Disney’s Mistakes, Universal’s Opportunities: An Examination of IP

Corporations aren’t run by ubermensch. Most businesses are run by some schmucks who either got better or were already better than the other schmucks around them.

A guest article by Martin Stone. This is the second article from Mr. Stone — and perchance the next might not be under the title of “guest writer”. 

Let’s say, mistakes are made.

Disney is making generational mistakes which are creating open lanes for competitors. Granted, Disney has a lot of lines of business and most of them are still turning out quality products, but popular perception turns on what happens with the entertainment companies: Lucasfilm, Marvel, Pixar, and Disney. That perception is Disney’s sweet spot. Every show or movie is a commercial for the tie-in merchandise, hotel stay, and theme park experience. It’s the very model of a modern major content farm.

Until there’s problems.

Problem 1: Product Mix

A company like Disney looks at the lifetime value of a customer. Lifetime. From the licensed Mickey Mouse diapers you wore as a baby to the vacation that you will take with your grandkids at the Grand Polynesian; your worth is estimated in dollars discounted to net present value based on actuarial calculations. It may interest you to know that under that model girls are more valuable than boys and that your movie ticket purchases are barely a blip in the numbers. In the late 2000’s Disney had a product mix that kept girls on the purchasing straight-and-narrow, but for boys there was a gap in that lifetime spending that stretched from adolescence to fatherhood. Since people were putting off parenting later into their lives that means over a decade of missing sales on almost half the population.

In the late 1990’s Disney missed out on buying the publishing rights to Harry Potter which was wildly popular with girls of all ages and boys from grade school to the early teen years. After a failed hostile takeover to acquire the American publisher Scholastic just to get the property, they were not about to make that same mistake again.

In early 2000’s Universal Orlando opened a dramatic expansion to their theme park complex with Islands of Adventure. The addition included attractions (and purchase opportunities) across every demographic group. Little Kids had Suess Landing and their older siblings had adventures with dragons, gods, and familiar characters like Spider-Man and The Hulk. Families vacationing in central Florida now had a place where Dad’s younger kids with his second wife could have fun with his older kids from his first wife while he had them for a week in the summer.

Then the really galling thing happened, the one that could cause actual problems for the IP-to-monetization pipeline. Paramount let the guy who directed Zathura make a big budget movie about an alcoholic womanizing self-destructive inventor in flying armor. Suddenly that missing market (boys ages 14+) was active and in the hands of a competitor with a license theme park theme park tie-in owned by… Universal.

Solution #1: Buy the Market

Starting from scratch and making your own superheroes would take too long and be too much of a risk, and Warner wasn’t about to sell DC, but Marvel Publishing and the new Marvel Studios? That could be bought. And what’s this? George Lucas wants to spend more time with his family and cash out before an increase in the US federal tax rate? Why yes, Disney WOULD like to own Star Wars and Indiana Jones. Suddenly, that boy and man-child market with all its wonderful toy sales were in Mickey’s gloved hands.

Problem #2: Having What you Want and Not Wanting What You Have

Now it’s 2013. The dawn of a new Disney Renaissance. Just a few years ago market analysts were looking at Disney Studios and talking about how much trouble the company was in because there wasn’t a major movie in production. Gone are the days when the failure of Tomorrowland can cause the cancellation of Tron 3 and a few other projects. Now the future of your movie releases is so good you have to break things up into phases just so the audience can keep track of all the plot lines they need to follow. A new Saga will be hitting theaters in two years with related movies coming out every year after that.

Superhero costumes are flying off the shelves at Halloween, but not enough of them are girl costumes…

Isn’t that old story of a farm boy who leaves home for adventure a little too old? Shouldn’t that boy make way for a new hero, a better hero, a hero to whom girls can look up to as well?

Remember earlier, about the lifetime value of a customer and how women will spend more in their lives than men? Disney remembers it. How much more valuable as a brand could Star Wars or Marvel be if the customer mix was closer to 50/50?

This is when Disney starts making fatal mistakes owing to bad assumptions. They went out and bought the boy market and assumed that meant they got to keep it. They saw male dominated markets and assumed women were kept out of them. They made sure the customers they wanted were represented by the characters on the screen and assumed that meant those new customers would make purchases in the same way as the old customers. They treated old customers as less important than the new customers and assumed the old customers would just keep co ming back for more.

You might think I’m wrong about this, but watch this commercial for Universal Parks from 5 years ago. They smelled blood in the water.

A boy who has outgrown kid stuff and wants adventure. A girl who floats away with her imagination. A girl who’s outgrown her princess dress and is ready for witches robes. That’s an attempt to capture both markets by giving each what they want. It wasn’t long after that when Universal announced yet another expansion to the Orlando property which would include more Harry Potter, some classic Universal Monsters, and a licensing deal with Nintendo.

Solution #2: Be Humble Enough to Challenge Your Assumptions

I doubt Disney can buy its way out of this problem. Even if they could, they would need to make decisions based on better assumptions than the ones they’ve been using. Mistakes can be fixed and even if they’re not fixed. they can be survived. At some point you have to stop being a schmuck, or at least be better than the schmucks around you.

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