Blue Ocean Strategy – Marvel Studios success mantra cost/value tradeoff

Blue Ocean Strategy – Marvel Studios success mantra cost/value tradeoff

Marvel founded in 1939, relied extremely on comics books frenzy led by editor-in-chief Stanley (“Stan Lee”) Lieber, cartoonist Jack Kirby, etc. who created new characters like super heroes Iron Man, X Men, Spider Man, Ant Man, Black man, Thor, etc. Until 1996, the company solely relied on comic books and toy sales which led to bankruptcy in December 1996, as comic book stores closed, comic book collectibles pricing collapsing and critical staff attrition. Post the bankruptcy Marvel realized that it needed to look for Blue Ocean Strategy where businesses created uncontested markets by creating new demand through innovative product and service offering thereby generating abnormal profits.

Isaac Perlmutter, Chairman(Marvel Board) recruited Peter Cuneo as CEO, who was experienced turnaround specialist who reorganized the business to create an atmosphere of creativity and risk taking rather than outright cost cutting.  The idea for this was to build Marvel’s own movie studio along with  deals signed with Sony to make Spider-Man movies and with Fox for X-Men movies as the revenues that were generated through Sony, Fox, etc  were not enough to bring Marvel back to profitability. The first movie from Marvel own studio  in 2008 was Iron man that grossed over $585 million on a $140 million budget. This movie emphasized the Blue Ocean Strategy of cost/value trade-off as the movie costed very less compared to superhero movies by other studios like Sony & Fox. All those that generate significant value need not be costly and the movie costed 30 percent less but generated gross revenues of about 2-4 times more. Marvel found the success mantra of  more value and cost less to produce, breaking the value/cost trade-off.

Marvel succeeded in lowering costs by hiring quality low priced stars instead of high prices super stars, cutting the budget for expensive scenes and stunts, bringing the super hero characters more to the real life, choosing the low cost location for the studios with minimal perks and facilities, and signing the actors for multiple sequels in the first instance. The low cost high value trade off clearly worked as Marvel as the average global revenues per movie  has doubled and Marvel regained its profitability. The high gross revenues for the 20 or so movies that Marvel produced highlighted that fact that not only the comic book fans and enthusiasts watched the super hero movies but also attracted those people who never were comic book fans watch these movies and become fans there by Marvel created new demand and uncontested market place for the comic book based superhero movies.

MARVEL ERRC Grid – Value Innovation

A look at the Value Innovation concept of Blue Ocean Strategy through the ERRC grid, Marvel has eliminated the competition in the super heroes movies franchise by specifically attracting the non-comic book enthusiasts to watch the super hero movies thereby creating new demand and segment for movie industry, reduced the costs associated with movies producing movies at extremely low costs, raising the quality and content of the movies that attracted movie audiences to appreciate and also bring in new audiences. The superhero movies that Marvel has been producing have been extremely successful till date and Marvel’s own blue ocean movie studio created the most valuable movie franchise in Hollywood history through the cost/value trade-off and creating new uncontested markets.