When it comes to taking Hollywood by storm, Disney has proven it is no Mickey Mouse operation. But its remarkable dominance comes from a bit of its own magic that other leaders can learn from: the art of the buy.
Heading into this weekend, Disney’s film studio sits atop the domestic box office with a total gross just shy of $1.4 billion for the year and 35% market share. That’s millions of dollars and 22 percentage points ahead of its nearest competitor, Warner Bros. Globally, two of Disney’s recent releases, Avengers: Infinity War and Black Panther, have each grossed more than $1 billion; only three other films have grossed more than $500 million internationally so far this year. The boffo box office, particularly from Black Panther, was the main reason the company handily beat expectations for its quarterly earnings, which it reported Tuesday.
These kinds of numbers stem from a savvy, selective, and expensive buying spree. Indeed, four of Disney’s five highest-grossing films over the last two years, including Infinity War and Black Panther, have been the product of studios the company acquired: Marvel, Lucasfilm, and Pixar.
“All of those deals were brave, bold, and unexpected,” says William Simon, global sector leader of Media and Entertainment for Korn Ferry. “[Disney CEO Bob] Iger has demonstrated an incredible eye for the value of big brands that are consistent with Disney’s brand and can flow from the theater through the entire organization.”
To be sure, at the time of Iger’s ascent to Disney CEO in 2005, the company’s film studio was in the doldrums, criticized for a lack of creativity and a dearth of hits. To reinvigorate its performance, Iger turned to acquisitions to change the game, spanning six years and a combined $15.7 billion, buying (in order) Pixar, Marvel, and Lucasfilm. “They realized the value of owning intellectual property that you can use to scale stories over time,” says Henry Topping, senior client partner with Korn Ferry’s Media, Entertainment, and Sports practice, referring to the ability to create sequels and spin-offs from core franchises (e.g., the upcoming Han Solo movie based on the Star Wars character).
Aside from content, the acquisitions also brought leadership, digital innovation, and a different cultural flavor to Disney. The Pixar deal, for instance, added Steve Jobs to the Disney board and, along with the Lucasfilm deal, brought the industry’s best computer-generated technology under one roof. Executives from all three acquired studios permeate Disney corporate leadership ranks. Moreover, the timing of the acquisitions coincided with a shift in the movie business toward universal characters and franchises as more and more box office revenue is derived globally. So far, more than 60% of the box office revenue for Avengers: Infinity War is from international markets; Black Panther’s performance is evenly split between domestic and international markets. “The predictability of success for these movies is easier to calculate than trying to find the next Titanic,” says Topping. “The global audience for these movies helps to minimize risk.” Infinity War and Black Panther, for instance, are two of six Marvel films to gross more than $1 billion globally. In total, 34 films have ever reached that mark; Disney produced 17 of them.
With Disney’s large and lucrative television business facing challenges as consumers move away from cable subscriptions and toward piecemeal streaming, its box office dominance has been a key driver of its performance—the company reported first quarter earnings Tuesday—at one of the most critical transitional junctures in its history. Indeed, part of the reason why Disney is offering to buy Rupert Murdoch’s 21st Century Fox for $52 billion is to gain control of more intellectual property. “They are doubling down on the need for size, scale, and the ability to control more content that they can use to establish ongoing direct-to-consumer relationships,” says Simon.
But there’s no guarantee Iger’s acquisition fairy dust will succeed this time around; it was reported Tuesday that rival Comcast is planning a $60 billion counterproposal for Fox in a bid to trump Disney.