Few things can stop Spider-Man, the Incredible Hulk or the X-Men, just a few of some 4,700 characters in the Marvel Comics stable of superheroes.
But even these legendary figures are subject to the laws of economics, if not the laws of gravity. That's what six Kellogg School students found when they teamed up for a super showing in a recent business competition.
The Kellogg contingent placed second out of 13 teams in the Turnaround Management Association's annual Carl Marks Student Paper Competition to recognize outstanding student achievement in the field of corporate renewal. Their paper, which studied the strategic missteps made by Marvel Enterprises and its subsequent efforts to regain its footing in the marketplace, garnered the team $1,500.
The prize was funded by Carl Marks Consulting Group LLC and Carl Marks Capital Advisors LLC in New York, affiliates of Carl Marks & Co., a leading New York merchant bank.
“We chose to study the turnaround of Marvel Comics because it was different from the other types of companies, such as those in the automotive or airline industries, that had undergone restructurings,” said David Youn '04, a member of the Kellogg School team.
Also representing Kellogg were Karl Bracken, Justin Kessler, Hitoshi Mitani, and Urapa Nontasut (all '04) and Nathan Chandrasekaran '05. The students were advised by Kellogg Adjunct Professor of Management and Strategy James B. Shein.
Marvel Publishing is one of the world's largest publishers of comic books, commanding a 35 percent share of the market. Marvel Enterprises, the parent company, also produces a line of toys, including action figures and games based on Marvel characters; items based on non-Marvel characters, including figures from the Lord of the Rings movies; and proprietary toys. In 2003, Marvel Enterprises reported $347.6 million in sales.
Youn noted that the team performed both financial analysis and qualitative research on the history of the Marvel turnaround before presenting their assessment of the company's prospects, which offered a mixed review.
“We read a lot of analyst reports that gave a pretty rosy picture of Marvel's future based on their spectacular performance from Spider-Man licensing and related product revenues,” said Youn. “But the way we saw it, Marvel's remaining assets beyond the most immediately successful franchises were not very well known from a mass market perspective.”
As one example, Youn pointed to The Punisher franchise. While popular with comic book fans, the character appears to have little resonance with the general public, as evidenced by tepid box office numbers for the 2004 film adaptation of the comic series. Even better-known franchises, such as The Hulk, did not do particularly well at the box office.
The Kellogg team concluded that Marvel's successes come when the firm creates blockbuster films that generate large licensing revenues, allowing for subsequent “downstream co-branding and licensing revenue streams,” said Youn.
The bottom line? “Marvel has prospects for big revenues in the short- to medium-term with their Spider-Man and X-Men film sequels, but what happens after that remains unclear,” Youn said.
The students all participated in Professor Shein's Managing Turnarounds course, which focuses on how to implement change effectively within struggling companies to bring them back from the brink of bankruptcy.
"Marvel Enterprises is a classic example of a company which made some major strategic mistakes, filed for bankruptcy protection, and has since then successfully turned itself around by generating cashflow, reducing its debtload, and strategically redefining itself,” said Bracken. “Our team was excited to learn that the Turnaround Management Association found Marvel as interesting a case study as we did."
Said Chandrasekaran, "It was the combination of great insight and traditional Kellogg teamwork that helped us write this paper."
The turnaround's $3,000 first-place honors went to a student team from the Stern School of Business at New York University. Third place, and $600, went to the paper produced by a team from the Martha & Spencer Love School of Business, Elon University, Elon, N.C.
Turnaround Management Association is an international nonprofit association dedicated to corporate renewal and turnaround management. With headquarters in Chicago, TMA has 6,800 members in 34 regional chapters comprised of turnaround practitioners, attorneys, accountants, investors, lenders, venture capitalists, accountants, appraisers, liquidators, executive recruiters and consultants.