Now Comics' Tony Caputo shared this essay with us on Marvel Comics and why he thinks they may license their comics to other publishers.


In my recent comic book white paper, I mentioned Marvel Comics' shift from a predominantly publishing-focused company in 1993, with 86% of revenues coming from publishing, to a licensing company today, with publishing revenues being in the teens.  A couple of industry people regarded this ominous message with a grain of salt, because who am I to know?  Marvel loves the direct market.  It generates over 90% of its comic book sales from the direct market.  They wouldn't hurt the one they love.  They've loved the publishing business model for over 50 years.  Why would they change it to a licensing model?  Well, besides the fact that they are already thriving as a licensing business, the answer is simple: public company.


I'm going to show you the actual numbers that my theory is based on, which show why I believe Marvel will stop publishing comic books, graphic novels and trade paperbacks and throw them into their mix of other licenses, too.  Don't worry; I'm not giving the corporate board of directors any new ideas.  I'm sure they have a similar analysis on their desks already.


Marvel survived through an IPO, inflated valuations, hostile takeover, a bankruptcy restructuring, a lawsuit with Stan Lee, and is now making movies.  I've had too much experience with financial investors and venture capitalists (mostly after my adventure with the previous iterations of NOW), and even more with licensors to last me a lifetime.  Please bear with me, as I attempt to explain some sophisticated financial information in layman's terms.


Table 1 is an excerpt of the Notes to Consolidated Financial Statements, dated December 2004 from the Marvel Enterprises, Inc.  Annual Report (we'll talk about the missing Toy Biz portion later).  A publicly-traded company makes this freely available to anyone, to promote interest in buying shares.  You can download your own version from


Table 1 contains:


  • Row 1 is the obvious description of the origin of the numbers listed.
  • Rows 3, 10, and 17 provide the year labels: 2002, 2003 and 2004.
  • Rows 4, 11, and 18 are the 'Net Sales,' defined as the amount of revenue generated minus and commissions, returns, damages and retail display allowances, or 'gross sales minus returns, discounts, and allowances.'  In other words, how much is deposited in the bank.
  • Rows 5, 12, and 19 are the 'Gross Profits,' which are Net Sales minus cost of sales.  This'll include production, printing, and shipping, and does not include overhead expenses.  You may want to take a quick look at Rows 26 & 27, which lists the 'Gross Margins' for Publishing and Licensing.  Notice that there is no cost of sales in Licensing, but Publishing cost $36,984,000 in printing, shipping and freelancers.
  • Rows 6, 13, and 20 are your Operating 'P&L' or Profit and/or Loss figures. Row 24 shows an estimated annual growth rate for Publishing, at about 10%, and Licensing at about 55%.  This should make the shareholders very happy.  You have incredible growth of 55% annually in the Licensing segment that requires no cost of goods and 100% Gross Margins, but alas, Publishing on the other hand, has grown only 10% annually, with an average of 55% Gross Margin, which, by the way, in publishing is very impressive.
  • Rows 8, 15, and 22 present the 'identifiable assets' of each segment - these are accounts receivables - money that is expected to come.










(in thousands)







 Net sales





 Gross profit





 Operating income (loss)










 Total identifiable assets















 Net sales





 Gross profit





 Operating income (loss)










 Total identifiable assets















 Net sales





 Gross profit





 Operating income (loss)










 Total identifiable assets










Annual Growth (Estimate)

10% growth

55% growth








Gross Margin  2003





Gross Margin  2004










Percentage of Sales






Table 1: Excerpt from Marvel Enterprises, Inc Annual Report


I learned as a liaison between an entrepreneurial visionary and the publicly-held corporation that purchased his company, and another who decided to go the venture capital route that it's all about what's best for the investors.  I also came to understand this when NOW Entertainment Corporation's investors, with an underwriter, attempted an IPO in 1994.  The fiduciary responsibility of the senior executives and board of directors of any publicly-held company is to maximize shareholder profits.  That is the primary objective of a public company.  Maximize shareholder profits.  This is why you read about thousands of people losing their jobs just before the holidays, as every dollar saved adds profit to the bottom-line. Fantagraphics Books' Kim Thompson believes that 'if a corporation were a human being, it would be a narcissistic sociopath with an eating disorder.'  It doesn't matter how shareholders (the corporation) get fat, just as long as they stay nice and fat, and get fatter.  It's not really greed.  This is corporate capitalism.


This is where Table 3 fits into the picture. Section 9 of the Marvel Enterprises, Inc.  Notes to Consolidated Financial Statements describes Marvel's licensor relationship with it's subsidiary Toy Biz Worldwide, LLC (TBW) in Hong Kong.  Marvel Enterprises entered into a license agreement with an unrelated Hong Kong company (now calling themselves TBW), where TBW handled the manufacturing and sale of all Marvel toy figures, other than those produced by licensee Sony Pictures.  TBW uses the Toy Biz name for marketing purposes, but Marvel doesn't own TBW, who paid a royalty advance of $20 million for a term of 5 1/2 years, plus payment for additional marketing, and service administrative fees.  Marvel received royalty payments for toy sales from TBW equal to $10.5 million in 2002, $29.6 million in 2003, and $9.3 million in 2004. Although the licensing agreement was for 5 1/2 years, with a $20 million advance on royalties, that advance was satisfied within two years, which brings me to my next point.


The most wonderful thing about licensing intellectual property (IP) instead of producing is that you're doing a mere fraction of the work, spending near-zero operating dollars (legal fees, professional fees, reviewers, etc), and can still generate substantial revenues.  As long as there are publishers out there willing to license a character, foregoing any rights in the artwork, stories, and characters forever, you can make the magic happen.


I've developed a worksheet with some conservative estimates.  You can view it as a table here.  There is no $20 million advance for 5 1/2 years, just an accrual spreadsheet of three classes of Marvel Comics.  Class 'A' is the bestsellers (see Table 2), typically shipping out an average of 100,000 copies per month, with reprints sold to 60 countries.  You may see some titles listed within the select categories that you feel do not belong, but I also considered international appeal through motion picture and television productions over the property's history as a variable. Class 'B' titles sell about 75,000 copies per month, and reprints sold to 20 countries.  Class 'C' titles sell 20,000 copies per month with reprints sold at a discount to ten countries.  I've also added two classes of trade paperbacks and graphic novels, with the licensee (someone like Scholastics, Warner Books, or Simon & Schuster), releasing only one a month from each class.  That's all, just one book per month with limited foreign reprint interest.


The entire publishing division of Marvel Comics would be gone, leaving a specialty team costing $2 million annually, for facilitating, reviewing and determining the best licensees per IP.  Marvel Enterprises, Inc would absorb this handful of individuals into their corporate overhead.  If they haven't considered a specialty team option, they need to rethink just throwing the responsibility to the existing licensing staff (corporations love consolidating workloads), to continue to establish a level of quality expected for the books.  Once all 4000 of Marvel's characters are up for grabs for comic book publishing, there would be a swarm of interested parties from all over the world, and not necessarily the best choice for the IP.  You'll have a wealthy father who'll pay for his son (thirteen years old) to draw a Man-Thing comic book, because he saw the movie on the Sci-Fi Channel.  A typical corporation wouldn't care who or what, if he walked in the door with a $250,000 advance on royalties check.  Okay, so that's an extreme, but you get the idea.


Table  2: Title Classes to Determine Sales Value  




(all properties of Marvel Enterprises, Inc.)


The Amazing Spider-Man, Peter Parker- The Spectacular Spider-Man, The Uncanny X-Men, Wolverine, The Incredible Hulk, The Fantastic Four


Daredevil, Electra, Captain America, Ghost Rider, Iron Man, The Punisher


Doctor Strange, Silver Surfer, Iron Fist, Nick Fury & Shield, Man-Thing, Mighty Thor


Table 3, lists the status quo, showing the number from the Marvel Enterprises Annual Report for 2004 under 'Publishing Model.'  The 'Licensing Model' shows a completely different world. I've separated the revenues I've calculated under separate headings as a differentiator.  The Licensing Model includes Marvel Enterprises licensing 70 titles, which is about what they publish (appearing in Diamond's Top 300 Comics), out of their thousands of characters, for comic books, graphic novels, and trade paperbacks.  The royalty percentages ranging from 5% to 15% of receipts (depending on the class), then licensing revenue would equal about $32 million annually, using the formula I mentioned earlier, multiplied by 3.88889 to reach 70 titles.  Realistically, they could and already require hefty advances for any licensing agreement, with Toy Biz Worldwide, Ltd being one example.  This could be one large sum from a single larger publishing company, or multiple agreements with a dozen comic book companies, which would create more competition, and revenue.  This is all hypothetical.  My scenario here estimates about $32 million annually, which is not quite up to what Marvel Publishing generated in 2004, however, without the overhead.


Table  3: With or Without Marvel Comics Publishing


2004 Comic books, Trade Paperbacks, Graphic Novels



Publishing Model

Licensing Model *


About 70 comic book titles








Net sales




Gross profit




Operating income (loss)








Overhead Cost Reduction:

$ 11,687,000


Cost of Sales Reduction:

$ 36,984,000


Total Cost Reduction Savings:

$ 48,671,000







All cost savings (Rows 8 & 9) add to the bottom line as profits.  Although the Licensing Model, in this scenario would generate less than the operating income of publishing the titles, you also have a savings of about $48 million by not dealing with printing, shipping and production, and dropping the overhead from $11 million down to $2 million, by transferring all production responsibility to the licensee.  If you add those savings to the bottom line, the Licensing Model, at least for the first year (unless some financial wizards decide to defer the savings over the course of a few years), would equal about $80 million.


What If...?


1)   What if ...Frank Miller licensed ELECTRA?


2)   What if ...Jim Steranko licensed NICK FURY: AGENT OF SHIELD?


3)   What if ...Todd McFarlane licensed SPIDER-MAN?


4)   What if... IDW licensed MAN-THING?


5)   What if...Dark Horse licensed X-MEN, HULK, CAPTAIN AMERICA, etc?


6)   What if...Alex Ross licensed SILVER SURFER?


7)   What if...Eddie Murphy licensed LUKE CAGE?


8)   What if...Simon & Schuster licensed SPIDER-GIRL?


9)   What if ...Warner Bros offered $50 million dollars for everything, so no one else could publish any Marvel IP and create a more balanced market share?


10)   What if...TokyoPop licensed and changed the Marvel Universe to Manga style?


11)   What if...Fantagraphics Books licensed the NEW UNIVERSE?


Could this really happen?  Why not?  When could this happen?  I'm willing to bet that at the first sign of financial hardship (maybe when a couple of their own movies tank), like any board of directors on any public company looking out for the shareholders (which usually includes themselves), they will pull out the analysis as an option to explore ways of cutting costs to increase profits and dividends.


One thing is for sure... it would be a completely new ballgame.


(Copyright 2005 Tony C. Caputo)