A success story to Marvel at

EVERY superhero has a catchphrase and Marvel Enterprises, home of Spider-Man, The Hulk and more than 4,700 other specially gifted characters, is trying this one on for size: 'expand and exploit'.

The publicly traded New York entertainment outfit, which this month forecast that revenues for fiscal 2004 could top $440m (£246m - partly on the back of the July release of Sony's Spider-Man 2 movie - has shifted the focus of its growth strategy to the development of its business abroad.

Marvel has quietly launched an international division - based in London and headed by Bruno Maglione, formerly Universal Studios' European head of consumer products - to build up aggressively the company's business operations in key foreign markets.

It is keen to have a presence throughout Europe, Asia (with even fewer fanfares, Marvel has also just opened a Tokyo operation), Australia and Latin America within a couple of years.

'Last year only around 5% of Marvel's licensing revenues came from outside the US, and licensing revenues account for around 80% of our company's total operating income,' admits Maglione.

'This is despite the huge demand for what consumers of all ages consider to be a very iconic and cool brand. It is down to previous bad management but things are changing and they're going to change more very soon.'

He says that Marvel will soon be signing a flurry of licensing deals, first with European companies, which are eager to ensure that merchandise featuring the superheroes will fly off the shelves.

Clothing is one of the biggest growth areas, he adds, and some new retail partners are surprisingly upmarket, including an unnamed company that 'makes leather jackets that start selling at $600'. Maglione says he has even received business proposals from fragrance manufacturers.

Although he won't be drawn on the likelihood of 'Hulk - The Perfume', he says that the international market could soon account for a muscular 50% of Marvel's licensing revenues.

The bonanza from licensing deals will be further buoyed by the ballooning revenues from video games, which have piggybacked on the recent success of Marvel's characters in films and on DVD, and its Toy Biz division, which also licenses toys for films such as Lord Of The Rings.

Then there are the comics. About 200 comic titles were published in the last quarter of 2003 with an average circulation of more than 55,000. The publishing division still accounts for about 15% of operating profits. Maglione confirmed that Marvel is also set to expand 'in a major way' into the book trade and has signed distribution deals with Borders and Barnes & Noble in the US.

'So-called graphic novels have become a really big area for us, as you might expect, but it doesn't stop there,' he says. 'We are getting into the children's books market, which we never have done before. Then there are pop-ups and novelty books and even novelisations.

'The main thing is to understand what Marvel is. We are not a comic book and we are not a toy company. We are an entertainment licensing company that owns a fabulous catalogue of proprietary characters.

'What is unusual for such a huge licensing company is that we are independent and not part of any conglomerate. Our business strategy is simply to find the best way to co-ordinate the expansion and exploitation of those characters across as wide an area as possible.

Undoubtedly the movies, which began with Blade in 1998, are the biggest moneyspinners, even without Marvel

taking equity stakes in any of them. In 2000, 20th Century Fox's X-Men grossed $157m at the US box office alone. In summer 2002's Spider-Man took $403m and became the fifth-biggest grossing movie in the US. Last year saw Daredevil, another $100m-plus film, and X-2: X-Men United, which grossed $215m in US ticket sales.

So far, Marvel has received a flat fee or a share of the box office on each film without risking a cent of its own capital. It has, however, raked in millions of dollars from licensed merchandise, and video games based on Marvel properties.

In 2002 Marvel's licensing division earned $13.8m in operating income just from equity interest in net income from the joint venture with Sony for Spider-Man movie and television rights. The company, says Maglione, typically gets a cash boost for a three-year period around the release of each movie.

Apart from Spider-Man 2, there are three movies based on Marvel-licensed characters released this year alone, starting with The Punisher next month, the first for which Marvel will receive a cut of DVD revenues.

The eagerly awaited Fantastic Four film is released next year while more Hulk, X-Men and Spider-Man sequels are in the pipeline.

Last summer, the cash-rich company even put in a bid to purchase Hollywood mini-studio Artisan Entertainment, best-known for The Blair Witch Project, and confirmed it was exploring the possibilities of producing its own movies with budgets ranging from $8m to $50m. It is also considering making live-action and animated television versions featuring some of its best-known characters, including Hulk.

Marvel is hunting for acquisitions, currently focusing on intellectual property in categories such as pre-school and preteen girls, but, says Maglione, acquisitions could be in any area. Marvel's board is also considering putting cash toward a dividend and a stock buyback plan.

All this activity seems light years away from 1996 when Marvel, then a mismanaged toy company and fading comic book publisher, entered bankruptcy. Indeed, the company was only resuscitated by a new management team that had grasped the value in licensing and was not shy about hawking pieces of its heritage to the Hollywood studios.

For its comeback, though, Marvel did employ a superhero's sense of timing: if it had got its act together any earlier, the technology probably would not have been ready to produce the films and video games to satisfy a new generation of fans.

'We have 60 years of storytelling and, while we've made giant leaps since the mid-Nineties, when it comes to exploiting our properties globally we haven't even scratched the surface for any of them,' Maglione says. For Spider-Man, it appears, the sky's the limit.