How Marvel Became the Envy (and Scourge) of Hollywood

 Illustration by: James Yamasaki

This article first appeared in the August 1 issue of The Hollywood Reporter magazine.

In 2008, only a few years ago, Marvel Entertainment was operating above a Mercedes-Benz dealership in Beverly Hills. Its CEO, Isaac "Ike" Perlmutter, was fretting so much about profit potential for the soon-to-be-released Iron Man movie that he wanted to serve only potato chips at the premiere.

Then came one of the most spectacular eight-film runs in history, with a combined gross of $6.1 billion for Marvel Studios movies. But the 71-year-old Perlmutter hasn't mellowed. Under his tightfisted management, Marvel has become one of the most admired, envied and, in some quarters, resented entertainment companies. The 300-employee outfit has thrived despite insistence on ever-stricter creative controls and a reputation for extreme cheapness that strikes many accustomed to old-school industry dealings as disrespectful.

In five years, Marvel has transformed into the only live-action brand that matters to mass audiences and prompted nearly every major studio to mimic its "universe" strategy for building franchises. Beginning with Samuel L. Jackson's cameo at the end of Iron Man, which grossed $585.2 million worldwide, Marvel introduced "the Avengers initiative," continuing with Iron Man 2 ($623.9 million), Thor ($449.3 million), Thor: The Dark World ($644.8 million) and Captain America: The First Avenger ($370.6 million). That set the table for Marvel's The Avengers, the 2012 film that snapped up a staggering $1.52 billion. This summer's Captain America: The Winter Soldier has grossed $712.9 million as of July 20.

"Marvel just seems unbeatable at the moment," says Mark Millar, who spent 10 years writing for Marvel Comics and consulted on the first Iron Man movie. "Even my elderly Scottish aunt knows what a Marvel movie is, so those guys are doing something very right."

Like many others, Millar is watching Guardians of the Galaxy, set to open Aug. 1, with particular interest as Marvel's seemingly invincible creative team pushes toward the edge of its known universe. Until now, the Marvel movies have been grounded (given that they involve Norse alien gods). Every adventure has been set on Earth, and the films have taken themselves seriously — though they are sprinkled with humor. But Guardians is set in galaxies far, far away and has a more comedic tone. That will test the company's creative team headed by president Kevin Feige, 41, who entered the Marvel world working for producer Lauren Shuler Donner on X-Men in 2000.

"It's different from the other Marvel movies," acknowledges director James Gunn. "There's more humor; there's more drama. There is more of me than other directors of the Marvel movies. It's a very unusual spectacle film and is much more of a space opera than a superhero movie."

Gunn's comment that Guardians reflects more of the director's vision than previous films touches on a rare misstep for Marvel: the public blowup of the company's eight-year collaboration with auteur writer-director Edgar Wright, who had been hired to helm Ant-Man, starring Paul Rudd and planned for a 2015 release. Wright departed in May after a creative clash and was replaced by Peyton Reed, whose most recent feature was the 2008 Jim Carrey comedy Yes Man.

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Feige makes the case that Wright's ouster was not a matter of a "big, evil studio … too scared at the outside-the-box creative vision." But an executive who has experience with Marvel movies says the rupture with Wright, "a filmmaker that geeks revere," has created unwanted tension with fans who also adore Feige and Marvel.

To the extent Marvel has a public face — and it controls media access as carefully as it controls everything else — it is Feige. But even though Perlmutter sold the company to Disney for $4 billion in 2009, he retains an iron-man grip on Marvel's operations and influences Disney's decisions on licensing, film-studio management and potentially even the looming question of CEO Robert Iger's successor (he is said to favor Disney CFO Jay Rasulo over Thomas Staggs, who leads the parks division).

Perlmutter is not featured on Disney's website (conversely, the heads of its Pixar and Lucasfilm divisions are), but he has shown no sign of relaxing on fiscal control simply because Marvel has become part of a big conglomerate. When staff moved from Manhattan Beach to the Disney lot in Burbank, a source says Perlmutter declined to upgrade the company's worn furniture because he did not want to change the culture. "Disney owns Marvel, but Ike gets to control every budget and everything spent on marketing, down to the penny," says a studio insider.

Disney does not disclose Marvel's contribution to its bottom line, but a non-Disney executive says Marvel hits are more profitable than tentpoles at other studios because of the company's deals with talent. "Avengers was a $200 million movie, but they're not giving away a lot of their back end," he says.

The Israel-born Perlmutter, who lives in New York and Palm Beach, Fla., with wife Laura, does not give interviews, and photos are all but nonexistent (except for a 1985 portrait in which he appears dark, handsome and slightly fearful-looking). He and fellow Israeli army veteran Avi Arad got into the Marvel business via a toy company they owned during the early 1990s. On the Marvel board, Perlmutter helped steer the company through bankruptcy protection and survived a battle with investor Carl Icahn to become CEO in 2005 — after which Marvel's plan to produce its own movies was hatched. Perlmutter is said to have attended the Iron Man premiere in disguise and has not been spotted at a Marvel event since. He relishes his reputation as secretive and frugal, according to a top executive who has dealt with him: "It's things like, 'Why do you need a new pencil? There's 2 inches left on that one!' "

Some at Disney are so intimidated, says one source, that they believe "he has spies or is listening in on phone calls," though this person allows that "it could be paranoia." (Or not: A Marvel veteran says "the way to curry favor is to tell Ike that someone spent more than he should have.") Perlmutter once complained that journalists at a junket were allowed two sodas each instead of one, and Disney ran out of food at an Avengers media event because of Perlmutter's constraints, causing reporters to pilfer from Universal's nearby suite for The Five-Year Engagement.

Perlmutter allows actors traveling on Marvel business only a single companion. A source with ties to the CEO says he makes no apologies. "He'll pay for the A-list talent — they get to travel with their entourage," says this person. Otherwise, he rejects Hollywood excess: "He's seen companies go into bankruptcy, and he thinks shareholders look at this stuff — and he doesn't believe in it."

Perlmutter is one of the top individual holders of Disney stock — the company declines to say how much he owns — and is said to have pressed Iger to dismiss studio chief Rich Ross in 2012. (Pixar's John Lasseter also is said to have lost patience with Ross.) Perlmutter also has been identified as a force behind the 2011 departure of Andy Mooney as head of Disney's consumer products division. (Perlmutter is said to have felt Mooney was not sufficiently focused on Marvel products and wanted more aggressive deals with licensees. Mooney, now CEO of Quiksilver, declined comment.)

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Perlmutter apparently has caused internal headaches for Disney. In 2012, the Financial Times reported that three female African-American executives in the licensing division were seeking settlements because they allegedly were offered lesser jobs following a reorganization. The British paper reported that Perlmutter berated the unit's CFO, Anne Gates, because she balked at his insistence on using Marvel's format for spreadsheets. Jessica Dunne, then-head of global product licensing, reportedly complained she felt threatened when Perlmutter, a registered gun owner, told her he had a bullet with her name on it. (A source familiar with the accusations claims the women were disgruntled after being passed over for promotion.)

And according to the FT, when Marvel replaced Terrence Howard with Don Cheadle in Iron Man 2 to save money, Perlmutter was alleged to have told colleagues that no one would notice because both actors are black. Disney declined comment on how the personnel issue was resolved or the alleged remark, but Marvel issued a statement that read in part, "Mr. Perlmutter and all of Marvel have a long record of diversity in the workplace and on movie sets around the world, as evidenced by both Mr. Perlmutter's own history and Marvel's management team." Marvel recently announced the new Captain America will be black in the comics, and Thor will be a woman.

Perlmutter also creates conflict outside the studio, notably with talent reps in negotiations. Nearly everyone on screen is regarded as replaceable, with the exception of Robert Downey Jr. With unmatched leverage after Iron Man, the actor reaped a payday well in excess of $50 million for Avengers. ("Isn't that crazy?" Downey told GQ when asked about a THR report on his pay. "They're so pissed.")

Marvel waded into the movie business by licensing characters to other studios: X-Men, The Fantastic Four and Daredevil to Fox; Spider-Man to Sony; and Hulk to Universal. (Daredevil has reverted to Marvel, which is turning it into a Netflix series due in 2015.) Insiders involved with those properties say Marvel has rights of approval on such matters as script, costume and storyline but does not seek to impose nearly the degree of control it does on its Disney films. Says a studio source, "I've never seen a Marvel person at one of the [X-Men] premieres."

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When Marvel began financing its own movies, the company made unconventional choices for directors such as Jon Favreau (Iron Man) and Kenneth Branagh (Thor). But both are said to have moved on in large part because Marvel was not willing to make the type of deal directors expect after launching a franchise. Feige now seems increasingly confident in managing the movies himself, relying on fresh directors to execute his vision. "They actually do good things for these filmmakers," says one talent rep. "Who was Shane Black? But Iron Man 3 — totally entertaining."

When it comes to creative decision-making, a source with knowledge of the players says Perlmutter is largely reliant on the soft-spoken Feige, who has found a way to accommodate his boss while getting what he wants. "Kevin never says, 'I would pay you, but Ike won't let me,' " says an exec who has worked on the films. "He's kept to the company line — always loyal to Ike." But Perlmutter's longtime associate Alan Fine, president of Marvel Entertainment, runs the creative committee, and chief counsel David Galluzzi takes the lead on dealmaking.

When it comes to negotiating with talent, one representative notes: "They say, 'This is what we're going to spend,' and there's not a lot of give and take. There's a lot less accommodation than dealing with a normal studio. If you don't like it, you don't do business there." For some actors who aren't top-tier stars, the terms can be constricting. "They make these ridiculous deals with option after option," says a source who has attempted to negotiate with the company. "Then you have to do this TV show. They want you to do mashups, mixing and matching the universes. If you're character A in franchise one, they not only want the right to put you in sequels but to say, 'Now you'll appear in a glorified cameo in franchise two.' "

Marvel allows itself 24 to 36 months after each movie to exercise its option on actors for additional films. Because of lengthy shoots, actors accustomed to working eight to 12 weeks on a film often are locked in for a year or more. On the TV side, "they not only want a seven-year option deal [the most allowed by law] but they want to have the right to put you in movies," says one rep. But a top agent argues that "it doesn't really matter if you're not making that much money because you're getting huge global exposure. And being locked up in a franchise is not such a bad thing in this day and age." Indeed, Samuel L. Jackson and Scarlett Johansson, who have appeared in most of the Marvel movies, are said to have made in the eight figures for their overall services.

As the highly detail-oriented man in charge of Marvel's creative strategy, Feige works closely with a team that includes Louis D'Esposito, who runs physical production, and Victoria Alonso, who handles effects and postproduction. The line between creative and production blurs on Marvel films. "Louis understands how films physically get made but with a more creative bent," explains one source. "He has sort of created a situation where he hires people almost apart from the director — a conceptual artist, this and that — because they're part of the Marvel brand." (Production designer Charles Wood, for example, moved from the Thor sequel to Guardians.)

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While on most movies the power resides with the director and top stars, at Marvel those players have little influence. "They view the director as executing their vision," says an exec involved with the company. Another says Feige monitors filming so closely that rather than wait for dailies, he's often on set and "sees the takes as the directors see the takes."

Another distinctive Marvel trait is the assumption that a film can be shaped in postproduction, which is Alonso's domain. "If you're a director and 75 percent of the script is good, you have to rely on them to finish and complete the movie," says this observer. An exec with experience on Marvel movies concurs: "The approach is more like animation than live action — 'We can tweak it.' "

Underlying Marvel's success, says one talent rep, is that "they know what their brand is, and they stick to it. … The minute you deviate, like Patty Jenkins [fired in 2011 as director of the Thor sequel], they get rid of you." But this source notes admiringly: "They manage to not just change the outfits of their superheroes. They've actually created a Captain America brand versus a Thor brand versus an Iron Man brand."

The tantalizing question now is whether Marvel can create a Guardians of the Galaxy brand and an Ant-Man brand. "Now they're trying some lesser characters, and it's a little more creatively risky," says an executive with Marvel experience. "But who knows? If you can sell Captain America, maybe you can sell Ant-Man."

Marvel veteran Millar says he's intrigued to see what happens next, especially because Disney on July 18 announced that Guardians will be followed by five untitled Marvel movies reaching into 2019. "The next few weeks are going to be really interesting," he says. "If Marvel can pull off those numbers with Guardians of the Galaxy, they can do anything. The thing I love about Marvel is they really do have balls. The Avengers comes out, and the next thing is a microscopic superhero. It sounds so mental, but Paul Rudd as a microscopic superhero? I'd pay 20 bucks to see that."

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