That's it. No more Mr. Nice Duck.
I'm gonna have to bust out some Quack-Fu on my dear opponent for talking smack about Howard the Duck. Without that glorious flop, George Lucas would never have sold Pixar to Apple's (Nasdaq: AAPL) Steve Jobs. I'm sure Disney (NYSE: DIS) would like to thank Howard and George for unlocking that hidden treasure from the Marvel (NYSE: MVL) vaults.
But I digress.
Chuck wondered what would happen if Marvel's upcoming self-produced flicks flopped. Again, it's very simple. Marvel has promised distribution partner Paramount -- a Viacom (NYSE: VIA-B) subsidiary -- that it will deliver two feature films a year for five years, based on a gallery of 10 Marvel characters. A consortium of banks will provide financing for these projects, backed by the future film rights to the heroes in question. HSBC (NYSE: HBC) and GE Capital Corporation (NYSE: GE) are providing the first round of cash.
Revenue from the movies will go to paying back the loans at first; the remainder of the net income after distribution fees and such is Marvel's profit to keep. If Doctor Strange or Shang-Chi, Master of Kung Fu should fail to cover their production costs, their movie rights pass to the bank, which will probably resell them somewhere, and the balance of that loan is voided out. No cash risk -- only intellectual property.
So you could actually say that the loans will repay themselves, if the movies do poorly enough.
Finally, Chuck thinks that Marvel's stock price today has impossible growth baked right in. "For that level of growth to continue, every future blockbuster needs to be bigger than the last one, and the hits need to keep on coming at an ever more rapid pace," he says. Not so, Dr. Value. A misfire like Daredevil may not have made a profit under the revenue-sharing deal with News Corp's (NYSE: NWS) 20th Century Fox, but it could be a different story under Marvel's own umbrella.
First, it's highly unlikely that an overmatched director will be allowed to destroy a potential golden franchise the way that Ben Affleck vehicle did. Marvel has the clout and the moola to land A-list crews now, not just crowd-pleasing actors. But more importantly, Daredevil's $179 million in worldwide box-office revenue would have made more than $50 million in profit under this arrangement, according to Marvel's own math.
No one laughs at a master of Quack-Fu. Invest in Marvel today, and you'll laugh all the way to the bank once the movie profits start to roll in.
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