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Comic Book Publisher Bulks Up Making Its Own Superhero Movies

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Comic Book Publisher Bulks Up Making Its Own Superhero Movies


Comic Book Publisher Bulks Up Making Its Own Superhero Movies Kevin Harlin

Fri Sep 12, 5:50 PM ET


"Iron Man" gave viewers much to marvel at this summer.




The blockbuster story of billionaire playboy Tony Stark facing down Afghan terrorists and evil-doers closer to home in his special battle suit kicked off the summer movie season in May. It also kicked off Marvel Entertainment's (NYSE:MVL - News) foray into producing its own films.


Previously, the company rooted in comic books had licensed many of its characters to other movie studios, which would make their own hits. Starting with May's release of "Iron Man," and followed by June's "The Incredible Hulk," Marvel is starting to produce its own movies.


The new strategy allows Marvel greater control over its stable of thousands of proprietary characters. That depth of material -- heroes ingrained in our culture -- is unmatched by any other studio.


Potential Payout


It also gives Marvel a much bigger piece of potential rewards. With previous Marvel movie offerings, such as three recent "Spider-Man" flicks, the company would settle for licensing fees and a smaller percentage of the box-office haul.


"It makes all the difference in the world," said David Miller, an analyst at Caris & Co.


"Iron Man" had $571 million in global box-office receipts, the company said in early August. "The Incredible Hulk" generated $246 million. Because of the timing in reporting and remitting that money, those movies contributed little to second-quarter results, though some early revenue from foreign releases did make it in. Analysts are looking for that bump to come in 2009.


Marvel has more than 5,000 proprietary characters, including Spider-Man, Iron Man, the Hulk and the X-Men. Depending on your age, those are either amazing comic book heroes or summer blockbuster movie titles.


Marvel's next studio effort, "Iron Man 2," is due out in 2010, followed by "Thor" later that year, then "The First Avenger: Captain America" and "The Avengers" in 2011.


It's still working through some previous collaborations with studios. "Punisher: War Zone," from Lionsgate, is scheduled for release later this year. And "X-Men Origins: Wolverine," from Fox, is due in 2009.


But Marvel's first movie, "Iron Man," still has legs. It's set to open in Japan on Sept. 27. Japan, Miller says, is one of the few international markets that can also surpass $100 million in box-office receipts.


Marvel intends to build that franchise there. It's teaming with Japanese anime studio Madhouse to develop a new series that will weave "Iron Man" characters in with Japanese cultural and historical story lines.


"They're increasing the power of their brand globally," said Doug Creutz, vice president for equity research at Cowen & Co. "Domestically, they have a pretty wide reach, but internationally, they have a lot of room to expand familiarity with their characters."


The New York City-based Marvel formed as Timely Publications in 1939. Marvel Comics was actually the title of its first book. The company and its stable of heroes and villains grew over the years. But some bad business decisions and a general slump in comics sales in the 1990s hurt the company. Then known as Marvel Entertainment Group, it filed for bankruptcy in 1996.


It came out of bankruptcy two years later and merged with toy maker Toy Biz Inc. The company changed its name to Marvel Entertainment, reflecting its wider focus.


The comic books at Marvel's core are still big business. The company claimed 40% of the business from comic-book shops in 2007, up from 38% the year before, according to estimates from industry tracker Diamond Comic Distributors. The rival No. 2 publisher -- DC Comics, owner of Batman, Superman and other superheroes -- fell to about 32%, down from 34% the year before.


Marvel's revenue from that publishing side -- comic books, graphic novels, magazines -- came to about 22% of total sales in the second quarter. That was down from almost 24% a year earlier, though the company said some strong titles a year ago skewed the comparisons.


Most analysts expect modest growth from that division for 2008.


"It's an important business. It helps drive their brand," Creutz said of the comic-book core. "But this is really more of a licensing company, and increasingly a feature film company."


And the success of any of Marvel's movies gives credibility and buzz to future movie efforts. It also creates demand for more action figures, board games and animated series spinoffs, driving licensing income.


Earnings Growth


The company posted earnings per share of $1.70 last year on revenue of $486 million. That was up from the previous year's 67 cents per share and revenue of $352 million.


Analysts expect $1.79 per share for all of 2008. Some analysts were put off and lowered projections earlier this year after the company said most of its studio revenue wouldn't hit until next year.


But it still bested second-quarter expectations by 31%. EPS was 59 cents, up 74% from a year earlier. Revenue was up 55% to $156.9 million.


Marvel thinks its pipeline of movie hits can continue to deliver those numbers. Analysts say fickle audiences are one of the biggest risks.


Large studios release dozens of pictures a year. Marvel is looking at about two a year. Any duds could hurt the stock and the bottom line.


Interesting article. The most intriguing was a break down of their sales piece. A few things struck me. First, that 70%+ of the comic market is dominated by MARVEL and DC....though I imagine that other 30% was nonexistent 15-20 years ago.


Second, was that only 22% of all their earnings come from comic sales! That means a SHITLOAD of money coming in from movies etc. I wish I would have boght stock in these guys before Spiderman hit theaters.


Thanks for digging this one up.




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