Netflix Inc. is breaking in a new M&A strategy with its first-ever acquisition after years of focusing its resources on internal and organic growth.
A recently announced deal to buy comic book publisher Millarworld makes clear Netflix's intent to compete in the booming comic content industry. But the market and audiences for prior Millarworld film adaptations imply Netflix will be reaching for a smaller slice of the comic fan market than the broad base driving blockbusters developed under the Marvel and DC Comics brands.
The success of comic content is no secret in the video industry. Franchises like Captain America, Batman and Iron Man from Marvel and DC Comics have adapted movie titles grossing above $1 billion globally. Even lesser-known comic book series like Guardians of the Galaxy have come close to the 10-figure mark. Walt Disney Co. paid $3.96 billion to purchase Marvel Entertainment in 2009, the company's largest acquisition to date at the time, to be only marginally topped by the acquisition of the creators of another science-fiction hero brand, Lucasfilm Ltd., three years later.
Netflix already has enjoyed a taste of the comic trend. In 2013, the company announced a deal with Disney to produce Marvel-based series "Daredevil," "Jessica Jones," "Luke Cage" and "Iron Fist." While Netflix does not release details on the success of individual series, those titles have received audiences and accolades, with each except "Iron Fist" getting "fresh" scores above 70% on Rotten Tomatoes.
Among Millarworld franchises, Kick-Ass, Kingsman and Wanted have been adapted to the screen. While some cult audiences have embraced those films, they have not reached the success of the best performing Marvel and DC titles. The most lucrative, "Kingsman: The Secret Service" collected $404.6 million in worldwide gross at the box office. The most critically acclaimed of Millarworld's movie adaptations, "Kick-Ass," collected just $97.5 million.
However, some investors are optimistic about the acquisition. L&F Capital Management, for instance, called Millarworld a "hidden gem" in a bullish report posted on Seeking Alpha. The Marvel Universe will be winding down come 2019, L&F Capital argued, leaving more of an opening for new superhero content.
Millarworld's offbeat titles could provide relief to audiences tired of the typical comic book tropes. "Deadpool," with a more humorous tilt and off-color language than other Marvel fare, became an unexpected success, exiting theaters with $783.8 million. Millarworld also purveys in humorous, off-color characters.
While comic book heroes have supported the bottom lines of studios like Disney, 21st Century Fox Inc. and Time Warner Inc.'s Warner Bros., the theatrical release business seems to be running up against secular headwinds for growth. Over the past seven years, the domestic box office has struggled to maintain growth while alternative sources of video entertainment like Netflix and other digital platforms have proliferated. Meanwhile, Netflix has attributed its double-digit revenue growth, which has stayed above 10% and touched as high as 50%, to its original content slate.