How Superheroes Might Save Your Portfolio
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It's a bird, it's a plane... it's a $116.6 million opening weekend for Time Warner's (NYSE: TWX) Man of Steel. The film's opening a couple of weeks ago broke the record for the largest June opening of all time, unseating Disney's (NYSE: DIS) Toy Story 3. It was also the second-largest opening for the year, behind Disney's Iron Man 3 and the $174.1 million it brought in at the beginning of May. Superheroes are hot, and with the right investments, you can make that popularity work for you.
Movies and comics
Both Disney and Time Warner have major interests in comic book superheroes. Disney owns Marvel and Time Warner owns DC, which together hold 80% of the total market share of the comic book industry. In addition to initiatives to stimulate comic book sales and make long-running titles more accessible to new readers, the companies are actively pursuing new franchises for the big and small screens.
A sequel to Man of Steel is rumored to be on the fast track for development, while sequels to Marvel Studios' Captain America and Thor are planned for release within the next year. Disney also has a sequel to the $1.51 billion-earning The Avengers in the works for 2015, and additional films slated through 2017. Superheroes have made it to TV as well with DC shows like Smallville and Arrow, while Marvel is preparing a TV spin-off from The Avengers called Agents of S.H.I.E.L.D. So long as the properties remain popular, Disney and Time Warner will continue producing films and other products based on these characters.
Disney and Time Warner aren't the only media companies making money from superheroes, either. Comcast's (NASDAQ: CMCSA) Universal Pictures has a stake in the superhero box office as well, producing and distributing comics-inspired films such as the upcoming R.I.P.D and Kick-Ass 2. While Universal Pictures doesn't have direct ties with comics as Disney and Time Warner do, it does have access to comic properties from smaller publishers. Universal has worked with Dark Horse Studios, and has also produced or distributed films based on comics by Icon Comics, Oni Press, and others.
This multi-publisher approach has worked well for Universal in the past. The original Kick Ass, for instance, brought in over three times its production budget during its theatrical run, while Hellboy II: The Golden Army nearly doubled its budget. Universal's films are typically smaller productions than those of Disney or Time Warner, of course, and are often co-produced or only use Universal Pictures as a distributor. While this reduces the amount of the profit that Universal receives from the films, it also significantly reduces the company's costs.
One major player in the superhero merchandising field is Hasbro (NASDAQ: HAS). Holding a license to produce action figures, toys and accessories based on Marvel Comics characters, the company makes products including action figures and role-playing toys such as "Iron Man" masks and smashing "Hulk" gloves. A preschool-aimed toy line, Marvel Superhero Squad, has also proven popular and has produced animated and video game spin-offs.
Hasbro has enjoyed significant success with its Marvel partnership. In 2012, the company enjoyed record sales of its Marvel toys due in part to the success of The Avengers and The Amazing Spider-Man from Sony's Columbia Pictures. It expects similar success in 2013 with the release of three films based on Marvel properties and two animated series to support the toy lines. Looking into the future, Hasbro wishes to further grow its partnership with Disney and to build its Marvel lines into a stronger global brand.
Six Flags (NYSE: SIX) theme parks also benefit from superhero-themed attractions. Visitors to Six Flags can enjoy rides such as "Batman's Batwing Coaster" and "Superman: Ride of Steel." Live stunt shows and other entertainment attractions have also been included in some parks' performance schedules as well. Though Six Flags is no longer owned by Warner Bros., it retains long-term licenses for its DC Comics-based rides and events.
The licensing terms allow Six Flags to do more than just create rides based on DC characters. It can also to sell branded merchandise featuring the characters, use the characters in promotional materials and have actors portray the characters as walk-arounds. In the company's 2012 annual report, Six Flags expressed its belief that the DC licenses and other licensed characters are a major boon to the company as they increase guest attendance, support higher ticket prices, improve the average length-of-stay for guests and improve revenue by enhancing in-park sales.
Though there are an increasing number of films and other products relating to superheroes, the market hasn't reached a saturation point yet.
The most direct way to benefit is to invest in the companies that own the characters. Given that both Disney and Time Warner benefit from licensing agreements and have earned hundreds of millions of dollars or more with each film release, both may be sound investments. Comcast benefits from the superhero market as well, though not as significantly as the others due to releasing fewer superhero-themed films and having a smaller stake in the films' successes.
License-bearers can also make good investments. Hasbro has an opportunity to launch a new toy line with each Marvel Studios film release and hopes to grow its brands globally. Six Flags may benefit from future DC releases as well, especially if the films are record-setting blockbusters like Man of Steel.
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John Casteele has no position in any stocks mentioned. The Motley Fool recommends Hasbro and Walt Disney. The Motley Fool owns shares of Hasbro and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!