(Comic Books) It seems like every time Marvel Entertainment has held a quarterly conference call, profits have been up and guidance has been raised; the picture has grown successively brighter and brighter. On the surface, it would seem that this was again the case in yesterday's conference call for the company's third-quarter earnings report. The Pulse's Heidi MacDonald has the details:
"3Q profits were $63.1 million, including a $31.5 million one-time gain from a tax adjustment, for a profit of 85 cents a share. However, sales were flat, at $85.5 million compared to last year’s $84.4 million. Publishing sales were up to $19.6 mil from $15.3 last year for the quarter, with sales up over $6 million for the year.
"The press release credited the sales growth to stronger than expected sales for 1602, JLA/Avengers and Supreme Power.
"While licensing revenue continued to fly high ($41.6 mil up from $25.0 mil last year,) toy revenue was down, as predicted, to $23.3.mil from $44.0 mil last year, due to lowered sales for Spider-Man toys."
Toy revenue, it should be noted, was also effected by Marvel's move from the direct manufacture of toys to a policy of farming out manufacturing to third-party licensees, which moves the profits over to the "licensing" column for accounting purposes. Marvel also now has more than enough money set aside to fully pay off its debt at the earliest opportunity next year, even taking in early-payment penalty fees into account. Everything sounds groovy, right?
This quarter differed from previous ones in one remarkable respect, however: it lead to an immediate and significant downturn in the company's stock price, dropping by over $2 per share and effectively erasing gains that pushed the price over the thirty-dollar mark last week. The Motley Fool, a financial publication long bullish on the comic-book company, chided investors for their apparent perfidity:
"Motley Fool Stock Advisor subscribers have certainly enjoyed watching Marvel transform itself. Since David Gardner first recommended it in July 2002's issue, Marvel has soared 471%. David re-recommended it in Dec. 2002, and had you waited to buy then, you'd be sitting on only a 256% gain.
"The good times aren't over yet for Marvel. It has a stable of thousands of characters just waiting for their shot at the big screen. And next year, moviegoers will have Spider-Man 2, Blade 3, The Punisher, and The Fantastic Four to enjoy. That spells more fun for Marvel, and its shareholders."
This particular spin is, I suspect, a bit more optimistic that investors seem to be willing to swallow at the moment. Spider-Man 2 is likely to do well, of course, but the others? The Blade franchise has done well enough so far, but such sequels inevitably wear out their welcome over time. The Punisher might be a modest hit, but unlikely to spawn much in the way of licensing crossovers -- September 11th put paid to the notion that little Johnny was going to be allowed to bring his Punisher water-uzi to school. The Fantastic Four is an unknown factor at the moment, but I suspect it would have sounded far more enticing to investors before League of Extraordinary Gentlemen and The Hulk. Hell, even Spider-Man might look more attractive if Marvel hadn't decided to drag Sony into court claiming that it wasn't getting its share of the gelt. The bloom, as they say, is off the rose.
As I've noted before, the way Marvel has tied its fortunes to the superhero movie boom could backfire on the company if said boom ends. With enough money in the bank to deal with the Perelman debt, the Doomsday Theory I advanced back in March is now safely neutralized as a threat -- but with "a stable of thousands of characters" all wearing spandex and shooting energy beams from their hands, it's not like there's a wide variety of bankable characters to choose from if the studios turn to Avi Arad and say, "Okay, costumed crimefighters are yesterday's news. What else you got?" What would they answer -- Man-Thing? That one's got a $10 million dollar budget, almost worthy of a Troma film, and not even Allen Lipson was willing to pretend that it was going to lead to an economic windfall (note that The Motley Fool left the film off its list altogether). Honestly, there's not a lot there at the moment for investors to get excited about.
Still, even if Wall Street wasn't exactly rushing to congratulate The House That Jack Built on a job well done, it's not like things are going badly. The Perelman debt is no longer a threat to the company. The Hollywood well hasn't dried up yet. While it may be cold comfort to Ike Perlmutter, Marvel is the number one comics company in America, at least until Tokyopop overlaps them. Things are better than they've been in years, and if the tax burden goes up next year, at least there should be enough money left over in the kitty to pay it off. Congratulations on a job well done, guys.
