Franchise Assemble: how Marvel created an all-conquering Hollywood juggernaut


The Avengers

Captain America: Civil War hits UK cinemas today. It’s the 13th and perhaps most anticipated film in the Marvel Cinematic Universe (MCU), the fictional world created by Marvel Studios, a division of Marvel Entertainment. The MCU is more than a fantasy arena in which characters from the popular comic books operate; it’s a global franchise that illustrates the fruits of executing a laser-focused brand strategy.

Captain America promotion

Since the creation of its comic book operation 76 years ago, Marvel has toyed with many strategies designed to help it grow beyond its core business. It is a logical move – characters like Spider-Man, X-Men, Daredevil, Captain America, Iron Man, The Incredible Hulk, Thor and Fantastic Four are engrained in popular culture and have been for decades. They are lucrative brand assets. But Marvel’s attempts to grow, particularly in Hollywood, during the mid-20th century were poorly executed and the brand was becoming diluted.

In the 1990s the firm refocused and set about creating a cinematic dynasty, producing the most successful film franchise of all time. By exercising greater control over the creative process and the use of its brand assets, Marvel created a richer and more authentic brand experience on screen – and a $4 billion takeover by mega-brand Disney in 2009 super-charged its strategy.

Marvel is now a cash cow – and Hollywood is milking it for all it’s worth. Since the release of Blade in 1998, Marvel films have grossed an estimated $19.6 billion at box offices globally. When you consider that those movies cost an estimated $5.6 billion to produce, it’s no surprise that Hollywood has an insatiable appetite for all things Marvel. And Marvel’s $14 billion profit pile doesn’t even include income generated through DVD/Blu-ray sales, toys, costumes, video games and other merchandise.

Marvel revenue versus production cost

Struggles in Tinseltown

Glancing at the box office receipts for the past two decades, you’d be forgiven for thinking that Marvel films have always been commercially viable. But from the launch of Marvel Comic #1 in October 1939 until August 1998, only four films were produced for cinematic release. Three of those grossed $38.5 million (the 1994 incarnation of Fantastic Four was never released) and Howard the Duck (1984) amounted for $37.9 million of that total. Despite that contribution, Howard the Duck was deemed a financial failure and was panned by critics, earning seven Razzie nominations and “winning” four of them. The estimated combined budget for these four films was $56.2 million, leaving Marvel nearly $20 million in the red. The company needed to rethink its Hollywood strategy.

To make matters worse, Marvel’s biggest rival, DC Comics, was achieving commercial and critical success during the same period. Relying almost exclusively on its Superman and Batman franchises, DC movies generated an estimated $1.75 billion at the box office, making a profit of almost $1.2 billion from 1966 to 1997. The success of these flicks showed that there was a market for comic book movies and the result of Marvel’s refocus was the creation of Marvel Studios in 1996.

Executing the vision

Marvel had confidence in the strength of its brand and the hugely marketable characters it had developed during the past 70 years. Key to kick-starting its new strategy was insisting on control during the pre-production process. Marvel gained more control over the scripting and casting of films and focused on fostering strong relationships with the studios and distributors it sold its character rights to. This was crucial as it enabled Marvel to provide input and advice as to how its characters should be used, while enabling the studios to focus more on production and filming.

Blade was the first film released by the new Marvel Studios – and it immediately provided a healthy return on investment, grossing $131 million. Blade may have bolstered Marvel’s coffers, but it didn't receive much change from critics, who panned the film. But the studio’s next two efforts, X-Men and Spider-Man, changed the game. They were hugely successful, grossing $296 million and $821 million respectively, and crucially they received glowing reviews across the board. Options for sequels were exercised for both films – the floodgates had opened and Hollywood couldn’t wait to get its hands on as many Marvel characters as possible.

Teething problems

In an attempt to satisfy the insatiable demand for more Marvel content, the studio licensed more character IPs for films and products. Film budgets rose, but quality began to be sacrificed for quantity. A swarm of unnecessary sequels were commissioned and peripheral characters were given their own films, diluting the Marvel brand. After poor critical receptions from 2005 to 2007, many thought Marvel’s bubble had burst. But despite these issues, every Marvel film continued to make a profit. That changed in 2008, when The Punisher: War Zone became the first Marvel film to make a loss.

It would prove to be a blip as Marvel Studios’ plan to gain greater control over its IP and take over the entire production process was already in motion. The start-up costs were high, but the risk would be worth it based on the consistent profits that were being made by all the Marvel movies produced by external studios. The main obstacle the company faced was the pre-existing deals for the rights to some of their biggest franchises. Spider-Man was locked in a deal with Columbia Pictures, X-Men and Fantastic Four were contracted to 20th Century Fox and, as of 2005, the rights to Iron Man, Thor and The Incredible Hulk belonged to other studios. Marvel Studios reacquired the rights to the latter trio of properties at the end of that year, paving the way for the creation of the MCU and the opportunity to bring The Avengers to the big screen – and ultimately create its first billion-dollar grossing film.

The Big Bang

Kevin Feige, an executive for Marvel Studios at the time, envisioned creating a shared universe in the same way the creators Stan Lee and Jack Kirby had done with their comic books in the 1960s. With this in mind the company set about creating the MCU. Where previous Marvel films had been created and distributed independently, and by different studios, Marvel could now produce them itself, bringing its numerous brand assets into the same universe with characters appearing in films as individuals and all together.

The Thor-y of Everything – Empire magazine

The concept of multiple characters appearing within the same universe may have seemed normal in the comic book industry, but in Hollywood it was rare. An idea of this scale would need to be carefully thought out to ensure continuity across the various films and to keep audiences interested. Marvel tackled this in an intensive way. By forming a creative committee, Marvel Studios mapped out three phases that would form the progression of the MCU – and its production schedule for the next decade.

Phase one introduced individual characters like Iron Man, Thor and Captain America in their own films to establish them with audiences, which culminated in the first crossover film, The Avengers. Phase two included sequels for now-popular characters and introduced new ones. Phase three will launch new brand assets from the Marvel canon and offer third films for characters like Thor and Captain America.

Marvel's three-phase strategy

The payoff

Having a long-term, structured release schedule designed to naturally grow its fictional universe enabled Marvel Studios to showcase its multiple brand assets in a consistent stream of high-quality and profitable films. The company’s success caught the eye of the Walt Disney Company, which shelled out $4 billion for Marvel Entertainment at the end of 2009 – completing the turnaround from near-bankruptcy two decades earlier. Disney’s reputation and financial power quickly became apparent as it snapped up the rights to distribute Marvel films from Paramount Pictures. A deal with Sony to receive ancillary merchandising rights to future Spider-Man films in exchange for Sony buying Marvel's film participation rights was significant, particularly as in February 2015 Marvel agreed to collaborate with Sony on the next Spider-Man film despite the character rights remaining with Sony.

The Disney deal has helped elevate Marvel and the delivery of the MCU to another level. Marvel films have generated $9.1 billion in global box office sales since 2008. The films are a goldmine for advertisers too – how many movies can boast the level of mainstream awareness that Marvel Studios films receive? A well thought-out creative plan backed by an entertainment juggernaut is a lethal moneymaking combination.

Inevitably this boom period will subside. The company’s most valuable assets such as Iron Man, Captain America and Thor will soon be at risk of over-exposure and audiences may begin to become fatigued. Will the newer, arguably less exciting, Marvel properties be able to appeal to a mainstream audience in the same way? This transition to phase three is going to be one of the most important periods for Marvel Studios to navigate – and the success of Captain America: Civil War will go some way to indicating how it will fare.

But regardless of whether or not the movie becomes Marvel Studios’ fourth billion-dollar film, it can’t be argued that the company’s efforts to maximise the value of its brand on the big screen during the past two decades has been nothing short of Marvelous.

Chris has left The Frameworks.

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