updated 4/29/2005 11:06:17 AM ET 2005-04-29T15:06:17

Marvel Enterprises Inc. will begin producing movies based on its comic book characters and team up with Paramount Pictures to distribute the films, the companies announced Thursday, in a deal Marvel said will boost its revenues.

“We are excited to be building our own film slate,” said Avi Arad, Marvel’s chairman and CEO of Marvel’s studio division.

The company also announced a seven-year, $525 million financing agreement with Merrill Lynch Commercial Finance Corp. that will let Marvel produce the films and cash in on merchandising.
Paramount, owned by Viacom Inc., will receive a distribution fee for each film and retain worldwide distribution rights to sequels covered under the agreement.

New York-based Marvel was able to emerge from Chapter 11 bankruptcy protection in 1998 in part because it licensed some of its most famous comic book characters to Hollywood studios.

The “Spider-Man” and “X-Men” franchises have produced lucrative revenue, but analysts believe Marvel has received only a small share of those box office returns.

Marvel has about 5,000 characters in its library, including The Incredible Hulk, Elektra, Iron Man and Blade.

The distribution agreement with Paramount specifies that Marvel can deliver up to 10 films over eight years, with the first titles including “Captain America” and “Nick Fury.”

The first picture is expected to be released by 2008, with production budgets ranging from $45 million to $180 million.

Paramount will not contribute to production costs, although it will fund film promotion and advertising.

Marvel also announced Thursday that first-quarter earnings decreased 11.5 percent from last year and said it posted a $10 million charge during the period for the resolution of all past and future payments claimed by illustrator Stan Lee. Lee sued Marvel in November 2002 to share profits generated by the company’s television and movie productions — particularly the box-office smash “Spider-Man,” which grossed more than $800 million worldwide, and its super-successful sequel.

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