Dueling Fools: Marvel Bear

I'm a fan of Marvel Entertainment's (NYSE: MVL  ) comics and movies. Well, most of them, at least. I agree with one of my best buddies who summed up X-Men: The Last Stand thusly: Bwahahahahahahahahaha!

I know what you're thinking: So what if I didn't like the movie? Millions of others paid to see it. Indeed they did. All told, BoxOfficeMojo.com says that X3 has grossed $425 million globally since its Memorial Day debut, easily outpacing the film's reported production budget of $210 million.

Tale of a two-hit wonder
And there's likely to be some other successes. Ghost Rider is planned for 2007, starring Nicolas Cage. Solo appearances of Hugh Jackman's Wolverine and Sir Ian McKellen's Magneto are also planned and could do well.

But the real key to Marvel's success is how well it does as a studio. We won't know how that turns out before 2008, when Iron Manreaches theaters. But we may be able to guess using history as our guide. Let's review the last few years of Marvel films, beginning with Blade in 1998:

Title Production budget Worldwide gross
Blade $59* $131.2
Blade II $54 $155.0
Blade: Trinity $65 $128.9
Daredevil $78 $179.2
Elektra $43 $56.6
Fantastic Four $100 $330.1
Spider-Man $139 $821.7
Spider-Man 2 $200 $783.8
The Hulk $137 $245.3
The Punisher $33 $54.7
X-2: X-Men United $110 $407.6
X-Men $75 $296.2
X-Men: The Last Stand $210 $425.5
TOTAL $1,303 $4,015.8
Source: Box Office Mojo; numbers in millions
* Estimate based on the average budget for Blade II and Blade: Trinity

Impressive, right? Absolutely. Understand, however, that 68% (!) of Marvel's box-office success can be traced to the Spider-Man and the X-Men franchises.

Stolen profits
What's more, the profit puzzle doesn't look all that great once you remove Spidey and his mutant pals:

Title Production budget Worldwide gross
Blade $59* $131.2
Blade II $54 $155.0
Blade: Trinity $65 $128.9
Daredevil $78 $179.2
Elektra $43 $56.6
Fantastic Four $100 $330.1
The Hulk $137 $245.3
The Punisher $33 $54.7
TOTAL $569 $1,281.0
Source: Box Office Mojo; numbers in millions
* Estimate based on the average budget for Blade II and Blade: Trinity

Do the math. Marvel films not starring a mutant or a web-slinging wall-crawler have grossed about double their production costs, before prints and advertising. That's not bad, but remember that roughly half the box-office take goes to theaters and distributors.

Here's why this matters: There are few franchises in the Marvel universe with the mass appeal of Spidey and the X-Men. So when Marvel becomes its own studio, investors are much more likely to see the less spectacular numbers from the second table. And how would that affect the bottom line? Recently, Business 2.0 and Jefferies & Co. figured that Marvel would earn 46% of the box-office take on films it independently produced. If that's true, then Marvel films without Spidey and X-Men would have netted -- wait for it -- $589.3 million, or just $20 million more than their collective production costs. Zowie.

By the way, these numbers don't include the juice newly independent producer Avi Arad will earn from Marvel films he helps create. According to published reports, he'll earn "points" -- that is, a percentage -- of the gross box-office take. Raise your hand if you thought Marvel was expecting to pay Arad millions in fees when it negotiated a $525 million credit facility to make films. Exactly.

My Fool-sense is tingling!
Of course, there's more to Marvel than movies. A new deal with Hasbro (NYSE: HAS  ) could bring in millions more in toy revenue. And comic books are still a staple of the firm. Still, those businesses represent the old Marvel. The new Marvel is hip, cool, and cut in celluloid. In sum: It's a great stock story.

But all great stories end. And some great cliffhangers end badly for the hero. With so much riding on creating new billion-dollar franchises, I can't shake the feeling that Marvel has already gone over the edge.

Marvel is a Stock Advisor selection. Hasbro, too. Ask for us anall-access pass, and you'll get a backstage look at all of the stocks that are helping David and Tom Gardner beat the S&P 500 by an average of 38 percentage points. It's free for 30 days. All you have to lose is the prospect of a richer portfolio.

Think you're done with the Duel? You're not! Go back and read the other three arguments, and thenvote for a winner.

Fool contributorTim Beyersowns more than a thousand Marvel comics. But he still won't buy shares in Marvel, or any of the other stocks mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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