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Marvel’s Journey from Bankruptcy to Billions

In 20 years, Marvel has gone from bankruptcy to a multibillion-dollar corporation.

Almost every great comic book narrative has a darkest hour moment: a time in the plot when everything seems to be lost. The heroes are on their knees, the city is a blazing waste, and the baddies are pressing in. The winter of 1996 was Marvel’s worst hour.

Marvel’s commercial success had peaked by the early 1990s, after the firm had risen in prestige during the 1960s, 1970s, and 1980s owing to the frequently breathtaking art and storyline in such comics as Fantastic Four and The Amazing Spider-Man. However, a succession of collapsing financial booms and dubious business dealings caused Marvel’s stock value to plummet; shares valued $35.75 in 1993 had fallen to $2.375 three years later. Following an unpleasant struggle between a group of extremely wealthy investors, the company’s future seemed questionable for a while.
Yet, despite all of the internal intrigue that hounded the firm in late 1996 and for several months thereafter, Marvel emerged a decade later as a film industry powerhouse.


A doomsday prediction

While Marvel and the comics industry as a whole seemed to be in good health in 1993, Sandman writer Neil Gaiman spoke in front of around 3,000 retailers and delivered a speech that few in attendance wanted to hear.

In it, he suggested that the success of the comic book business was caused by encouraging collectors to purchase several versions and stockpile them in the belief that they may one day be worth a fortune. This, according to Gaiman, was similar to tulip frenzy, a peculiar moment in the 17th century when the value of tulip bulbs suddenly skyrocketed, only to plummet again.

“You can sell a lot of comic books to the same individual, particularly if you convince them you’re investing money for high assured returns,” Gaiman said. “But you’re selling tulips and bubbles, and the bubble will burst one day, and the flowers will rot in the warehouse.”

The bubble Gaiman described began some years before, when comic books, formerly deemed trash by parents, became valued collectibles by collectors who had grown up with their favorite superheroes as children. By the 1980s, comic book collecting had captured the attention of the mainstream media, which jumped on tales of Golden Age comics fetching thousands of dollars.

Publishers were wooing the collector market as well, with variant covers featuring foil embossing or other eye-catching, sophisticated printing methods. These were eagerly purchased by readers, but also by speculators who believed they’d discovered a sure-fire way to make money by stockpiling copies and selling them for a profit later.

Here comes Ron Perelman.

While the comics were selling well, Marvel caught the attention of a guy called Ron Perelman. Perelman, a rich businessman with a wide smile and an enormous cigar in his hand, was often seen with a broad grin and a huge cigar in his hand: in 1985, he’d negotiated a major deal for cosmetic giant, Revlon, via his holding company, MacAndrews & Forbes. Perelman paid $82.5 million for the Marvel Entertainment Group, which was then controlled by New World Pictures, in early 1989.

Within two years, Marvel was listed on the public market, and Perelman went on a spending frenzy, acquiring ToyBiz, a few of trading card firms, Panini stickers, and Heroes World, a distribution company. All all, Marvel paid $700 million for those deals.

Throughout the early 1990s, Marvel was boosted by the immense popularity of Spider-Man and the X-Men. X-Force, a new comic, sold very well, due in part to a clever advertising ploy: the first issue came in a polybag with one of five different trading cards inside. Collectors who wanted all five cards had to – you guessed it – purchase several copies of the same comic. Collectors did just that when the craze was still in full force — as former Comics International news editor Phil Hall remembers, fans were purchasing five copies to preserve immaculate and unopened, and a sixth to rip into and read.

The bubble then burst, just as Gaiman prophesied. Revenue from comic books and trading cards started to decline between 1993 and 1996. Marvel, which had previously seemed indestructible as it expanded in size, suddenly appeared fragile.

“When the business changed,” said Marvel’s then-chariman and CEO Scott Sassa, “it seemed like everything that could go wrong did.”
Some in the business went so far as to claim that Perelman’s practices were endangering the whole industry:

“[Perelman] reasoned, very well, that by raising pricing and output, dedicated Marvel fans would spend an increasing part of their discretionary cash to purchasing comics,” wrote Chuck Rozanski, CEO of Mile High Comics. “Once he had enough sales statistics to back up his premise, he went public, selling 40 percent of Marvel’s shares for much more than he spent for the whole firm.” The issue in his strategy was that he promised Marvel investors even more brand expansions and pricing rises. Most comics merchants realized early in 1993 that this strategy was patently unworkable, as more and more fans simply stopped collecting owing to the exorbitant cost, and amid a general sense of diminishing quality in Marvel comics.”

Whether or not Perelman was personally to fault, the ramifications for the business as a whole were excruciating. Hundreds of comic book stores went bankrupt as sales plummeted by 70%. The boom had abruptly gone to collapse, and even Perelman conceded that he hadn’t expected the bleak future Gaiman had predicted in his address.

“We couldn’t figure out how much of the market was driven by speculators,” Perelman said, “the ones purchasing 20 books, reading one, and retaining the other 19 for their nest egg…”


A fight in the boardroom

Marvel Entertainment was deeply in debt by 1995. In the face of rising losses, Perelman decided to delve into new territory: he founded Marvel Studios, with the intention of finally bringing the company’s most renowned characters to the big screen after years of legal wrangling. To do this, he intended to purchase the remaining shares of ToyBiz and combine it with Marvel, resulting in a single, stronger corporation.
Marvel’s stockholders objected, claiming that the financial impact on the company’s share price would be too large. Perelman’s answer was to declare bankruptcy, giving him the authority to restructure Marvel without the permission of the stockholders.
There was then a perplexing power struggle that lasted over two years. Carl Icahn, a stakeholder, attempted to challenge Perelman, and the financial press gleefully reported on the ensuing public battle. “Perelman was like a plumber,” Icahn said, “you loan money to get him started in business; then he comes in, ruins your home, and tells you he wants the house for free.”
When the war ultimately concluded in December 1998, nobody could have foreseen the bizarre outcome: after a protracted legal dispute, ToyBiz and Marvel Entertainment Group were successfully amalgamated, but Perelman and his opponent Icahn were both fired in the process. Other employees with links to Perlmutter were also fired, including CEO Scott Sassa, whose employment had lasted just eight months in all.

They’d been booted off the board by two ToyBiz execs who’d been on it since 1993: Isaac Perlmutter and Avi Arad. With Scott Sassa gone, they appointed the 55-year-old Joseph Calamari, who had overseen Marvel in the 1980s, as its new CEO.

With the financial drama in the boardroom subsiding, Marvel decided to focus on a goal it had been attempting to reach since the 1980s: the movie industry.


On the big screen, marvel

Avi Arad, who was born in Israel, introduced a gruff attitude to the toy business. After rising to the position of CEO at ToyBiz and being dubbed “the hottest developer in the toy world” by one contemporary, Arad’s huge career transition occurred in 1993, when Marvel purchased a 46 percent stake in the firm. As part of the purchase, Arad earned a 10% stake in Marvel, and although he first managed the creation of Marvel action figures at ToyBiz, he rapidly supplanted the renowned Stan Lee as the chairman of Marvel Films.
Arad was an executive producer on the blockbuster animated TV series X-Men and had a contract with 20th Century Fox to develop an X-Men film by the summer of 1993.
For years, Marvel has battled to bring its characters onto the big screen: Spider-rights Man’s were entangled in a convoluted web that wouldn’t be untangled until the late 1990s, and 1986’s Howard The Duck was a critical and commercial flop. But it now seemed that Arad’s strategy might produce fruit.
Then Marvel’s financial problems started, and Arad fought to persuade Hollywood executives of the studio’s cinematic potential. “It was essentially a daily effort to open people’s eyes to what was standing in front of them,” he subsequently said.

Things started to change in the late 1990s, when Marvel began to regain its footing: Blade was a smash, and the X-Men began to make headway at Fox. However, the options for Marvel were limited: Blade grossed $70 million at the movie office, while Marvel received just $25,000, according to a Slate story. The X-Men and Spider-Man films were big successes, but Marvel only received a tiny portion of the proceeds. Arad lamented, “We were handing away the finest portion of our company.”


The beginnings of a cinematic world

A talent agent called David Maisel approached Marvel’s Isaac Perlmutter with an idea in 2003. Why not make the films under your own label and profit from them? And, if you’re making your own movies, why can’t the plots cross across as they do in comic books?
It was a notion that, in principle, could be worth billions of dollars: although Marvel’s stock had recovered since 1996, Maisel believed that moving into film production might propel it much higher. The challenge would be persuading Marvel’s board of directors, as well as obtaining the necessary funding.
Marvel had a significant breakthrough in 2005 when it struck a partnership with Merrill Lynch. The terms of the agreement seemed risky: Marvel was basically putting up its crown assets — characters like Thor and Captain America – as collateral. If the movies didn’t earn money, the superheroes would be taken over by the bank.
Nonetheless, Merrill Lynch provided Marvel with a massive financial reserve: $525 million over seven years, which it could use to fund ten films with budgets ranging from $45 million to $180 million. With its increased power, Marvel was able to reclaim the rights to characters it had previously sold, including Iron Man, Black Widow, Thor, and the Hulk.
Marvel said Iron Man will be its first independent production shortly after the arrangement with Merill Lynch was finalized. Finally, a character who had been stuck in development purgatory since the 1990s (Universal controlled the rights before passing them to Fox and then New Line) was getting a chance at big-screen success.

While development on Iron Man started, Marvel made another significant acquisition – one that may be as vital to the company’s future success as the return of some of its most recognizable superheroes.


A president and a $4 billion transaction

Kevin Feige began his film career as an assistant to producer Lauren Shuler Donner (wife of director Richard). Feige’s passion of comic books was so strong that, despite his early age, he got the post of producer on Fox’s production of X-Men when he was just 27. After producing subsequent Marvel films such as Spider-Man, Daredevil, and Hulk, Feige was appointed president of Marvel Studios in 2007. Under his leadership, Marvel continued to thrive; Iron Man, his first credit as a producer for the company, grossed $585 million, launching a cinematic universe that is still in its early stages.
The next watershed moment occurred in 2009, when Disney paid a staggering $4.3 billion for Marvel. Avi Arad claimed, with his customary bravado, that Disney had gotten a good deal. “It’s a great deal!” Arad said. “It’s absolutely nothing!” We planned on this brand since it is really powerful. It wasn’t a coincidence.”
Arad seems to be correct based on Marvel’s track record over the last near-decade: The Avengers alone grossed billions of dollars, and it is presently the third highest-grossing film of all time. Iron Man 3 became the second Marvel picture to make over a billion dollars. Even a wacky picture like Guardians Of The Galaxy – a space opera that some considered a risk – grossed more than $750 million. Black Panther is not just another $1 billion plus success story, but it is also one of the top earning pictures of all time.
Marvel has had a spectacular turnaround in fortunes for a corporation that was in debt 20 years ago. Marvel, like a superhero, overcame its darkest hour in 1996 and plucked a multibillion-dollar win from the jaws of defeat.

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