In December 1996, Marvel Entertainment filed for bankruptcy. The comic book market had crashed after a speculative boom, and the company was buried in debt. It emerged after merging with the toy company Toy Biz, but it was still in rough shape and needed money.
Its most valuable asset was its characters, so Marvel started licensing them to Hollywood studios. The movies were hits. The deals were not. When Blade became a $70 million hit in 1998, Marvel reportedly earned about $25,000 from it. The first two Spider-Man films brought in billions across box office, DVDs and TV. Marvel’s share was about $62 million. The studios made the real money. Marvel had sold the most valuable part of its business for a small fee.
So in 2005, Marvel decided to make movies itself. It arranged a $525 million financing deal with Merrill Lynch to produce films based on its own characters. The terms were risky. As collateral, Marvel put up the film rights to several of its characters, including Black Panther and Doctor Strange. If the movies flopped, it could lose them.
The first film under the new plan was Iron Man, released in 2008, built around a character most moviegoers barely knew. It was a hit, and it launched a connected series of films that became one of the most successful in movie history. In 2009, Disney agreed to buy Marvel for about $4 billion.
The lesson: if someone else is making most of the money from what you create, look closely at the deal. Licensing, subcontracting and white-label work can keep a business alive, but they can also cap it. Once you’ve proven the demand, consider whether you can deliver the finished product yourself, and capture the value you’re creating.
Article contributed by
The AFE Editorial Team
