Barron's Bill Alpert (free) does some investigative reporting - and comes up with some serious questions about Marvel Entertainment (MVL).
Marvel - owner of more than 5,000 characters including Spider-Man, Iron Man, Hulk and X-Men - has made a spectacular comeback since its bankruptcy in 1998. Shares trade for $33, after earnings more than doubled in 2007 to $140M. This year Marvel began producing its own films, opening up a new source of revenue besides its bread-and-butter licensing segment.
Here's the issue: In 1998, controlling shareholder Isaac Perlmutter used bankruptcy procedures to cancel Marvel's $1M/year lifetime contract with Stan (The Man) Lee - which also voided Marvel's exclusive rights to Lee's characters. Lee left Marvel and started Stan Lee Media [SLM] with his friend Peter Paul; Paul put up $500K and Lee assigned to the company all his intellectual property.
In 2000, soon after underwriting a gala Hollywood fundraiser for Hillary Clinton's Senate campaign, Paul fell out of favor when previous felony convictions - for robbing the Cuban government (not a great idea) and for cocaine possession - came to light. This lead to Paul dipping into his margin account - in which he had booked profits gained by manipulating SLM's shares - in order to keep the company afloat. The SEC got suspicious and launched an investigation. Paul, who had fled to Brazil, was extradited, and currently awaits sentencing on stock fraud manipulation.
Meanwhile, Stan Lee abandoned Paul, and went back to Marvel for up to $1M/year and 10% of movie and TV profits.
But what of his characters? Lee now claims his creations were 'works-for-hire' and have always belonged to Marvel. But in 2002, Stan Lee sued Marvel, and was apparently paid $10M, claiming half-ownership of his characters due to the 1998 contract cancellation. If so, Stan Lee Media, now run by Jim Nesfield (star Eliot Spitzer insider-trading whistleblower), seems to have a legitimate claim to part-ownership in the characters.
Marvel rejects Paul's claims, and questions how much credence one should give to a man with a record the length of Paul's. Still, even if Stan Lee Media doesn't win the rights to half of Marvel's profits, their claims raise serious questions that should concern investors.
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Here's the contract Stan Lee signed with Stan Lee Media in October 1998. Note 4 a):
I assign, convey and grant to the Company forever, all right, title and interest I may have or control, now or in the future, in the following: Any and all ideas, names, titles, characters, symbols, logos, designs, likenesses, visual representations, artwork, stories, plots, scripts, episodes...
And here's his Nov. 1 1998 contract with Marvel. Note 5 a):
You hereby assign, convey and grant to Marvel forever throughout the universe all right, title and interest solely and exclusively which you may have or control or which you may have had or controlled in the following: Any and all ideas, names, titles, characters, symbols, logos, designs, likenesses, visual representations, artwork, stories, plots, scripts, comic books or comic strips, episodes...
5 b):
You hereby warrant that you have not assigned, licensed, pledged or otherwise hypothecated, nor attempted to do so any of the Property and Rights to anyone other than Marvel, its affiliates, predecessors or their designees and will not do so in the future.
The Comics Reporter summarizes some of the Stan Lee vs. Stan Lee proceedings.
Marvel strategic partners: Viacom's (VIA) Paramount distributes Marvel's films. Lions Gate Entertainment (LGF) produces direct-to-DVD films for Marvel. Hasbro (HAS) has exclusive toy rights for its characters. And Universal Studios (NBC) has created some heavy-duty theme-park attractions based on its characters, such as Florida's Marvel Super Hero Island and a Japan Spider-Man attraction.
