Who really owns the theme park rights to the DC and Marvel comic characters?
Written by Robert Niles
Yesterday's news about the production company behind "The Dark Knight" and "Man of Steel" movies moving to Universal got some theme park fans dreaming about the DC comic characters also making the move.
Keep dreaming. As I explained yesterday, Legendary Pictures' move does nothing to change the ownership of those icons, which remain the property of Warner Bros. Let's take this opportunity to look at exactly who owns what when it comes to the legal rights to use some of the world's most popular comic characters in theme parks.
Who owns the characters? Warner Bros.
Who owns the rights to use those characters in theme parks? Six Flags
Warner Bros. used to own the Six Flags theme parks, which corporate parent Time Warner sold to Premier Parks in 1998. As part of that deal, Time Warner also sold Premier (which then renamed itself "Six Flags") the long-term theme park rights to its comic and cartoon characters, including Batman, Superman and Bugs Bunny.
Six Flags pays an annual royalty to Warner Bros. to continue using those characters, and must also obtain approval from Warner Bros. for each use of its characters. According to Six Flags' annual report, filed with the U.S. Securities and Exchange Commission, in 2011 (the latest year for which Six Flags has disclosed the figure), Six Flags paid Warner Bros. $3.3 million for its DC ad Looney Tunes license, in addition to an unspecified amount representing 12 percent of the in-park sales of merchandise using those characters.
Want to read the legalese of the deal? Here it is:
"We have the exclusive right on a long-term basis to theme park usage of the Warner Bros. and DC Comics animated characters throughout the United States (except for the Las Vegas metropolitan area), Canada, Mexico and certain other countries. In particular, our license agreements entitle us to use, subject to customary approval rights of Warner Bros. and, in limited circumstances, approval rights of certain third parties, all animated, cartoon and comic book characters that Warner Bros. and DC Comics have the right to license, including Batman, Superman, Bugs Bunny, Daffy Duck, Tweety Bird and Yosemite Sam, and include the right to sell merchandise using the characters. In addition, certain Hanna-Barbera characters including Yogi Bear, Scooby-Doo and The Flintstones are available for our use at certain of our theme parks. In addition to annual license fees, we are required to pay a royalty fee on merchandise manufactured by or for us and sold that uses the licensed characters. Warner Bros. and Hanna-Barbera have the right to terminate their license agreements under certain circumstances, including if any persons involved in the movie or television industries obtain control of us or, in the case of Warner Bros., upon a default under the Subordinated Indemnity Agreement."
Hey, there's actually interesting stuff in there. Most interesting, Warner Bros. has some ways to get out of the deal. Presumably, as in any contract, if Six Flags were to breach the contract by not paying its royalty or not obtaining or adhering to Warner Bros.' approval for use of the characters, Warner Bros. could terminate the deal. But the language above explicitly mentions two other ways that Warner Bros. could pull the license.
The complicated one has to do with what's called "the Subordinated Indemnity Agreement." That's a section of the contract under which Time Warner sold the parks to Premier that obligates Premier to spend a minimum annual amount improving the original Six Flags parks and to make certain payments to Time Warner for the next 15 years. If Six Flags defaults under those terms, it loses the DC and Looney Tunes rights (among a bunch of other penalties). But given that Six Flags kept spending enough money on its parks and making its payments to avoid default while it went through bankruptcy, it's hard to imagine that Six Flags would default on that deal now, given the much stronger financial position the chain now enjoys. (As of today, Six Flags has a market capitalization of $3.5 billion.)
But it's Warner Bros.' other way out of the deal that most affects Six Flags' future. Six Flags would lose the rights to use the DC and Looney Tunes characters if the amusement park chain were to be acquired by any other business in the movie or TV business.
In other words, Disney or Universal.
Warner Bros. doesn't want the theme park rights to its characters falling into the hands of a studio competitor without its approval. As Six Flags' annual report states, "This could deter certain parties from seeking to acquire us." If Disney or Universal wanted to buy Six Flags as an end run to get the theme park rights to Batman and Bugs, they couldn't do it. All they'd end up with would be a bunch of freshly unnamed, unthemed roller coasters and flat rides. That's a pretty substantial "poison pill" against a takeover, given that Disney and Universal are the number-one and number-three largest theme park operators in the world, by annual park attendance.
The DC/Looney Tunes license is "long term," and not "in perpetuity," according to Six Flags' legal documents. So if Warner Bros. wanted to regain control of these theme park rights, perhaps to sell them to another company, the value of that buyout presumably would be diminishing over time, as we approach the year in which the license deal would expire anyway. (I've not found a public document that states when that happens, though other terms and obligations between Warner Bros. and Six Flags expire in 2027 and 2028.)
Until that does happen, Six Flags owns these rights.
Who owns the characters? Disney
Who owns the rights to use those characters in theme parks? In Japan and the United States east of the Mississippi: Universal. Elsewhere in the world: Disney
Disney bought Marvel Comics in 2009 for $4 billion. But years before, Marvel had sold the theme park rights to its characters to Universal Studios. Two years before Disney bought Marvel, Universal opted not to renew those theme park rights for the western half of the United States, and the Marvel characters left Universal Studios Hollywood in at the end of 2007.
Universal retained the rights for the eastern United States, where it had built Marvel Super Hero Island in its Islands of Adventure theme park in Orlando, as well as for Japan, where Universal's Japanese development partner had built a clone of IOA's Amazing Adventures of Spider-Man ride in Osaka's Universal Studios Japan. (I've not found any public documents that reveal what Universal is paying Disney, or paid Marvel, for these rights.) The theme park rights for Japan are under a long-term deal, said to last into the 2020s, while the Orlando rights are in perpetuity, meaning that Disney never will be able to secure the rights to use its Marvel characters in Walt Disney World's theme parks until it can convince Universal to give up those rights.
And in the business world, "convince" means to write a very large check or to fork over other capital assets that Universal would want more than to continue to be able to run Marvel Super Hero Island.
Disney has the rights to bring Marvel characters to Disneyland, Hong Kong Disneyland and Disneyland Paris (or to any other company's theme parks outside the eastern US or Japan), but it can't do anything with those characters inside theme parks in the eastern US or Japan. That's why the Walt Disney World monorail wraps promoting Marvel movies had to stay on the Magic Kingdom line. The Epcot monorail line goes into that park, so if a Marvel character were depicted on those trains, Disney would be in breach of contract with Universal, and liable in what could be a nasty, expensive lawsuit.
So unless you hear about another deal coming, don't get too caught up daydreaming about a Gotham Island at Universal or an Avengers ride at Disney's Hollywood Studios. Absent any making someone else an offer they can't refuse, the DC characters will remain in the Six Flags theme parks, and the Marvel characters at Universal Orlando, for years to come.
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