UPDATE: The Walt Disney Studios deal to buy Paramount Pictures out of the final two films of its six-picture distribution deal with Marvel Studios amounts to the Mouse paying a premium to get cracking on its $4 billion investment in Marvel. When you break down the numbers, it’s a pretty good deal for both studios. Paramount had been earning an 8% distribution fee on the Marvel titles like Iron Man. Paramount also put up P&A and got reimbursed over time. The $115 million will be paid in two installments–half when The Avengers is released May 4, 2012, and the other half when Iron Man 3 is released May 3, 2013. If those movies perform more strongly than expected, Paramount will earn more than $115 million advance. I’m told that Paramount is actually getting 9% on that third Iron Man movie, a reward for launching one of Hollywood’s most valuable franchises. So essentially, Paramount is getting paid without having to put up the P&A or exert the manpower that goes into releasing summer blockbusters.
Paramount loses bragging rights that come with counting the worldwide grosses in its annual tally. But considering that Disney kept 92% of the profits that came from Iron Man 2′s $622 million worldwide revenues, how much were those bragging rights really worth? Paramount needed the Marvel deal when it was signed because the studio had little of its own homegrown franchise product to lean on. Marvel and DreamWorks product got the studio through lean times. DreamWorks is gone and Marvel will be out in 2012, but Paramount is already in a much better place. The $50 million grosses on the $20 million budget Jackass 3D indicate that this franchise is far from done. Transformers 3 gets released in July, a fourth Mission:Impossible is in production and will be released for holiday, 2011. The following year brings another Star Trek, G.I. Joe and the relaunch of the Tom Clancy-created Jack Ryan series, with Chris Pine playing the CIA analyst. Paramount next week releases Paranormal Activity 2, and it owns worldwide distribution rights on sequels. Many of those movies are coming from core lot producers Bad Robot and Lorenzo di Bonaventura, and newcomer Platinum Dunes is revamping the Teenage Mutant Ninja Turtles franchise. Clearly, Paramount won’t need the product in 2012 as much as it has in recent years. Paramount will still distribute Thor on May 6, 2011 and The First Avenger: Captain America on July 22, 2011.
For Disney, the deal brings its superhero franchises under one roof and eliminates the difficulty and power struggles of trying to work with another studio’s marketing and distribution. Bruised feelings and egos are inevitable. We don’t believe that Disney will try to buy up other Marvel franchises that are tent poles for other studios, like Spider-Man, X-Men and other franchises. Sony, Fox and other studios can hang onto those titles as long as they keep making payments and occasional movies that they finance. The difference here is that the films under the Paramount deal are the ones that Marvel Studios began funding under its $500 million credit line with Merrill Lynch, an accommodation made before the studio was bought by Bob Iger last year for $4 billion.
BURBANK, Calif. – October 18, 2010 – The Walt Disney Studios, Paramount Pictures and Marvel Studios announced they have reached an agreement under which Paramount will transfer its worldwide marketing and distribution rights to Disney for Marvel Studios’ The Avengers and Iron Man 3. Paramount will remain the worldwide distributor of the upcoming films, Thor and Captain America, as well as the previously released Iron Man and Iron Man 2.
Under terms of the new deal, Disney will pay Paramount $115 million for the transfer of the distribution rights to Iron Man 3 and The Avengers to be paid on the theatrical release dates. These monies will serve as a minimum guarantee against the distribution fees.
“In completing this agreement, Disney will now assume worldwide marketing and distribution of The Avengers and Iron Man 3 and leverage these two highly-anticipated films across the multiple global platforms of The Walt Disney Company,” said Rich Ross, Chairman of The Walt Disney Studios. “We appreciate the tremendous momentum that Paramount established with these iconic Marvel characters and look forward to propelling the brand even further in the coming years.”
“Five years ago, when Paramount and Marvel made our initial deal, both our businesses were in very different places,” said Brad Grey, Chairman & CEO of Paramount Pictures. “We are grateful for the partnership we have had with the terrific Marvel team over these years and proud of the work we have done together. Today, this new agreement is the right deal for Paramount, for Marvel and for Disney. We look forward to working together on Thor and Captain America, and we wish Disney and Marvel the utmost success, in what we know will be a very productive and wide-ranging partnership.”
“Paramount has been a wonderful partner in helping Marvel Studios bring our characters to the big screen,” said Alan Fine, Office of the President, Marvel Worldwide, Inc. ”This agreement makes sense now that Marvel is part of The Walt Disney Company.”
Paramount will release Marvel Entertainment’s Thor and Captain America worldwide beginning on May 6 and July 22 of 2011, respectively. The Avengers will be licensed to Epix under Paramount’s existing pay television arrangement.