• With the release of Avengers: Age of Ultron, the “Marvel Cinematic Universe” has become the highest grossing movie franchise of all-time. 
  • However, but for a string of poor licensing decisions, Marvel Studios might have reached this milestone significantly earlier.
  • In this article we look at how Marvel came close to insolvency and the lessons smart businesses can learn from the Marvel experience.

A Brief History of ‘Superhero’ Films

While the earliest ‘Superhero’ movies date back to the 1940’s, it wasn’t until the success of the 1977 version of Superman that movie studios and comic book publishers started to appreciate the full potential in adapting comic book characters for the big screen. As the top selling comic book publisher in the world, Marvel were well placed to take advantage of this market opening.

Lesson 1: Always do your due diligence

Unlike DC Comics, who were a subsidiary of Warner Brothers, Marvel lacked the infrastructure and experience required to turn their intellectual property ("IP") into successful movies, and instead opted to license the movie rights to their most popular characters. In 1983, Marvel licensed the film rights to the Fantastic Four to Bernd Eichinger for $250,000. Eichinger was an Oscar nominated producer but had no track record producing big budget films and could not secure the necessary funding for the project.

This was a recurring theme for Marvel, who licensed most of their popular characters to studios that lacked the necessary funding and experience required to make big budget blockbusters. Nearly all of these films were stuck in a perpetual state of development, or ended up being released as unimpressive low budget productions that damaged the brand value of the characters.

Lesson 2: Control the quality of any licensed product

By 1992, Eichinger was in danger of the Fantastic Four film rights reverting back to Marvel unless he produced a Fantastic Four movie within the contracted option window. With Marvel refusing to extend this deadline, Eichinger, correctly noted that the agreement with Marvel said nothing about the quality or budget of the film and made a low budget version of the film for the sole purpose of retaining the rights.

Unable to regain control of their IP, Marvel paid $2 million for the negatives of the film to prevent its release and protect the Fantastic Four’s brand value. Having extended his option, Eichenger negotiated a producer credit on the later big budget adaptations of the Fantastic Four.

Lesson 3: Get your profit sharing formula right

By 1996, Marvel's inability properly to capitalise on movie licensing opportunities meant that they were still reliant on comic books sales for the bulk of their income. As the market entered its biggest slump in decades, Marvel entered bankruptcy protection. On exiting bankruptcy, Marvel took a more proactive approach to movie licensing by forming Marvel Studios as a production house. Marvel Studios would put together a script, director and actors and then turn the project over to major studios for filming and distribution. This was a far more successful strategy as the likes of Blade, X Men and Spiderman were huge financial successes.

However, Marvel did not see much of the profit from these movies. It has been estimated that while the first two Spiderman films grossed $ 1.5 billion worldwide, Marvel only received £62 million from these movies. They also had little control over the quality of the productions and films like the Punisher and Daredevil proved to be creative and commercial disappointments.

Lesson 4: Be clear about what you are licensing

In 2004, frustrated by the lack of control and profits, Marvel decided to make and finance their own movies and obtained $525 million in funding from Merrill Lynch. This loan was secured against the rights to a number of their characters, including the 'Avengers'. The documentation for the deal did not specify who the Avengers were, which as any comic fan will tell you, can consist of any of 80 odd characters that have been members of the Avenger's rotating line-up over the years.

So, had Marvel's moviemaking attempts failed, they could have handed over the rights to some of its lesser known characters to Merrill Lynch and tried to claim that these were the Avengers, or Merrill Lynch could have tried to claim the rights to all the characters that have ever been in the Avengers. Either way, it would likely lead to a long and costly court battle with both parties unable to capitalise on the IP at stake.


While Marvel are rightly being lauded for their recent successes, IP right holders would do well to pay heed to their historic mistakes. Considering the success of a franchise built on secondary (the Avengers) and previously lesser known (Guardians of the Galaxy) characters, how much more successful would Marvel had been had they retained or properly capitalised on the rights of their most popular characters like the X-Men (no. 13 on the list of highest grossing film franchises, owned by 20th Century Fox) and Spiderman (no. 6 on the list of highest grossing film franchises, owned by Sony Pictures Entertainment). Interestingly Marvel Studios have recently bought back a share in the film rights to Spiderman, the idea being to reintroduce the character into the Marvel Cinematic Universe in the next Captain America film.

The lessons we can learn from Marvel's experience are applicable to any IP agreements. Before entering into licensing agreements, the Licensor should:

  • Determine if the proposed licensee has the ability to exploit the licensed IP in an appropriate way;
  • Ensure that it has clearly specified the standards of quality of the end products, licensed, police adherence to these quality standards and end the agreement if the standards are not being adhered to;
  • Have the ability to renegotiate or end the arrangement if you are not receiving profits as anticipated; and
  • Be absolutely clear as to what rights are being licensed, how they may be used and who will own any derivative products.

It is important to get the contract right to ensure that not only are you monetising your IP assets properly but that you at all times retain control of these assets so that you can make appropriate changes should the arrangement be unsatisfactory.