Marvel Entertainment began as a comic-book business, and the heroes and villains created by its writers captured America's attention starting in the late 1930's. The company now owns a portfolio of over 5000 characters, and it continues to earn revenues by publishing the comic books and novels that established its core following.^[1] However, over half of Marvel's revenues in 2007 came from licensing its characters to third party producers of video games, TV shows, toys, and movies. The licensing business has very high margins, since Marvel's cost of production on a licensed product is almost nothing - but the drawback is that Marvel sees only a percentage of the profits from the products.

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 ^[2] and the X-Men trilogy grossed over $500MM^[3]), 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.^[4] 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.^[5]

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.^[6] 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.

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