In 2009, Disney acquired Marvel. During the early years, the Marvel franchise benefited greatly. As the 2020 rolled by, little of that creativity could be found in the latest installments.
In November 2022, a Fandom survey, cited by Variety, revealed Marvel fans started to experience franchise fatigue. An alarming one-third of Marvel fans indicated to feel fatigued with the franchise as Disney has been flooding the market with content from the cinematic universe. Media observers have reported on the phenomenon for several years, with the series now reaching a new low. How did Disney drive this valuable IP into the ground?
Understanding market saturation
Market saturation occurs when a company tries to maximize profits by flooding the market with its product or service. As more and more customers’ needs are being met, a smaller portion of the market remains willing to buy the product. Market saturation can have multiple causes and isn’t always in control of the distributor. Competitors can enter the market who want to see an opportunity, capitalizing the remaining market share, leaving little for the original provider.
Each company will deal with market saturation at some point along the product life cycle. Market saturation can act as a positive force, as it fosters innovation to stay ahead of the competition and keep customers coming back. The ability to innovate isn’t always possible. Grocery items, especially perishables cannot or have limited innovation ability. This situation can spark price wars where players will keep undercutting each other to maintain, or increase, market share.
Alternatively, companies can employ marketing strategies to increase brand awareness, persuading potential customers to opt for their product and remain relevant to current customers. We can witness this in the premium passenger vehicle market. This segment of vehicles is no different than their cheaper counterparts, hence heavily relying on brand and reputation to drive growth. To itself and to all the underlying products.
The Marvel Disney Chronicles
In August 2009, Disney acquired Marvel Entertainment for an upward of $4 billion. President and Chief Executive Officer of The Walt Disney Company, Robert A. Iger, said in the press release that Marvel’s unparalleled IP portfolio, consisting of strong franchises like Captain America, Spider-Man and Iron among others, would deliver strong value to Disney’s entertainment properties. Confident that the unique Marvel brands would unlock new long-term growth opportunities for the media-conglomerate.
Chief Executive Officer at Marvel, Ike Perlmutter, noted that Disney was the perfect home for the vast library of over 5,000 characters within the Marvel Universe, allowing for the brand to expand content creation and licensing deals. Through the massive reach of Disney, Marvel would be able to expand its franchise to audiences around the world.
Media analyst at stockbroker Miller Tabak, David Joyce, told The Guardian that acquiring Marvel would allow Disney to reach the young male demographic, where it had lost significant momentum. Adding that Disney has been primarily focussed on its cable networks and consumer products, which are heavily centered around the Disney princesses and fairies. This strategy has helped Disney root itself in the young female demographic, but adversely losing momentum among males.
Troubles at Marvel
Six years into the deal, Disney started to restructure Marvel, marking a drastic reshuffle of executives at the studio. In June 2015, Rob Steffens returned as CFO of Marvel Entertainment, with Chris Acquavivam leaving the company, amicably according to the studio. In August 2015, The Hollywood Reporter said President of Marvel Studios, Kevin Feige had finally completed his long desired reorganization of the production company in order to unshackle it from the tight grip of its CEO, Isaac “Ike” Perlmutter, who, according to Feige ruled the studio with a worrying degree of micromanagement.
Feige transformed the struggling comic book publisher into an entertainment powerhouse, which would eventually be acquired by Disney. Feige was rumored to have voiced his concerns about the operations at Marvel to Disney Studio’s Chief Alan Horn and CEO Bob Iger. A spokesperson for Disney told The Hollywood Reporter that the reorganization at Marvel Studios was necessary to promote a further integration of the production company within the The Walt Disney company. Marvel followed in the footsteps of Pixar, who experienced its own bumpy ride since its acquisition by Disney and Lucasfilm.
The Hollywood Reporter noted that the restructuring of the studio was a blow to Perlmutter, who shrouded Marvel in a veil of mystery, giving the company an infamous reputation for penny pinching. Perlmutter valued a low-profile as exemplified when he disguised him to attend the Iron Man premiere. His frugality meanwhile surfaced when he complained that journalists were allowed two sodas instead of one.
Perlmutter also felt the precious Marvel franchises had been tainted due to female superheroes, which he found to be one of the reasons why superhero movies no longer performed at the box office, according to leaked emails sent toward Sony executive Michael Lynton in 2014. These views were directly opposing Iger’s more inclusive views of how the brand should operate.
Iger meanwhile had to strike a delicate balance, ensuring that the studio maintains its talents to create solid productions that will generate a profit for the company, whilst pleasing the executives of the respective studios under the Disney umbrella. Encroaching too much onto their territory might set off further reluctance to cooperate, however, giving them full autonomy might result in the productions that don’t align with Disney’s strategic vision.
Captain America
Captain America: Civil War became the metaphorical climax of the internal power struggles at Marvel, The Hollywood Reporter commented in September 2015, a month after its breakdown of the studio’s reorganization. The Civil War installment was set to break tradition and part ways with culture Ike had ingrained in the company. The latest adaptation of the Captain America franchise featured Hollywood’s biggest stars and a budget that rivaled Marvel’s mega blockbusters.
The large production budget, The Hollywood Reporter noted, didn’t sit well with Perlmutter, who always favored tightly controlled budgets. A strategic shift introduced by Kevin Feige. The total products budgets were still fairly modest, as we will later see, budgets started to spiral out of control in years to come. Keige, according to one insider who spoke to the news outlet, deserved more autonomy as under this leadership, Marvel generated billions. Wondering why he needed to report to an elderly man who didn’t make movies.
However, how the reorganization would eventually play out under the much younger Keige was still a great unknown for industry observers. In October 2019, Marvel underwent yet another major reorganization with all the creative staff at Marvel being switched to Marvel Studios in anticipation of the upcoming launch of Disney+. Through the administrative switch, all employees would be directly reporting to Kiege, who allegedly added Chief Creative Officer for Marvel to his title. This seemingly minor adjustment, would herald great implications for the operations at Marvel, as Kiege would now oversee all efforts from the company’s executives across all entertainment branches.
Structurally this meant that President of Marvel Entertainment, Dan Buckley, would assume a dual reporting role, where he would oversee the publishing creative and editorial division, whilst simultaneously reporting to Fiege, a departure from the previous chain of command, with Ike Perlmutter seeing his influence further diluted. Perlmutter would keep his seat as Chairman. Creative lead for Marvel Entertainment, Joe Quesada, maintained his current position, continuing to report to Buckly.
Through these changes Kiege’s influence greatly expanded, Deadline commented. Prior to the administrative change, Kiege already oversaw the Marvel Cinematic Universe. Mike Fleming Jr. from Deadline, noted that it’s highly probable that Kiege’s influence would be extended as he has been a notable figure during Walt Disney’s Investor Day, where the company announced its streaming service, Disney+. Marvel revealed its upcoming installments that would be coming to Disney’s streaming service intended to rival Netflix.
While Disney+ has seen its own struggles, this change would prove a pivotal moment in the relationship between Marvel and Disney, as under the leadership of Chapek, who would succeed Iger as CEO in 2020, Marvel’s importance as a revenue vehicle would tip the balance further away from Perlmutter. The days of Marvel’s frugality would permanently cease and unleash a power struggle between Perlmutter and Iger. This topic is beyond this article, as this high stakes of chess has many more subtleties.
Marvel in overdrive
The number of worldwide Marvel Cinematic Universe (MCU) releases started to increase after Disney’s acquisition. In 2009, the year of the deal no Marvel movie was released. The following year, one movie was released. The year after, in 2010, two movies found their way to audiences around the world. The release schedule would follow a similar schedule up to 2017, where three new adaptations were released. This marked a spree in annual Marvel movie releases.
In the two consecutive years after 2017, three movies were released. In 2020, no Marvel products were released. However, in some apparent drive to compensate for the lackluster performance over the previous year, Disney cranked up the release machine, releasing nine Marvel entertainment products in 2021 and another nine in 2022. Releases dipped to five in 2023. Between 2020 and 2023, Disney released 23 MCU products. This raises the question as to why Disney was so eager to increase the amount of adaptations in such a short time frame.
Chapek takes the wheel
We can best understand this in several contexts. The drastic change in MCU adaptations occurred after Bob Iger stepped down as Walt Disney’s CEO and was succeeded by Bob Chapek in February 2020. Chapek had a different vision for the company and its product offering, primarily in the streaming and theatrical releases. Chapek reshaped the strategy for Disney’s streaming service Disney+.
Under Iger, Disney+ would be a viable contender among the many streaming platforms through its lower pricing. Iger believed that the lower price point would compensate for the smaller, yet distinguishing, content library. A reason, CNBC noted, why Iger kept Hulu and ESPN separate from its Disney offering. Chapek however, had an opposite view of the platform’s performance. Chapek commented that over the years great content had been added to the service and the time was right to increase prices.
This led to the August 2022 announcement that prices for Disney+ would increase by 36 percent. The reasoning is fairly simple, Disney had been pouring money into its streaming service to create an offering that would justify a price increase to push it into a positive cash flow, which had been a loss making endeavor, accumulating hundreds of millions in losses. Hence, the company was in desperate need to turn the fortunes in its favor and one mechanism to achieve it was to tap into one of its most valuable franchises, Marvel and Pixar, with the latter experiencing its own meltdown.
Budgets for MCU productions started to increase exponentially after Chapek’s appointment. In 2008, production budgets for MCU adaptations sat at $280 million, dropping to $200 million in 2010. In 2013, the costs increased to $370 million. This figure remained fairly steady. Budgets started to grow in 2017, which marked a tipping point for MCU productions. In that year budgets surpassed the half a billion mark, reaching $555 million. This wouldn’t be the end for the budget increases, as in years to come production budgets grew exponentially.
Budgets spiral out of control
Shortly into Chapek’s leadership, budgets for MCU productions spiraled out of control. In 2020, budgets increased to $668 million, a modest increase from the $662 million the year prior. In 2020 however, budgets surpassed a billion dollars, reaching $1.53 billion. This was a clear departure from the strategy of years prior. These high costs remained in 2022, where the estimated production costs exceeded one billion once again, reaching $1.26 billion. In 2022, budgets decreased, following the slowdown in production.
Despite the decrease, the costs had grown exponentially since the acquisition of Marvel back in 2009. The development is not entirely surprising, as Disney itself has way more funds to create high value productions and subsequent promotion. But, even this media behemoth is not immune to corporate pressure. A profit needs to be made and the budgets increased only served as a compounding mechanism when considering the poor performance in its streaming business.
A little over a decade after the Disney acquisition the Marvel fan base was starting to display fatigue. The November 2022 Fandom survey, cited by media website Variety, which collected 5,000 responses from entertainment and gaming fans aged 13 to 54, found that Marvel enthusiasts experienced the endless stream of Marvel releases across theaters and Disney+ as cumbersome. Interestingly enough the fans themselves were still very much open to consume any new Marvel project.
The high volume of incoming releases and the subsequent fan fatigue, who remained eager to consume almost every adaptation, led to a drop in ratings. A part for the occasional high performing release, such as Spider-man: No Way Home (IMDB Rating 8.2), Avengers: Infinity War (IMDB Rating 8.4) or Loki (IMDB Rating 8.2). Some have been rating disasters, with She-Hulk having an abysmal 5.3 IMDB rating, The Marvels with a 5.6 and Secret Invasion with a 5.9 rating. These recent adaptations show a malfunctioning production house with its owner eager to turn a profit on its other, loss-making, projects.
Reclaiming Marvel’s magic
The lackluster performance of Disney entertainment products led to the eventual firing of Bob Chapek in November 2023, concluding a short, yet tumultuous period for the Walt Disney Company. While the writing was on the fall given the recent performance of the media company’s most valuable franchises, the abrupt firing of Chapek sent shock waves through the industry.
Iger expanded on his views on the Marvel franchise during a NBC News interview, cited by IGN, where he stated that Marvel movies have been underperforming due to a lack of executives on the set. Elaborating that quality needs attention, whilst quantity dilutes the quality. The Walt Disney Company experienced a rocky road in the run up to Chapek’s lay-off, as it had been drastically reducing its workforce.
In November 2020, due to financial setbacks from the coronavirus pandemic, which hit Disney’s Park business especially hard, an upward of 32,000 employees were set to lose their jobs rolling into the fiscal year of 2021, USA Today reported. The lay-offs came after Disney reported a $600 million loss in the last quarter of 2020.
Perlmutter era comes to an end
In March 2023, Disney announced it would lay-off Marvel Entertainment Chairman Isaac “Ike” Perlmutter as part of its cost-cutting efforts. Perlmutter supported an attempt by activist shareholder Nelson Peltz to become a member at Disney’s corporate board of directors. While it has been reported that lay-offs at the relatively small Marvel unit was a cost cutting measure, one might theorize that the Disney board was displeased with Perlmutter’s efforts to brute force Nelson Peltz into the highest ranks of its parent company. Months later we learned that removing Perlmutter from the board was a strategic move by Disney.
In November 2023, Disney revealed that ousting Perlmutter was a necessary step to end Peltz’ proxy fight to claim a seat at the board at Walt Disney, which was labeled as a longstanding personal agenda set out by Perlmutter against CEO Bob Iger. Disney commented that Perlmutter owned 78 percent of shares, of which Peltz had a majority ownership made possible through his $800 million investment into Disney stock which started in the closing hours of 2022.
Peltz’ would eventually increase its stake in Disney by acquiring 30 million shares worth an upward of $2.5 billion by October 2023. This brought an unwelcome dynamic that hurt the conglomerate’s stock performance. By barring access to the board through Perlmutter’s termination, Disney could focus on its own financial stability. In order to further satisfy investors and optimize stock performance, the LA Times noted, Disney announced it would resume dividend payments to shareholders at $0.30 a share.
Allowing for dividend payments has been a promise made by Iger and serves as an important metric for shareholders to assess which stocks to invest in and in what quantity. Removing Perlmutter wasn’t the last intervention at Marvel set out under Iger. In February 2024, during an earnings call, Bob Iger announced a strategic realignment, where Marvel’s production output would be reduced, with the company focussing on its core assets within the Disney portfolio.
Looking ahead
The title of the article was formulated as if Disney was the instigator for the Marvel fallout. In some respects this was indeed the case. But this only happened when Chapek wanted to force its streaming service Disney+ into profitability. Before Marvel turned into a movie factory that had to draw customers to the service, the internal power struggle between Disney and Marvel, wholly orchestrated by Perlmutter, was the precursor for the crumbling empire.
Disney had trouble integrating Marvel into its domain. Perlmutter was always a notorious figure in Hollywood and it’s highly likely Iger knew what he was getting himself into. But, the intellectual property under the Marvel umbrella was too valuable and could bring significant strategic advantage to The Walt Disney company, who would be able to leverage franchises heavily catered to male audiences. Disney drove itself into a corner by overly relying on its existing franchises and failing to nudge itself into the animation era.
The pivotal moment that drastically altered the course of history for Marvel, was Chapek’s decisions to push more content onto its streaming service Disney+. Disney’s streaming service had yet to turn a profit and Marvel’s IPs had to pivot Disney+ into profitability. The amount of Marvel adaptations went into overdrive, with at its peak seeing 18 installments in just two years. As Chapek was relieved from his position, Iger had to drastically intervene to bring Marvel back onto the right track to prevent further intellectual property dilution.
In May 2024, Iger explained during an investment call that Marvel’s output would be limited to two good films per year, with a maximum of three, with questions being raised about superhero-fatigue after the studio’s recent failures. Series would also see lower output, with adaptations being limited from four to two per year. Iger noted that this is a departure from the desire to increase volume, with Disney now aiming to better balance sequels and originals.
