Analysts Split on Netflix's Deal With Marvel For 'Defenders'
While some praise Disney for buying lower-cost stories around lesser heroes Daredevil, Luke Cage, Iron Fist and Jessica Jones, others don't see the upside for the streaming service.
A version of this story first appeared in the Nov. 22 issue of The Hollywood Reporter magazine.
The Defenders -- are they the new Avengers? Disney and Marvel hope so, partnering with Netflix for four superhero series whose leads ultimately will team up for a miniseries. While Wall Street initially was skeptical -- Disney's stock dropped 3 percent on Nov. 7, the day Marvel's Alan Fine and Netflix's Ted Sarandos announced the deal, with one analyst suggesting investors were disappointed at its limited scope -- many observers now are warming to the idea.
Some praise Disney for the arrangement because the Defenders -- Daredevil, Jessica Jones, Iron Fist and Luke Cage -- aren't popular enough to warrant big-budget films (Ben Affleck's Daredevil movie underwhelmed in 2003). If enough of Netflix's 40 million subscribers worldwide take to them, though, they could be.
"The Netflix effect is real and an attractive draw for studios," wrote The Motley Fool's Tim Beyers. "Lesser-known characters offer the most upside. … Unknowns cost less to produce and, for Netflix, less to acquire."
Financial terms of the deal weren't disclosed, but Netflix has agreed to distribute at least 13 episodes of each of the four shows, to begin streaming in 2015, before getting to the Defenders mini. "The deal likely calls for Netflix to absorb some production cost in exchange for an exclusive window. Disney could do this themselves, but the numbers appear not to have penciled out for them, so they are shifting the production risk to Netflix," says Wedbush Securities' Michael Pachter. "Smart for Disney, not so obvious that it benefits Netflix."
But Northlake Capital's Steve Birenberg sees the deal as a way for Netflix to keep its original programming momentum going as such shows as House of Cards and Orange Is the New Black approach maturity. "It seems like a profitable way to exploit less well-known intellectual property and maybe find new, larger potential projects as these characters are further developed," he says. "Maybe they get lucky and find another Iron Man."
Disney made its Defenders-Netflix announcement the same day it reported quarterly earnings, giving CEO Bob Iger a chance to address the deal a couple of times during a conference call with analysts. In his opening remarks, he called it an "unprecedented deal."
Later, an analyst wondered why the four shows and miniseries went to Netflix instead of a Disney-owned TV channel, and Iger reminded her that Agents of SHIELD is on ABC and other superheroes are at Disney XD. "We realized that there were just so many Marvel shows we thought we could actually fit on to those platforms," he said.