Marvel Enterprises has announced plans to produce its own motion pictures based on its stable of more than 5000 characters.  In a major change from previous movie deals in which Hollywood studios financed production (and took the financial risk), Marvel will now be in charge of a slate of up to ten films with budgets ranging from $45 million to $180 million that will be delivered over the next eight years and distributed by Paramount. 


To finance the films Marvel has obtained a financing commitment from Merrill Lynch Commercial Finance Corp. for a $525 million non-recourse revolving credit facility over seven years.  The facility will be secured by the theatrical and motion picture production and distribution rights for ten (undisclosed) Marvel characters.  Although Marvel will have more financial risk producing its own films versus previous deals in which the studios assumed the costs of production -- the non-recourse nature of the financing limits Marvel's actual cash risk to un-reimbursed development coasts and general incremental overhead.  This risk, which pales in comparison to what a Hollywood studio typically faces, will be balanced by Marvel's ability under this new deal to keep a larger share of all the revenue streams related to its films, to begin building its own film library, to retain all merchandising revenues and to receive a producer fee for each film.


Paramount will not have to contribute to the production cost of the films and will receive a distribution fee for each film it distributes and will retain worldwide distribution rights to sequels to the films covered under the agreement.  But the distribution deal is also a sweet one for Marvel since Paramount will provide advance funding of promotion and advertising for the films (no small matter when advertising costs for a blockbuster film can easily top $30 to $40 million).


Expect Avi Arad, who has played a key part in the Marvel movies produced by Fox and Sony, to assume an even greater role in the production of the new slate of films, which will likely include Captain America and Nick Fury among the first entries, with the first in-house Marvel blockbuster due in 2007 or 2008.