe, things aren't looking so good for Marvel. So they've expanded a lot. 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. But even more so in 1994, Major League Baseball went on strike and this was like.

• 15:17David Rosenthal?

  A huge thing and people thought this was the, 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.

• 15:29Speaker 00

  Absolutely.

• 15:31David Rosenthal?

  Fleer suffered huge losses when, when this happened.

• 15:37Speaker 00

  Yeah, I mean, I remember that. That was the, so I'm an Indians fan, grew up in Cleveland. That was the first, first year Jacobs Field was open and they didn't get a full season in there.

• 15:44David Rosenthal?

  Oh, wow. I didn't realize that, man. Yeah, I remember that strike so vividly 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. And he, I think I remember he was on pace to like shatter the home run record that year. And then the strike was, the season was shortened by the strike.

• 16:07Speaker 00

  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 always 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. But I remember thinking like, how did we have a new ballpark in 94, but get into the World Series in 95? And it didn't really occur to me till I was later, you know, like late, later in the 90s, like, oh duh, there was no playoffs in 94.

• 16:40David Rosenthal?

  Yeah.

• 16:41Speaker 00

  Can you, can you imagine like that if that happened with the NFL now? Like, oh yeah, there's no.

• 16:45David Rosenthal?

  No Super Bowl. Yeah, totally. It was, it was terrible. And like, I was such a huge baseball fan growing up and it was, it was, it was really a black mark on the, on the sport.

• 16:59Speaker 00

  Yeah.

• 16:59David Rosenthal?

  So Marvel's not doing so good. People are speculating, you know, the company's in trouble. Maybe it'll end up filing for bankruptcy.

• 17:08Speaker 00

  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?

• 17:17David Rosenthal?

  I don't know. Um, I didn't do enough research on this. I, I wonder if it was related to just the whole, you know, the baseball card bubble, uh, which is probably even bigger of a bubble. I mean, I was a huge baseball card collector, as were so many of my friends at that point in time and still in my parents' basement have boxes and boxes full of baseball cards that are now Yep, me too. worthless. Um, that the, the, the market just got flooded. Um, and I wonder if a similar dynamic was playing out in the comic book industry. I can see that. Yeah. Um, so, uh, there's all this speculation about the future of Marvel and, uh, and comic book villain, as Ben referred to him in the, in the intro, Carl Iken takes

• 18:02David Rosenthal?

  notice and he and his firm start buying up some of the, uh, debt that, um, that Marvel had, uh, with public company, even with private companies. If you have debt, uh, that, uh, often trades, other people, not the people who loaned you the money can then sell the debt to other people. And, uh, folks like Carl Iken, this was, this is a big part of their playbook is they buy, uh, debt in companies that they think are troubled and with the hopes that, uh, 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. Uh, the, um, the, the not so charitable term for this in, in the industry is loan to own. Um,

• 18:47David Rosenthal?

  Or comic book villain. Yeah, or, or being a comic book villain. So, um, this, and this all starts playing out in the press and, uh, and then at the end of 1996 in December, uh, Marvel does end up filing for bankruptcy. And so this all goes to court and, uh, in early 1997, the court rules that Carl Iken can indeed take control of the company and he does. So Carl Iken, comic book villain, is now head of Marvel. It honestly sounds like a Lex Luthor move. It totally does. The only thing that would make this better is if, uh, Carl Iken were also CEO of DC Comics.

• 19:32Speaker 00

  It's true. But alas, this is probably a good time to, our listeners are, I'm sure they figured out by now, Carl Icahn is true, the Fleer thing is true, the CEO of DC owning a large number of shares in Marvel is false.

• 19:51David Rosenthal?

  That is false. So Carl Icahn now has control of Marvel, but there's just one problem. Carl Icahn didn't own all the debt. There are actually big Wall Street banks that had also loaned Marvel a lot of money. And they still wanted their money back. So the court, the court case wasn't over and the company still needed to officially reorganize and exit bankruptcy. So this is where Toybiz ends up coming back into the picture, this, this toy action figure company. And turns out it was owned by this guy named Isaac Perlmutter, who was an Israeli American.

• 20:30David Rosenthal?

  And he ends up proposing a new plan to the creditors of Marvel that involves Toybiz putting up money and paying back the creditors and then taking control of the company away from Carl Icahn. And the creditors and the courts actually decide to go along with this plan. So control of Marvel gets wrested away from, from the villain. It's like, it's like the comic book, you know, happy ending. And the superhero Isaac Perlmutter comes in to save the day.

• 21:04David Rosenthal?

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

• 21:08Speaker 00

  Ah, it's a great story.

• 21:09David Rosenthal?

  Even post-acquisition.

• 21:10Speaker 00

  All right. So what happens to Toybiz then? How does, how does that?

• 21:13David Rosenthal?

  So Toybiz gets folded into Marvel, I believe, and, and becomes part of the combined company.

• 21:22Speaker 00

  So then at this point Marvel owns the IP to the characters and has a merchandising division to actually sell the toys themselves.

• 21:32David Rosenthal?

  Yep, I believe that's right, but it's still not like a, you know, it's not a Disney scale consumer products division.

• 21:43David Rosenthal?

  So in the meantime, something even more important for the future of Marvel happens and that's, that I believe for a long time they'd been making various types of films and movies about the franchises, but films based on Marvel franchises actually start to kind of catch on with the public and become pretty big movies. And it actually starts, I did not realize this, in 1997, that year when Men in Black comes out, Men in Black apparently was a Marvel franchise, I had no idea.

• 22:18Speaker 00

  Oh, no way, because I knew there were comic books, but I always assumed it was one of those like after the movie comics.

• 22:24David Rosenthal?

  No, it was a Marvel franchise and then, God, I watched that movie so many times when I was a kid. Will Smith and Tommy Lee Jones was great.

• 22:36Speaker 00

  Absolutely, heroes.

• 22:38David Rosenthal?

  So Men in Black comes out, the first Men in Black comes out in 1997.

• 22:42Speaker 00

  And this was before Marvel Studios, right? This was Marvel IP being-

• 22:46David Rosenthal?

  So this was exactly, 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. Blade, 1998, and then the first really big one, X-Men, in the year 2000, Spider-Man in 2002. So again, Marvel's not making them these movies themselves, but obviously is noticing that collectively these movies are making billions of dollars.

• 23:19Speaker 00

  Really starting to take off, yeah, and it was, it's interesting to think about, like, there had been superhero movies for decades, right? I mean, like, we had a whole franchise of Batman movies, it's not like-

• 23:31David Rosenthal?

  Superman movies.

• 23:32Speaker 00

  That's right. Yeah. Oh, yeah. Christopher Reeve. Who can forget? 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 grossed $580 million within Marvel Studios. Like it wasn't that scale yet. It wasn't like every single blockbuster at the, at the box office is going to be a superhero film. So it's interesting to think about like, what, what changed that, that like all of a sudden caused these superhero movies to become more and more of a sure thing for the studios to make?

• 24:01David Rosenthal?

  Yeah. I don't know. And it also kind of coincided. Well, I think the, 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. But, but I think it was just those two were like the big franchises, the DC franchises and, and DC, I believe not always, but for certainly through all of these decades was owned by Time Warner and still is. So they were part of a big, major media company and had the resources to make these, you know, big budget movies. Whereas Marvel, I don't think ever did until, until, until this era. And so you see these superhero franchises that had been obviously had huge followings,

• 24:44David Rosenthal?

  but weren't like the mainstream, you know, to the extent that Superman and Batman were, 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, sort of the dawn of like sequelitis in Hollywood.

• 25:05Speaker 00

  Oh, yeah.

• 25:07David Rosenthal?

  And superhero movies, of course, franchises lend themselves so well to sequels.

• 25:12Speaker 00

  Yep. Yep. Very true. I mean, as, as ever since, you know, 1939, every single one of these, these comic book franchises has issue after issue, after issue.

• 25:23David Rosenthal?

  They're serials.

• 25:24Speaker 00

  Yep.

• 25:25David Rosenthal?

  Um, 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?

• 25:35Speaker 00

  Yep, yep.

• 25:36David Rosenthal?

  So in 2005, after, you know, a few of these, uh, huge, successful movies based on Marvel IP have come out from other studios, uh, Marvel actually takes a really ambitious step, um, to start Marvel Studios to make movies themselves. And, um, so they raised 525 million in, uh, in debt in a credit facility from Merrill Lynch. Um, ironically, like right before Merrill Lynch went bankrupt in the, in the, in the recession. Um, but they, they get a, a, a film financing, um, vehicle from, from Merrill, uh, and create the, really the first kind of major independent

• 26:19David Rosenthal?

  Hollywood studio since kind of the DreamWorks era. Um, this was a, this was a pretty big deal.

• 26:25Speaker 00

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

• 26:35David Rosenthal?

  Absolutely. Yeah. So the, and, and also interesting, um, you know, they sort of, when they announced this, uh, this was in 2005, 2006, when they were getting this set up. Um, they announced that the plan was that they were gonna release individual films of gonna, you know, individual franchises, Iron Man, and then the Hulk, which were the first two movies that they end up releasing, um, create these franchises, and then they were gonna tie them all together into a crossover film. So, which obviously they did under Disney.

• 27:06Speaker 00

  For Shadow of the Avengers.

• 27:06David Rosenthal?

  Yes, exactly. Um, but, uh, but that was the plan all along. And interesting that, um, Disney really, you know, has been hands off and let them, let them operate that plan. Um,

• 27:16Speaker 00

  Yeah, yeah. And thinking about, so, uh, in, in making this move and starting the studio, they'd already licensed out so many of their characters to, to other studios for, uh, to make films and distribute. And so when you think about like-

• 27:30David Rosenthal?

  And they're, they're really their top tier characters.

• 27:33Speaker 00

  Right, right. So let, I'll, I'll list the, um, the characters that were no longer eligible for Marvel to make their own films around. Spider-Man? The Fantastic Four, Silver Surfer, Wolverine, the rest of the X-Men.

• 27:48David Rosenthal?

  Yep.

• 27:48Speaker 00

  Deadpool. Uh, yeah, there, there's others, but when you think about like, wow, okay, so all those are off limits. And what they've got is sort of like the second tier at the time, like, we don't think of them now because they're huge. You know, gigantic blockbuster wins, but like Thor, Hulk, Iron Man.

• 28:06David Rosenthal?

  Yep.

• 28:06Speaker 00

  Like that, like that's who they're left to work with. And then that's what they create the, the studio around.

• 28:11David Rosenthal?

  Yep, uh, totally. And, um, and Iron Man was really, uh, that was really the best that they had available. And that was the first film, uh, that they made. And it came out in early 2008 and it ended up being, I mean, Robert, tour de force from Robert Downey Jr. I remember seeing it in theaters. Such a great movie, the original Iron Man.

• 28:32Speaker 00

  Absolutely. And actually the year before, I think that was oh nine and in 2008, they had the Hulk, which, which, uh, um, was about half of, of what that film grows. But that was a.

• 28:41David Rosenthal?

  They actually both came out in 2008, uh, and, uh, they came out like, uh, they, they made them concurrently. Uh, Iron Man actually came out a couple of months before Hulk, uh, I believe, uh, at least according to Wikipedia. Um, and, uh, which is always right. And, uh, yeah, Iron Man made, uh, 585 million, uh, at the box office. So almost 600 million, which is, uh, compared to films like the Avengers and, uh, well, Iron Man three, uh, and Frozen and other Disney movies. And, um, certainly the force awakens that make a billion or even close to 2 billion. That doesn't sound like a lot, but at the time that was a huge amount, even though it was only a few years ago.

• 29:22Speaker 00

  It's the beginning of an era.

• 29:24David Rosenthal?

  Beginning, really beginning of the superhero blockbuster era.

• 29:28Speaker 00

  That's right. And, and it sort of signals to like any potential, uh, buyer of, of Marvel stock. Like there's a new way to value this company and it's based on these numbers and has nothing to do with any of the other lines of business they're in.

• 29:41David Rosenthal?

  Yep. Um, so as, as you mentioned, uh, the Hulk comes out shortly thereafter and isn't the huge success that Iron Man is. But it's, it's a pretty, pretty successful movie makes, uh, just under 300 million. Um, 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.

• 30:10David Rosenthal?

  So the next year in 2009, uh, before, I believe there were, I believe they were intended to be five films on the slate that, um, that Marvel did with Merrill Lynch. Uh, but before any of the following ones can come out, August 31st, 2009, blockbuster deal, uh, Bob Iger and Walt and Walt Disney Company announced that they're going to acquire Marvel for 4.2 billion dollars, um, which is kind of a lot when you think back to, um, when, uh, Pearlman bought Disney. Granted, it was in the, in the late eighties, but it was

• 30:48Speaker 00

  Out of Bankruptcy Corp.

• 30:49David Rosenthal?

  Uh, no, no, Pearlman bought it. Pearlman bought it from, uh, in the late eighties from, uh, New World Entertainment. Uh, it was less than a hundred million. So, you know, here we are sort of 20 years later, uh, and we're talking 4.2 billion.

• 31:03Speaker 00

  Yep. Yep. 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.

• 31:15David Rosenthal?

  Yeah.

• 31:15Speaker 00

  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.

• 31:29David Rosenthal?

  Yeah. Um, super interesting. I mean, it really was, it really was the films.

• 31:34Speaker 00

  Yeah. Yeah. And to put, to place a, um, to kind of like, uh, for listeners out there, a, a 29% premium, um, was what was paid for, uh, for Marvel above what it was, uh, currently trading at. So while there was some scrutiny, like, oh my God, that's a huge, you know, 4.24 billion, that's a huge ridiculous acquisition. It's, it's not that much more than what the public markets were valuing it at. And it actually is pretty much in line with other public company acquisitions that we've covered on this show.

• 32:06David Rosenthal?

  Mm-hmm. And, uh, another thing that's important to think about, about this deal, um, That I think other folks who've written about it now and talked about it, it kind of lose context of a little bit. This was in the middle of the recession. 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, our and we were talking about box office numbers a minute ago. They were certainly depressed by the fact that we're in the middle of the recession and like, people didn't have nearly as much disposable income as they were used to having earlier in the decade.

• 32:44Speaker 00

  That's right. And for even more perspective, it was just over half the price that they paid three years before for Pixar. So and if you kind of look at this trend, they hadn't yet acquired Lucasfilm, but let's let's simplify Disney to a a content and distribution company. And they're basically out buying content. You know, the part, part two of their the second big pickup that they made here, you know, that they signaled that they were going to do this before. This was Iger's strategy. And it clearly had been working with Pixar.

• 33:16David Rosenthal?

  Yeah. And I mean, the Pixar, 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 wanted to buy Pixar. And this was clearly how he kind of set the tone for his, his tenure as CEO. And he's, you know, certainly hard to argue with his execution across the three of these companies.

• 33:39Speaker 00

  Right, right. And 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 and pockets elsewhere. But the three other big powerhouses are Lucasfilm, Pixar, and and Marvel. And, you know, when when and over, what, how many years? 2006 to 2012. So over six years rolled them all up.

• 34:08David Rosenthal?

  Well, and, you know, also, 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.

• 34:53Speaker 00

  Absolutely.

• 34:54David Rosenthal?

  And very actively deciding to be a consolidator as opposed to a consolidatee and looking around to see what they could buy.

• 35:01Speaker 00

  Yeah, and you look at what that aggressive strategy helped them do, I mean, who was competing with Disney in 2005 and who's even close to competing with them now. I mean, I think that that just totally worked.

• 35:14David Rosenthal?

  Yeah. And interestingly, Iger actually said in kind of the press quote at the time of the Marvel deal, he 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. It's a full price, but a fair price." And absolutely, you know, we talked about this in the Pixar episode and especially in the Lucasfilm episode, but you know, Disney's core competency and what they have that the

• 35:53David Rosenthal?

  other media companies don't have is that flywheel that Walt Disney drew back in the early days of the 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.

• 36:14Speaker 00

  That's right. And old school Disney was creating it, but new school Disney has has pretty efficiently figured out how to bring in content they don't create into that flywheel too.

• 36:22David Rosenthal?

  Yep.

• 36:23Speaker 00

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

• 36:41David Rosenthal?

  Yeah, and it's interesting, too. I mean, I hadn't thought about ESPN in this context, but you bringing it up and in the context of the flywheel.

• 36:50Speaker 00

  I guess actually Disney was an acquisition. It was just a long time ago.

• 36:54David Rosenthal?

  Or yes, yeah, ESPN, yep. It was through a pretty complicated history. That might be a fun show to do sometime.

• 37:02Speaker 00

  Yeah.

• 37:03David Rosenthal?

  ESPN is a super interesting corporate history. But the core ESPN business, I think in a lot of way, I mean, it was totally the golden egg for many, many years for Disney. 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. And obviously, SportsCenter is still popular 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. But but you see this this strategy, and especially around film with

• 37:46David Rosenthal?

  ESPN2 now with 30 for 30, and some of the investments they're making there. Think about the OJ documentary and how great and ambitious that was.

• 37:56Speaker 00

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

• 37:58David Rosenthal?

  All right, well, we'll stop now.

• 38:00Ben Gilbert?

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• 38:15David Rosenthal?

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• 38:28Ben Gilbert?

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• 38:38David Rosenthal?

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• 38:56Ben Gilbert?

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• 39:12David Rosenthal?

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• 39:29Ben Gilbert?

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• 39:38David Rosenthal?

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• 39:49Ben Gilbert?

  And you want to move on to acquisition category?

• 39:52David Rosenthal?

  Yeah, let's do, but first just to wrap up quickly on the aftermath of the acquisition. So as we mentioned, Pearl Mutter remains the CEO of the company. The company stays in New York. So it's a fully autonomous subsidiary within Disney. 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.

• 40:17Ben Gilbert?

  And producing dramatically more, like their scale now, I mean, they had like five or six in the pipeline when they were acquired. But I think you look at the pace of new Marvel movies coming out and new Marvel movies planned through the next few years, like they're not letting up.

• 40:31David Rosenthal?

  Yep. And even, you know, so there's much more value to be realized from the company in the future. But even since the acquisition in 2009.

• 40:43David Rosenthal?

  The Marvel movies have generated almost $9 billion in revenue, in box office revenue, which is crazy. Now, that doesn't necessarily equal, certainly doesn't equal profits and profits for movies are harder to get to than than pure revenue. We can, we can get that data.

• 41:04Speaker 00

  Yeah, I think, I think Marvel estimated profit margins, at least in the first eight films released, I actually pulled the stat, under Disney were about a 23% profit margin.

• 41:16David Rosenthal?

  Okay, so, you know, you call roughly sort of 2 billion-ish, slightly more than 2 billion in profit so far from the movies. So that's half the purchase price right there. And that's just the box office, you know, not the, not the home video, not the merchandising, not the theme parks, you know, all that stuff. So.

• 41:38Speaker 00

  Totally. And I even, I grabbed another stat. I think this is, I think this is from, yeah, Fortune article in 2015. One analyst said that by the time it was finished with the Avengers, Iron Man 3, and Captain America, and Thor sequels, Disney probably paid for the acquisition of the entire company. So I think it's, it's a pretty quick payback period there. And I think looking at that, that 22% profit margin, and you look at the price tag of, of production now on these films, pretty expensive to make these huge blockbusters.

• 42:09David Rosenthal?

  Yeah. Well, you need.

• 42:11Speaker 00

  200 million, 150 million.

• 42:12David Rosenthal?

  Yeah, you need, well, well, we should, we should delay some of this discussion until we, till we render our final grade. But.

• 42:18Speaker 00

  All right, all right.

• 42:19David Rosenthal?

  Let's, let's jump into a category. So as a reminder, we Pixar, which was our very first episode on this show, we actually, we said it was a business line. And then Lucasfilm, we said was a product. So what is, what is Marvel?

• 42:35Speaker 00

  Yeah, so I am going to foreshadow my tech themes and my conclusion a little bit here, but I think it was two things. One is a business line. They bought the business line of making the films. They were able to scale that. You know, we talked about kind of paying back the acquisition in a shortish amount of time. You know, the studio itself, but ultimately, they have this asset in perpetuity of the characters. And unlike, in my opinion, the reason why we didn't call, well, we didn't have asset yet in this categorization for Pixar, but Pixar sequels don't hold up as well as the serialization that comic book characters

• 43:20Speaker 00

  lend themselves to. So unlike a lot of sequels, which fatigue very often, there's these like few in the world, the James Bonds 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. So you kind of can keep experiencing the same tight plotline over and over again. Superheroes let themselves do that. 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.

• 43:57David Rosenthal?

  Yeah, interesting. 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. And I thought that this is too, and I still think it is, but it's an interesting insight on the serializability of superheroes and the assets of superheroes versus a Pixar, which as great as Pixar is.

• 44:36Speaker 00

  I'm not excited for another Toy Story.

• 44:38David Rosenthal?

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

• 44:50Speaker 00

  Right, it's like your assets depreciate faster.

• 44:53David Rosenthal?

  Yeah, or yeah, well, or there is no, I mean, they do do sequels at Pixar, but but that's not the core of what it is. It's like you have to keep generating new, keep pushing the rock up the hill each time.

• 45:04Speaker 00

  Right. And actually, it's funny, if you look at the, I was about to make the point that

• 45:10Speaker 00

  it is more expensive to create a Pixar film because you don't have the same reusability that you do from the nth, you know, superhero film.

• 45:20Speaker 00

  It actually is, the profit margin on Pixar films are higher. So to kind of combat the point I just made, 23% profit margins for Marvel, 27% profit margins for Pixar. And, you know, render farms and illustrators are expensive, but not as expensive as flying helicopters into buildings.

• 45:43David Rosenthal?

  Yeah. And, well, Pixar pays actors a lot too for their voice, but I would imagine probably in aggregate, in terms of money paid to actors, Pixar movies, I would have to imagine are less than a Marvel movie.

• 45:59Speaker 00

  Yeah, yeah, I would think.

• 46:02David Rosenthal?

  Interesting. Yeah, I like the, I like the asset categorization. I mean, I think it is definitely also juice to pump through Disney's flywheel. But it is a different kind of asset than certainly Pixar. And I think in a lot of ways, Star Wars too.

• 46:20David Rosenthal?

  Star Wars is kind of like, or Star, tellingly, I called it Star Wars, Lucasfilm. Yeah, but it is Star Wars, right? Whereas Marvel is many of these franchises.

• 46:32Speaker 00

  Right, right, right. Oh, yeah. I mean, that's a, that's a great point. It's like, if you look at the 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 50 of which are recognizable by the American public. And you look at, look at Star Wars, and I don't think Lucasfilm was sort of looking, valuing themselves based on all those deep characters. 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

• 47:19Speaker 00

  Stories that they're trying to tell that aren't with our favorite characters. And I'll be really interested to see 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. And if Disney will be successful in kind of creating the sort of serial blockbuster out of Lucasfilm characters, the same way they've been able to with Marvel characters.

• 47:45David Rosenthal?

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

• 48:29David Rosenthal?

  any sort of new Star Wars content that would come out and it's much faster now.

• 48:33Speaker 00

  Right, right. Multiple decades.

• 48:35David Rosenthal?

  Yep. And, and, and Lucasfilm is sort of about the people, you know, I mean, obviously there's George Lucas and, and some great leadership at Lucasfilm. But, but also, you know, about the franchise. And then, and then you've got Marvel at the other end of the spectrum, which has had great business leadership, especially under Isaac, Isaac Perlmutter. But, you know, all of the, all of the talent that comes into the, the making the movies and even the artists of the comic books, like it's all, it's all third parties, you know?

• 49:13Speaker 00

  Right.

• 49:14David Rosenthal?

  It's not, it's not like, it's kind of, it's very different from Pixar.

• 49:18Speaker 00

  Yeah. Great point.

• 49:22David Rosenthal?

  Interesting. Alright, should we move on to what would have happened otherwise?

• 49:25Speaker 00

  What would have happened otherwise? Yeah. So, um, I think Marvel was gonna get acquired. Like, we were in an era of consolidation where distribution was buying content.

• 49:36David Rosenthal?

  Yep.

• 49:37Speaker 00

  And I don't know who else it would have been. 20th Century Fox, Sony.

• 49:43Speaker 00

  Seems like, actually, there's a lot of places they could have landed. It's kinda shocking to me that with, um,

• 49:52Speaker 00

  the Pixar pickup in 2006, that someone else didn't see this coming and try to make a play for it sooner. Did, maybe other people, other studios, or I guess other-

• 50:03David Rosenthal?

  Well, especially the other stu- well, I wonder if the other studios maybe, were a little bit lazy in their thinking because they were kinda having their cake and eating it too, right? In that they were getting Marvel movies in Spider-Man and in X-Men, without having to actually buy the company. And, uh, and it was only when, uh, when Marvel started making movies on their own, that it became a really valuable company as itself.

• 50:33Speaker 00

  Yeah, that's true. And it really hadn't been long since Marvel Studios was around. The shocking thing is like, how did no one else, I mean, oh, actually, here's a, here's kind of an interesting question. If you're 20th Century Fox, or if you are Sony Pictures, and you see, um, let's say you can see the future and know that Disney was going to do this, do you try to do it sooner? Like, did people, A, not think Disney was gonna do it, or B, not care that Disney was gonna do it?

• 51:02David Rosenthal?

  Yeah. Well, here's an interesting thing that we, we haven't talked about yet so far, but,

• 51:08David Rosenthal?

  on the surface, uh, this actually wasn't the most natural fit with Disney.

• 51:15David Rosenthal?

  Which actually, I think is one of the reasons why Bob Iger and Disney really wanted to do this acquisition.

• 51:22David Rosenthal?

  But Disney was always, you know, kind of like princesses and animated movies and then Pixar, which definitely fit into that mold. And, you know, in terms of their strategy with children, you know, super gender stereotypes here, 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 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

• 51:52Speaker 00

  To a much lesser extent.

• 51:52David Rosenthal?

  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?

• 52:05David Rosenthal?

  In, in total, you know, old school gender stereotyped ways, speaking as a massive Frozen fan myself.

• 52:13Speaker 00

  Right, right.

• 52:16Speaker 00

  You know, I still haven't seen it.

• 52:17David Rosenthal?

  Oh, you gotta change that. It's so good.

• 52:19Speaker 00

  I know. I know. As a, as a admitted Pixar fanboy, I really should.

• 52:26Speaker 00

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

• 52:31David Rosenthal?

  Yeah. And it's interesting to think too, I can't imagine this had that much impact on Pearl Mutter and Marvel because it was, they were much more business executives than sort of founder creative types. But Iger and Disney have developed this reputation now with these three acquisitions as like excellent stewards of, of franchises. They're kind of like the Warren Buffets of, of creative, of creative content and businesses.

• 52:58Speaker 00

  Right, right. When Yeah. In the, in the Pixar animation, we, or the

• 53:06Speaker 00

  I think it was the Pixar. Uh, no, in the Lucasfilm acquisition, we compared it to Facebook. That Disney was really good at leaving their, um, their sort of disparate brands that they acquire on their own.

• 53:18David Rosenthal?

  Which again, a little bit was why it didn't, on the surface, it was a little, wow, Disney buying, you know, Marvel. Like Marvel is much edgier than Disney, but they've let it be totally separate. But this was, you know, in the Lucasfilm acquisition, uh, you know, George Lucas said to Bob Iger before he sold like, if I'm gonna sell it, I would only sell this to you and to Disney.

• 53:40David Rosenthal?

  And, uh, and Steve Jobs too, right? Like, it's hard to imagine Pixar and Jobs selling to anybody except Disney.

• 53:48Speaker 00

  Right, right. Yeah. So two, two other questions here then for you that I would pose. One, uh, is there a fourth? Like, will we see Disney make a play for another large piece of content? 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? And then two, while you're, you're sort of newling on that.

• 54:14Speaker 00

  I generalize this to, uh, distribution, combined distribution content company buying more content and pumping it through their distribution. Do we see that in other verticals? Like, are we seeing that in tech outside of entertainment? Or any other forms of content being bought by, um, distribution plus content companies?

• 54:37David Rosenthal?

  Interesting questions. Well, on the second, I mean, to a certain extent, I think we see it a little bit with Facebook and,

• 54:46David Rosenthal?

  and Instagram. I mean, it's very different. Like, I think Instagram would have grown hugely on its own. 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.

• 55:03David Rosenthal?

  On the first question, you know, I'm not close enough to, uh, have a super informed opinion on, on that front. But one thing that just popped into my mind, especially because the company is struggling a bit now. What about Nintendo?

• 55:19Speaker 00

  Hmm. Boy, that's like the, you're right that that is like the, another huge treasure trove of IP that

• 55:26David Rosenthal?

  Yeah.

• 55:27Speaker 00

  as we saw with, with Pokemon Go. I mean, you, you, you take an existing piece of technology or relatively existing with the Niantic and, and slap highly valuable IP like Nintendo's on top of it and you can create something, you know, that, that the world goes crazy for. We can have a debate on how lasting that is, but.

• 55:48David Rosenthal?

  Yep. But certainly the IP that Nintendo has in, in Mario and Zelda and so many, you know, even, I mean, there are a lot of ways, like the parallels to Marvel are very similar. 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. Man, what would, if, if all of that IP were liberated from the challenged business model of like gaming console hardware sales?

• 56:19Speaker 00

  Right, right.

• 56:20David Rosenthal?

  Yeah. What, what could you do with it?

• 56:22Speaker 00

  And what, this is interesting, like almost all of this, probably excluding Pixar, but at this point Pixar is a little, kind of an older company too. Like what IP is super valuable and a major part of the American consciousness and new? Cause all this is like, you know, buying the Star Wars stuff from 77 and buying the Marvel stuff from the 40s and 50s and buying Nintendo from the 80s. Like where, where is, you know, like where's 2010's Mario? And like, does that exist in the era of the internet and shortened attention spans and social media where individuals are their own content creators and content is short-lived?

• 57:04David Rosenthal?

  Yeah. Well, maybe it lives on Facebook.

• 57:07Speaker 00

  Yeah. And it's like, it's funny, like one, you know, and all the rumors of

• 57:10David Rosenthal?

  Or Snapchat.

• 57:11Speaker 00

  maybe Disney buying Twitter. Yeah. And then that sort of fell through probably because of pricing issues. Like.

• 57:20Speaker 00

  None of these platforms own the IP. There's like shared licenses between the tweet and the and between Twitter and the originator of the content, but like there it's hard to think of new intellectual property that everyone cares about. Like everyone cares about their little filter bubble of

• 57:42David Rosenthal?

  Yeah, I think about or like Twitch too, right? Like

• 57:46Speaker 00

  Right.

• 57:47David Rosenthal?

  All the big

• 57:50David Rosenthal?

  big entertainment franchises of the last five years, certainly. I think you would, you know, they're they're apps, right? They're not. They're not IP themselves. They're platforms.

• 58:03Speaker 00

  Yeah, yeah, exactly. 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 not actually being a content powerhouse.

• 58:17David Rosenthal?

  Yep.

• 58:18Speaker 00

  Other than, you know, actually, we are seeing this with Netflix, right? Netflix, Amazon, 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 of who else is is 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.

• 58:48David Rosenthal?

  Yep. Well, actually, you know, there are plenty of IP franchises out there being created and great ones. I should have thought of this. Jenny and I with my parents over Thanksgiving weekend went to see Fantastic Beasts and Where to Find Them, which we loved. But yeah, Harry Potter, of course.

• 59:10Speaker 00

  Another, yeah, totally. And that's the last couple of decades or decade and a half.

• 59:14David Rosenthal?

  Or at least younger than some of these other franchises that Disney's been buying.

• 59:18Speaker 00

  Yeah, yeah, maybe that's not a fair.

• 59:21David Rosenthal?

  But also, you know, that was really created. Not pre-internet, but certainly pre-social media and you know, the first Harry Potter, I don't think JK Rowling or Harry could have, you know, peered into the future and seen the world that we live in today.

• 59:39Speaker 00

  Yeah, absolutely not.

• 59:41David Rosenthal?

  In fact, you know, like Ben and I both got iPhone 7s 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.

• 59:58Speaker 00

  Yeah, right. It's kind of a, 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. And you're like, whoa, these are, uh, these are weird when I send them to people and they

• 1:00:10David Rosenthal?

  They're pictures that move.

• 1:00:11Speaker 00

  Too much context. Yeah.

• 1:00:12David Rosenthal?

  Totally.

• 1:00:12Speaker 00

  Yeah.

• 1:00:14Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:00:27David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:00:44Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:00:59David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:01:23Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:01:42David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:02:12Speaker 00

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you.

• 1:02:37David Rosenthal?

  All right. Should we move into tech themes?

• 1:02:39Speaker 00

  Yeah, totally. So the one, I've got one that's based on a stat. So of the top 10 grossing films in 1981, seven of them were original content. Raiders of the Lost Ark, 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 2 and For Your Eyes Only.

• 1:03:11Speaker 00

  Fast forward to 2011, so three decades later.

• 1:03:17Speaker 00

  I'll read you the top 10 grossing films. 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. So that is eight sequels, two adaptations, and zero original pieces of content.

• 1:03:42David Rosenthal?

  Yeah, all of them franchises.

• 1:03:45Speaker 00

  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. It's happening elsewhere. And we're in this era right now simultaneously of a great TV renaissance. There's every, every season, there's like brilliant dramas on with, you know, Hollywood acclaimed actors and best in class writing. And, you know, there was Mad Men, 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 to mention

• 1:04:27Speaker 00

  yet, but like, all of the experimentation has moved to cheaper things. TV, or YouTube, or social media. And I'll, and the Hollywood is, is the way to go and make a billion dollars off of sure things. Because if you're gonna go pour a couple hundred million in, you want to get big, big money out, and you're not willing to take a chance.

• 1:04:51David Rosenthal?

  Yep. It's interesting. I think that the question for me that that begs, and I've been thinking about, even starting to do the research and as we've been doing the episode, for all the justifiable admiration, deserved admiration that I think we're keeping on Marvel and Disney here, I think there is one really key existential risk. 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, and so maybe it'll never come. But how many sequels can we take?

• 1:05:36David Rosenthal?

  You know, how long are superhero movies gonna be in vogue? You know, is this just a very extended fad cycle that we've been living in? Like in, in 10, 20, 30 years, will we look back on this and be like, man, that was like leisure suits? Like, remember the superhero movie days, you know?

• 1:05:55Speaker 00

  Yeah.

• 1:05:56David Rosenthal?

  And I just wonder, you know, like, I don't know. I don't have a good answer to it.

• 1:06:00Speaker 00

  Well, yeah, and it's, I guess it's interesting to like, if...

• 1:06:05Speaker 00

  If this is like a permanent thing, what changed in the world that like what piece of technology or what societal norm shift or something changed that made it so that we were, well, maybe it's this, maybe it's we're actually capable of of creating something that resonates so strongly with with people's nostalgia and we're actually capable of creating multiple billions of dollars of revenue on a single film. Therefore, we're going to spend all the money to produce that thing. Therefore, we're not going to take chances.

• 1:06:40David Rosenthal?

  Yeah. And producing those films costs hundreds of millions of dollars.

• 1:06:45Speaker 00

  Right. 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 and it was possible to spend to earn that much from instant global distribution that, you know, we actually, we actually are seeing it come to fruition and it was only technology limited before.

• 1:07:06David Rosenthal?

  Yeah. And, and the flywheel like Disney of, you know, consumer products and theme parks and, you know, when you're investing in an IP as something as an entity like Disney, like that is a huge investment. You really can't, and, and they do take risks and, you know, have failed on stuff like, what was that one? They had a couple of live action movies that were total flops, like right around the time that they bought Marvel.

• 1:07:34Speaker 00

  Which is interesting.

• 1:07:35David Rosenthal?

  Tomorrowland was one of them.

• 1:07:37Speaker 00

  They're taking big risks, but they're flopping.

• 1:07:38David Rosenthal?

  Yeah, right, right. But, but you can't afford to have too many of those flops.

• 1:07:42Speaker 00

  Right. 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.

• 1:07:49David Rosenthal?

  Yeah.

• 1:07:50Speaker 00

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

• 1:07:58David Rosenthal?

  Yeah, it's interesting, though. 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. Is there or will there be something similar in the, you know, film format? I mean, obviously, there's independent film and there's lots of innovation going on. 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, a channel to distribute that to a mass audience?

• 1:08:37Speaker 00

  Yeah, it's interesting. 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. And with global distribution happening so quickly and so cheaply, you have the ability to achieve much more sameness and have much more people agree on what the best thing is. And it lead, 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?

• 1:09:21David Rosenthal?

  Yeah.

• 1:09:22Speaker 00

  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, they were much more distributed and there were many more people that could make it big. And now there's like this echelon of people that you can count on the, on one hand, who are like these super phenomenon, phenomenas.

• 1:09:46David Rosenthal?

  Yeah.

• 1:09:46Speaker 00

  And I think the same thing's sort of happening in movies.

• 1:09:49David Rosenthal?

  Yep. Well, and this, this, this totally bleeds, leads super well into my tech theme, which is something I've been thinking about. I've been reading this great book, it came out, came out last year, I think, or a couple of years ago, called Sapiens, by, by this guy Yuval Noah Harari. And it's a great book, and it's about, it's sort of a, a...

• 1:10:18David Rosenthal?

  Biological time history of Homo sapiens and how, you know, our, our species came to take over the world, basically, even though there were, 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, and you know, you could argue now are destroying the planet, but certainly have taken over the planet. What like actually differentiates us from other Homo species and from the rest of the animal kingdom? And he argues that the, the

• 1:10:58David Rosenthal?

  primary thing is our ability to believe in, create and believe in fictions. He calls it, which are like, you know, a, 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? But like, it's not that it's not real, it's very real, but it's not something that any other species could comprehend. And so that, that kind of makes me think about like IP and exactly what we were just talking about,

• 1:11:39David Rosenthal?

  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?

• 1:11:55Speaker 00

  Yeah. Yeah. Yeah. It's a great point.

• 1:11:58David Rosenthal?

  Heady stuff for Marvel. I highly recommend, I highly recommend the book. Not my carve out for the week, but, uh, cause I'm not done with it yet, but great book.

• 1:12:07Speaker 00

  Cool. Cool. You want to grade it?

• 1:12:09David Rosenthal?

  Let's do it.

• 1:12:09Speaker 00

  So an interesting stat that I found when I was looking through all this, uh, 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. Pixar made about four and a half. Costs of creating them are fairly similar. The box office profit from Marvel is about 1.2 billion versus 600 million. So there's like this interesting thing where Marvel does phenomenally better at the box office, but over the long term. Marvel's home video sales are about 400 million and Pixar's are 1.6 billion.

• 1:12:51Speaker 00

  And for there, 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. 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 a, on a streaming service or from Amazon, like Iron Man 2. And you can sort of see like that, that these serialization films don't have lasting value or nearly as much

• 1:13:35Speaker 00

  as, as the Pixar ones do. And so I went back and listened and, you know, I have an, I have an A, not an A plus for Pixar. And I think that it's fair for me to, to say Disney, a great acquisition, almost a necessary one. We'd be sitting here saying like, you were fools not to buy Marvel, but it's an A minus to me. It's, it's not as good as, as the, the Pixar acquisition. And I think the, the characters are brilliant IP for a long time. I think they've basically already recouped the cost of that, that $4 billion outlay. And we'll see what they can do with the, the character intellectual property because unlike

• 1:14:15Speaker 00

  Pixar, that, that those already created assets on a shelf will just keep, keep creating value for them with, with the assets that they have from, from Marvel, from these characters and this intellectual property, they're going to have to keep pouring cash in to get cash out.

• 1:14:33David Rosenthal?

  Yep. I think we found that same infographic that I was, I had it copied in my notes and I was looking at it too. Yeah, it's interesting too to think about our grading benchmark throughout this throughout the life of this show.

• 1:14:50Speaker 00

  What, you mean Instagram?

• 1:14:51David Rosenthal?

  Yeah, well, we start well, we well, no, I was gonna not the evolution of our benchmark.

• 1:14:55Speaker 00

  Oh, yeah.

• 1:14:56David Rosenthal?

  You know, I think Instagram is still one of, if not the top on the benchmark, but I keep thinking about to next and I don't think you can argue that that's not the greatest acquisition of all time. When you create a trillion dollars of value, it's hard to top that.

• 1:15:14David Rosenthal?

  But also makes me think a little bit about like the as cool as as much as we love, you know, IP and these fictions and what we're what I was just talking about in in media and movies and these franchises, the value that you can create in technology is so much more like the leverage is so much higher than you can get from the media industry or really any other industry. You know, this is why technology companies are so valuable, you know, 13 people at Instagram can create many, many billions of value. You can't make you can't make Iron Man three with 13 people or the Iron Man theme park.

• 1:15:53Speaker 00

  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. That is why technology companies are worth so much and you just can't pull a lever to make the 23% profit margin from from these Marvel films into something, you know, 1.5x that.

• 1:16:18David Rosenthal?

  Yep, yep. And of course, there's a dark side to that, too, as we also talked about on the Facebook, you know, episode like, you know, you don't create nearly as many jobs when you're pulling that technology lever. But anyway, we're getting off track here. 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.

• 1:16:57David Rosenthal?

  I think in a lot of ways, there is the most risks to the future value of Marvel. And it's it's in, you know, will superhero, because it's a portfolio of superhero franchises. Will superhero franchises continue to be as popular? You know, I think so. They've been popular for 100 years, but how popular will they be? You're totally indexed to that. Lucasfilm is all about Star Wars. You know, and Star Wars, you could argue you have even more risk indexed to that. However, you could probably also argue it is one of, if not the single most beloved franchise in the entire world of all time.

• 1:17:41David Rosenthal?

  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 trilogy. So I'm going to go, I'm going to go A minus for Marvel.

• 1:18:15Speaker 00

  Cool. Cool, cool.

• 1:18:18David Rosenthal?

  All right.

• 1:18:20Speaker 00

  Follow ups?

• 1:18:21David Rosenthal?

  Follow ups. Uh, one real quick follow up. Spectacles have launched and people think they're cool.

• 1:18:29Speaker 00

  People do.

• 1:18:29David Rosenthal?

  Snap Inc.

• 1:18:31Speaker 00

  Would love, if any listeners have them, would love, love to hear your your comments in Slack or email us at [email protected].

• 1:18:39David Rosenthal?

  We haven't made it to a vending machine yet.

• 1:18:41Speaker 00

  No, no. And my God, Evan Spiegel is a product marketing genius. I think.

• 1:18:50Speaker 00

  Launching them, what, in a custom vending machine in LA? And then that going away and of course, selling out immediately and having a huge line? And then popping one up, uh, where was the one in the kind of like Great Plains area? Like Tulsa, I think? And then on the Grand Canyon? And then, once people are saying, where is it going to be next? Then having a store in New York City that just has the vending machine in the back of the store? And like, I just wonder what's next? And I maybe, well, maybe there's even something before this, uh, this show goes live, but, um,

• 1:19:27David Rosenthal?

  Spectacles in space?

• 1:19:28Speaker 00

  Yeah, like doing, doing everything right. Like you could totally see other companies being like, okay, we have to work with retailers to make sure there's enough, enough of these things available. And it's, it's totally just like, demand generation, uh, 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, 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 on to something when they're about to go on this IPO roadshow.

• 1:20:04David Rosenthal?

  Yeah, um, 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, uh, more of a congratulation to friends, but, uh, Hightower announced, uh, very, very recently, if not today, as we're recording this, um, which is a startup in New York with lots of Seattle roots, uh, that they are merging with VTS in a deal valued at 300 million.

• 1:20:32Speaker 00

  Yeah, huge congratulations to, uh, to Donald DeSantis and that, that whole team. Um, really like, really cool story, Startup Weekend, guys, uh, got together actually to gel as a team at a Startup Weekend, um, moved to New York when it was very clear that, um, to be in commercial real estate, they should, they should be in New York. Really just nailed product market fit quickly, built a great team and, uh, um, you know, this is not the end. It's, it's a, a reported estimated $300 million merger with, um, their competitor. And the, the Wall Street Journal article that we'll link to likens it kind of to, um, to, uh, the Zillow Trulia merger.

• 1:21:11David Rosenthal?

  Trulia, yeah.

• 1:21:12Speaker 00

  But awesome, awesome, awesome to see, uh, see it happen for that company.

• 1:21:16David Rosenthal?

  Yeah, and, um, Great to have startup weekend alums. Startup weekends played as an organization and and events such a huge role in Ben and my lives and careers and whether it's rover.com, getting started at startup weekend or Ben, Ben meeting, well, leading indirectly to us meeting and

• 1:21:41Speaker 00

  Yeah, adding up to PSL and yeah.

• 1:21:44David Rosenthal?

  PSL and Madrona.

• 1:21:46Speaker 00

  I've got a really gushing blog post about how much, how awesome Startup Weekend is on my blog at some point, if anybody actually wants to check that out. But should we move on to carve outs?

• 1:21:57David Rosenthal?

  All right, carve outs.

• 1:21:58Speaker 00

  Cool. 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. It's a HBO show based on a Michael Crichton book, which then got turned into a movie in the seventies with Yul Brynner as a cowboy. And I don't want to say too much about it now, but if you, if you like the concept of where is AI and robotics going, and you like really high production value entertainment, it's, it's created by JJ Abrams and Jonathan Nolan, who of course worked on all the, the recent Batman films and the prestige and

• 1:22:42Speaker 00

  yeah, a bunch of great films. You gotta watch it. It's so good. And I just signed up for HBO now and it's like trivially cheap and you get a month free. So highly recommend it.

• 1:22:53David Rosenthal?

  Technology, technology and superheroes, all in one.

• 1:22:56Speaker 00

  Yep.

• 1:22:58David Rosenthal?

  My carve out for the week, real quick, I, I don't think I've done this before on this show, but I should have because I love it. Super cool app called Overdrive, which is, 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 and then read them on your Kindle or on your smartphone and listen to the audiobooks for free with your library membership. And I actually had started using this a few years ago, kind of forgot about it and picked it up again earlier this year. And it's just

• 1:23:38David Rosenthal?

  like removing that little bit of friction to, you know, not that eBooks are very expensive, but audiobooks are. Yeah, I'm reading like.

• 1:23:48David Rosenthal?

  Four or five times as many books as I used to because of it. So highly recommend it. Go sign up at your local library, support your libraries and use Overdrive.

• 1:23:56Speaker 00

  True that.

• 1:23:58David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:24:04Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:24:15David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:24:35Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags and product analytics into one unified system. So teams can ship safely, test rigorously and directly link what they changed to how users actually behaved.

• 1:24:48David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:24:59Speaker 00

  All right, that's all we've got. If you weren't subscribed and you want to hear more, you can subscribe from your favorite podcast client now. If you're a long time listener, or even if you've just picked us up and you really like us, we don't ask for much, but we would really, really love if you'd share about us on Twitter, share about us on Facebook, leave a review. It's how we grow the show and it's how we can reach more people and do more things. So thank you so much for being a listener and we will hear you next time.

• 1:25:27David Rosenthal?

  We'll see you next time.