The battle between Disney's (DIS -0.93%) Marvel and Fox (FOX) over the future of the X-Men and the Fantastic Four just turned ugly.
Source: Fox.
Comic book writer Chris Claremont, speaking at Phoenix Comic Con, stated that Marvel has banned the creation of new X-Men characters in the comics, since Fox would immediately own the film rights. Prior to Claremont's statement, Marvel also said it would cancel the Fantastic Four comic book series next June, two months before Fox's film reboot.
Marvel's decisions, while shrewd, also feel petty, considering how small the comic book market is compared to the film business. Therefore, let's look at what the bitter clash between Marvel and Fox can teach investors about the state of the comic book film industry.
Why Marvel wants Fox's Marvel films to fail
Before Disney acquired Marvel in 2009, the struggling comic book company sold the film rights to its most marketable franchises -- the X-Men, Spider-Man, Iron Man, Thor, the Hulk, Captain America, and others -- to various studios.
In 2013, Disney bought back the rights to Iron Man, Thor, and Captain America from Viacom's (NASDAQ: VIA) Paramount Pictures. Comcast's (CMCSA 0.15%) Universal returned the film rights for the Hulk to Marvel in 2003, but retained distribution rights for solo films. That's why Marvel still hasn't released a solo Hulk film yet. Meanwhile, other characters -- including Daredevil, Ghost Rider, Blade, and the Punisher -- reverted to Marvel after their respective studios gave up on making new films or TV shows.
The Hulk still can't smash Universal's chains. Source: Marvel.
That means Sony (SONY -2.01%), which owns the film rights to Spider-Man, and Fox, which controls the X-Men and Fantastic Four, are next on Disney's hit list. According to recent rumors at HitFix, Sony might let Spider-Man join Disney's Marvel Cinematic Universe, or MCU, while retaining distribution rights for solo films. Fox, on the other hand, has no plans to play ball with Disney -- it will reboot the Fantastic Four next year, followed by a solo Deadpool film and X-Men: Age of Apocalypse in 2016.
Disney doesn't want Fox to develop its own MCU because it wants to profit from those properties, and it doesn't want moviegoers to be confused by two rival MCUs that are expanding at the same time. Therefore, Marvel believes axing the Fantastic Four comic book and eliminating new characters in the X-Men could disrupt Fox's long-term plans and possibly force Fox back to the negotiating table.
Why Marvel's strategy makes no sense
Yet that strategy makes no sense from a financial perspective. Marvel reported $125 million in publishing revenue in 2008, its last full fiscal year before the Disney takeover.
Comichron reported that North American comic book revenue rose 20% between 2008 and 2013, so we can assume Marvel's print comics still generate around $150 million per year -- a drop in the pond compared to Disney's $45 billion in revenue last year. Meanwhile, revenue growth is outpacing comic books sold, which climbed less than 4% between 2008 and 2013. This indicates that increased revenue mostly came from higher cover prices for comics being sold to a stagnant reader base.
By comparison, Disney grossed over $4.7 billion with its past five MCU films in the past two years, while Fox's The Wolverine (2013) and X-Men: Days of Future Past (2014) grossed nearly $1.2 billion. Most of the revenue from all of these films came from foreign markets, where Marvel's print comics have limited distribution. That indicates many foreign audiences simply flock to see action-packed summer blockbusters, with little regard to the source material.
In comparing comic book sales with film releases, we can see that films help comic book sales, and not the other way around. For example, when Fox released the first Fantastic Four film in July 2005, Ultimate Fantastic Four became the ninth-best-selling comic book that month, up from 21st place a month earlier, according to Comichron.
It is shortsighted and naive to believe that canceling the Fantastic Four comic book, which only sold 28,000 issues in September, will disrupt Fox's upcoming film reboot. It's also absurd to believe that Marvel's creative teams could suddenly create a brand new X-Men character popular enough to be integrated into Fox's film franchises.
The Foolish takeaway
Marvel would clearly like to make films with all of its characters, but it already has plenty on its plate with its MCU planned until 2017. Disrupting its print comics out of spite is just bad for PR, and dramatically reduces the likelihood of a cross-studio crossover between the X-Men, the Fantastic Four, and the Avengers in the future.
