New article on Disney/Marvel Contract

[sarah91182]

http://www.orlandosentinel.com/business/orl-disney-marvel-universal-090209,0,7440273.story

While the Walt Disney Co.'s $4 billion acquisition of Marvel Entertainment Inc. does not pose a near-term threat to the future of Universal Orlando's popular Marvel-themed attractions, it could still create headaches for the resort.

In taking over Marvel, Disney will inherit the theme-park licensing contract Marvel has with Universal — along with all of the rights contained within it. As a result, Disney is poised to gain veto power over some of Universal's marketing materials, audit rights over some of its finances, and more.

That's on top of the annual licensing fees and merchandise royalties that Universal pays to Marvel — but, soon, to Disney.

"It's an unusual situation. Awkward is a good word for it," said Harold Vogel, a stock analyst and author of Entertainment Industry Economics. "They're obviously competitors, and there's an interest in keeping aspects of these deals private. And now Disney will have some access to it."

Universal declined to discuss fallout from the Disney-Marvel pact Tuesday, beyond reiterating comments made Monday that both Marvel Super Hero Island at Islands of Adventure and Marvel characters such as Spider-Man and the Incredible Hulk will remain "an important part" of the resort.

But a person familiar with Universal's licensing agreements said executives at the resort think they will be able to "work through the business issues involved" with Disney and Marvel, given Universal's experience with licensing contracts. Universal has multiple licensing deals involving its theme parks, for characters ranging from The Cat in the Hat and Popeye to Homer Simpson and Harry Potter.

Disney also declined to discuss the issue. A spokesman instead deferred to comments Disney Co. Chief Executive Officer Bob Iger made Monday on CNBC that Disney intends to honor Marvel's existing theme-park contracts.

From a guest perspective, the Disney-Marvel deal will have little, if any, near-term effect on Universal's Marvel-based attractions, which include The Amazing Adventures of Spider-Man dark ride, The Incredible Hulk roller coaster, Dr. Doom's Fearfall, and Storm Force Accelatron.

The contract allows Universal to continue using the Marvel trademarks for as long as the attractions are in operation. It also ensures that no other theme park east of the Mississippi River — including Walt Disney World — can develop attractions based on the same characters.

But the deal stands to give Disney some control over Universal through the Marvel licensing pact.

For example, under the contract, Marvel has the right to approve marketing materials featuring any of its trademarks. Marvel can also approve or reject the use of any non-Marvel characters within Marvel Super Hero Island.

The terms also prevent Universal from scaling back promotion of Marvel characters, even after they become part of the Disney empire. One provision requires Universal to devote a certain percentage of its annual advertising spending to promoting Marvel characters; another states that Universal must maintain at least 10,000 square feet of retail space for selling Marvel merchandise.

Marvel — and, soon, its new owner, Disney — even has "reasonable audit and review rights" to assure that Universal is paying the proper amount in annual merchandise royalties.

Still, as awkward as the situation may be, several analysts said Universal is unlikely to face any significant intrusion from Disney.

"There's no reason why both sides can't live with it at least for the foreseeable future," Vogel said.

Disney, meanwhile, could face some tricky issues of its own. For instance, while Disney could opt to incorporate Marvel characters used at Universal Orlando into attractions at Disneyland in Anaheim, Calif., it would have to ensure that any national advertising did not imply that those characters existed at all Disney parks.

That's because Universal's licensing pact requires any theme-park company that uses similar Marvel characters beyond the East Coast but has parks on both coasts — such as Disney — to "make abundantly clear that the character only appears in the parks west of the Mississippi."

[WDWFan]

interesting article. guess it all depends on how the management of the two companies want it to be.

[sarah91182]

Yes, it will be interesting to see how things transpire over the next few years. Would have been nice to be a fly on the wall in all those meetings between the two giants!