Marvel goes Hollywood (cont.)

By Devin Leonard, Fortune senior writer

For people like me," says Avi Arad, "comic books are the ultimate fables." The former Marvel Studios chairman bears more than a passing resemblance to the actor Rip Torn. He always wears black, which makes the Marvel superheroes that adorn his clothes stand out even more.

Arad, who grew up in Israel reading comics in Hebrew, says the secret to making successful superhero movies lies in unlocking the "metaphor for life" within each of them. Spider-Man, for instance, is a coming-of-age story. Peter Parker learns to use his powers responsibly only after failing to prevent the murder of his Uncle Ben. "Peter is just like any other teenager," sighs Arad, who has three children himself. "You give a kid a car. He drinks and drives. Something terrible happens that defines the rest of his life."

A pop-culture savant, Arad was once a successful toy designer, with creations like the Pretty Ballerina doll and the Zap-it Disappearing Ink Gun. In 1989 he teamed up with fellow Israeli immigrant Isaac Perlmutter, whose Toy Biz company had a deal with Perelman to make Marvel toys. Arad persuaded Perelman to send him to Los Angeles to assist Lee. It wasn't long before Arad had supplanted the former editor-in-chief as Marvel's Hollywood ambassador. "Avi insinuated himself into the job," says Lee, with a surprising lack of bitterness.

Toy Biz bought the company in 1998. The same year, Arad's work in Hollywood began to pay off when New Line released "Blade," starring Wesley Snipes as a vampire slayer. Blade sold $133 million of tickets worldwide. Marvel made only $25,000, but the deal spawned other deals.

In 1999, Arad and Perlmutter licensed Spider-Man to Sony. Marvel's box-office take wasn't much when "Spider-Man" opened in 2002, but the company sold so much merchandise that net sales rose from $181 million in 2001 to $299 million in 2002. Profits soared from $1 million to $80 million over the same period.

Soon after "Spider-Man 2" opened in 2004, though, the stock dropped more than a third. Wall Street thought Marvel was all Spider-Man. By this time Fox had "Fantastic Four" and a third X-Men movie in the pipeline. But those characters didn't move merchandise like Spider-Man, who was not set to return to the screen until this year.

Instead of depending on other studios, Arad felt Marvel should produce its own movies. But how to finance them? The answer came from David Maisel, whom Arad had met in 2004 and introduced to Perlmutter. Maisel's idea was to fund movies with borrowed money backed by superhero movie rights. Perlmutter liked the idea and hired Maisel as COO of Marvel Studios.

Arad soon regretted that. He had played a key role in setting up the new studio, personally calling Brad Grey, CEO of Paramount Pictures, to arrange distribution. He helped sell the idea to Wall Street. Michael Blum, head of global structured finance for Merrill Lynch, who worked on the Marvel deal, says, "Nobody can pitch those characters like Avi can." But Arad feared Maisel wanted to produce too many movies too fast. He also worried that Marvel was putting too many weak characters into the lineup. Arad and Maisel were soon fighting. Maisel, though, had won the backing of Perlmutter. "Ike was a supporter - not just of the deal, but of my role," says Maisel.

In May 2006, Arad quit and cashed out almost all of his stock for $59 million. Marvel's stock is up about 30% since then. Arad says he has no regrets. He remains one of the producers of "Iron Man" and "The Incredible Hulk." But he is also working on his own projects, like a movie adaptation of the Bratz dolls.

Maisel took over as chairman of Marvel Studios this March. He was behind the company's recent agreement to co-produce a Spider-Man musical on Broadway with songs by U2's Bono and the Edge. He has been suggesting changes on the "Iron Man" script, including combining two villains into one to save money.

But the fallout from Arad's departure still hovers around the company. In February, Sony's "Ghost Rider," starring Nicolas Cage, was a surprise hit, grossing $224 million in worldwide ticket sales. (According to Lehman Brothers, Marvel's cut is only about $9 million.) It was a pet project of Harley-Davidson fan Arad. Arad recalls bitterly that Marvel tried to distance itself from the movie when it got bad pre-release buzz: "Nobody at my company, my ex-company, wanted to talk about this movie. It was a bastard child."

Maisel denies that and says he knew all along "Ghost Rider" would be a hit. The movie's success - despite a B-list hero and bad reviews - seems to bear out Maisel's belief in Marvel's strength as a brand. However, Marvel board member Sid Ganis says, "The board didn't expect much from 'Ghost Rider.'" Marvel executives can be a lot like their heroes - fighting one another as often as they fight the bad guys.

Recently I tracked Maisel down by phone in Dubai, where he was closing a deal for Marvel characters to be used in a theme park. As usual he wanted to talk business. But I couldn't resist asking, "By the way, do you happen to know the inscription on Thor's hammer?"

It turned out he'd just been doing a little research, reading a Thor graphic novel. He couldn't recite the inscription verbatim (For the record, it's "Whosoever holds this hammer, if he be worthy, shall possess the power of...THOR!"), but with the verve of a true comics geek, he got the gist of it right.

Maybe Maisel is the right guy for this job after all.

Research associate Joan L. Levinstein contributed to this article. Top of page