Marvel Team-Up: Iron Man and the Governator

Life imitates art, but can business? Sure, if you're Marvel Entertainment (NYSE: MVL  ) .

Yesterday, in a moment eerily reminiscent of the old comic book series Marvel Team-Up, in which two superheroes are thrust together in a save-the-world-or-at-least-the-city drama, Marvel agreed to produce its next four films in Hollywood, seemingly clinching a deal that Iron Man director Jon Favreau and Cal-EE-foh-nya Governator Arnold Schwarzenegger had been lobbying for.

Marvel will team with production company Raleigh Studios, located in scenic Manhattan Beach and home to the popular CBS (NYSE: CBS  ) crime drama, CSI: Miami. Reuters reports that Raleigh is already building sound stages for Iron Man 2, which Favreau, a Los Angeles resident who prefers local gigs to be near his family, will direct.

Schwarzenegger can also claim victory. His state should benefit from more than $500 million in production spending through 2011. (Marvel spent $140 million on Iron Man, according to Box Office Mojo.)

What we can't be sure of is what the Governator and the California Film Commission gave up to get Marvel to stay in L.A. Tax incentives seem likely; Schwarzenegger had been arguing for them as a means to keep California -- and more specifically, Hollywood -- the center of gravity in the motion picture industry.

And for good reason. Marvel Studios chief David Maisel has shown zero remorse in choosing tax-friendly locales for his company's movies. The Incredible Hulk was filmed in Canada, for example. Disney (NYSE: DIS  ) , meanwhile, left Hollywood to shoot Ugly Betty in New York, which offered big incentives.

So does the Marvel deal reveal a shift in thinking for California's film industry regulators? Will Viacom's (NYSE: VIA  ) Paramount, Sony's (NYSE: SNE  ) Columbia Pictures, and Time Warner's (NYSE: TWX  ) Warner Brothers soon reap the benefits of a best-in-the-U.S. tax system for filmmakers? Not exactly.

"I'm very surprised. I wasn't sure they were going to be able to make it work financially, considering how attractive some of the other options were," Amy Lemisch, director of the California Film Commission, told Reuters. "This is great news for California. Each one of these movies is going to employ thousands of workers."

Fair enough. Marvel might have done better on a pure-numbers basis elsewhere. But Hollywood is where the talent is. It's also where Favreau is, and keeping a hitmaker happy is always a good idea.

But I'll also be unsurprised if, during the next earnings call, we learn that the partnership with Raleigh is as much about taxes as it is talent, part of a broader strategy to lower costs, control risk, and enhance returns. Or as Deadline Hollywood's Nikki Finke put it in a blog post: "Marvel, of course, only cares about the bottom line."

"Only?" That's probably too harsh. But, as a shareholder, I, too, care about the bottom line, Ms. Finke. If this team-up enhances it, then I'm all for it.

Related Foolishness to the rescue:

Fool contributor Tim Beyers had positions in Marvel shares and LEAPs at the time of publication. He also hunts for the best of tech as a member of the Motley Fool Rule Breakers team. Here's how to try this market-beating service free for 30 days. Get access to all of Tim's Foolish writings here.

Disney and Marvel are Stock Advisor selections. The Motley Fool's disclosure policy hates deadlines some days.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 746999, ~/Articles/ArticleHandler.aspx, 7/29/2014 3:25:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement