But Marvel makes relatively little money from these box-office bonanzas, because of unfavorable deals struck in the 1990s. A Lehman Brothers analysis calculated that Marvel made just $62 million from the first two ?Spider-Man? films.
By making his own movies based on other Marvel characters, Mr. Maisel hopes to transform his division of Marvel Entertainment into a true filmmaking brand, maintaining control from script to release, keeping all the profits for the company and building a film library, while using someone else?s capital.
Paramount Pictures will market and distribute the movies, for a fee. (Universal Pictures, which made 2003?s ?Hulk? by the director Ang Lee but sold back the rights to Marvel after its poor box-office performance, will handle that sequel.)
The financial model seems unusually favorable. Because most of the financing raised by Merrill Lynch (the $465 million revolving credit facility) is insured by Ambac Assurance, Marvel is not liable to repay its senior creditors if the movies tank. The Ambac deal uses the comic characters as collateral and thus requires no capital outlay by Marvel.
And on top of the profits, Marvel gets 5 percent of all film-related revenues as a producer fee.
Wall Street has already showed its approval, steadily lifting the company?s stock to Friday?s close of $26.78 from $19.43 a year ago.
?What they?ve done is take themselves from a niche licensing company and have really knocked the cover off the ball as far as execution where the stock is concerned,? said Brad Ruderman, of Ruderman Capital Partners. ?If they can make appealing movies, I don?t see any reason why they can?t be successful.?
But that if ? making successful movies ? has tripped up many a brilliant financial model in the past. And the favorable terms mask a hidden risk: If the movies are not successful, Marvel will forfeit the film rights to the characters in the deal, including Captain America, Thor, Nick Fury and the Avengers.
?It?s a convoluted, almost Rube Goldberg-type apparatus for generating higher profitability with minimal risk,? said Harold L. Vogel, of Vogel Capital Management. ?But we all know the movie business depends on how profitability is defined. We know most movies do not actually make money, or a lot of money. So I don?t know that they come out ahead at the end of the day, even when you adjust for risk and the time it takes. Why go through all this, except to generate fees for Merrill Lynch and some lawyers??
Veteran Hollywood insiders raised other caveats about the Marvel arrangement, including the company?s dependency on major studios for setting their marketing budgets and for overseeing distribution. The studios have been known to pay more attention to their own movies rather than those made elsewhere.
Additionally, Marvel?s slate of up to 10 films will be based on second-tier superheroes, who may not resonate with younger moviegoers. With the major studios continuing to pump out blockbusters based on the better-known Marvel characters, it could lead to a glut of the genre.
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