What movie headed the box office on the weekend when 2005's 19-week box office slump ended? Fantastic Four.
Many pegged Marvel Enterprises'
Perhaps the FF will become the third major movie franchise, after Spider-Man and X-Men, in this Motley Fool Stock Advisor recommendation's stable.
In the movie business, establishing a film franchise with strong sequel potential is almost a guaranteed path to box-office success. MGM propped itself up for decades on its fortune from secret agent James Bond.
Stock Advisor pick Time Warner
Marvel's better deals
There are two types of people in Hollywood -- those with money and those without.
In years past, Marvel's movie contracts gave it licensing fees and profit participation. They were generally good deals that Marvel used to pull itself out of debt and onto the road to cinematic riches. As the Marvel movies boomed, the company was able to negotiate gross participation contracts, a much better deal.
Now, after years of success, cash-rich Marvel is able to demand equity participation. That's the best deal available without taking on a film's full financial risk.
In April, the company announced it would produce 10 movies of its own over an eight-year period while continuing its preexisting studio collaborations. Marvel is finally poised to accept the bulk of the risk and reward from producing motion pictures.
Marvelous movie metrics
Movies are a font that just keeps flowing. Even after the film hits theaters, Marvel can cash in on toys, games, comics and other books, fast food tie-ins, and apparel. Over time, there are also DVDs, pay-per-view fees, cable and TV licenses, and more toys and games.
Video games are increasingly important. For example, fellow Stock Advisor pick Activision
One new concept is the Marvel Nemesis: The Imperfects fighting game. Marvel superheroes will battle The Imperfects, opponents created by game giant (and, yes, fellow Stock Advisor pick) Electronic Arts
Oh, and let's not forget the recently signed deal with Microsoft
Looking ahead to 2006
Marvel's next big movie is the May 26, 2006 release of X-Men 3. However, my pick for the lower-budget smash hit of the summer is Sony's
Analysts predict Marvel will average earnings growth of 15% annually for the next five years, and foresee 7% per-share earnings growth for 2006. Between the movies, the new game deals, and a Lions Gate
At 17.7 times trailing earnings, Marvel is an inexpensive growth stock with many budding business opportunities.
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Marvel, Activision, Electronic Arts, and Time Warner are all Motley Fool Stock Advisor picks. For more superheroic stocks from the mighty minds of Tom and David Gardner, subscribe today for a 30-day free trial.