Question

What is Marvel’s business model (business divisions and their roles and interplays of activities in each division)? In your view, what strategic direction should Marvel Enterprises’ Vice Chairman Peter Cuneo and his colleagues pursue? Why? How?

Why was Marvel’s turnaround so successful? Would you characterize that success as a fluke? Or do you view it as sustainable? Why? How?

How important are each of Marvel’s three divisions – comic books, toys, and licensing – to its past and future performance?

To what extent is Marvel’s success due to only one character, Spider-Man? How can Marvel develop its lesser-know characters?

Case Discussion (Marvel)

Answer 1

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In your view, what strategic direction should Marvel Enterprises’ Vice Chairman Peter Cuneo and his colleagues pursue? Why? How?

In my view they should continue licensing as they have been. With increased exposure through mass and social media the opportunities for licensing will only increase. Marvel can continue to capitalize on the strength of prominent characters but there should also be a focus on the lesser known characters. There is underutilization of the characters from Marvel’s Character library. By further developing the lesser known storylines and characters there is potential to turn them into blockbusters.

There should be a constant focus of creatively utilizing the array of characters available to generate more stream of revenue. Currently, Marvel has been largely dependent on the Motion Pictures Company for its revenues. Marvel has low penetration in small screen media market, which can be another great revenue source for the corporation. Geographically diversifying would provide new markets and possible new needs for different characters. I also feel that an app or interactive comic book would provide a great source of revenue. This move would alleviate the dependency on print media and the distribution channel of specialty comic stores. It would allow Marvel to create content in more areas than their current comic books and toys

2. Why was Marvel’s turnaround so successful? Would you characterize that success as a fluke? Or do you view it as sustainable? Why? How?

In my view the business model Peter Cuneo chose was sustainable and not a fluke. Cuneo recognized that Marvel’s only media tool, publishing, was not strong enough to expand their influence to new consumers. This is also where their vast cast of characters come from. The existing media, comic books, was only reaching a very limited market. Mostly composed of male teenagers and young adults from 13 to 23 years old.

This traditional market is very difficult to expand. Many years of development has created a stable and matured market. In an era where mass media and social media are so prevalent in consumers’ lives the decision to reach new forms of media was crucial. Marvel’s new strategy involved monetizing the proprietary library, of over 4,700 characters, by licensing those characters for use with media products.

Through exposure to movies, televisions, and videogames, Marvel was able to more effectively influence people’s consumption behavior than with comic books alone. These various modes of media simply reach more consumer segments than traditional comic-book publishing. Expansion into broadcast media greatly increased Marvel’s development potential. Marvel’s market expansion developed in both a comprehensive and intensive manner. The media products in conjunction with consumer products, such as toys, apparel, collectibles and food reinforced each other. This combination could provide a market ranging from 2 to 60 years of age, as is the case with the Spider-Man character.

Marvel’s new management strategy emphasized long-term value as well. This was achieved through careful management of the library of characters and ensuring the quality of their content when featured. Creation and consistency in characters and stories mean everything for Marvel. Before Marvel’s turnaround, the low publishing market share was mostly due to a lack of quality control.

Without consistency in the characters and stories the comic book division would suffer again and this is where Marvel’s credibility came from. It provides the primary support for both licensing and toys. The publishing business was rejuvenated and the market share increased through implementing improvements to the artwork and creativity. The success of Marvel’s success will sustain, because the products lives are extended with a well- planned “career”, and the market is expanded with thriving licensing and toy businesses. Investment in quality can enhance the product’s competitive ability in terms of both product life and market expansion. Great potential exists in each aspect of Marvel’s market.

3. How important are each of Marvel’s three divisions – Comic books, toys, and licensing – to its past and future performance?

Marvel’s core business and largely sole revenue stream in the past was the comic book business. Its market share determined if Marvel would live or die. This business was so important for Marvel that in the 1990’s they had a huge drop in comic-book sales, due to mismanagement, and had to file for bankruptcy. After Marvel’s turnaround, it was evident that comic-book publishing was important as a primary business, but not sustainable as a core business. Since 1997, Marvel’s financial performance in comic-book industry has been very stable and the annual sales totaled around 300 million every year. While comic book revenue should continue to be stable, its percentage will decrease in the future as Marvel’s other businesses grow.

In the past, licensing was mostly concentrated within the comic-book industry, selling the publishing license to some book-related businesses or some toy merchants. This was only a small part of Marvel’s overall revenue. Revenue was mostly concentrated within the comic-book industry. After Marvel took advantage of broadcast media, such as movies, television, and video games, its licensing became the largest division and collected the majority of the profit for the company. In 2003, licensing accounted for 54.4% of the gross profit (See Appendix A Exhibit 2). Licensing profit had a much sharper increase from 2000 to 2003, growing $170,700, than the other two businesses.

In the future, licensing will keep increasing and its percentage of revenue will grow, especially if the management adopts a strategy of capitalizing on it. In the past, the toy business was just an annex of the publishing industry and did fairly well, bringing in twice as much in revenue in 2000 as it did in 2003. The toy industry is the second-highest profit maker in Marvel, generating over $85 million in sales in 2003. The toy business is very promising in the future. However its percentage in revenue will still remain stable or slightly decrease, just as publishing will do, because licensing has such a strong possibility for growth. In addition, while the toy industry competition is too fierce to permit further achievements.

4.To what extent is Marvel’s success due to only one character, Spider-Man? How can Marvel develop its lesser-known characters?

There is no doubt that, to a great extent, Marvel’s success since the 1960s is due to Spider-Man. However, during the 1990s, the company declined despite such a successful superhero. “Exploiting” strategy by significantly increasing the number of titles stretched out consumers’ interest. Marvel’s new CEO, Peter Cuneo, restructured the company with negative assets and turned the company around. Spider-Man was resuscitated in comic-book sales. Spider-Man has gained great achievements, since the company turned around. However, Marvel’s success is not due to only one character.

Other lesser-known characters, such as the X-Men and Fantastic Four, have also contributed to the company’s success. The entertainment market is difficult to predict. Consumers’ interests for media products are notoriously fickle. It could be very risky to continue to infuse resources to Spider-Man. Spreading limited resources to lesser-known characters helps the company reduce risk. Marvel needs to shift their focus to lesser-known characters which have great potential to be popular with wider public.

It is often hard to be interested in a story line that has been going for 30 years. Updating and modernizing the characters will be critical to continued development. Integrated marketing communication can be a very useful strategy to promote lesser-known characters by using prominent characters. For example, the Fantastic Four can be guests in Spider-Man’s comic-books or movies. When lesser-known characters and Spider-Man are presented to people as “Marvel’s Superheroes”, lesser-known characters can be promoted by the fame of prominent characters. As Marvel’s previous CEO Peter Cuneo (2003) said, “this is about converting Spider-Man fans into Marvel fans.”

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