Marvel reported stellar fourth quarter earnings and a strong overall performance in 2007 driven largely by licensing revenues, which in turned owed much of their giddy-up to the wall-crawling antics of one Peter Parker aka Spider-Man, the star of Spider-Man 3, the top-grossing film of 2007. But with Marvel set to unveil Iron Man and Hulk, the first self-produced cinematic fruits of its new business model, comes word that the writers' strike has slowed the development of the second wave of Marvel Studio films with Marvel's Hollywood cohorts struggling mightily to get one movie release ready for late 2009, rather than the planned quota of two summer movie blockbusters per year.
Even with some storm clouds on the horizon, it's hard not be impressed with Marvel's performance in 2007. Revenue was up 38%, and cash flow was such that Marvel was able to repurchase $211.9 million in stock and still end the year with $72 million in cash, restricted cash, and short-term investments versus $40 million on hand at the end of 2006.
Licensing for Q4 2007 brought in $58.5 million versus just $25.5 million in 2006. Spider-Man licensing alone brought in $22.7 million for Q4 (thanks to royalties from Marvel's joint licensing programming with Sony as well as DVD revenues) and $122 million for the entire year of 2007. Total licensing revenues for 2007 were $272.7 million versus $127.2 million for 2006. Licensing generated operating income of $33.1 million in Q4 and $196.1 million for the year.
Publishing continued to do well with net sales up 6% to $30.3 million in Q4 2007 versus $28.6 million in the final quarter of 2006. World War Hulk and the comic adaptation of Stephen King's
Sales in Marvel's toy segment declined from $31.1 million in Q4 2006 to $20.5 million in Q4 2007, but operating income soared from $6.5 million in Q4 '06 to $15 million in Q4 '07 as Marvel completed its transition from low margin toy manufacturing and distribution (21%) to a high margin licensed-based toy operation with a margin of 73%.
While the debut of the Spectacular Spider-Man animated series (which already has an ambitious licensing program) should keep some of the Spider-Man licensing revenues flowing, Marvel's major prospects for 2008 revolve around the performances of its two first self-produced films, Iron Man, which debuts on May 2nd, and Hulk, which is due out on June 13th. With budgets estimated at $125 million (Hulk) and $186 million (Iron Man) these Marvel films will have to perform at the box office to generate positive revenue, but if they do well, Marvel will profit from their success to a much greater extent than the company has been able to do with the Spider-Man movies, which were produced by Sony.
Marvel has a number of other movie projects in development and had planned to exploit the potential of its new self-produced business model by releasing two Marvel Studio films per year. However the writers' strike has thrown a monkey wrench into those plans. In a conference call with stock analysts Marvel Studio's David Maisel indicated that, because of the strike, the company was scrambling to get one film debut in 2009 (and indicated that if that happened, it would likely be in late 2009). Marvel lists four films in development, Ant Man, Captain America, Thor and The Avengers, but Maisel gave no indication which one of those projects might be the one that Marvel plans to release in 2009 -- look for an announcement in the fairly near future, because given the time necessary for special effects work, a new Marvel Studio project would need to get underway by this spring or early summer in order to make a 2009 date. There will be one Marvel-based film debuting in the summer of 2009, but it will be X-Men Origins: Wolverine from Fox, which is slated for a May 1st release, not a Marvel Studios' film.
Marvel has two more animated TV series in development including a Hulk series that is tentatively set for a spring 2009 release and one called Super Hero Squad also slated for spring of 2009, though no animation studio is yet attached to either project. Marvel is continuing its direct-to-DVD program with Lionsgate. Avengers: Heroes of Tomorrow is due out in August, followed by Hulk Vs. (now delayed until January, 2009), Thor: Son of Asgard (September 2009), and Planet Hulk (February, 2010).