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Does Marvel Understand Hollywood?

You think New York is a tough town in which to do business? Try L.A. Or, worse yet, Hollywood.

Not even two months after Iron Man launched to rave reviews and box-office gold, Hollywood insiders are reporting that Marvel Entertainment (NYSE: MVL  ) doesn't want to pay director Jon Favreau what he's worth.

Call it hardball, Hollywood-style.

Let's play hardall!
Or, if you're Robert Sanchez of movie news site and author of the story that helped put the rumor mill in motion, the more appropriate word is "insulting." That's how he described Marvel's initial offer -- less than $5 million, according to Sanchez's sources -- in an interview with me yesterday.

Here's why that matters. In May, Favreau admitted during an episode of Howard Stern's popular radio show that he made $4 million for Iron Man and that, for a sequel, he'd hope to make 1% of the gross. Were he to have exactly that sort of deal today, Favreau would be taking home a (surprise!) $5.4 million check, going by the latest numbers at Box Office Mojo ($538.1 million globally).

Alas, he doesn't -- though he could be eligible to share in a small percentage of the film's profit, if there is any to report. Hollywood producers, Favreau told Stern, have a history of being stingy with profits.

Marvel can relate. Look at Spider-Man. A mega-hit by any measure, the web slinger's celluloid debut yielded $821.6 million in worldwide theater receipts in 2002. DVD sales brought in more than $200 million the same year and created a windfall for producer Sony (NYSE: SNE  ) .

And what did Marvel make from this billion-dollar box-office bonanza? It made $10.4 million -- equal to just 1% of the gross -- according to the company's 2002 10-K annual report. Future deals with News Corp.'s (NYSE: NWS  ) 20th Century Fox for the X-Men and Fantastic Four series, Universal Studios for Hulk, and Lions Gate (NYSE: LGF  ) for The Punisher didn't change the equation much.

Thus the irony: Favreau apparently wants what Marvel, as a company, decided was so insufficient that it had to build a studio of its own.

I'll take revisionist history for $200, Alex
Not that Favreau has helped himself much recently. During a Q&A session at his MySpace page, Favreau raised some issues:

It's been five weeks since the one and only phone call my reps have gotten from Marvel. I know their hands are full with the [The Incredible Hulk] and I'm sure they will get into it shortly, as they tell me they intend to. I ran into the Marvel guys at the Hulk premiere and everyone sounded eager to get to work on IM2. ... I am concerned, however, about the announced release date of April 2010. Neither Robert nor I were consulted about this and we are both concerned about how realistic the date is in light of the fact that we have no script, story or even writers hired yet.

Concerned? Not consulted? No writers? Gahhhhhh! Sell!

Or don't. This is Hollywood we're talking about, Fools. Negotiating via the press is practically high art in L.A. Intrigue is the rule, not the exception.

Even in this case. Sanchez's story drew fire from another Holly-blogger yesterday morning. Writer Nikki Finke cited an inside source that said that Marvel had "very recently" made an offer that would pay Favreau more than he earned for Iron Man.

Who's right? Finke, I hope.

Nevertheless, Favreau's deal, if one is to be had, is in the hands of Marvel Studios Chief David Maisel, who joined the company from a talent agency in Los Angeles after piling up a distinguished record as a Hollywood dealmaker, including stints at Disney (NYSE: DIS  ) and as an aide to one-time super agent Michael Ovitz.

Expecting anything other than shrewd negotiating from a dealmaker of Maisel's training would be, at best, naive. Favreau isn't. He's money. And I think he knew exactly what he was doing when he logged on to MySpace -- negotiating for the sort of deal that fans like me want to see him get. Maisel, on the other hand, is seeking the best deal he can get for the company without destroying a billion-dollar franchise in the making. As a shareholder, I appreciate that gesture.

Bravo to both men, I say.

Fool contributor Tim Beyers had positions in Marvel shares and LEAP options at the time of publication. He still very much believes that the company, though officially a Stock Advisor selection, is the sort of multibagger in the making that he and his rebellious colleagues search for daily at Rule Breakers. Try either service risk-free for 30 days.

The Motley Fool's disclosure policy met a man with repulsors at a bar last night. He hadn't showered in weeks.

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