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    marvel

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    196 views15 pages

    Case 4 - Entertainment and Leisure

    Uploaded by

    Mayar Abueleniin
    marvel

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 15
    Marvel Entertainment Inc.: IRON MAN TO THE RESCUE Ellie A. Fogarty and Joyce P. Vincelette Introduction Pow! Baw! Zar! IN 2008, MAnveL MAN’s ENTIRE UNIVERSE SHIFTED. After 70 years of fe- rocious strugele, Marvel Man’s domination of the printed page was strong, with occa- sional swipes by his long-time nemesis DC Man and some puay domestic and foreign tials. With no longer the need to fight on every frontier to protect his formidable assets from being exploited, Marvel Man was able to share his super strengths through lucrative licensing agreements with other trusted big-name heroes who understood the ins and outs oftheir own ‘competitive worlds Marvel Man was growing up and leaving toys behind. The new skiemishes \Would be fought online and on the big screen, What surprises await Marvel Man in these new ‘media worlds? Which Hollywood villains might strike first—the writers or the actors? How ‘can Marvel Man stay fresh and relevant in these changing times? What superhuman strength Will be needed to triumph over sinister intellectual property thieves? What nefarious plot \Would the unpredictable Wall Street Woman concoct and would it involve batling a bear or a bull? Keep alert, loyal followers, and welcome toa brand new day! History ‘Today's Marvel Entertainment Inc. traces its long, complicated history back toa small comic book company, Timely Comics, which was owned by Mastin Goodman inthe 1930s. A New ‘York publisher of pulp magazines, Goodman's selections featured stories about detectives, ‘Tis case was prepared by Fie A. Fogarty, EAD. and Profesor Joyce P.Vnclete ofthe Clip of New Jes. Copyright © 208 by Ele A, Fopary and Joys Binet. Tis eas cannot be repredicedin any for without ‘ie ween poms of he copy hau, Elie A Foguty and JoyeeP Velo, Rept emissions oly pated tothe publisher, Price Hal for he book, Sate Management and Busines Policy 13h ation ad {he meratonl andcletonic versions his ook bythe cpyeen holler, Eli A, Fogarty and Joye. Viele. “Thscare was edited for SMP th Eton. The copy holes are okey espe for ase ome. Any thee pabicaton of tr ese (wanton, ay fom of elacvuns oe mia a sale ay fom ef puta anetiet Falster wil be inition of copyright iw, nes Ele A Fogarty ar oy Viele hae rand tora ‘Seiten reprint permission Roprnsd hy perms, 154 science fiction, Westems, crime, and horror. Following closely on the heels of rival DC ‘Comics, which had just inuoduced Superman and Batman, Timely Comics produced its fist Marvel Comics seies in 1939, featuring the Human Torch and Namor the Sub-Mariner. The issue sold well and solidified Goodman's interest in the superhero genre. By late 1940, the first Captain America issue was an instant success as he batted the emerging Nazi threat. At ‘5.10 an issue, comic books provided the action-packed distraction thatthe Depression-era ‘generation needed. Stanley Leiber, better known as Stan Lee, began working as an assistant 1940 at his cousin Goodman's company. Lee would later become synonymous with Mar- vel Comies as an editor, manager, and spokesman. Goodman's company grew rapidly ‘throughout the 1930s and 40s during the Golden Age of comic books. In the early 1950s, Goodman ereated Atlas News Company, which he sot up as his na ‘tional distribution system. Timely Comies was renamed Alas Publishing in 1951. During the 1950s, the entire comic book industry slowed, not only from the popularity of television, but also from a newly created censorship board, the Comics Code Authority, whose special seal of approval guaranteed inoffensive, and bland, content between the pages. Distribution opera- tions at Allas News Company were suspended in 1956, forcing Atlas Publishing into a disti- bution deal with competitor DC Comics to get a limited number of comics inthe Marvel series ‘out per month. In the 1960s, the re-emergence of superheroes appealed tothe baby boomer generation, row in high school and on college campuses. It was in 1962 that Stan Lee co-created Marvel's ‘most recognizable character, Spider-Man, Over the next few years, withthe releases ofthe Fan- taste Four, the Incredible Hulk, the Avengers, and the X-Men, the company, now publishing ‘under the name Marvel Comic Groups, began merchandising its products and debuted its first ‘superhero show on the ABC television network. Although the company was still reporting ‘strong sales, its profits had dropped duc to consolidating distribution outlets. The increasing popularity of chain supermarkets, which did not carry comic books, hurt many comic book ‘publishers that had relied on comer grocers asa primary distribution outlet. In 1968, Goodman sold Atlas, including the Marvel Comics series, o Perfect Film and Chemical Corporation, ‘which was then re-named Cadence Industries. Marvel Comics existed within Cadence as part ‘ofa business unit called Magazine Management. By the end of the 1970s, the market for comic ‘books was reduced to an alltime low, Readers had lost interest i comics. In the 1980s, the growing number of comic book collectors ushered in a wave of stores dicated tothe sales of comic books, Marvel began to target different demographics in the market, and began o use new distribution outlets including shopping malls. Marvel's revenues continued to grow through character license agreements. As part of a liquidation, Marvel was ‘sold by Cadence to New World Entertainment for $46 milion in 1986, Ron Perelman, through his Andrews Group and MacAndrews & Forbes holding companies, acquired Marvel from, [New World Entertainment in 1988 for $82.5 million and formed Marvel Entertainment Group. In June of 1991, Perelman announced that Marvel would sell its stock tothe public forthe first time. Perelman pushed Marvel to expand into other areas with the 1992 purchase of Fleet Conporation, which made trading card, and the 1998 exchange of a 46% interest in Toy 4 toy company owned by Isaac Perlmutter, in return for the use of Marvel's characters, ‘Throughout the early nineties, Marvel completed a number of acquisitions, including chil- dren's kites (Sepetra Star), stickers (Panini), toy rockets (Quest), smaller publishers (Welsh Publishing and Malibu Comies), another trading card company (SkyBox), and a distribution ‘operation (Superhero Enterprises). Marvel Mania was opened as a theme restaurant with servers in costume and menu selections wit superhero descriptions, Confusion reigned as vat- jous firms claimed specific rights to produce and distribute films with Marvel characters. For ‘example, Columbia Tristar Home Video claimed video cassette rights and Viacom claimed tel- cevision rights fora possible motion picture based on Spider-Man, By December 1996, Marvel filed for bankruptcy amid plunging sales and mounting debt. ‘In 1997, Perelman was accused of helping to divert over $553 million from Marvel to his, ‘other companies before the bankruptcy, The suit was finally settled when Perelman agreed to ‘pay former sharcholders $80 million in 2008.! Perelman was ousted by the board, and Carl Icahn, a major bondholder, won control ofthe company for about a year until the courts ap- pointed a Chapter 11 trustee atthe end of 1997, fer Icahn’ filed aitempts a a plan of reor- ‘ganization, the company merged and became a wholly-owned subsidiary of Toy Biz-in 1998. ‘Toy Biz became known as Marvel Enterprises Inc, and changed the trading symbol for Toy Biz stock on the New York Stock Exchange to MVL. Adltional legal issues were resolved with movie studios and Marvel entered into a joint venture with Sony Pictures to develop the ies, the company streamfined publish- ‘expanded into foreign markets hungry for Marvel superheroes. To signal its move into the en- tertainment industry, Marvel Enterprises changed its name to Marvel Entertinment Inc. in September 2005, Alter signing a master toy licensing agreement with Hasbro in 2006, Marvel began its exit it ‘sibuting businesses. Marvel made some ‘of the decade, Marvel was well on its way to becoming a leader in the entertainment industry, {040 self-produced feature films in 2008 (Iron Man and the Incredible Hulk) andthe fund- ing and creative ideas for many more. Marvel Entertainment Inc.’s history bears a striking resemblance to one of its down: ‘odden superheroes that battles rivals and fights injustices. As it transitioned from a tradi ‘tional publisher and toy maker into a new media and entertainment company, would Marvel ‘emerge triumphant over the forces of intense competition and flagrant disregard for the prin~ ciples of intellectual property? Corporate Governance Board of Directors Exhibit 1 lists the company’s board of directors and the compensation received by each in 2007, The 8 directors were: Isaac Perlmutter, 65, had been Marvel's Chief Executive Officer since January 1, 2005, ‘and was employed by Marve as vice chairman ofthe board of directors since November 2001. “Mz, Perlmutter was a dtector since April 1993 and served as chairman of the board of dec ‘ors until March 1995, Perlmutter held over 379 of the company's common stock outstanding Exeter 1 Board of Directors: Marvel Entertainment nc. Age Title Compensation 72 Chairman of the Board $868,160 65 Vice Chairman ofthe Board, Chief Executive Officer $3872.97 46 Direcior $273210 6 Director $192,180 62 Vice Chairman ofthe Roard (Now Executive) 387.988 68 Director $435.710 51 Director 298.210 68 Director 312988 ‘SOURCE: Maret Enertainment, In. Proxy Statement (May 5, 2008), pp. 4-5, 7 as of March 2008. Under the terms of a share disposition agreement in February 2008, Perlmutter agreed not to sell any of his Marvel stock until the company’s share repurchase pro- ‘gram ended in March 2010. F Peter Cuneo, 63, was Marvel's president and chief executive officer from July 1999 ‘through December 2002 and served as the part-time special advisor to Marvel’schiel execu- ‘ive officer from January 2003 through December 2004, Mr. Cuneo had been a Marvel direc- ‘or since July 1999, and since June 2008 he served as @ non-executive vice chairman of the board of directors. Mr. Cuneo was a senior advisor to Plainfield Asset Management LLC, a hedge fund based in Greenwich, CT, that specialized in special and distressed si Me, ‘Cuneo was a director of Iconix Brands Inc. ‘Sid Ganis, 68, had been a Marvel ditector since October 1999, Mr. Ganis was the presi- ‘dent of the Academy of Motion Picture Arts and Sciences, the organization that awards the Os- ‘cars. Mr. Ganis had been president of Out ofthe Blue ... Entertainment, a company that he ‘founded, sine September 1996. Outof the Blue... Entertainment was aprovider of motion pic- tures, television and musical entertainment for Sony Pictures Entertainment and others. From January 1991 until September 1996, Mr. Ganis held various executive positions with Sony Pic- ‘ures Entertainment, including vice chairman of Columbia Pictures and president of World- Wide Marketing for Columbia/TiiStar Motion Picture Companies. James F Halpin, ST, had been 2 Marvel director since March 1995, Mr. Halpin retired in “March 2000 as president and chief executive officer anda director of CompUSA Ine.,a retailer ‘of computer hardware, software, acessories and related products, with which he had been em- ployed since May 1993. Me. Halpin was a director of Life Time Fitness Ine. James W. Breyer, 46, hal been a Marvel director since June 2006. Mr. Breyer had served ‘asa partner ofthe Silicon Valley-based venture capital firm, Accel Partners, since 1995. Mr. [Breyer was a director of Wal-Mart Stores Inc. and RealNetworks Inc. Me. Breyer also served, ‘on the boards of various privately held companies. Mr. Breyer was a member of the board of ‘dean's advisors to Harvard Business School and was chairman ofthe Stanford Engineering Venture Fund. Laurence N. Charney, 60, bad been « Marvel director since July 10, 2007. Mr, Charney retired from his position as a partner of Est & Young LLP in 2007, having served that firm for over thirty-five years. AL Emst & Young, Mr. Charney most recently served as the Amer- ‘cas director of conflict management. ln that role he had oversight and responsiblity in ensur- ing compliance with global and local conflict of interest policies for client and engagement acceptance across all service lines. Mr. Chamey previously served as an audit partner and was “Marvel's audit partner for its 1999 through 2003 audits. ‘Morton E. Handel, 72, had been the chairman of the board of directors of Marvel since ‘October 1998 and was frst appointed as a director in June 1997. Me. Handel was a director of ‘Trump Entertainment Resorts Inc. and served from 2000 until February 2006 as a director of Linens "N Things Ine. Mr. Handel was also a regent of the University of Hartford and was active on the boards of several not-for profit organizations inthe Hartford, CT, area. Richard L_ Sotar, 68, had been a Marvel director since December 2002. Since Febru- ary 2003, Mr. Solar had been a management consultant and investor. From June 2002 10 February 2003, Mr. Solar acted as a consultant for Gerber Childrenswear Inc., a marketer ‘of popular-priced licensed apparel sold under the Gerber name, as well as under licenses from Baby Looney Tunes, Wilson, Converse and Coca-Cola. From 1996 to June 2002 (hen Gerber Childrenswear was acquired by the Kellwood Company), Mr, Solar was sen- jor vice president, director and chief financial officer of Gerber Childrenswear. Mr, Solar was also vice president and treasurer of Barrington Stage Company Inc., which produced plays, developed experimental musicals and provided a program for at-risk high school stu dents in the Berkshires. EXHIBIT 2. Corporate Officers: Marvel Entertainment, nc. ‘Name Age Tile Compensation evtmate, Kane 65 Vice Charman of the Board, Chief Exceutive OMe SBS72T97 ‘West, Kenneth 49 Executive Vice President, Chet Financial Omicer $166 526 Fine, Alan 57 Executive Vice President Publishing/Toy/Characters $632.420 Maisel, David 48 Executive Vice President, Marvel Studios $4118.99 Tarizin, John 52 Executive Vice President, Legal/General Counsel 81390212 ‘SOURCE: Marvel Enzenainment, Inc. Proxy Statement (May 5.2008), pp. 13,23. Corporate Officers Exhibit 2 lists Marvel's corporate officers and the compensation received by each in 2007. In ‘addition to Mr. Isaac Perimutter, listed earlier, there were four other key corporate officers Alan Fine (57) had served as executive vice president and chief marketing officer of Mar- ‘vel Characters Inc. (a wholly ovned subsidiary of Marvel Entertainment Inc. that owned and li- ‘censed Marvels intellectual property library since May 2007. Mr. Fine also had served as Chief ‘Executive Officer of Marvel's publishing division since September 2004, and as Chief Execu- live Officer of Marve’s toy division since August 2001 and from October 1998 to April 2001 David Maisel (45) had served as exccutive vice president, Office ofthe Chief Executive, since September 2006 and became chairman of Marvel Studios in March 2007, From Septem- ‘ber 2005 until September 2006, Mr. Maisel served as executive vice president, Corporate De- velopment, and from September 2005 until March 2007, Mr. Maisel served as vice chairman ‘of Marvel Studios. From January 200d to September 2005, Mr. Maisel served as president and, chief operating officer of Marvel Studios. From October 2001 to November 2003, Mr. Maisel headed Corporate Strategy and Business Development for Endeavor Agency, a Helly wood lit ‘rary and talent agency. “John Turtzin (52) had served as executive vice president, Office of the Chief Executive, since September 2006. From February 2006 until September 2006, Mr. Turitzin served as Mar- vel’s chief administrative officer. Mr. Turitzin had also served as an executive vies president and general counsel since February 2004. From June 2000 to February 2004, Mr, Turtzin was ‘8 partner in the law firm of Paul, Hastings, Janofsky & Walker LLP. Kenneth P. West (49) had served as executive vice president and chief financial officer since June 2002, Corporate Structure Primary Operating Segments Inthe first quarter of 2008, Marvel Entertainment eli to three operating segments: Publishing Licensing, and Film Production. Marvel operated in these markets both domestically and internationally, although the U.S. market made up an average of over 70% of the company’s annual revenues. Because each segment depended on. Marvel's extensive library of characters, the company emphasized the intograted and ‘complementary nature of the three segments, Exhibit 3 shows Marvel's primary business segments and Exhibit 4 lists Marvel's subsidiaries, EXHIBIT 3 Business Segments: ‘Marvel Entertainment Ine. =) ‘SOURCE: Derived from Marvel Entertainment, lc, Form 10-Q (Sane 30, 2008), pp. 11-12 and Cimeo & Torin resentation af IP Morgan US Mid Cap Growth Conference, Londo Sept 30. 2008), pp. 6-713 For most of its history, Marvels primary direct competitors had been other comic book ‘publishers, such as the well-established DC Comics, a subsidiary of Wamer Bros. andthe pub- {isher of Superman, Batman, and Wonder Woman comics, and the much younger Dark Horse ‘Comics. As Marvel repositioned itself as an entertainment firm, the company faced competi- ‘ton from industry giants such asthe Walt Disney Company and NBC Universal. ‘The Publishing segment created and published comic books, trade paperbacks, custom ‘comics, and digital comics. Well-known characters included Spider-Man, X-Men, Fantastic ceived revenues from related advertising and subscription operations. Publish between 25% to 30% of the company's annual net sales, with revenues coming overwhelm- ingly (85% from the U.S. market. Segment revenues were $125,657,000, $108.464,000, and '$82,455,000 in 2007, 2006, and 2005, respectively. ‘Over the course of 70 years, Marvel developed! an extensive library of ever 5,000 charac {ers, most of which were developed and popularized through published comic books (sce Exhibit 5 for listing of popular characters). The publishing segment had published comic books since 1939 and was able to present characters in contemporary dramatic settings that, ‘were suggestive of rel people with rel problems. The ability to stay relevant enabled Marvel {toretain the attention of old readers, while also attracting the attention of new readers overtime. In 2008, Marvel was focused on expanding its distribution channels as wel as its prciuct lines. Comic books were distributed through three main channels: comic book specialty stores, ‘atitional retail outlets such as bookstores and newsstands, and on a subscription basis. Approx” imately 70% of the Publishing segments revenues were attributed to sales from comic book spe

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