Explaining Marvel's Finances

Rare is the occasion your faithful Geek Beat author has the chance to throw around links to websites which explain such complex topics as Wall Street financing, so I'm taking full advantage of this opportunity. The Motley Fool is a website which attempts to translate the world of Wall Street into terms simpletons such as myself can have a fighting chance at understanding.

Why, you might ask, is Mark reading Wall Street websites? Well, I could claim it was due to personal interest and a healthy desire for education (I did earn my undergrad in politics, after all, and thus took a number of economics courses in my time), but you'd all see through such a flimsy lie. In point of fact, I happened upon the Motley Fool (which does seem to be a decent site, by the way) in my daily trolling of the internet for all things geek movie-related, because they published a brief and excellent explanation of Marvel's new financial situation with the big "war chest" they've borrowed from major investing firms. Essentially, it boils down to this: Marvel is producing movies with money which doesn't technically belong to them, and any profit they turn is pure gravy.

I picked out two money quotes (believe it or not, I did not intend the pun there) from the explanation:

"A $100 million U.S. box office gross makes a break-even movie for Marvel, according to Cuneo, and the historical $200 million domestic average and $400 worldwide gross taken in by Marvel's movies will put $117 million or so directly in its net profit coffers. This one means there is a lot of money to be made for Marvel if they play well."

But what if they don't play well? This is a small risk for Marvel, because box office takes will also combine with all other merchandising rights, which represent anywhere from $20 to $60 million in cash. As such, merchandising alone can account for nearly half of the needed break-even total of $100 million. Even a disappointing Marvel flicks like Daredevil netted just over $100 million in box office returns. However, The Punisher managed only a meager $54 million with a combined domestic and foreign take, so it is possible for a Marvel flick to flop. Now that Marvel is financing their own films, they can't afford many such flops. They could likely suck down the cash damages of one or two Punisher-level flicks if the rest proved successful, but what if the unlikely should occur and Marvel should encounter a string of dismal failures? This is where money quote number two comes in:

"The worst that can happen is that a particular movie bombs out at the box office, and the creditor -- conference host Merrill Lynch -- forgives the debt on that movie's budget in exchange for the rights to that character."

Just imagine, Ant-Man -- or worse -- Iron Man, suddenly disappearing from Marvel continuity because they no longer own the rights to the character. A small and calculated risk to be sure, but a risk nonetheless. Do you think it is a risk worth taking?