A Lesson in Entrepreneurship from Marvel Part 1

At the end of this month, people around the world will participate in cinematographic history. With the release of Avengers: Infinity War, Marvel Studios will wrap up over a decade of storytelling, bringing together several, multi-film franchises into a penultimate, two-part Avengers finale.

Avengers: Infinity War is also indicative of Marvel’s status as a juggernaut of the entertainment business. Since 2008, Marvel Studios has generated almost 15 billion dollars in revenue from their movies alone and with plans for the next ten years, alongside a line up of actors and actresses of incredible pedigree eager to join the gravy train, it seems like nothing can stand in Marvel’s way.

But there was a time when Marvel’s future did not look as certain. After filing for bankruptcy in 1996, it seemed like all hope was lost; but, like a Dark Phoenix (X-Men reference #1) rising from the ashes, Marvel’s incredible turnaround has signalled not only a resurgence in the superhero genre, but acts as a prime example of astute, entrepreneurial practices.

Don’t Swim in Red Waters

If you’ve ever delved into strategy lore or entrepreneurial teachings, chances are you’ve come across the concept of Blue Ocean Strategy.

Put forth by Chan Kim and Renee Mauborgne, the theory suggests that a majority of businesses compete in what they call “red oceans”—markets where businesses attempt to outperform their rivals by acquiring larger segments of existing customers. As competition in the market grows and new, alternative offerings emerge, goods and services progressively lose their value and become commodities, reducing company profits.

Since success so crucially hinges on capturing existing demand, competition amongst firms is cutthroat, with each change in market share resulting in the industry waters being tainted red with the blood of those who conceded customers.

Conversely, Blue Oceans are open waters, markets where businesses create new demand, face no competition, and are well positioned to generate profit.

Marvel’s Not So Marvelous Situation

Until the early 1990s, Marvel’s attention was focused on driving growth through the sale of comic books. Its primary problem: there was little to separate Marvel products from their direct competitors, DC Comics and Darkhorse Comics. In fact, the inspiration for several Marvel storylines and even characters, including the antagonist of Avengers: Infinity War, Thanos himself, came straight from DC.

In a market where product differentiation between competitors was low, Marvel increasingly relied continually on its pool of loyal collectors to buy into the commodities that it was producing.

To exacerbate the problem further, the market for comic book enthusiasts and the “coolness” factor associated with their collection gradually dissipated through the 1990s. The rare few who still sought comic collectables viewed them as investments that might be flipped for a hefty profit in the future.

It was a recipe for disaster. In this shrinking, yet highly contested market, marred by narrow profit margins and loss of customer interest, many comic book retailers went out business. Marvel’s sales dropped by 70%, victim to the ruthless nature of their own red ocean.

The Avengers Initiative

Having weathered a rough Storm (X-Men reference #2), in the late 1990s, Marvel began to focus on a commercialization strategy that would pave the way for unimaginable success and categorically change the way comics were perceived by the masses: movie production.

Movies like Blade, X-Men, and Spiderman were some of Marvel’s early renditions on the big screen; however, the pivotal moment came with the release of Ironman in 2008. Robert Downey Jr’s superlative performance, the brilliant story arcs, and an exorbitant amount of fan service were just some of the many drivers behind the movie’s success.

The moment that teased Marvel’s biggest and boldest Gambit (X-Men reference #3) occurred during the post-credit scene with Samuel L. Jackson’s character, Nick Fury. It was then that Marvel alluded to the Avengers Initiative and the creation (as we know it today) of the Marvel Cinematic Universe (MCU).

And so Marvel began their journey into a Blue Ocean.

Smooth Sailing

The notion of a continuous narrative, expanding over multiple movies of different franchises was something previously never attempted. Think about it, Star Wars episodes I-VI, though interconnected, were all about the Skywalker family. Christopher Nolan’s brilliant Dark Knight trilogy strictly followed the journey of Gotham’s greatest detective. And even the Harry Potter franchise focused on the lives of Harry, Ron, and Hermione.

Marvel, on the other hand, gave each of their characters the homage they deserved with standalone films. Through recurring characters and their infamous post-credit scenes, Marvel has linked together 18 different movies, with these next two Avengers films representing the culmination of all that was before them.

Furthermore, Marvel’s take on superhero movies has generated a new base of customers that were previously uninterested in comic books. Since 2008, the average global earning they’ve made per movie has doubled. Unless that’s attributed to the rising cost of movie tickets (it’s not by the way), it’s indicative of more people keen on seeing what Marvel has to offer. In fact, I’m willing to bet if you’re reading this post, you’ve seen a Marvel movie in theatres, but likely wouldn’t call yourself a comic book enthusiast. The leeway on that dichotomy is precisely why Marvel has been so successful. They’ve been able to create an offering for a grey area of customers that were unaware of the pleasure they derived out of watching superhero movies.

Their industry-wide innovation, ability to craft new demand, and nonexistent competitors in the same genre (seriously the DCEU is a joke), all showcase the prowess of Marvel’s Blue Ocean Strategy. It also serves as a prime example for entrepreneurs keen on breaking into the industry. Starting a business is already an uphill battle; therefore, it’s crucial to try and carve out a new market where demand can be generated, rather than lost.

Key Takeaway: Marvel Studios went from bankruptcy to billions by employing a Blue Ocean strategy to their business model. Having developed a cohesive story across multiple movies of different franchises, Marvel ventured into unchartered territory in their industry, created new demand for their offerings, and is reaping incredible profits.