What makes the Marvel Cinematic Universe the greatest film franchise ever?

As Phase 3 of the Marvel Cinematic Universe (MCU) reaches denouement with the final installment of Avengers scheduled to take place in April, 2019, I wanted to take a moment to excavate what exactly has made the MCU so special. Creatively, they’ve wowed us with their ability to seamlessly intertwine what feels like an insurmountable amount of character universes. Strategically, they’ve made decisions that have resulted in a jaw-dropping $17.4B worth of global box office revenues across twenty Marvel films to date. The MCU should be celebrated for their accomplishments and in this article, I breakdown what makes them THE pre-eminent tentpole film franchise the likes of which the world hasn’t seen before.

Act I: Finding Product/ Channel Fit

It was clear since Phase 1 that Marvel found product/ market fit (PMF) after the first Iron Man and Avengers grossed ~$585k and ~$1.5M respectively in worldwide box office revenues. However, as is the case in startup land, PMF is always necessary but never sufficient to achieve long-term escape velocity and global domination. To scale the MCU into what it is today, Marvel, like many prosperous digitally native vertical brands of today have done, have achieved sustained success through finding product/ channel fit. Glossier for example, started off as and built its cult like following through its beauty blog as the go to resource for women wanting to learn more about different beauty regimens and products. CEO Emily Weiss was able to create a tremendously impactful blog amassing tens of millions page views a month, cultivating a community of loyal followers that made monetizing her reader base in a meaningful way that much easier. However, in contemporary consumer-centric society, it’s become fundamental for brands and retailers alike to be in a portfolio worth of acquisition channels. So as the company has scaled, Glossier has deployed capital into different paid channels from traditional ad formats to digital. Nevertheless, the company has remained headstrong in developing its own proprietary acquisition channel by continuing to produce a best-of-breed skincare and cosmetics blog realizing it has an unfair advantage in this particular channel. Glossier has developed a growth loop utilizing their proprietary acquisition channel that explains part of its success: more content -> more readers -> more shoppers -> more data -> more content.

A similar phenomenon has taken place at Marvel. While Marvel is still in traditional paid channels like print and TV, they have also developed their own unique proprietary acquisition channel through embedded video advertising. It is no secret that consumers today neglect traditional video ads (both pay-TV and online) to the point where viewers no longer attune, rendering them ineffective and a couple factors contribute to this. The first factor has to do with the overabundance of promotional content and ads that is siphoned across every and all known channels in today’s world. However, I posit the more attributable reason for the inefficacy of video ads has more to do with the formats in which they are presented. Most video ads you’re probably familiar with take the form of either in-stream ads including your classic pre-roll, mid-roll, and post-roll, or out-stream banner video ads. The problem with these formats doesn’t have so much to do with the formats themselves but rather the broader lack of innovation within video ad formats. This is because like all advertising channels/ formats, “the law of shitty clickthrough’s” applies. All marketing strategies inevitably asymptote to 0 as the novelty effects wear off. In other words, we as consumers have become so use to these traditional ad formats that we no longer give them the time of day, knowing they generally won’t be of any value.

This is where Marvel shows off part of their creative design genius. They have created an entirely new video ad format for their own IP through embedded marketing. Whether it’s the introduction of two new Avengers (e.g. Black Panther and Spider-Man) in ‘Captain America: Civil War’ or the supporting role Black Widow plays in six different Marvel films, both outcomes were and are the same; Marvel has been able to effectively promote ‘Black Panther’, ‘Spider-Man: Homecoming’, and the yet to be released Black Widow standalone film (now in pre-production). This unique Marvel marketing technique is ingenious for a couple reasons. Firstly, they are able to seamlessly integrate their ads in a hugely authentic and entertaining way that enhances the overall viewing experience as opposed to takes away from it. Secondly and just as critically, they are able to leverage a massive, highly engaged, impressionable audience base when you’re talking about 40M-60M theatrical watchers on average who are completely focused on the programming at hand. Embedded marketing has been utilized before in the form of product placement, but it hasn’t been done to the scale of Marvel and it hasn’t resulted in a flywheel effect that powers the MCU.

Result: Marvel films can serve as organic acquisition channels for other standalone Marvel films but are an even more effective acquisition channel for the big one in Avengers. This is due to the interconnected storylines the MCU so adroitly entwines, especially when factoring in how the circumstances in one standalone Marvel film can have important implications for the direct outcome in an Avengers title. This and the fact they get to see their favorite Avenger fight alongside other bad-ass superheroes, which is super bad-ass in of itself.

Nonetheless, if the commonly used setup/ payoff screenwriting device is what defines some of your favorite all-time films, the standalone Marvel films acting as the setup provides a massively optimized organic acquisition channel for the payoff in Avengers. This phenomenon partly explains why the three most successful Marvel films ever at the global box office have been all Avengers titles. Although portions of an Ant-Man fan base might not go see Doctor Strange and vice versa, I bet you they’ll show up to Avengers knowing that they’re favorite Avenger will not only be present, but have a potentially outsized impact on the outcome of the film. The beautiful part about it though is that this relationship works both ways. Avengers can just as effectively serve as free advertising and as an organic channel for standalone films. Due to the pop culture fever that tends to build pre and post Avengers (more on this below), there are viewers who are introduced to the MCU for the very first time through an Avengers title, that subsequently leads them to the standalone films. Thus, you can see the flywheel start to take shape.

Act II: Marvel’s Growth Loop

But wait, why even Iron Man 3 or Thor 2 if we all know how much of a cash cow the Avengers films are as the most valuable component of the MCU nominally. Why doesn’t the MCU turn two or three of these every year instead of only producing one every three years historically (it’s not like they don’t have the IP). Here, they’ve stolen a page out of the Supreme playbook. Supreme, a fashion retailer known for their somewhat impromptu drops garnering queues that span blocks have become somewhat of a pop culture sensation. Rather than having their stores open on a daily basis, Supreme only operates during the release of their Fall/Winter and Spring/Summer collections. This format creates a perception of scarcity working in Supreme’s favor as it builds up pent-up demand and creates a pop culture buzz diffusing to a word-of-mouth vitality that drives customer acquisition.

A similar strategy is taken with Avengers. Historically occurring once every three years, an Avengers film is a scarce commodity where the paid advertising leading up to the motion picture generates a type of social buzz unlike any other tentpole besides Star Wars that facilitates in the massive box office numbers these films generate. It acts like the Super Bowl of the MCU, with the standalone films portraying regular season games leading up to it. Imagine if the Superbowl occurred two or three times a year. It just wouldn’t capture the same amount of fanfare, viewership, and revenue in a sustainable way. However, there is a more human element at play that makes Disney, well Disney. It is perennially a really cool theme to have a group of superstars team up for a bigger cause no matter what industry you’re talking about. As a spectator event however, we only care to watch if we have something or rather someone to care for. As viewers, we have to care about these superheroes in a way that feels genuine. Otherwise, it can come off as pretentious and dissuade an audience base. This is where the standalone films wedged in-between an Avengers adds a tremendous amount of value. Not only does it introduce new storylines for the upcoming Avengers to play off of adding to the flywheel, but it also compels us to understand these individuals’ worldview and herein, care for them enough to show up when it matters most.

Now that we’ve unpacked why Avengers is a triennial event, let’s explore what this allows for. Avengers definitely qualifies as a “water-cooler” movie. After every successful Avengers screening, chatter about the film invariably infiltrates pockets and corners of the world creating a natural word-of-mouth vitality. It becomes pop culture. It becomes a topic you want to discuss with your friends, family, and or colleagues. However, what if you haven’t seen the film or worse, what if you haven’t seen it and want to, but you haven’t yet seen the other Marvel films? The main impediment behind every Avengers film is that due to the inexorably linked nature of the MCU, you can’t really watch an Avengers film without having viewed the rest of the films and have the same experience. Some choose to go watch anyways as some fans actually get introduced to the MCU through an Avengers title as mentioned previously, but others will choose to skip out for that very reason. What the three-year time lag between Avengers films then allows for is an opportunity for the curious, FOMO non-consumer to catch up on the gauntlet of Marvel films leading up to the next Avengers, making them feel like a qualified member of the community. This encapsulates the growth loop that powers the MCU engine:

Standalone film -> better and bigger Avengers -> more buzz -> more fans watching a better standalone film -> more fans watching a better and bigger Avengers -> more buzz -> more fans watching a better standalone film.

Added bonus: with the type of bottom-line numbers an Avengers film generates (Infinity War generated over $600M in net income), Marvel is also able to subsidize the costs of future films with their own free cash flow.

Act III: Brand is Distribution

The final component of Marvel’s machine is a powerful one. That is, the Marvel brand has become distribution. This has allowed them to launch numerous different product extensions both theatrically and in TV with great reception. Marvel, not unlike your favorite retail and CPG brands of today, have developed a scaled loyal community of followers. Phase 1 of the MCU did an impeccable job of building trust and consumer love and Phase 2 further cemented those warm connotative feelings associated with the Marvel brand. Since then, Marvel has been able to produce and introduce completely new character universes at an unrelenting pace both for the big screen and for TV. On the theatrical side, we have already been introduced to Doctor Strange, Spider-Man, and Black Panther, while still waiting for Captain Marvel just within Phase 3 alone. The logic being, Marvel has already built a significant viewer install base up who trusts and loves them. Therefore, releasing new character universes the casual fan may be unfamiliar with will still attract a similar sized audience and do similar numbers. Fruitful because besides ‘Ant-Man and the Wasp’ grossing less than ‘Thor’, the rest of the Phase 3 films did better in the worldwide box office than every single Marvel film in Phase 1 except for the first Avengers. This further accelerates the flywheel as the more character universes they introduce, the more likely at least one Avenger will find resonance with a consumer. Since theatrical releases are still centered around a movie-going experience that is social by nature, there’s a good chance that consumer will be able to convince his/ her friends to purchase a ticket as well, resulting in an audience base that grows exponentially. We’ve seen a similar thing take place on the TV side as well. As a brand extension, Disney has produced a plethora of different Marvel character universes adapted for TV across a wide-ranging of different MVPD and SVOD channels they have access to. First came “Marvel’s Agents of S.H.I.E.L.D.” (distributed through ABC), which was unsurprisingly made to order soon after the first Avengers film became a smashing success. Since then, Disney has produced an MCU TV series for Freeform, Hulu, and Netflix to name a few, leveraging the Marvel brand to its fullest.

In the theatrical window, Marvel has clearly been able to achieve product-monetization fit. They’ve been able to fine-tune their revenue inputs and experiment with different ad campaigns over the years, resulting in a pretty formulaic equation Marvel uses to reach baseline profitability numbers. This is ultimately why Marvel can get away with redundant and somewhat formulaic 3-act structures in their screenwriting to the great David Fincher’s dismay. Marvel has built a sect following who loves the brand and are highly profitable prompting no real incentive for Marvel to do anything different. Sure, the films have become somewhat predictable and won’t win any Oscars but with the kind of numbers they’re doing, I don’t think the studio is overly concerned. Also, just because their screenplay structure has become moderately predictable, it doesn’t make the films less compelling. Connecting with consumers on an emotional level is what Disney does best and Marvel films are no exception.

Act IV: The Rest is Still Unwritten

What does this all mean for the future of Hollywood, Disney, Marvel, and ultimately the palpable streaming wars that is mid-way through the first quarter? Well frankly not much. As Netflix continues to run up the score, I find myself hard pressed to believe the continued outperformance of this tentpole franchise will be able to move the needle in any meaningful way for “Disneyflix”. So far, Netflix’s film division has underdelivered relative to its prowess in TV, absent any prestige drama’s and tentpole franchises to bloviate about. Now, imagine a scenario in which Netflix gets the rights to a tentpole caliber franchise or creates its own MCU. In today’s environment, where Netflix just added 25% more subscribers year-over-year in spite of hiked prices and a quiet film division, that scenario is scary for its streaming competitors. The good news for Disney and company is that it is very, very, very hard to build something quite like the MCU at that scale. The only other tentpole franchise that compares in fanfare is Star Wars. However, the MCU plays in a league of its own when you consider Star War films combined have only made a little more than 50% of what Marvel has been able to generate in box office revenue from their films in aggregate. While George Lucas was able to develop the Star Wars concept from scratch, Marvel Studios had the added advantage of possessing a built-in installed base due to the comics. IP like that isn’t exactly lying around out and about readily available for purchase.

Nonetheless, if anyone can conceive the next MCU, it might be Netflix with the type of accrued talent, financial war chest, and “at-bats” they will have (they would still have to figure out windowing to get this right). Even if Netflix never has their own MCU and or never figures out windowing which they haven’t yet, I’m still not sure it matters for their ability to achieve long-term success in an SVOD climate, where optimizing for value is the way to a viewer’s wallet. When choosing which subscription streaming service to purchase in a generation where millennials and Gen Z have been trained and re-trained to over-index to value through looking for deals and hunting for bargains, the winner won’t be the player that has the highest quality or most popular content on an absolute basis (which might be Disney). Rather, the winner will be the platform that can provide a programming library that provides the most satisfaction/$cost/month. This would be Netflix at its current production run rate.

That being said, the market dynamics within video programming doesn’t have to be one of winner-takes-all. I believe this is a winner-takes-most market with an inherent power law distribution curve. In a world where these direct-to-consumer platforms know you better than you know yourself sometimes, such platforms can provide immense value through the discovery of continuously growing content that speaks to you. Consequently, high switching costs are implicit, where first-to-scale or in this case, second-to-scale will accrue most of the benefits. As is the case, “Disneyflix” with the help of the MCU can realistically co-exist alongside Netflix although, challenges lie ahead in Disney’s attempt to drive adoption of their new streaming service. This includes getting encumbered content off the pay-windows (e.g. Marvel films licensed to Netflix), as well as solving for how to judiciously allocate the mountain of programming sitting inside their walled gardens across the numerous distribution channels at their disposal (“Disneyflix”, Hulu, Disney channel, ABC).

While the future of Disney and Marvel looks obfuscated, one thing is clear: Marvel should be celebrated for the type of ingenuity they’ve conjured up both creatively and strategically. As I’m impatiently waiting to see my favorite original Avengers team up one last time, I am incredibly grateful for the past decade of greatness that the MCU has put on display and look forward to the next generation of Marvel films that will carry on the legacy.