For the better part of the last decade, Disney's $4 billion doll acquisition of Marble Entertainment has been viewed as one of the most successful in lucrative Investments of all time. They acquired Marvel in 2009 and over the following years expanded the desperate superhero franchises into the all-encompassing Marvel Cinematic Universe or MCU The MCU has been the most successful theatrical franchise of all time. Since the Disney acquisition, they've released 31 movies grossing and eye popping $29 billion of box office revenue cumulatively of the top 10 highest grossing movies of all time. Four of them are part of the MCU.

As a popularity of the franchise increased throughout the 2010s, Disney doubled down on their investment to great success. Shareholders were rewarded with Revenue profits and a stock market valuation which steadily increased year-over-year It looked like Disney had cracked the code. So long as they keep making high budget CGI heavy films, tens of millions of fans around the world would remain glued to the big screen, not wanting to miss out on the next edition of the ever expanding. MCU If we look at the annual box office results of the MCU, we can see a steady increase in the later half of the 2010s.

There were no releases in 2020 due to the pandemic. Over the past 3 years, Revenue started declining precipitously. In 2023, the three MCU movies release grossed $1.5 billion in the box office, a shocking 70% decline from the 2019. Peak.

If we estimate the net revenue, the situation looks even more alarming. Based on our estimates of net revenue, the MCU likely made a loss in 2023 after accounting for advertising expenses. This is the first loss the franchise has made in over a decade. The deterioration of the MCU is perhaps the main culprit of Disney's disastrous share price performance with its stock Falling by more than 50% since its 2021.

Peak This puts it within Striking Distance of its lows from the depths of the pandemic. The fall of the MCU has been the topic of much discussion across social media. Many commentators attribute the In to Disney's alleged Woke agenda. This has alienated much of the franchise's original fan base.

In a recent interview at the New York Times deal book, Summit Disney CEO Bob Iger said that Marvel's creative team had become too focused on social messaging, which has been in some cases detrimental to the quality of the content. He thus seemed to admit that MCU has become too woke. While it's easy to get caught up in recent creative missteps, this is merely a symptom of more fundamental problems. Blaming all of Disney's problems on wokeness is an oversimplification.

In this video, we'll explore a number of key strategic decisions that Disney made over the past few years, which s the seeds of Mcu's inevitable demise. Join us as we look at what made Marvel the most successful franchise in cinema history and how it all came crumbling down. Before we get into the video, a quick pause from our sponsors over at public, you've seen the headlines. Bonds are making a comeback, but if you've ever tried to invest in bonds, you know what a clunky, complicated, broken experience it can be.

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The Marvel Universe was created all the way back in the 1960s by Stan Lee who worked at a comic book company called Timely Publications. He created substantially all of the iconic superheroes associated with the MCU today. these include Spider-Man Thor, Iron Man The Avengers and countless others. Importantly, the superheroes would interact with each other in the comic books, making it a superhero universe as opposed to Independent story lines.

What started as Timely Publications eventually changed its name to Marvel Enterprises and went public on the New York Stock Exchange in 1998. As the popularity of their comic books grew, they adapted many of their stories to film, including Iron Man in 2008. However, due to the high budget nature of superhero movies and Marvel's limited resources as an independent company, they had to stretch their balance sheet thin to make a big movie. One box office flop had the potential to bankrupt the company, and on multiple occasions they were forced to seek outside Capital at unfavorable terms.

Marvel Enterprises owned a goldm of intellectual property, but they lack the financial resources to bring them to their full potential. This created a perfect opportunity for Disney Disney had the financial resources to fund High budget movies. Furthermore, their well-oiled distribution and merchandise machine would allow them to monetize the franchise far more efficiently than Marvel Enterprises could do as a standalone company. So, in August of 2009, they acquired Marvel for $4 billion.

This represent presented a significant premium to Marvel's stock price, but was a relatively small chunk of change for the media. Behemoth From the beginning Disney had big plans for the franchise Marvel owned the rights to hundreds of superheroes, of which over a dozen were already household names. This gave them a virtually unlimited Runway to build a Marvel Cinematic Universe One of the biggest challenges in the movie business is that consumer preferences are fial and difficult to predict. No matter how much time you spend with focus groups and creative directors, there's no guarantee that your movie will catch on with the general public.

This is why the idea of a Cinematic Universe is so attractive. Once a consumer gets interested in the universe as a whole, they'll be much more likely to watch the spin-off movies with each individual character. When Marvel introduces a new superhero, existing fans are more likely to watch it. This is both because they've come to expect high quality from the Marvel franchise and they want to learn about this new character who will likely also make appearances in future movies.

The Avengers movies Drew Huge audiences because of the large cast of superheroes involved. If you are a fan of of just one of these characters, you'll be inclined to watch The Avengers just to see him or her. This created a virtuous cycle. The more MCU movies Disney made, the broader its appeal became.

This led to higher box office results which Justified even more investment into MCU films. When Disney first bought Marvel they would release just one or two MCU movies per year. In 2017, they increased his Cadence to three per year. They've maintained this schedule with the exception of 2020 and 2021, which were disrupted by the pandemic.

The increased production clearly paid off, with the Mcu's gross box office results surging to $5 billion in 2019 largely driven by Avengers Endgame: An average MCU movie only costs about $200 million to produce, so the gross box office exceeds the production cost by a huge margin. However, box office gross minus production cost does not equal profitability. The gross box office is the gross value of tickets sold. The movie theaters themselves take a significant cut.

Disney also has to pay a distributor who distributes the film to thousands of theat for domestic releases. The movie studios such as Disney only receive around 60% of the box office gross. For international releases, the distributor takes a bigger cut due to the added complexity of navigating the unique Market structure and regulations in each. Country Movie studios typically only receive 40% of the box office gross for international releases.

In addition to production costs, we also have to consider the massive paid marketing campaigns behind each film. All the trailers you see when you go to a theater are paid for by the studios movie studios. typic. Ally Don't disclose their advertising budgets, so we have to rely on sporadic media reports.

According to a report from Deadline.com in 2019, Disney spent at least $200 million to advertise Avengers Endgame, at least $150 million to advertise Avengers Infinity War $140 million to advertise Spider-Man Homecoming, and $80 million to advertise Guardians Of the Galaxy Volume 2. This represents 53% 42% 80% and 40% of their respective production budgets. So it appears that Marvel's spends about 50% of the production budget on Advertising. While these are only estimates, it gives us a good enough ballpark figure.

In most years, the MCU is profitable. indeed. during the peak year of 2019, it probably made well over $1 billion of profit, but over the past 3 years is rapidly deteriorated. Based on our estimates, they probably lost money in 2023, the first loss in over a decade.

So what happened? How did the MCU Go from Disney's Crown Jewel to a money losing Enterprise In just 3 years, The seeds of the Mcu's eventual demise were Swn in 2019. Ironically, the same year of their most successful release Avengers Endgame. With the rise of Netflix and the acceleration of cord cutting, traditional media companies like Disney realized that they would need their own streaming services if they wanted to maintain their relevance. So in 2019 Disney launched Disney Plus.

Historically, Disney's strongest suit has been kids content such as animated movies under their namesake and Pixar Brands. They only have two iconic franchises that cater towards adults: Marvel and Star Wars. With Marvel being the larger of the two, it would have to do the heavy lifting. so they went all in on expanding the MCU creating nine Marvel TV shows for Disney plus since 2021.

These shows added a huge amount of complexity and in many cases introduced entirely new characters who were not in any previous movies they wanted Disney Plus to appeal to as wide of an audience as possible. So the shows were extremely diverse, with some meant to appeal to a male audience and others meant to appeal to a female audience. Some shows were serious While others were light-hearted comedies. There's nothing wrong with making a diverse range of shows.

In fact, it makes perfect sense to maximize the appeal of Disney Plus, the problem is, they're all part of the same universe. so if you want to fully understand everything that's going on, you technically have to watch everything in. November Of 2023 Marvel Released the Marvels It was the biggest flop in Mcu's history, generating just $47 million of gross box office revenue in North America for its opening weekend, the film had three protagonists Captain Marvel Monica Rambo and Miss Marvel Captain Marvel was introduced in a previous movie, so the audience was already familiar with her, but Monica Rambo and Ms Marvel were only seen previously on the Disney plus TV shows, Ms Marvel and W division. Originally, the script writers didn't bother to introduce these two characters, assuming the audience would have already seen them in their respective Disney Plus shows.

Obviously, this was a huge blunder as many people don't subscribe to Disney plus and even among those who do, only a small percentage of them had watched both shows at the last minute. Disney Decided that they needed to do a bunch of re-shoot to solve this problem, which greatly reduced the quality of the final product. From a creative perspective, there's always pressure to push the envelope and make each movie more Fantastical than the last. Because they've already made so many movies, they've had to expand to New Concepts like the Multiverse which is confusing and overthe toop.

In fact, the MCU has gotten so confusing that even Marvel script writers can't keep track of everything. This has led to many plot holes and logical inconsistencies. Perhaps the most outrageous one comes from the Elementals movie released in 2021. At the end of the movie, there's a giant dead monster that comes halfway out of the Earth, but it is never mentioned in any subsequent Marvel movie.

The only people who can get the full value from Marvel movies are the hardcore fans who watch everything. Their only reward for this diligence is being exposed to inconsistencies which make the whole franchise come across as a sloppily written joke. In the first decade after Disney acquired Marvel, they thought they had a Golden Goose. The early success made their your management arrogant and lazy.

Instead of doing the hard work of diversifying their content offering with new franchises, they doubled and tripled down on the MCU. They thought they could score billion dooll box office hits indefinitely. In doing so, they stretched the MCU Beyond. Its Breaking Point becoming so convoluted and unwieldy as to alienate casual viewers and hardcore fans alike.

And Marvel fatigue isn't only impacting the box office, people are also getting tired of the Endless Marvel shows on Disney plus Disney plus recorded a decrease in subscribers in in 2023 for the first time ever. While the streaming service is still losing money, with all that being said, there's still some hope for Disney in the summer of 2023, CEO Bob Iger Admitted that the company had relied too heavily on Marvel and Star Wars which has a similar oversaturation problem in the coming years, they plan to invest their production budgets into new franchises to rekindle audience interest. While it's unclear whether or not this strategy will work, the first step in recovery is admitting that you have a problem. All right guys, that wraps it up for this video.

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