Universal and Disney’s Arrangement on Marvel IP in Theme Parks
Universal’s Islands of Adventure is an innovative theme park in Orlando, Florida home to a roster of unique and exciting experiences. Islands of Adventure’s heavily themed lands house attractions utilizing intellectual property connected with Harry Potter, Jurassic Park, Dudley Do-Right, Popeye the Sailor Man, and Dr. Seuss. While mythical wizards, ferocious dinosaurs, comical cartoons, and rhyming animals provide a steady stream of adventures, this theme park’s backbone of high thrills entertainment consists of a never-ending battle between comic book superheroes. This adrenaline-inducing place is none other than Marvel Super Hero Island. Voted as the best theme park in the world, Islands of Adventure welcomes millions of guests, who constantly rave about the exciting thrills that wait behind the park’s iconic lighthouse.
In fact, intellectual property is a highly desired asset in the theme park business, as evidenced by a recent study that confirmed that guests are willing to spend more money at theme parks that feature a specific intellectual property. For a decade, the heroes of Marvel Comics inhabited the island without any fear of replacement. The Incredible Hulk smashed through the park on an adrenaline-inducing roller coaster, Doctor Doom subjected guests to fear-enticing heights on a drop ride, and Spider-Man protected brave civilians from the Sinister Six in an innovative 3-D ride. However, in 2009, Disney acquired the Marvel company for $4 Billion. As Disney is a major theme park competitor in Orlando, thrill seekers wondered if this business transaction was the death knell for Marvel representation at Universal parks.
In the immediate aftermath of Disney’s acquisition, Universal maintained its commitment to the Marvel IP, while remaining vague about the terms of the licensing deal. For years, Universal executives hinted that the theme park attractions could remain within Universal “until the end of time.” While the actual contract remains secluded from public knowledge, a public SEC filing appears to provide Universal with a secured assurance of the future of Marvel Super Hero Island. According to this public information, Universal’s agreement with Marvel remains in effect as long as the park remains open and meets a minimum level of satisfactory standards. Notably, other rights holders have learned from Marvel’s mistake as another SEC filing shows that Universal’s deal with Warner Bros. over the Harry Potter IP ends in 2019 with a renewal that must end in 2029. This sort of arrangement provides Warner Bros. with a chance to renegotiate, a right Disney wishes Marvel considered. Furthermore, Universal brokered an exclusivity clause, prohibiting other parks east of the Mississippi River from utilizing the Marvel characters in their attractions. Therefore, as long as Universal abides by the current terms of the agreement without misrepresenting Marvel’s intellectual property, Disney would need to buy Universal out of the agreement in order to have proper Marvel attractions in Orlando’s Disney World.
However, the current terms of the agreement do not appear to allow Universal to add new attractions to their theme parks, because Disney must approve any additional, future uses of Marvel characters. For years, the grey area of this agreement involved ride upgrades and refurbishments. Then, in 2011, Universal shockingly announced plans to renovate the Amazing Adventures of Spider-Man 3-D ride. In fact, this update featured new animation for Spider-Man and his villainous foes. Now, Universal is mid-way through a renovation of their Incredible Hulk roller coaster. Surprisingly, this update involves the construction of a whole new track, while teasing the inclusion of desperately needed story elements.
Disney has remained very conservative in challenging Universal’s contractual rights. While Marvel superheroes greet guests in Disneyland, and an Iron Man ride is soon set to debut in Hong Kong Disneyland, Disney has limited Marvel’s presence in its Florida theme parks. Law suits loomed during the promotional campaign of Iron Man 3, which involved a monorail vehicle adorned by an Iron Man overlay. Disney carefully plotted the vehicle’s course to run outside the gate of Disney’s Epcot theme park. This maneuver shows that Disney comprehends that prior contracts can cause significant problems to Marvel expansions within Disney parks. Still, Disney has featured video previews for their Marvel movies within the parks, including a dance party featuring Marvel’s Guardians of the Galaxy characters. However, these attractions do not specifically utilize the Marvel brand in their title as Universal’s exclusivity agreement prohibits promoting the “Marvel” mark within the theme park or through any advertising mediums for any park east of the Mississippi. Even Disney World’s gift shops selling Marvel merchandise, resort to generic super hero store names, rather than drawing the ire of Universal executives. For instance, Disney chose to not even mention the words “Marvel” or “Avengers” to promote the release of an Avengers themed Vinylmation set sold within the parks.
This arrangement provides interesting questions for the current state of IP and contractual law. Should a contract that lasts forever actually be enforced by the courts? Can a court require an acquiring company to honor prior agreements through specific performance, especially when damages would possibly never fully compensate a party for the loss of so many popular attractions? In other words, how can Disney efficiently break this contract with Universal?
For background, courts normally avoid interpreting ambiguous provisions as lasting forever, yet the court will enforce a contract that explicitly provides for a perpetual duration. Therefore, it seems that Disney would have to pay a very large sum in order to fully compensate Universal for the loss of one of its main themed areas. Commentators speculate that a buy-out agreement could possibly cost $1.5 billion. Furthermore, journalists find this move is unlikely as Disney would basically be funding one of its competitor’s latest expansion. The most efficient result for Disney is to continue receiving licensing fees, possibly re-negotiating for a higher stake of Universal’s revenues, while allowing Universal to utilize more characters, such as the popular cinematic versions of the legendary Marvel characters. This scenario may actually come true, as rumors persist of a landscape makeover to tie-in to the Marvel cinematic universe. This expansion would culminate in an innovative Avengers-themed ride. Of course, this strategy seems impossible under the current agreement without Disney’s cooperation. Only time will tell how the sordid custody battle over the theme park rights to Spider-Man and the other Marvel super heroes will shake out.