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Session 03

Kim & Mauborgne (2016)

The Marvel Way: Restoring a Blue Ocean

case
Sasanka Sekhar Chanda
2019
Strategic Management - II

Exploring Options: Blue Ocean Strategy

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Marvel – early days

• Started 1939 Martin Goodman, comic books
▫ 40s Captain America only original character. Rest
knock-offs from DC comics (mimicking Superman, Batman, Wonder Woman)
▫ 1954 slump: comics are bad Homosexuality, teen pregnancy
▫ DC Comics purchases Marvel’s distribution arm
 Restricting sales of me-too, knock-off Marvel comics
• Onwards 1961 (Marvel under Stan Lee in ‘61-’65)
▫ New demographic- college students targeted with
original content and a new way of writing The Marvel method.
 Fantastic Four, Incredible Hulk, Thor, Ant-Man,
Spiderman. Bundled into The Avengers
 Also, X-men, The Human Torch, Dr. Strange, Loki
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Trouble starts from late ‘60s

• 1968: Goodman sold Marvel to Cadence Industries

• New owners poor managers. Lead cartoonist quit for DC
• 1986: Marvel sold to New World Entertainment
• 1988: Perelman the corporate raider bought Marvel
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Till bankruptcy under Perelman (1996)

▫ Comic book prices were raised repeatedly
▫ Marvel introduced many versions of the same comic
book, each with a different cover, in order to fuel
speculative purchases by collectors
▫ 12 distributors reduced to one
 Hero World acquired for $7m, 1994
 # of comic book stores fell from 9000+ to 4000+
▫ More companies purchased to artificially boost share
prices (showing higher revenue)
 Fleer ($286m, 1992), Skybox ($150m, 1995) both in sports
card Panini (Stickers, $158m, 1995), 46% of Toy Biz
▫ 1996: 375 + 115 employees laid off.
 Marvel filed for Bankruptcy in December
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Post Bankruptcy 1998

• 1998: Perlmutter era starts
▫ Toy Biz used $250 million in high-yield junk bonds,
renamed Co. to Marvel Enterprises high interest debt $30m/yr
• 5 businesses
▫ Comic books: Revenue + IP + Goodwill + brand
▫ Trading cards: not profitable Fleer + Skybox sold for $26m in 1999
▫ Toys: low margin but profitable Marvel exited toy prodcn in ‘99
 Successful movies increased toy sales
▫ Licensing of characters (movie studios, toy biz)
▫ Marvel Studios: Not a movie production set up
 Rather, used for licensing Marvel characters to Hollywood
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Early movie deals provided capital

• Spiderman
▫ Movie rights purchased by Sony for $10m + 5%
first dollar royalties.
▫ Spiderman, Spiderman 2, Spiderman 3 grossed
$2.5b, marvel got upwards of $62m
• Twentieth Century Fox
▫ Movie rights to X-men, Fantastic Four, etc.
▫ Movies grossed 2.5b. Marvel got $26m for X-men
• Universal: rights to make Hulk movies
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2004 onward: create a real movie studio

• David Maisel earlier worked for talent firms Endeavor and Creative Artists Agency
▫ Comic book fan, suggested that Marvel make movies
▫ Create one large Universe of Marvel characters
▫ Use Marvel characters as collateral for financing
 Eventually $525m in low interest debt
• 2006 Maisel – chairman of Marvel Studios
▫ Iron Man in May 2008, $585m w/w revenue
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Cost consciousness @ Marvel Studios

• Location: Above a car dealership
▫ No empty soundstages, no unused backlots
• Office Furniture: Threadbare; no unused space
• No free coffee/ Lunch. Thin rank of mid-management
• No spending on glamor
▫ Lesser known actors, directors, screen-writers
 Signed to obligation for appearing in 6-9 films
▫ Edited films to reduce expense on shots
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Value in marvel-made movies

• Rich narrative and story-telling, leveraging decades of
intricate comic book storylines
▫ X-men are mutants with special abilities but are also
alienated
▫ The Hulk character has a tendency to ‘blow up’
▫ Spiderman has power. Struggles to get date
▫ Iron man has life-threatening heart condition, and a
drinking problem
• High quality drama that contains super heroes
▫ Layering: building success of new characters on success of
preceding characters
▫ Creative committee to ensure integrity of characters and
story lines: Marvel execs (not 3rd party) bring comic books to
life. Storyline independent of any single actor or director
• Nerd culture began to eclipse pop culture
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The Wagon Wheel @ Marvel

• Hub: Characters, Brands (IP)
• Rim: Synergy across the spokes
• Spokes: Media forms, consumer product categories
▫ Only two spokes at start: Comic Book, Toys
▫ Subsequently:
 Motion pictures
 Licensing
 Video games
 Television
 Amusement parks
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At present …
• Dec 2009: Disney acquired Marvel for $4.2b
▫ Maisel (chairman), Cuneo (CEO) out. Perlmutter stays
• Marvel and Time Warner key players in fantasy films
• Marvel’s primary competitor is bad comic book movies
▫ Too many of them sour audiences to the genre
▫ Marvel made 91 movies, from 1999-2015
 41 based on Marvel characters($21.7b), 16 DC ($5b)
• Aggressive expansion into television sector 2010
• Fiege (studio head) dissolved the Creative Committee
▫ Got Captain America: Civil War reassigned to Disney studio
• Marvel moved to Disney’s lot –better offices etc.
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Class Questions
• Draw the Strategy Canvas for Marvel:
▫ Before 1961 and afterwards, i.e., in 1961-65
▫ before the Bankruptcy (1996) and afterwards (till 2015)
• What factors of competition did Marvel eliminate,
reduce, raise and create post-1996
• In the post-2015 scenario
▫ (a) How do Marvel and Time Warner look like, on the
strategy canvas?
▫ (b) what can Marvel do to find another blue ocean?
Draw the corresponding curve in the strategy canvas.
 THE STRATEGY CANVAS

AS-IS Hollywood Studios Marvel Studios