The Walt Disney Co. (DIS) may not be the movie house behind “Spider-Man: Homecoming,” but it is still banking on making a windfall from owning the merchandising rights for the upcoming film.
Sony Pictures Entertainment, the movie production unit of Sony Corp. (SNE) paid $175 million to produce the movie, but Marvel Studios, a unit of Disney, managed the entire process and also gets to keeps the merchandising rights to all the stuff that will undoubtedly flood the market ahead of the July 7 premier and thereafter. The arrangement is not typical—it's not often you see two rivals work together—but for Sony it's aimed at boosting its flagging movie business and for Disney it's hoping it will drive consumers into the toy stores, reported The Wall Street Journal. (See also: Sony Resumes Vinyl Record Production After Nearly 3 Decades.)
Last 5 Years: Not-So-Amazing Spider-Man
While the Spider-Man movie franchise has resulted in billions of dollars in box-office sales during the last 15 years, it has been marred with issues. Sony acquired the Spider-Man franchise back in 1999 in a deal with Marvel, which was a stand-alone company at the time. According to the Journal, in the deal, the comic book company got 5% of the film revenue and the two split the revenue resulting from merchandise sales. The first movie in 2002 was a huge hit grossing $822 million. The sequels in 2004 and 2007 were also successful, but later iterations in 2012 and 2014 didn’t do so well.
In 2011, Sony gave all of its merchandising rights back to Marvel. Marvel, now a Disney unit, waived its 5% rights to the film revenue. Sony also paid the $175 million fee and agreed to pay as much as $35 million for each Spider-Man film in the future. Under the deal, Disney’s Marvel didn’t have to worry about box-office sales anymore, but it did care about merchandising revenue, which had fallen in lockstep with lowered interest in the more recent movies. Citing NPD Group, the market research firm, the Journal reported U.S. sales of Spider-Man toys declined to $200 million amid the release of “The Amazing Spider-Man” in 2014 from $385 million in 2004 when “Spider-Man 2” was released. (See also: Netflix Could Earn up to $1B from Merchandising: Analyst.)
Toys vs. DVDs
For Disney and the other movie houses merchandising is becoming increasingly important as DVD sales tank and box-office revenue around the globe slows. With increasing profits the name of the game, consumers should expect to see more products tied to “Wonder Woman,” “Spider-Man: Homecoming,” “Cars 3,” “Transformers: The Last Knight” and “Despicable Me 3.” Meanwhile, “Justice League” and “Star Wars: The Last Jedi” toys and other products will hit store shelves in the fall.
While the other studios are playing catch-up when it comes to merchandising, Disney has been doing it for years now and it has paid off. During the past five years, operating income at the consumer products and video game unit increased to $2 billion from $1 billion thanks to blockbuster hits like “Frozen.” More recently it has been rolling out products tied to the live-action remake of “Beauty and the Beast,” among other films. It currently holds the title of No. 1 licenser, not only with toys, home décor and apparel but also its massive theme parks around the globe.