Chapter 838: The Superhero Movie Business Model

Right after Memorial Day, a fresh batch of box office statistics landed on Duke's desk.

The Avengers had just passed its fourth weekend in North America. It pulled in another 47.88 million dollars over the weekend, bringing its cumulative North American box office to 572.3 million dollars. It was now infinitely close to the top three films on the all-time North American box office charts: The Lord of the Rings 3: The Return of the King, Titanic, and Avatar.

The film had only been in theaters for four weeks. Although its momentum was gradually cooling, it still had plenty of screening time ahead to pad its total.

Similarly, the overseas box office of The Avengers easily cleared 1 billion dollars. Its cumulative global gross had reached 1.59571 billion dollars, making it only a matter of time before it broke past the 1.6 billion mark.

Everyone knew that The Avengers would surpass The Lord of the Rings 3: The Return of the King to become Duke's highest-grossing single film.

Meanwhile, Fast and Furious 5, which had once aimed to compete with The Avengers, was seeing its momentum fade far faster than the superhero film that had premiered a week earlier. This weekend, Fast and Furious 5 plummeted by 62 percent compared to the previous weekend, taking in 20.44 million dollars in North America.

Still, this figure allowed the North American box office of Fast and Furious 5 to steadily cross the 200 million dollar mark, reaching 210.44 million dollars.

Overseas, Fast and Furious 5 was firmly suppressed by The Avengers, having grossed just over 320 million dollars at the international box office so far.

But combined, a box office gross reaching 530 million dollars was enough to make the film one of the commercial stars of the summer season.

Without a doubt, from a box office perspective, even if Fast and Furious 5 utilized the Vin Diesel incident to engage in "nostalgia marketing," it clearly wasn't in the same weight class as The Avengers.

From the perspective of the film industry chain, the two films were separated by several tiers.

The Avengers had already generated nearly 1.5 billion dollars in non-theatrical output value. Fast and Furious 5, on the other hand, had managed a mere few tens of millions of dollars.

This achievement perfectly reflected Duke's comic book superhero movie business model.

Not every film adapted from a comic was a superhero movie, nor was every superhero movie adapted from a comic. For example, Peter Berg's Hancock and Night M. Shyamalan's Unbreakable were both original properties.

To Hollywood, however, superhero movies adapted from comics held the most value. Never lacking source material for sequels was one aspect, but more crucially, they served as the master switch for the much larger business of integrating the entertainment industry. As long as the film locomotive started moving, the other links in the industry chain—including comics, toys, licensed merchandise, audiovisual products, and theme parks—would receive a steady stream of new content, bringing in massive profits.

The entirety of Hollywood envied Duke. They envied him for throwing down a massive sum of capital years ago to secure a majority stake in Marvel Comics when no one else in America favored it.

Today, many investment firms and Hollywood studios knew that without paying a near-insane price, it was impossible to make Duke give up his Marvel shares. Therefore, they began eyeing the remaining equity in Marvel, engaging in constant struggles over it.

Walt Disney, which had been gradually weakening from internal friction in recent years, was no exception. To raise funds to acquire a portion of Marvel's equity, they had laid off 70 percent of the staff at their independent film division, Miramax, last year. They halved the number of films it released annually to two, and this year simply sold it off to a film private equity fund.

The famous company founded by the Weinstein Brothers boasted a massive library of 700 films, including masterpieces like Pulp Fiction and The English Patient.

It was pathetic, though. Despite Miramax being the "sole professional player" on Oscar night, its sale price was only 363 million dollars. The reason wasn't hard to understand: Miramax's films indeed held extraordinary "artistic value," but they couldn't sell licensed merchandise, nor did they help increase the profitability of an industrialized film business.

Today, the Big Six Hollywood studios were basically all divisions of entertainment conglomerates or even larger corporations. Furthermore, none of them were the divisions with the highest revenue. Film and television production costs were exorbitant. After deducting expenses, the pure profit of cinematic products was far inferior to that of their derivatives. But the driving effect of film and television was obvious; it could guarantee the turnover and high profit margins of other related departments.

This was the foundation of the Hollywood empire: "Content is King," pulling the entire industry chain along.

Although The Avengers captured an astonishing box office, in essence, it was still an expensive trailer for the films of the next few years—Avengers 2, 3..., Iron Man 3, 4, Captain America 2, 3..., and so on. Even more so, it was a massive advertisement for Warner's theme parks, toys, and licensed products, such as the 37.99-dollar Hulk action figures and the 11.99-dollar Captain America Beer Mugs.

In early June, Hasbro renewed a licensing agreement with the Marvel Company. The new contract lasted until 2017. Hasbro held the overseas franchise rights for over 1,000 characters, including Iron Man, Thor, and Captain America, covering toys, games, and more. The franchise fee Hasbro needed to pay was 400 million dollars, and they were also required to pay a certain percentage of sales royalties.

For Duke and Marvel, this was a "huge profit from zero investment" gained through "content."

But Marvel wasn't without its own problems.

Marvel had been continuously providing content and profits for multiple Hollywood studios in recent years, but its core business—comics—was actually showing a declining trend. In May of this year, not a single comic book issue managed to sell over 100,000 copies, setting a historic low. Comic books hadn't increased in price during the inflation of recent years; Marvel and DC Comics maintained their 2.99-dollar price tag.

In fact, after experiencing a harsh winter in the mid-1990s, the comic book industry had clearly gone downhill. This was also an important reason why Duke hadn't encountered strong competitors when he acquired Marvel.

Marvel's market share accounted for around 40 percent of the American comic book industry, but the annual sales of the entire industry were less than 1.5 billion dollars. At the very least, within Duke's entire empire, the direct comic book business didn't stand out much.

However, Duke knew very well that the true value of Marvel Comics wasn't in the comics themselves.

The overall state of Hollywood wasn't great these days. DVDs, once seen as the savior of the film industry, had shrunk drastically after 2007. Following the rise of the internet, television copyright values also dwindled rapidly. Major companies had to find alternative profit centers during this period of industrial transition. The media loved reporting on box office numbers (because such information was easy to obtain), but they paid little attention to the array of derivative products behind the box office.

Leveraging the massive platforms of Warner Brothers and Time Warner, where he served as a major shareholder and board member, Duke had undoubtedly built a comprehensive industry chain for Marvel Comics.

For the Hollywood of the past, the mainstream "national blockbusters" were original films like Ben-Hur, The Bridge on the River Kwai, Bonnie and Clyde, Butch Cassidy and the Sundance Kid, The Godfather, and E.T. the Extra-Terrestrial. Making a sequel or a trilogy was already pushing the limit. Aside from the special 007 Series, the ones that shot sequel after sequel were almost entirely B-movie horror flicks or comedies.

But with the arrival of the "franchise" era led by Star Wars, the entertainment industry discovered that "high-concept" commercial films were just the beginning of a series of extended product revenues. And as Hollywood studios were successively acquired by multinational comprehensive entertainment and media conglomerates, massive capital took control of the film industry. Cinematic products were increasingly incorporated into overarching strategic plans, and how to maximize profit became the most important issue.

Therefore, films like Superman, Batman, X-Men, and Spider-Man emerged endlessly, even reaching the point of oversaturation.

Duke wasn't just a director; he was also the representative of a massive capital group's interests. Naturally, his next film would still be a superhero movie.

The oversaturation of superhero movies essentially reflected the natural profit-seeking side of capital. Films like Captain America and Thor didn't have bad box office results, but as commercial films, they were actually far from recovering their costs based solely on the box office. Yet, Duke and Marvel Pictures never tired of it, and as the distributor, Warner Brothers flocked to them. The most important reason was their enormous derivative value.

Walt Disney Chairman Michael Eisner was blunt when selling Miramax: "Continuing to invest in new Miramax films is unnecessary for our core strategy."

What he valued were films that could provide content for Disney's theme parks, television, other media, and licensed products. He didn't care at all whether these films had originality and artistic value.

This was also a trait shared by all Hollywood producers and distributors.

Take Pixar Studio, for example, where Duke also held a large number of shares. Its films widely recognized as having the highest artistic value, Ratatouille and Robot WALL-E, brought in less than 1 billion dollars in total revenue, even when including their box office. Meanwhile, the heavily criticized Cars had an unremarkable box office, yet it had spawned a market value of over 8 billion dollars today.

If Duke and Time Warner were forced to choose between them, they would definitely choose Cars. This didn't mean Duke liked Cars; rather, the position he was in naturally dictated that he had to do so.

To maximize the value of Cars, Duke and Warner Brothers pushed hard for the global release of Cars 2 last year, making it a franchise capable of competing with Disney's classic animations in the merchandising market. To achieve this, they didn't hesitate to delay Toy Story 3 until this summer.

This delayed animated blockbuster officially landed in the North American market in early June. As a highly anticipated sequel and what Pixar Studio called the "finale," it attracted widespread attention.

As long as a film was successful and could still generate massive profits, just like the actions of those big Hollywood directors, the so-called "finale" was just talk.

Duke was temporarily on vacation, and he had also accepted Pixar Studio's invitation to appear at the premiere of this film.