Diminishing Returns to Superhero Movies

I previously blogged and suggested that superhero movies were cases of monopolistic competition, and that economic profits would fall to zero in the longrun as the summer lineup became overwhelmingly crowded by them. Thus, Marvel's ambition to create a Marvel Universe imprint on the big screen may not be such a sure thing given what will almost certainly be a heavily canvassed superhero summer by that time. It already is, in fact. Portfolio has an article suggesting some of the same things, and wonders if there's diminishing returns to superhero movies. That they work with Batman only is kind of like cherry-picking the data. Batman premiered at a time with less overall competition to movies. Tim Burton's Batman was a huge hit, too, because the movie was less dependent on CGI, which today runs the budgets up to twice the number represented there. But, check out the numbers on Spiderman.

1. Spiderman's budget was $139 million, and it made $404 million approximately in the domestic run, giving it a return on investment of 190%.

2. Spiderman 2's budget was $200 million, and it grossed $373 in the domestic run, giving it an ROI of 87%.

3. Spiderman 3's budget was $258 million, and it grossed $336 million domestically, giving it an ROI of 30%.

So, those numbers also support Portfolio's basic point of diminishing returns to an individual franchise, though the drop off is largely driven by budget inflation, though falling domestic revenues is also a cause. I think also what is likely the case is the more general issue I stated earlier: monopolistic competition. It's not simply that Americans are exhibiting diminishing returns to superhero movies, because with each summer, the number of superhero movies that were shown has increased. It would be an interesting exercise to add up total revenues for all plausible "superhero movies" by summer and see what is going on. Because I suspect that the more general issue is, I suspect, due to increased competition from neighboring substitutes, like Batman, Superman, Hellboy, Ironman, Hulk, Matrix, and many many other movies which are effectively substitutable for Spiderman. One will expect that if this is the case, and if there are no barriers to entry or exit, then firms will create so many superhero movies that the economic profits fall to zero, and it looks like we're seeing something like that, or at least kind of like that.