Marvel Entertainment, Inc. announced its fourth quarter and full year results for 2005.  Earnings for the fourth quarter were $25.9 million, down from $30.1 million in Q4 2004, but this was primarily due to a $12.5 million charge for the early termination of Marvel's toy licensing deal with Toy Biz Worldwide (see 'Marvel Inks Five-Year Deal With Hasbro').  Licensing revenues, which increased 44% from Q4 2004, were a prime factor in Marvel's ability to meet Wall Street's expectations (Marvel's stock was up 8% after the release of its financials).  Prime contributors to the growth in licensing revenue were a $50 million video game extension with Activision, and a 37% growth in international licensing.

Marvel's publishing program continued its solid growth with a 6% gain from the same period in 2004, fueled in part by increased advertising revenues.  In a conference call with stock analysts Marvel's CEO Peter Cuneo described his company's publishing division, which achieved a profit margin of nearly 37%, as 'probably the most profitable publishing unit in the world.'  Cuneo ascribed the growth in publishing revenues to a double-digit rise in sales of graphic novels (a trend he sees as continuing in 2006), and to increased sales in the mass market.  In response to a specific question about Marvel's program with 7/11 convenience stores, Cuneo said that the C-store distribution deal 'was going well.'

Cuneo stated that 2006 would be a 'transitional' year for Marvel, which is handling the manufacturing and distribution of Marvel toys before handing them off to Hasbro in 2007 in a straight licensing deal.  He cautioned that licensing revenues would be down in part because Marvel's licensing team would be concentrating on Spider-Man 3.  Spider-Man 2 contributed over $100 million in royalty payments and Marvel is hoping that Spidey 3 will do even better, though the vast majority of those payments won't be booked until 2007 or later.  Studio revenue will be in the $10-$13 million range (vs. $25 million in 2005) in large part because Marvel only has one major theatrical release set for 2006, X-Men 3, and the X-Men property is not, in Cuneo's words, 'a licensing dynamo' like Spider-Man.

Marvel's 2006 sales (though not its margins) will be inflated by the wholesale sales of its Curious George, Marvel Legends, and X-Men 3 toys, and Marvel is expecting modest initial contributions from its animated projects, such as the just released Ultimate Avengers direct-to-DVD movie (Cuneo indicated it was too early to be able to forecast the sales of the first animated DVD, but said that Marvel was hoping for sales of 600,000 to 1,000,000 units).  Marvel also expects continued modest top-line and bottom-line growth from its publishing division in 2006.