One year ago, two Fools battled it out over the promise and pitfalls inherent in Motley Fool Stock Advisor pick Marvel Enterprises
Fellow Fool Rick Munarriz argued that Marvel's 5,000 characters "come in various shapes and sizes, but most come in one color: multiplex gold." Then he went on a myth-busting bender to point out how the company was doing much better than people would give it credit for.
For example, Marvel's own Fantastic Four and X-Men: The Last Stand teamed up with Time Warner's
Lumpy production schedules lead to lumpy earnings, and 2006 was an expected low point in Marvel's income graphs. But the $525 million credit facility that allows Marvel to act as an independent movie producer is far less risky than its hefty credit line might suggest, with a clever capital structure backed by intangible assets like character rights.
Rick saved his best shot for the rebuttal, though. Multiplex profits don't tell half the story, since toys, games, soundtracks, and above all else, DVDs really juice the numbers. Breaking even at the box office is just fine, with that in mind. Fantastic Four sold a reported 2.4 million DVD copies in its first day on American store shelves.
Back to formula
Tim Beyers said that he likes Marvel's comics and movies, but not the new, cinema-centric business model. He presented charts of Marvel's movie budgets and box-office results since 1998, pointing out that 68% of the dough came from the Spider-Man and X-Men franchises.
Back those megahits out, and the rest of the slate pulled in just a bit more than double their collective production cost. Remove distributor and projectionist takes, and they'd just about break even. "Zowie," as Tim put it.
And that's the future he sees for Marvel, the freestanding movie house. Not every movie can be a Spider-Man type of hit, and most will pull in about as much as they cost. These figures showed Tim that "Marvel must create another $1 billion box-office blockbuster to earn the piles of moola investors are expecting. Call me crazy, but I don't see Ant-Man delivering such giant-sized returns."
Our readers chimed in with their votes at this point, giving Rick the clear edge. 68% of 123 voters took his side, versus 22% for Tim and 10% undecided. Game over, bub. Or at least, round one to Rick.
Since that Duel aired, Marvel has gone on to reward shareholders handsomely, returning a market-beating 34% in share-price gains alone. The company has also bought back $100 million in shares since last year's duel, and it authorized another anti-dilutive buyback of $200 million this past May.
The new releases have done rather well, too. Spider-Man 3 has raked in a cool $883 million in total gross receipts worldwide, according to the Box Office Mojo website. Sony
The Fantastic Four sequel has opened stronger than its predecessor; the original went on to a worldwide $330 million theatrical performance. Nicholas Cage rode Ghost Rider to a respectable $228 million lifetime gross. Still plenty of power left in the superhero genre, then.
We haven't even seen the first of the independently produced films, either. That'll come next year, with Iron Man and a new take on The Incredible Hulk, both due for release in 2008. After that, we'll have a better sense of how that financing facility will work out. But judging by recent releases such as the relatively obscure Ghost Rider, I think it'll work out really well.
So I'll give the real-world point to Rick, as well, based on one-year stock performance and future prospects. Out Motley Fool CAPS players are hovering between an indifferent three-star rating and a more bullish four stars. That's not enough to unravel Rick's resplendent results, so this fight goes to Coral Gables overall. Better luck to Denver next time.
Super Foolishness aplenty:
- Can Spidey Swing to Islands' Rescue?
- Fool on the Street: Marvel's Super Powers
- How Fantastic Was "Silver Surfer"?
Fool contributor Anders Bylund holds no position in any of the companies discussed here. He bought Marvel shares at $2 apiece back in the day, and sold them for twice the price. He still has nightmares about that sale. You can check out Anders' holdings if you like. With Foolish power comes Foolish responsibility, and the disclosure is here to help with that.