Marvel Unmasked

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Marvel soon replicated that model with hundreds of its heroes, now bringing in nearly $230 million annually from more than 500 licensing partners. Today the Marvel brand adorns everything from toys, games and apparel to hotels and theme parks. "Marvel has the best array of characters of any licensor in the business," says Brian Goldner, president of Hasbro's U.S. toy division, whose company in January guaranteed Marvel at least $205 million for its toy licenses over the next five years.

The key to Marvel's future, though, is not trinkets but storytelling. Marvel's most iconic characters were created in the 1960s by comic-book legend Stan Lee, but 30 years on, the stories had become tired, and comic-book sales were miserable. So in 2002 Marvel began to hire writers and artists from outside the comic business, turning instead to TV and film writers and novelists. The results have reinvigorated the industry, says Gerry Gladston, a co-owner of New York City's Midtown Comics. "The stories have gotten better and better, fans are thrilled, and sales are climbing," he says. Marvel produces about 70 titles a month these days, and its market share of the $450 million industry has nearly doubled since 1999. Gladston adds, "Marvel's pretty much rocketed all publishers into a new age."

Buoyed by its hits, the company has turned its attention to frontiers previously left unexplored. Many of its comics now arrive from cyberspace, and the amount of interactive features and user-created content on its website increases daily. Marvel is also exporting its characters. In Japan, Spider-Man is a 4-ft. version of himself. In India, he exchanges his blue-and-red suit for more native garb. "Our strategy is to find best-in-class partners in those respective parts of the world and use their expertise and cultural knowledge," said Rothwell before exiting Marvel in late July. "We allow our characters to transform for the local culture."

Marvel management still sensed it was leaving money on the table. For years it watched studio partners reap billions while the company took home only a small percentage of movie profits, especially on DVDs. "If we wanted to control our own destiny, we'd have to make our own movies," says Michael Helfant, president of Marvel Studios. That was a leap Marvel's risk-averse board was loath to make on its own dime.

Instead, Marvel secured a $525 million nonrecourse credit facility--other people's money--from Merrill Lynch to make 10 films by 2012. Production is under way for the first, Iron Man, to be released in May 2008. Marvel's new studio can spend up to $165 million a flick--still relatively low for the production of an action film with sophisticated special effects, warns media analyst Harold Vogel. "And they've got to create excellent stories to stick out in the oversaturated superhero genre," Vogel says. If the studio goes over budget on a film, Marvel could be forced to use some of its own cash or seek out a partner.