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MARVEL JOLTS COMICS INDUSTRY INTO NEW ERA TOP PUBLISHER PUSHING INTO YOUTH MARKETING

By Published on .

There's a revolution going on in the comic book world that even Superman can't stop.

Actually, it's being called a "Marvelution," as Marvel Entertainment Group sets about radically changing itself and the comic book industry as well.

The New York-based entertainment company owned by billionaire Ronald Perelman doesn't merely want to be the world's biggest comic book publisher. Marvel now wants to be the world's foremost youth marketing company, and is willing to spend hundreds of millions and reshape the retail landscape of the comic book industry to do it.

In the past year, it has acquired Welsh Publishing Group, which markets magazines for kids based on licensed characters; Malibu Comics, a young, rival publisher; Heroes World, a regional distributor of comic books which Marvel will begin using exclusively in July; and Skybox International, a marketer of trading cards, an acquisition that cost Mr. Perelman $150 million. Terms of the other deals weren't disclosed.

Marvel also owns trading card company Fleer, a thriving toy company called Toy Biz, and an Italian-based sticker company called Panini. And Marvel Films, a division of sister unit New World Entertainment, is responsible for turning Marvel properties like Spider-Man, Iron Man and the Fantastic Four into TV cartoons and live-action films.

This transformation into a diverse youth marketing company has caught the attention of Coca-Cola Co., Pizza Hut and Unilever, who look for vehicles to reach kids and teens. As a result, Marvel will generate $20 million in revenue from licensing for use in advertising and promotions this year, up from $3 million in '91, when that side of the business was sorely underdeveloped.

"Our goal is to be able to meet each of the core interests of our audience," said Jerry Calabrese, president of Marvel Comics and Marvel Consumer Products. "Moreover, we want to use all our resources to create comprehensive, integrated marketing programs for advertisers."

So Marvel can insert Fleer trading cards or Panini stickers into its comic books as value-added premiums, and can also create custom comic books and trading cards for Kraft General Foods' Kool-Aid and Nabisco Foods Group in promotions, supported with ads in monthly Marvel comics.

Unilever will market Good Humor brand ice cream products based on Marvel characters this year, while Pizza Hut is tapping Marvel for three promotions supported with TV spots during the highly rated "X-Men" and "Spider-Man" cartoons on Fox.

And by taking control of distribution, Marvel will have unprecedented power over how its products are distributed, displayed and marketed. It will also be able to expand into retail outlets beyond the comic book shops that do 80% of the industry's business.

Marvel made the acquisitions despite a tough '94, when its $300 million trading card business was hit hard by labor problems in pro baseball and hockey. The company's comic book circulation dropped 42%, to about 9 million.

Mr. Calabrese attributed the circulation decline to an industrywide recession following several years of sharp growth, fueled by the popularity of Image Comics, an upstart publisher comprised of ex-Marvel talent, and creative stunts like D.C. Comics' "death of Superman" storyline.

Mr. Calabrese also said the decline isn't as precipitous as it may seem. The new figure represents an Audit Bureau of Circulations' decision to not count 15% of Marvel's monthly production, since retailers allocate a portion of their weekly orders for their back-issue business.

Moreover, said Mr. Calabrese, the circulation decline won't yet impact advertising and promotional efforts as Marvel sells a rate base of only 6 million. Marvel does no consumer advertising; Jerry & Ketchum, New York, handles trade efforts.

Marvel still dominates the $600 million comic book industry with a 32% market share, more than 10 share points higher than longtime rival D.C. Comics. Still, Marvel is canceling as many as 20 titles, cutting monthly production to about 110 titles.

Advertisers in the company's comic books can select from two networks of 3 million units: Marvel Junior, which includes Marvel's "Spider-Man" titles; and Marvel Senior, comprised largely of Marvel's phenomenally successful "X-Men" titles.

Marvel's transformation into a youth marketing juggernaut has been cause for alarm in the comic book industry, especially Marvel's exclusive distribution deal with Heroes World.

That move hurts the industry's top two distributors, Diamond and Capital City, because it takes away nearly half their respective businesses. And competing comic book companies are mulling exclusive distribution deals of their own. So retailers used to a single distributor, and getting a 50%-60% discount for doing so, will now have multiple distributors and shrinking profit margins.

Still, industry observers say the move makes perfect sense.

"Marvel hasn't just eliminated the middleman so it can make more money," said John Miller, editor of Iola, Wis.-based The Comics Retailer. "By getting closer to retailers, Marvel is learning more about its customers. Before, Marvel had no idea really who was buying their product and why because they were selling to distributors, not retailers."

Still, in the short term, there could be much upheaval, since Heroes World, a regional distributor serving the Northeast, will suddenly have to handle a huge national account.

"Only time will tell," Mr. Miller said. "It remains to be seen if the rest of the industry will go along with this `Marvelution.' No one's really sure how this will all shake out."

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