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Marvel is a mine, not an IP creator – and distribution is still king

By on September 2, 2009
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The content versus distribution argument may be as old as the media industry. But does the Disney acquisition of Marvel for $4 billion return content to the ascendancy.

Marvel logo

Barely a decade ago, Marvel was bankrupt. But it was rescued in a bitter battle by Isaac “Ike” Perlmutter, who stands to make over $1.4 billion from the acquisition.

Marvel’s success has less to do with comics (although it is the #8 magazine publisher in the US and reaches over 4.1 million people each month) and more to do with films. There has been a Marvel-licence blockbuster at the cinemas every year since 2000.

In essence, Perlmutter realised that CGI had advanced sufficiently to make Marvel’s superheroes look good on the silver screen. And the sale to Disney is the culmination of a decade of dealmaking and licensing that has seen Spiderman, X-Man, the Hulk and a range of other characters either on our screens or in production.

To demonstrate that, let’s look at how Marvel makes its money.

Marvel Entertainment revenues
Year ended 31st December 2008

Licensing

292.8

43%

Publishing

125.4

19%

Film production

254.6

38%

All other

3.4

1%

 

676.2

 

Source: Marvel Entertainment, Inc 10-K

Less than 20% of its revenue comes from making comics. Yet that’s where the creative risk is being taking. Marvel’s success comes from exploiting proven franchises, all of which were tested in the cheap medium of comics first.

So which is king? Content or distribution?

The FT quotes Jay Sherwood, senior managing director of McGladrey Capital Markets, a boutique investment bank, as saying “this deal shows that content is still king.”

Mitch Lasky of Benchmark Capital has been the cheerleader for the value of distribution, particularly within the games industry. He argues that Steam may be the most unsung games asset in the world, and that new businesses should be focused on building new distribution models, not creating a brand new IP. And I agree with him.

Does the Marvel deal change that?

Not in the slightest. Marvel is a pretty unique company. It has nearly 5,000 characters in its archive. (OK, so some of them must be pretty minor. I can’t see a movie starring “petty thug #3” coming any time soon.) It is, in fact, an archive more than a IP creator.

Sure, there are new comics coming all the time. And there have to be to so Marvel can look for new hits. But Disney is paying for the recurring revenues coming from a proven back catalogue. Don’t believe me? Let’s look at the ages of the characters that have either starred in movies in the last ten years or whose movies are in production.

Superhero First comic published
Captain America *

1941

Fantastic Four

1961

Spiderman

1962

Incredible Hulk

1962

Thor *

1962

X-Men

1963

Iron Man

1963

The Avengers *

1963

 

* Movies coming soon

Did you spot the theme? Those characters are all over forty years old. Marvel is not a content creation machine: it’s a mine. A mine of gold and platinum sure, but a mine nevertheless.

The acquisition of Marvel by Disney doesn’t change anything. Distribution still matters. (In fact, one of the rationale’s behind the acquisition will be that Disney will be able to maximise the value of Marvel’s IP due to its massive distribution muscle.)

And on the content side, if you can build a vast portfolio of popular content that can be consistently re-invented for new audiences across multiple media, you’re onto a money-spinner.

But notice the key words: vast, portfolio, re-invented, multiple media. That’s not a strategy that a start-up, or even an established, games company will find easy to follow.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
  • It's interesting to see people agreeing with the idea of Marvel as simply a back catalogue.

    It also suggests that anyone trying to break into the comic world should give Marvel a wide berth (unless they simply want to get a job with Marvel to learn their craft and get a good name of the CV before quitting to work on their own ideas)

  • deftangel

    I'm glad you posted this as the other week I read a comment you left on MCV about “distribution being King” which I didn't get at the time. I do now. I'm not so sure about your BSkyB example though. Having their vast distribution network will mean sweet FA in the admittedly unlikely prospect of them losing Premiership football rights.

  • It's interesting to see people agreeing with the idea of Marvel as simply a back catalogue.

    It also suggests that anyone trying to break into the comic world should give Marvel a wide berth (unless they simply want to get a job with Marvel to learn their craft and get a good name of the CV before quitting to work on their own ideas)

  • deftangel

    I'm glad you posted this as the other week I read a comment you left on MCV about “distribution being King” which I didn't get at the time. I do now. I'm not so sure about your BSkyB example though. Having their vast distribution network will mean sweet FA in the admittedly unlikely prospect of them losing Premiership football rights.

  • maurij

    I would disagree with the fact that Marvel can be a source of IP creation. New IP creation among the comic book majors has been dead for a long time. The circumstances around creatom of the character Spawn sparked it.

    Todd McFarlane created Venom when he was drawing Spiderman in the late 80s/early 90s. Marvel wouldn't cut him in on the character, so he left, creating a new comic book company and poaching several of Marvel's best writers and artists. Writers/Artists have no incentive to create IP unless they leave and start their own company, then have it get bought for any successful IP. Is it a coincidence that the majority of “bankable” characters were created or co-created by Stan Lee back when he was part of the Marvel senior exec team?

    This almost sounds the way video games are going/have gone. David Jaffe left Sony after creating God of War to set up his own shop. Will Wright has done the same with Stupid Fun Club. Activision are playing the part of Disney by buying IP/creative teams (Bizarre) and managing IP like a “portfolio”.

    Disney's job with Marvel is to exploit, exploit, exploit, but the current Marvel CEO knows this anyway, which is why so many Marvel characters have been on the big screen since his takeover. Management interests are clearly aligned here and I would be astonished if new IP came out of this.

  • dylan1

    Well, I think the comment that Marvel is *just* a mine is a little unfair. Not much, mind you, but a little.

    At some point, they will come out with a new IP that's up there with X-Men et al. Look at some recent (ish) new IP from other comic companies that has successfully made the jump: Spawn, Hellboy etc.

    Also, they do have the ability to turn minor characters into much greater IP opportunities e.g. Deadpool.

    At the end of the day, I'm sure about 90%+ of the purchase price was predicated on their catalogue but I wouldn't rule out their new IP generation just yet…