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Marvel Enterprises (MVL) |
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WIKI ANALYSIS| This company has recently been acquired or received a credible acquisition offer. |
In 2008, with the release of the first installment in the Iron Man franchise, Marvel took a step in a new direction. The company had previously licensed movie rights to third party production companies, as in the case of the Spider-Man and X-Men trilogies. While those movies were huge hits (Spider-Man movies grossed over $1BN worldwide [3] and the X-Men trilogy grossed over $500MM[4]), Marvel's royalties from those releases were only in six figures as most of the windfall went to the studios producing those movies, Sony Pictures and Fox Studios.[5] In order to capture a bigger piece of the profit from its hit movies, Marvel will make its own films through its new movie production segment - which hit the ground running when its first release Iron Man grossed nearly $100MM its opening weekend.[6]
Moving film production in-house is part of a larger strategy shift at Marvel, as the company is looking to combat poor creative management of its characters by third parties, such as the movie Elektra which grossed only $24MM domestically despite a $43MM budget.[7] However, in some businesses - toys, for instance - Marvel will continue to outsource production. Despite its recent successes in movies and video games, Marvel continues to face challenges in industries that require creative talent. These industries are risky not only because of the difficulty of producing quality content, but because of the fickle nature of consumers - what's considered brilliant one month is a bust in the next. A movie has significant production costs, and there is no guarantee that these costs will be recouped if the product is unpopular.
Business Overview
MVL's primary assets are rights and properties associated with its various comic book characters. The company sells those rights to a variety of media and entertainment outlets and uses these characters in products of its own.
Business Segments
The company reports in 4 different segments:
- Licensing - The Licensing segment earns revenues from selling rights to movies, television production companies, video game publishers, and merchandise manufacturers to use it's character properties. The licensing business concentrates on a few large licensees, and attempts to manage and re-segment opportunities with its characters, creating "classic" editions, "youth" editions, and "movie" editions to take advantage of every revenue opportunity.
- Publication - The Publishing segment produces, markets, and sells comic books. This business publishes comic books and novels about the company's characters, and licenses characters from other sources and turns them into graphic novels.
- Toys - The Toys segment collects royalties and service fees from Hasbro. The company has an exclusive toy merchandising agreement with Hasbro (HAS) until December 31, 2011, that began in 2007.[8] Prior to this, most revenues in the Toy segment were made from toys produced by Marvel.
- Movie Production - The movie production arm of the company was set up to independently produce films and grow revenues. The new Films segment produces films featuring Marvel's characters like Iron Man.
Character Portfolio
According to Marvel[9], its most popular characters are:
- Spider-Man (Peter Parker)
- Captain America (Steve Rogers)
- Iron Man (Anthony Stark)
- Wolverine (James Howlett)
- Silver Surfer
- Rider (John Blaze)
- Gambit
- Thor (Thor Odinson)
- Phoenix (Jean Grey)
- Hulk (Bruce Banner)
The company has hero "teams" such as the X-Men, the Avengers, and the Brotherhood of Mutants.[10]
For a complete listing, please see Wikipedia, "List of Marvel Comics Characters"
Trends/Forces
Saturation of super-hero type media a concern
Given that MVL's only character base is in its super-heroes (and associated villains), there is a concern over the number of movies in this genre that have been released or are in production from 2005-2010. The DC Comics Batman and Superman mega-franchises have recently had successful movie releases, and will likely continue to receive sequel treatment. Audiences can be fickle to their super-heroes, but more importantly these movies have captured the casual viewer who may not be a comic-book reader but is attracted to the films. Saturation of the market risks losing this mainstream audience's interest. Comic Book to Movie adaptations have benefited from a few box office blockbusters, but there have been flops as well, including Elektra (Budget: $43MM, Domestic Gross: $24M), and Catwoman (Budget: $100MM, Domestic Gross: $40MM).[11][12][13] Movie production has more associated risk than the licensing "third-party" businesses, but the upside is significant as a successful movie can gross in the hundreds of millions.
Competition
Due to Marvel's licensing business model based on its characters, it does not have very many comparable companies or direct competitors. The closest comparison could be made with rival DC Comics owned by Time Warner (TWX), which also has licensed its comic book characters, most notably, Superman and Batman.
Marvel has nearly 70 years of character history and awareness built up around it's properties. This is an extremely valuable intangible asset that can be levered in almost limitless ways to provide revenues, and costs practically nothing to maintain. Everyone from 5 year old boys to 70 year old women know of Spider-Man, Incredible Hulk, X-Men, Captain America, etc. This is a big competitive advantage that cannot be easily reproduced by a competitor.
Licensing
In the licensing space, Marvel characters are sold on various products generating overall revenue on the same scale with other large licensors. The largest licensor in the world is Disney, now Marvel's parent company, with over $20BN in licensed sales relating to its many children-entertainment properties.[14]. Competitors with similar scale to Marvel are:[15]
- Phillips-Van Heusen (PVH) - Licensor of shirt brands
- Warner Brothers part of Time Warner (TWX) - Children's entertainment characters
- Nickelodeon and Viacom (VIA) - Children's entertainment characters
- Sanrio - Children's entertainment characters
Publication
The publication business was the underlying business for character creation that Marvel is capitalizing on today, and continues to compete against rival DC Comics, each with their own respective character portfolios. More minor publishers include Image Comics and Dark Horse Comics.
Toys & Movie Production
Marvel no longer directly competes in the Toy business, as it has licensed the right to manufacture to Hasbro. Previously, it did not directly compete in the Movie business, but has since moved to directly compete the space. Its primary super-hero genre competitor DC Comics is continuing to license the right to make movies however.
References
- ↑ David Goldman (August 31, 2008). Disney to buy Marvel for $4 billion. CNNMoney.com.
- ↑ Marvel Entertainment "Company and Contact info"
- ↑ Box Office Mojo "Marvel Comics Movies"
- ↑ Box Office Mojo "Marvel Comics Movies"
- ↑ Seeking Alpha "Marvel's New Movie Financing Concept" May 16, 2006
- ↑ Box Office Mojo "Marvel Comics Movies"
- ↑ Box Office Mojo "Elektra"
- ↑ Marvel Entertainment FY 2007 10-K "Toys" pg. 19
- ↑ Marvel Universe
- ↑ Marvel Universe
- ↑ Box Office Mojo "COMIC BOOK ADAPTATION, 1978-Present" Date of Access:May 14, 2008
- ↑ Box Office Mojo "Elektra"
- ↑ Box Office Mojo "Catwoman"
- ↑ Wikipedia "Disney Consumer Products"
- ↑ Wedbush Morgan "Marvel Entertainment" December 17, 2007
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