What Does It Take to Create a Billion-Dollar Superhero?

iron_man_three_ver9_xlgSuperheroes have never been more powerful. Tony Stark — the genius, billionaire, playboy, philanthropist at the heart of Iron Man — has earned himself the coveted position of ‘character with the single highest grossing film’ with the release of Iron Man 3over $1.1 billion worldwide in just about a month, all on a budget of $200 million.

As of May 27, the three film adaptations of Marvel’s Iron Man have grossed approximately $2.633 billion worldwide, and had a collective production budget of $540 million. That’s a top-line return of 388 percent. The first two films were distributed by Paramount, a subsidiary of Viacom (NYSE:VIA), and the third was distributed by Disney (NYSE:DIS). All three films were produced by Kevin Feige, president of Marvel Studios, which is a subsidiary of Disney. Disney acquired Marvel Entertainment — previously listed on the NYSE as MVL — for approximately $4 billion in cash and stock in 2009, one year after the release date of the first Iron Man film.

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It’s important to point out that what Disney really acquired with its purchase — aside from talent — was intellectual property. The Disney umbrella now shelters a library of characters including Iron Man, Spider-Man, X-Men, Captain America, Fantastic Four, and Thor. Each of these characters has a narrative and a fan base that is decades old, and as Disney and Time Warner (NYSE:TWC) have found out, highly engaged.

These entertainment giants know that the secret to blockbuster success, the kind that pulls in more than $1 billion in worldwide sales in under a month, is owning the right intellectual property.

Both The Dark Knight and The Dark Knight Rises — film adaptions of the Batman IP from the DC Comics universe, which were both distributed by Warner Bros., a subsidiary of Time Warner — have grossed over $1 billion worldwide on budgets similar to that of Iron Man. To put the success of these films in some perspective, only 16 films have ever grossed more than $1 billion, and a quarter of them have been comic book adaptations.

The message to the world’s media moguls is clear: there are big bucks in good IP. The message is not new, but the surge in comic book adaptations recently indicates what a treasure chest America’s home-grown comic book industry really is. New media has unbound Marvel, DC, and other libraries of well-loved characters and narratives from print, and they have proven to be highly lucrative fodder for the film industry.

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Top Grossing Comic Book Adaptations2

Source: Box Office Mojo

What’s particularly interesting is that at a glance, combining individually popular IP has been successful. Comic book publishers caught on to this idea when they developed the concept of combined narratives such as The Avengers, and evidence of the idea’s success is apparent in the box office numbers. It should come as no surprise that a film adaptation of the Justice League — IP owned by DC Comics — is in the works.

The recipe for success here is clear, and the entertainment industry has made quick work of capitalizing on its ability to successfully adapt comic book IP to film. However, like with any recipe, there is always a limiting ingredient. In this case, it’s original IP. Anybody wishing to reproduce the secret sauce will need to get their hands on some good characters, a compelling narrative, and an established audience to get the ball rolling.

Enter Red Giant Entertainment (OTCQB:REDG), an intellectual development company founded by Benny Powell. Powell cut his teeth at Marvel and worked on IP such as Spider Man, X-Men, and Captain America. His team — largely comic-book industry veterans — is creating IP designed to serve the same tent-pole function that current blockbusters do.

To be clear, Red Giant is a small player in a big game. With a market cap of just $5.65 million, the company is just a fraction of the size of its peers and is less than a decade old. The company is largely self-funded and is mostly held by directors, although it has zero debt. What makes the company particularly interesting is its strategy.

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At a fundamental level, Red Giant is not a comic book company, although creating and distributing comics seems to be what it is primarily engaged in. It will be producing four books a month and one a quarter and pushing them to a monthly audience of between 4 and 5 million people — which is a tremendous audience for the industry.

One of the reasons why circulation is so big — approximately 52 million per year — is because the books will be free. The Giant-Size Line will support advertising in each book that will cover the cost of printing and distribution and remove a price barrier between their IP and the readers. This allows them to build a massive audience quickly, and develop the kind of audience necessary to propel an IP into the limelight.

From this point, monetization can head in any number of directions. Film is clearly one, but others include online distribution, toys, video games, apparel, apps, television, and general merchandise. Again, core to the print-media line is the ability to serve advertisers.

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So what does it take to create a billion-dollar superhero? Good characters, a strong narrative, an engaged audience, and rights to the IP. From there, the road to monetization is ripe with precedent and a recovering consumer, hungry for good media.

You can follow Dan on Twitter (@WscsDan)

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