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 Post subject: The POOP on Avi Arad, Marvel and Paramount...
PostPosted: Fri Apr 29, 2005 9:00 pm 
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If you read DAILY VARIETY, you may know SOME of this...

Avi Arad convinced MARVEL COMICS to take out a line of credit to access 600 million to run their own movie studio and finance their own films.

What did MARVEL use as collatoral on the loan? The rights in all mediums for Nick Fury, Captain America, THe Avengers, and other characters (NOT Spider-Man).

In other words, if Marvel can't pay the interest on the loan and defaults-- the bank gets the rights to Captain America. The Bank can license him right back to Marvel, or to DC, or publish him on their own and make their own toys. Pretty unprecedented.

Marvel has a deal with PARAMOUNT to distribute the films they would make. Why do this? Marvel wants to OWN DVD and Home Video (not just get a piece of it) and the only way to do that-- is to put up money yourself and finance your film. PARAMOUNT also has relationships with DVD retailers to make sure Marvel product gets primo shelf space when it hits DVD.

The hope is that This will also goose Marvel's stock price. And word has it they were tired of folks like DISNEY releasing DVDs based on the old FOX SPIDER-MAN cartoon simply because they licensed it to the DISNEY. Marvel is suing DISNEY over this by the way.

This is a fairly big risk. You probably can't do most live-action super-hero films for under $40 million. But DVD DOES generate a ton of revenue, sometimes even outweighing the box office. Avi has brought us both Spider-Man and THE PUNISHER, but this could go either way. (Off the table for Marvel to adapt are Spidey, Hulk, Ghost Rider, Iron Man, Blade, Namor, The Fantastic Four, Daredevil, and Elektra-- all tied up at other studios. )

In related news, Marvel settled Stan Lee's lawsuit for a reported $10 million dollars-- which means it was less.. Stan could have gotten way more. After taxes and legal fees, I suspect Stan only got about $2 million in take home pay. And he STILL gets the $1 million a year salary!

CubanZod


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 Post subject: Re: The POOP on Avi Arad, Marvel and Paramount...
PostPosted: Sat Apr 30, 2005 1:38 am 
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Cubanzod wrote:
If you read DAILY VARIETY, you may know SOME of this...

Avi Arad convinced MARVEL COMICS to take out a line of credit to access 600 million to run their own movie studio and finance their own films.

What did MARVEL use as collatoral on the loan? The rights in all mediums for Nick Fury, Captain America, THe Avengers, and other characters (NOT Spider-Man).

In other words, if Marvel can't pay the interest on the loan and defaults-- the bank gets the rights to Captain America. The Bank can license him right back to Marvel, or to DC, or publish him on their own and make their own toys. Pretty unprecedented.


This is not an accurate statement. In the Wall Street Journal article on Thursday, which is far more in depth than the Variety announcement, the terms of the agreement are specified much more specifically. First of all, it is not a loan, it is a revolving line of credit(not a loan) for $525million(basically a much larger version of a credit card account). The credit is secured by the FILM rights to 10 characters Marvel owns. No more than 10, and just for the rights to make films based on those characters. The reason this is worth so much is because they are for the complete ownership of those film rights, and not just a license as with X-Men, FF, Iron Man, Spider-Man, etc.

There is zero chance of Marvel losing toy, merchandising, and publishing rights to these characters in this deal. They just aren't part of it.

What this deal basically is just Marvel setting up a situation with Paramount that is similar to the one George Lucas has with Fox with the Star Wars films. In much the same way that Lucas funded his prequels with the movie licensing sales, Marvel will do the same with their films, and then pay Paramount a distribution fee for domestic release. Marvel can then broker deals with foreign companies to distribute its films abroad.

Also it's worth mentioning that in order to default on the credit line, Marvel would have to completely spend their entire credit limit, and then have the films they have made then make no money. And in an industry where a notorious flop like Waterworld made money at the end of the day, I don't find that scenario the least bit likely.

This is probably the smartest move Marvel has ever made, imo.


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 Post subject: Not my understanding, BUT
PostPosted: Sat Apr 30, 2005 8:03 am 
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You're right about the technical amount of $525 million, BUT--

My source-- for what it's worth-- but I believe this source-- says the following.

The Paramount deal is to distribute the films and DVDs.

Marvel Comics would finance the films with their line of credit. They'd own the films. Paramount would get a cut for their distribution abilities and network.

If Marvel defaults on the loan-- they do not lose only the movie rights-- but the complete rights to the characters that are collatoral.

How is this inaccurate? What bank/investmentgroup would accept movie rights as collatoral if the movie based on the character fails? Of what value are the movie rights then?

I'm willing to admit if I'm wrong-- but give me some key questions and I'll ask my source.

Humbly yours,

Cubanzod


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 Post subject:
PostPosted: Sat Apr 30, 2005 6:22 pm 
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Well, I'm just repeating what the Wall Street Journal said, and their source is most likely from inside Merril Lynch. It was more of an investigative piece, and not just a rephrasing of the press release like most articles about this have been.

The WSJ said specifically that it is the film rights, and the film rights alone that are being used as security on the credit line. Their specificity in this instance suggests that they have a detailed knowledge of the deal. They are not ones to fudge facts, especially in regard to financial matters.

Regarding your comment about whether those rights would likely not be worth much if the films failed, you're right. But you're assuming that the ten films Marvel has in their deal with Paramount covers the same ten characters that are being used as security for the credit line. Also it's worth noting that sequels are likely covered as part of the ten films in the Paramount deal. So with sequels to Nick Fury, Thor, Captain America, and the Avengers films(if successful) then it's not even ten properties necessarily being covered in the Paramount deal.

A likely scenario imo is that the film rights Marvel has put up as security include franchises currently under license, such as Spider-man, the Hulk, and Iron Man. When that caliber of license becomes involved the value of the ten character package increases enormously. The licenses from those rights continue to produce revenue for Marvel, and have an inherent value even aside from the future possibility of Sony's license expiring in the example of Spider-man.

As regards your other comments concerning the specifics of the Paramount deal, I find them rather plausible and have no contradictory information to impart. My objection was the contention that Marvel will lose the rights to publish and license their characters(outside of the ten characters film rights), which goes against my knowledge of the situation. Though if your source is correct about that, it is indeed a worrying decision. But it's also such a worrying decision that I find it implausible it would be made. Avi Arad has to date proven himself to be a very capable business man, having engineered Toy Biz' takeover of Marvel while in its Chapter 11 proceedings, and from there re-establishing Marvel as a thriving company after the crippling Icahn/Perlman years.


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 Post subject:
PostPosted: Sun May 01, 2005 5:17 pm 
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Quote:
Though if your source is correct about that, it is indeed a worrying decision. But it's also such a worrying decision that I find it implausible it would be made. Avi Arad has to date proven himself to be a very capable business man, having engineered Toy Biz' takeover of Marvel while in its Chapter 11 proceedings, and from there re-establishing Marvel as a thriving company after the crippling Icahn/Perlman years.


Let me get to my source at Viacom and get back to you on this... Maybe I misunderstood, but that's the impression I got from our initial conversation.

Regarding Ari-- I wish him well. He certainly has Spider-Man to boast about-- but he certainly has substantial misses on his credits as well.

One key person Ari & Marvel need to hire is a knowledgeable and savvy HEAD OF PRODUCTION. That $525 million line of credit can be killed in the following manner--

3 Catwoman movies. 'Nuff said!

Basically, the Head of Production can shoot the films effectively and on budget-- making sure they're not getting hosed on every deal and that people are getting rich off a movie and ripping off the studio. It happens ALL THE TIME. An Exec Producer doesn't always know what something really costs-- but a Head of Production would. It makes the difference between a movie that costs $50 million that maximizes $50 million-- or a movie that skyrockets to $180 million but bankrupts the studio that finances it. This is high stakes poker and people need to really know their stuff...

The successful TERMINATOR movies bankrupted both ORION and CAROLCO because of bad deals-- everybody got rich except the studio, which went under.

Ari needs to hire the right people to make this work-- both production-wise and creatively. But for now-- Ari's stock at Marvel (so to speak) has never been higher. Time will tell!

Cubanzod


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 Post subject:
PostPosted: Sun May 01, 2005 5:40 pm 
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Well, Arad's work at Marvel is not solely limited to the movie side. He ran Toy Biz successfully for years prior to Marvel acquiring them, and then through the process I mentioned in which he engineered Toy Biz' takeover of Marvel. Prior to his tenure at Toy Biz he was an incredibly successful toy designer, a job which led to him running Toy Biz(he created Stretch Armstrong).


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