8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

May 5, 2008­

ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-13638	13-3711775
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(I.R.S. Employer Identification No.)
417 Fifth Avenue, New York, New York		10016
(Address of principal executive offices)		(Zip code)
(212) 576-4000
(Registrant's telephone number, including area code)

(Former name, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d- 2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.                Results of Operations and Financial Condition.

(a)           On May 5, 2008, Marvel Entertainment, Inc. issued a press release announcing its financial results for its fiscal quarter ended March 31, 2008.  A copy of the press release is attached to this Current Report on Form 8-K (“Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

(b)           On May 5, 2008, Marvel hosted a conference call on the subject of its financial results for its fiscal quarter ended March 31, 2008, and made the call available to listeners by webcast.  A copy of the transcript of the conference call is attached to this Current Report as Exhibit 99.2 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

(c)           The information in this Item 2.02 and in Item 9.01 of this Current Report, including the exhibits attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Item 2.02 and in Item 9.01 of this Current Report, including the exhibits, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act, regardless of any incorporation by reference language in any such filing.

Item 9.01.                Financial Statements and Exhibits.

(d)                           Exhibits

Exhibit No.	Description
99.1	Press release issued by Marvel on May 5, 2008.
99.2	Transcript of conference call hosted by Marvel on May 5, 2008.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MARVEL ENTERTAINMENT, INC.
By:  /s/ John Turitzin
Name:	John Turitzin
Title:	Executive Vice President
	and General Counsel

Date: May 9, 2008

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release issued by Marvel on May 5, 2008.
99.2	Transcript of conference call hosted by Marvel on May 5, 2008.

EX-99.1

Exhibit 99.1

   

MARVEL REPORTS Q1 EPS OF $0.58 AND RAISES 2008 FINANCIAL GUIDANCE

Iron Man Launches with #1 Opening Weekend Domestic Box Office

of $100.75 Million, the 2nd Best Non-Sequel Debut Ever,

and Worldwide Box Office of $201 Million

Marvel Announces Feature Film Release Slate: Iron Man Sequel and Thor in Summer 2010 and Two Avenger-themed Movies in Summer 2011

New York, New York – May 5, 2008 -- Marvel Entertainment, Inc. (NYSE: MVL), a global character-based entertainment and licensing company, today reported operating results for its first quarter ended March 31, 2008.  Marvel also announced the opening weekend box office performance of its debut Iron Man feature film, and unveiled its self-produced feature film slate through 2011.  Iron Man debuted this weekend, generating an estimated domestic box office of $100.75 million for the three-day weekend.  This performance represents the 10th best opening weekend ever and the 2nd best non-sequel feature film debut ever - second only to Spider-Man, also a Marvel character.  On a worldwide basis, Iron Man has generated an estimated $201 million in global box office to date.   In keeping with the Company’s increasing focus on entertainment and licensing opportunities, Marvel also announced it has substantially completed its exit from direct toy operations and consequently will no longer report the results of its remaining toy business as a separate reportable segment effective with Q1 2008.

Marvel Entertainment, Inc. Segment Net Sales and Operating Income (Unaudited) (in millions)
		Three Months Ended March 31,
		2008	2007
Licensing (1):	Net Sales	$ 84.6	$119.7
	Operating Income	85.4	98.8
Publishing:	Net Sales	26.5	27.5
	Operating Income	9.9	11.5
Film Production:  Operating Loss		(2.0)	(3.0)
All Other (1):	Net Sales	1.5	4.2
	Operating Income	(5.8)	(6.2)
TOTAL NET SALES		$  112.6	$  151.4
TOTAL OPERATING INCOME		$    87.5	$  101.1

(1) Income from Marvel’s licensee Hasbro previously reported in the Toy segment is now recorded within the Licensing segment.  Marvel’s remaining in-licensed toy lines are now aggregated with corporate overhead in “All Other.”  Q1 2007 segment information has been restated accordingly.

Reflecting contributions in the year-ago first quarter related to the coming release of Spider-Man III, Marvel reported Q1 2008 net sales of $112.6 million and net income of $45.2 million, or $0.58 per diluted share, compared to net sales of $151.4 million and net income of $46.8 million, or $0.54 per diluted share, in Q1 2007.

Marvel Entertainment Q1 2008 Results, 5/5/08 page 2 of  9      

Feature Film Slate Update:

Marvel today updated its feature film slate strategy and plans for the next three years, locking in key release windows for its character franchises.  In order to focus its attention on maximizing the success of an Iron Man sequel and the launch of Thor in the summer of 2010 and because Marvel believes that the summer is the optimal time to launch a new property, the Company will not release a self produced film in 2009.  Marvel plans to launch its 2010 film slate with the release of the sequel, Iron Man 2, on April 30, 2010, followed by the launch of Thor on June 4, 2010.    Additionally, Marvel is planting its feature film stakes for summer 2011 with an Avengers-themed summer – a two-picture project which will debut on May 6, 2011 with The First Avenger: Captain America (working title), followed by The Avengers in July 2011.

Marvel’s Chairman, Morton Handel, commented, “Adjusting for the strong year-ago contribution from the Spider-Man JV, Marvel’s Q1 2008 operating results continued to demonstrate strong global demand for consumer products based on the Company’s portfolio of characters.  Marvel’s self-produced feature film slate launched this past weekend with a performance that firmly establishes Iron Man as a major new film franchise, and the Company eagerly awaits the June premiere of The Incredible Hulk, Marvel’s second self-produced film.  In addition, Marvel has been investing in other important areas of growth such as the Internet where, to lead the Company’s newly formed Global Digital Media Group, Marvel recently announced the hiring of Ira Rubenstein.  Marvel has a strong foundation to build from, and the Company is adding infrastructure to maximize these opportunities.”

First Quarter Segment Review:

· Marvel is now reporting the net sales and operating contribution from its license agreement with Hasbro within the Licensing segment.  Net sales in the Licensing Segment decreased in Q1 2008 principally reflecting a decline in net sales from the Spider-Man merchandising joint venture (JV) with Sony and a decrease in income from Hasbro to $8.3 million, compared to income from Hasbro of $20.8 million in Q1 2007.  

Net sales for the Spider-Man JV declined to $29.7 million in Q1 2008, versus $56.9 million in Q1 2007.  The year-over-year decline in JV net sales was anticipated, as the high level of net sales in Q1 2007 was triggered by “on shelf dates” related to the May 2007 release of Spider-Man III.  This decline was offset in part by increases in domestic and international consumer products licensing, as well as from a higher level of license revenue from Marvel Studios related to the Spider-Man, X-Men and Fantastic Four movie properties.  Marvel’s Q1 2008 Licensing segment operating income results also reflect settlement payments from two licensees in connection with the termination of their respective interactive license agreements.  The settlements totaled $19 million and were recorded as other income.  Operating margin in the Licensing segment was 101% in Q1 2008, reflecting the benefit of these settlement payments included in operating income but not included in net sales.  The operating margin for the Licensing segment was 83% in Q1 2007. 

Marvel Entertainment, Inc. Licensing Sales by Division (Unaudited) (1) (in millions)
	Three Months Ended
	3/31/08	3/31/07
Domestic Consumer Products	$  25.7	$  41.0
International Consumer Products	15.0	18.4
Spider-Man L.P. (Domestic and International)	29.7	56.9
Marvel Studios	14.2	3.4
Total Licensing Segment	$  84.6	$119.7

Marvel Entertainment Q1 2008 Results, 5/5/08 page 3 of  9      

(1) As noted above, income from Marvel’s toy licensee Hasbro, Inc. is now reflected within Marvel’s Licensing segment in Domestic and International Consumer Products.  The year-ago period has been restated to reflect this treatment.  In prior periods, income from Hasbro had been recorded within the separately reported Toy segment.

· Marvel’s Publishing Segment net sales declined by $1.0 million or 4% to $26.5 million in Q1 2008 principally due to the timing of major publishing initiatives.  Q1 2008 net sales reflected a decline in comic book sales within the direct channel and lower advertising and custom sales, offset in part by continued strong growth in the Mass Market channel.  The year-over-year decline in direct channel sales principally reflects strong sales of high profile titles Civil War and The Death of Captain America in the year ago period, versus no comparable specialty titles in Q1 2008.  Operating income in the Publishing segment declined by 14% on a year-over-year basis to $9.9 million in Q1 2008 with an operating margin of approximately 37% compared to approximately 42% in the prior-year-period.  Based on its planned slate of publishing initiatives, including the release of the Secret Invasion series in late Q2 2008, Marvel expects its Publishing segment to return to traditional margins for the full year 2008.

· Marvel’s Film Production segment operating losses were $2.0 million for Q1 2008, compared to $3.0 million in Q1 2007, reflecting overhead costs that were capitalized into Marvel’s self-produced films in Q1 2008.  Film Production segment operating costs consist primarily of employee compensation and the expenses associated with Marvel Studios’ office in California.

· Among the items in All Other is Corporate overhead, which was $6.5 million in Q1 2008 and $3.6 million in Q1 2007.  The difference in year over year Corporate overhead is principally attributed to a one time credit in Q1 2007 of $1.9 million associated with pension accounting.  All Other also includes the results of in-licensed toy lines: for Q1 2008, net sales of $1.5 million and operating income of $0.7 million; for Q1 2007, net sales of $4.2 million and an operating loss of $2.6 million.

Balance Sheet And Share Repurchase Update:

As of March 31, 2008, Marvel had cash and investments of $150.6 million (including $23.2 million in restricted cash) with no outstanding borrowings under its $100 million line of credit with HSBC Bank.  In Q1 2008, Marvel purchased approximately 414,000 shares of its common stock, at an average price of $24.01, for total consideration of $9.9 million.  The Company has approximately $128 million remaining under its share repurchase authorizations, including its $100 million February 2008 authorization.

Marvel Studios Entertainment Pipeline (Development and release dates for licensed properties are controlled by studio partners)
Feature Film Projects Being Developed by Marvel – partial list
Film/Character	Studio	Status
Iron Man	Marvel	Released May 2, 2008
The Incredible Hulk	Marvel	Scheduled for June 13, 2008 release
Iron Man 2	Marvel	Scheduled for April 30, 2010 release
Thor	Marvel	Scheduled for June 4, 2010 release
The First Avenger: Captain America (working title)	Marvel	Scheduled for May 6, 2011 release
The Avengers	Marvel	Scheduled for July 2011 release
Ant-Man	Marvel	Writer/director engaged
Licensed Marvel Character Feature Film Line-Up
Film/Character	Studio/Distributor	Status
Punisher: War Zone	Lionsgate	Scheduled for December 5, 2008 release
X-Men Origins: Wolverine	Fox	Scheduled for May 1, 2009 release
Marvel Character Animated TV Projects
Character	Studio	Status

Marvel Entertainment Q1 2008 Results, 5/5/08 page 4 of  9      

Fantastic Four: World’s Greatest Heroes		Moonscoop SAS (France)	26, 30-minute episodes airing internationally.
Spectacular Spider-Man		Sony	Currently airing on Kids’ WB
Wolverine and the X-Men		First Serve Toonz (India)	26, 30-minute episodes in development; scheduled for Spring 2009 release on Nicktoons.
Iron Man: Armored Adventures		Method Films (France)	26, 30-minute episodes in development; scheduled for Spring 2009 release on Nicktoons.
Hulk Gamma Corps		TBD	In development; scheduled for Spring 2009 release.
Super Hero Squad		TBD	In development; scheduled for Spring 2009 release.
Marvel Character Animated Direct-to-DVD Projects
Title		Partner	Status
Next Avengers: Heroes of Tomorrow		Lionsgate	Scheduled for Late-2008 release.
Hulk Vs.		Lionsgate	Scheduled for Early-2009 release.
Thor: Son of Asgard		Lionsgate	Scheduled for Late-2009 release.
Planet Hulk		Lionsgate	Scheduled for Early 2010 release.
Marvel Character Live Stage Projects
Project	Producers			Status
Spider-Man, the Musical	Hello Entertainment/David Garfinkle, Martin McCallum, Marvel Entertainment, SONY Pictures Entertainment			In development/opening date to be determined; Julie Taymor director; music & lyrics by U2’s Bono and The Edge
Marvel 2008 Video Game Releases (Release dates controlled by Publishing partner)
Publisher	Title			Status
Sega	Iron Man			Released, Friday, May 2, 2008.
Sega	The Incredible Hulk			Scheduled for release Tuesday, June 3, 2008.
Activision	Spider-Man: Web of Shadows			Scheduled for release Fall 2008.

Exit from Toy Operations

In Q1 2008, Marvel substantially completed its exit from direct toy operations that were primarily focused on the in-licensed Curious George toy line and consequently will no longer report “Toys” as a separate reportable segment.  Marvel is now reporting the net sales and operating contribution from its license agreement with Hasbro within the Licensing segment.  Marvel has assigned the Curious George license to a division of Jakks Pacific but has retained the minimum guarantee obligation associated with this license, which remains fully accrued as of March 31, 2008.  Revenues and operating income contribution from the remaining sale of toys are now aggregated within the category “All Other” which also includes Corporate overhead.

Financial Guidance:

Reflecting the Company’s strong first quarter performance, Marvel today raised its 2008 financial guidance for net sales, net income and diluted EPS as highlighted in the table below.  Marvel’s 2008 financial guidance does not include revenues or expenses related to the box office, home video/DVD, TV or media sales performance of the company’s self-produced Iron Man or The Incredible Hulk films as the Company does not currently have sufficient performance information to reliably estimate the impact of these films on the Company's Filmed Production financial results.  Marvel’s 2008 financial guidance does reflect the overhead costs related to its film production business, and the interest and fees related to the origination of Marvel’s $525 million film slate facility, as well as the anticipated results of the Company’s licensing, publishing and toy operations (including Iron Man and Hulk movie toys and merchandising).  The primary assumptions for the Company’s full year 2008 financial guidance as noted below have been updated to reflect the elimination of Marvel’s Toy segment and the associated restatement noted earlier in this press release.

Marvel Entertainment Q1 2008 Results, 5/5/08 page 5 of  9      

Marvel Entertainment – Financial Guidance
(in millions, except per-share amounts)		Updated 2008 Guidance (1)	Previous 2008 Guidance (1) (2)	2007 Actual
Net sales		$370 - $400	$360 - $400	$486
Net income		$104 - $122	$100 - $118	$140
Diluted EPS		$1.35 - $1.55	$1.30 - $1.50	$1.70
(1)	Marvel’s financial guidance for 2008 does not reflect revenues or expenses related to the box office, home video/DVD, TV or media sales performance from the Company’s self-produced films, Iron Man and The Incredible Hulk.
(2)	As provided on February 19, 2008.

Primary Assumptions/Drivers for Full Year 2008 Financial Guidance:

· Marvel’s Licensing segment is expected to contribute net sales of approximately $240M - $265M in 2008 and to generate an operating margin of approximately 65% -75%.  Marvel expects that full year-2008 Licensing segment net sales (now including income from Hasbro) will have the following approximate mix:

- 49% from Domestic Consumer Products, including income from Hasbro.

- 31% from International Consumer Products, including income from Hasbro.

- 13% from Spider-Man L.P.

- 7% from Marvel Studios (excludes revenues related to Marvel’s self-produced feature films)

· Marvel’s Publishing segment is expected to contribute net sales of approximately $130M – 135M in 2008 and to generate an operating margin of approximately 41% - 43%.

· Reflecting corporate overhead and anticipated contributions from in-licensed toy lines, Marvel expects to report net sales of approximately $1.5M – $2.5M in 2008 in the “All Other” category.  Those sales are anticipated to generate a breakeven operating margin.  Traditional corporate overhead, excluding toy contributions, is expected to approximate $26.0 million in 2008 compared to $22.4 million in 2007, reflecting increasing levels of personnel and other expenses.

· Marvel anticipates an effective tax rate of 39% in 2008.

· Marvel’s guidance is based on 78.2 million diluted shares for 2008 and does not reflect any future share repurchase activity.

Marvel cautions investors that variations in the timing of licenses and entertainment events, the timing of their revenue recognition, and their level of success result in variations and uncertainty in forecasting the Company’s financial results.  These factors could have a material impact on year-over-year annual and sequential quarterly results comparisons as well as on Marvel’s ability to achieve its financial guidance.

About Marvel Entertainment, Inc.

With a library of over 5,000 high-profile characters built over more than sixty years of comic book publishing, Marvel Entertainment, Inc. is one of the world's most prominent character-based entertainment companies.  Marvel utilizes its character franchises in licensing, entertainment (via Marvel Studios), and publishing (via Marvel Comics), with emphasis on feature films, home DVD, consumer products, video games, action figures and role-playing toys, television and promotions.  Marvel's strategy is to leverage its franchises in a growing array of opportunities around the world.  For more information visit www.marvel.com.

Except for any historical information that they contain, the statements in this news release regarding Marvel's plans are forward-looking statements that are subject to certain risks and uncertainties, including a decrease in the level of media exposure or popularity of Marvel's characters, financial difficulties of Marvel's licensees, changing consumer preferences, delays and cancellations of movies and television productions based on Marvel characters, and concentration of Marvel’s toy business in a single licensee.

In addition, in connection with Marvel Studios’ film production operations, including those related to the slate of feature films Marvel plans to produce on its own with proceeds from its $525 million film slate facility (the “Film Facility”), the following factors, among others, could cause Marvel’s financial performance to differ materially from that expressed in any forward-looking statements: (i) Marvel Studios’ potential inability to attract and retain

Marvel Entertainment Q1 2008 Results, 5/5/08 page 6 of  9      

creative talent, (ii) the potential lack of popularity of Marvel’s films, (iii) the expense associated with producing films, (iv) union activity or other events which could interrupt film production, including strikes by Hollywood writers, directors and actors, (v) changes or disruptions in the way films are distributed, including a decline in the profitability of the DVD market, (vi) piracy of films and related products, (vii) Marvel Studios’ dependence on a single distributor for its self-produced films, (viii) that Marvel will depend on its film distributors for the implementation of internal controls related to the accounting of film-production activities, (ix) Marvel’s potential inability to meet the conditions necessary for an initial funding of a film under the Film Facility, (x) Marvel’s potential inability to obtain financing to make more than four films if certain tests related to the economic performance of the film slate are not satisfied (specifically, an interim asset test and a foreign pre-sales test) and (xi) fluctuations in reported income or loss related to the accounting of film-production activities.

These and other risks and uncertainties are described in Marvel's filings with the Securities and Exchange Commission, including Marvel's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Marvel assumes no obligation to publicly update or revise any forward-looking statements.

For further information contact:
Matt Finick – SVP Corporate Development Marvel Entertainment, Inc. 310/550-3132 mfinick@marvel.com	David Collins, Richard Land Jaffoni & Collins 212/835-8500 mvl@jcir.com

Marvel Entertainment Q1 2008 Results, 5/5/08 page 7 of  9      

MARVEL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(unaudited)

		Three Months Ended
		March 31,
		2008		2007
		(in thousands, except per share data)
Net sales	$	112,567	$	151,402
Costs and expenses:
Cost of revenues (excluding depreciation expense)		12,467		14,886
Selling, general and administrative		31,519		33,270
Depreciation and amortization		375		1,840
Total costs and expenses		44,361		49,996
Other (expense) income, net		19,326		(349	)
Operating income		87,532		101,057
Interest expense		3,086		2,902
Interest income		979		467
Income before income tax expense and minority interest		85,425		98,622
Income tax expense		33,210		38,311
Minority interest in consolidated joint venture		6,984		13,469
Net income	$	45,231	$	46,842
Basic and diluted net income per share:
Weighted average shares outstanding:
Weighted average shares for basic earnings per share		77,423		83,161
Effect of dilutive stock options, warrants and restricted stock		803		2,910
Weighted average shares for diluted earnings per share		78,226		86,071
Net income per share:
Basic	$	0.58	$	0.56
Diluted	$	0.58	$	0.54
Comprehensive income:
Net income	$	45,231	$	46,842
Other comprehensive income (loss)		145		(1,183	)
Comprehensive income	$	45,376	$	45,659

Marvel Entertainment Q1 2008 Results, 5/5/08 page 8 of  9      

MARVEL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	March 31,			December 31,
	2008			2007
	(in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	65,547		$	30,153
Restricted cash		23,201			20,836
Short-term investments		61,854			21,016
Accounts receivable, net		19,997			28,679
Inventories, net		11,308			10,647
Income tax receivable		–			10,882
Deferred income taxes, net		23,374			21,256
Prepaid expenses and other current assets		6,016			4,245
Total current assets		211,297			147,714
Fixed assets, net		2,374			2,612
Film inventory		303,322			264,817
Goodwill		346,152			346,152
Accounts receivable, non–current portion		826			1,300
Income tax receivable, non–current portion		5,906			4,998
Deferred income taxes, net		36,773			37,116
Deferred financing costs		10,155			11,400
Other assets		995			1,249
Total assets	$	917,800		$	817,358
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,428		$	3,054
Accrued royalties		82,671			84,694
Accrued expenses and other current liabilities		30,649			37,012
Deferred revenue		95,360			88,617
Film facilities (1)		57,938			42,264
Income tax payable		17,127			–
Minority interest to be distributed		45			556
Total current liabilities		285,218			256,197
Accrued royalties, non-current portion		9,931			10,273
Deferred revenue, non-current portion		56,831			58,166
Film facilities, non-current portion (1)		279,462			246,862
Income tax payable, non-current portion		59,590			54,066
Other liabilities		9,496			10,291
Total liabilities		700,528			635,855
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 100,000,000 shares authorized, none issued		–			–
Common stock, $.01 par value, 250,000,000 shares authorized, 133,404,306 issued and 77,435,629 outstanding in 2008 and 133,179,310 issued and 77,624,842 outstanding in 2007		1,334			1,333
Additional paid-in capital		729,152			728,815
Retained earnings		394,821			349,590
Accumulated other comprehensive loss		(3,250	)		(3,395	)
Total stockholders’ equity before treasury stock		1,122,057			1,076,343
Treasury stock, at cost, 55,968,677 shares in 2008 and 55,554,468 shares in 2007		(904,785	)		(894,840	)
Total stockholders’ equity		217,272			181,503
Total liabilities and stockholders’ equity	$	917,800		$	817,358

(1) Balances as of March 31, 2008 do not reflect an estimate of cash flows to be received from films over the subsequent twelve-month period that are required to be used to repay Film Facility debt.  This estimate will affect the classification of film facilities borrowings as current or non-current and will be disclosed in Marvel’s first quarter 2008 Form 10-Q.

Marvel Entertainment Q1 2008 Results, 5/5/08 page 9 of  9      

MARVEL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended
	March 31,
	2008			2007
	(in thousands)
Cash flows from operating activities:
Net income	$	45,231		$	46,842
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		375			1,840
Provision for doubtful accounts		–			425
Amortization of deferred financing costs		1,245			1,245
Unrealized loss on interest rate cap and foreign currency forward contracts		198			444
Non-cash charge for stock-based compensation		1,571			2,231
Excess tax benefit from stock-based compensation		–			(502	)
Loss on sale of equipment		5			–
Deferred income taxes		(4,057	)		15,607
Minority interest in joint venture (net of distributions of $7,279 in 2008 and $1,961 in 2007)		(511	)		11,508
Changes in operating assets and liabilities:
Accounts receivable		9,156			19,134
Income tax receivable		–			40,915
Inventories		(661	)		(891	)
Prepaid expenses and other current assets		(1,771	)		2,821
Film inventory		(38,505	)		(32,554	)
Other assets		56			23
Deferred revenue		5,408			(66,423	)
Income taxes payable		35,569			–
Accounts payable, accrued expenses and other current liabilities		(13,262	)		(18,376	)
Net cash provided by operating activities		40,047			24,289
Cash flows from investing activities:
Purchases of fixed assets		(142	)		(1,256	)
Expenditures for product and package design		–			(298	)
Sales of short-term investments		4,031			29,133
Purchases of short-term investments		(44,869	)		(48,009	)
Change in restricted cash		(2,365	)		(2,082	)
Net cash used in investing activities		(43,345	)		(22,512	)
Cash flows from financing activities:
Borrowings from film facilities		48,274			16,300
Borrowings from line of credit		–			2,000
Repayments of line of credit		–			(19,000	)
Deferred financing costs		–			(395	)
Purchases of treasury stock		(9,945	)		(22,169	)
Exercise of stock options		156			368
Excess tax benefit from stock-based compensation		–			502
Net cash provided by (used in) financing activities		38,485			(22,394	)
Effect of exchange rates on cash		207			18
Net increase (decrease) in cash and cash equivalents		35,394			(20,599	)
Cash and cash equivalents, at beginning of period		30,153			31,945
Cash and cash equivalents, at end of period	$	65,547		$	11,346

#  #  #

EX-99.2

Exhibit 99.2

Marvel Entertainment, Inc.

Transcript of Conference Call

Moderator: Peter Cuneo

May 5, 2008

9:00 a.m. EDT

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Marvel first quarter conference call.  During the presentation, all participants will be in a listen-only mode.  Afterwards, we will conduct a Q&A session.  At that time if you wish to register for a question, you may please press the 1 followed by the 4 on your telephone.  If at any time during the conference you need to reach an operator, please press star zero. And as a reminder this conference is being recorded Monday, May 5, 2008.  It is now my pleasure to introduce Peter Cuneo, Vice Chairman of the Marvel Board. Please go ahead, sir.

Peter Cuneo

Thank you, Operator. Good morning, everyone and welcome to Marvel Entertainment’s first-quarter conference call. As mentioned, I’m Peter Cuneo and today we also have speaking David Maisel, the Chairman of Marvel Studios; John Turitzin, Executive VP; and Ken West, our Chief Financial Officer.

Our agenda today includes, of course, first reading our Safe Harbor agreement. We will then have some prepared comments from Ken West and then from David Maisel, and then of course we’ll open the line for questions-and-answers. We’ll start with the Safe Harbor.

Voice

Some of the statements that the company will make on this conference call, such as statements of the company’s plans, expectations, and financial guidance, are forward-looking. While forward-looking statements reflect the company’s good faith beliefs, they are not guarantees of future performance and involve risks and uncertainties and the company’s actual results could differ materially from those discussed on this phone call.

Some of these risks and uncertainties are described in today’s news announcement and the company’s filings with the Securities and Exchange Commission, including the company’s

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reports on Form 8-K, 10-K, and 10-Q. Marvel assumes no obligation to publicly update or revise any forward-looking statements.

Peter Cuneo

Thank you very much. Now, Ken West.

Kenneth West

Thanks, Peter and good morning, everyone. Marvel’s first-quarter results were issued earlier this morning, and we provided a lot of detail in the press release, so I’ll just review the highlights with you now.

Net income amounted to $45.2 million for Q1 ‘08 as compared to $46.8 million for Q1 ‘07, despite lower revenue, and that amounted to $112.6 million for this quarter versus $151.4 million last year’s first quarter, resulting in diluted earnings per share of $0.58, an increase of $0.04 per share over last year’s first quarter due to a reduced number of weighted average shares outstanding.

As we hope we made clear in this morning’s news release, effective Q1 Marvel ended its remaining in-house toy operations and eliminated our segment reporting for toys.  Income from Hasbro, which previously was reported in the toy segment, is now reported within domestic and international consumer products licensing, and I will break them out by geography to help you analyze their impact.

Of the $8.3 million contribution from Hasbro in this Q1 of ’08, $5.9 million was recorded within domestic consumer products and $2.4 million was reflected in international consumer products.

Let’s now turn to our licensing segment. When we reported our Q4 ‘07 results, we disclosed the settlement gains associated with two interactive licenses that were terminated.  Of these gains, $19 million has been classified as other income in our Q1 ‘08.  Because this license income has not been classified as license revenue, it has brought our licensing segment operating margin above 100%.  Had these settlement gains been classified as revenues, the licensing segment operating margin would have been 82% as compared to the licensing segment operating margin of 83% in the comparable period of 2007.

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As expected, the publishing segment’s first quarter results were not as strong as Q1 ‘07 principally due to the timing of major editorial events.  Unlike 2007, the 2008 line-wide event, Secret Invasion, does not roll into full swing until late Q2 of ‘08, whereas in quarter one of ’07, it was wrapping up the Civil War mega-event, which included three of the top-selling comics of 2007, which includes Captain America #25, which was the Death of Captain America, Marvel Civil War #6 and Marvel Civil War #7, each 300,000 unit-plus books.

As a result, operating margins within the publishing segment declined from 42% in Q1 ‘07 to 37% this Q1.  Full-year publishing segment operating margins, however, are expected to range between 41% and 43%.

Cash generation, including restricted cash, remained strong in this quarter with cash and cash equivalents, restricted cash, and short-term investments increasing from $72 million at the beginning of the year to approximately $151 million at March 31, 2008, with no borrowings under our $100 million HSBC line of credit.

As indicated on our balance sheet, total non-recourse film borrowings increased during the quarter by approximately $48 million to a balance of $337 million at March 31, 2008.  Included in the March 31, 2008 totals is approximately $44 million of accrued interest and fees and borrowings of the facility’s origination costs.  Borrowings under our film finance facilities will grow modestly in our second quarter, reflecting the completion of production work on both the Iron Man and The Incredible Hulk feature films in this current quarter.  David Maisel will review our release strategy in more detail in just a few moments.

Given the film revenue recognition accounting we have previously reviewed, at this time we believe that the first quarter in which we will record any revenues related to the Iron Man box office will be our second quarter.  At a minimum, we expect to record a portion of the foreign territory minimum guarantees into revenue for the five pre-sold territories for both Iron Man and Hulk during Q2.  Final collection of these guarantees will then be used to repay loans backed by those minimum guarantees, which are classified as current obligations on our balance sheet.  I’ll remind everyone that none of the revenues or expenses associated with the box office performance for either of the Iron Man or The Incredible Hulk feature films are included in our financial guidance for 2008, although our expectations for consumer products and toys related to

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these movies, as well as studio overhead and the interest and fees related to the origination of the film slate facility, are included in our full-year guidance.

This morning we updated our full-year financial guidance, reflecting our strong performance to date in 2008. We raised the low end of our net sales guidance.  Now sales are at the range of $370 million to $400 million and we raised net income guidance for the full year 2008 by $4 million at the top and bottom of our range to $104 million to $122 million, and diluted earnings per share guidance range was increased by $0.05, now in the range of $1.35 to $1.55.

Our diluted earnings per share guidance is based on an estimate of 78.2 million weighted average shares outstanding.  During the first quarter, we repurchased approximately 414,000 shares for total consideration of $9.9 million and have approximately $128 million remaining under our current share repurchase authorization.

Absent further stock repurchases, we anticipate ending 2008 with no borrowings other than film financings and a cash and short-term investment balance, including restricted cash, of approximately $130 million to $140 million.

Let me now turn the call over to David Maisel for an update on our film slate projects.

David Maisel

Thanks, Ken. Good morning, everybody. A few words before I get into the details about some of our film projects.  This is clearly a transformative time for Marvel with the successful launch of our first self-financed and produced movie and the announcement of our future films coming up over the next few years.

As many of you know, this is the culmination of a nearly five-year effort to reposition the company and launch this new studio, starting with the analysis and the decision that it was important for us to get much more control of our destiny and the ability to greenlight and make these movies on a predictable basis and also to have the greater financial upside from the films and from the merchandising.

This has now culminated in this first release, Iron Man, which was very successful, as you all know, this past weekend. Numbers are – have been out and circulated – just very quick, to

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reiterate, the film did $201 million worldwide [estimate] and in the U.S. for the three days, Friday, Saturday, Sunday, did $100.75 million estimate, which is the second-best opening of a

non-sequel film of all time and the 10th best movie - of any type of movie - of all time for the opening weekend.  We think this is a fantastic start for the movie. We’re very, very happy with those results and we are also very happy with the word of mouth and the critical acclaim that the film has received, which hopefully will bode well for the upcoming weeks of the movie.

There’s a site called Rotten Tomatoes, which takes all the reviews and has a percentage of which how many of them were positive. Out of 161 reviews, Iron Man received a score currently of 94%, which makes it one of the best reviewed movies of the year and the best reviewed superhero movie of all time.

We are very proud of that achievement. It’s a real validation of the fortunate ingredients that we feel that we have that give us the ability to try and make these movies and have these results.  We have the Marvel brand, which has now been established not just in the comic book world but in the overall film world as a brand that consumers love and understand and trust will deliver a high-energy, exciting, family-friendly, tent-pole movie.

We have our beloved characters and their decades of stories that give us such a treasure chest of possibilities to present to the film-going public.  We have our great fans and their passion, who support and are interested in everything we are doing, and their passion virally just goes through the Internet and the rest of the world building up to our films’ release.

We have a great production team led by Kevin Feige, who has worked incredibly hard on our films and with Iron Man has cracked the puzzle that other studios – New Line had the rights for many, many years – were unsuccessful in doing themselves, in presenting Iron Man like we just have.

I also wanted to say my hat is off to Paramount, who’s been a fantastic partner for us in marketing and distributing the movie.  They’ve been a pleasure to work with and have done a world-class job.

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Moving on from Iron Man, we also announced today our future film slate. We’ve decided to not present a new character at the end of 2009 but instead to present it in the optimum time for both the film and for the consumer products’ potential.  So the film slate releases that we’ve announced is starting with Iron Man 2.  The date will be April 30, 2010.  That’s the first weekend of the summer.  Marvel has traditionally presented many movies that weekend, and we view that weekend, which is similar to this weekend in starting Iron Man 2, as an optimum time for this film and our future films, in kicking off the summer and getting the attention that we love for our films from the movie-going public.

We are then going to follow that up with Thor on June 4, 2010.  Thor is another film that our fans have asked for us to make again and again, and presents another type of storyline and different type of genre to our fans.

2011 will be an Avengers-themed year, with the first film being The First Avenger: Captain America – that’s a working title for now – scheduled for May 6, 2011, again kicking off the summer, leading up to The Avengers, which will be set in July, 2011. The exact release data we’ll announce at a later point.

We’re very excited about these four films for many, many reasons, but a couple of comments in terms of how we approach these and something that we are very excited about.  As we’ve creatively developed these storylines, we have such a luxury that our characters, and by now controlling our destiny, we can control where the characters are, and we can have our movies connect and be in the same universe.  So you see these films and the introduction of these characters leading up to The Avengers in July of 2011.

We’re also able to, on an individual basis, have characters pop up in each other’s movies and help make those movies more interesting and get visibility and promotion for our future films.  Many of you already know that at the end of Iron Man, there’s a bit of a treat for the fans with a scene of Nick Fury, our director of S.H.I.E.L.D., talking to Tony Stark.  We also announced at ComicCon in New York that Tony Stark himself is in The Incredible Hulk.  And in reciprocation for that, stay tuned – perhaps the Hulk will be in Iron Man 2.

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It’s very exciting as we develop our movies to have this kind of flexibility, and we are going to work very, very hard for our fans and the movie-going public to try and continue this track record of success.

Now a few words about the big, big event coming up in just six weeks, The Incredible Hulk movie.  We are extremely excited and very happy with this film.  It’s the same energy and effort and creative team on this movie from Marvel’s point of view and from the Marvel personnel that are focusing on The Incredible Hulk with a huge amount of effort.  We have one week left to go in post-production on the film, and as I mentioned, we are very happy with the results.

We kicked off the marketing in a very big way this past weekend.  We are very fortunate, like I just said, because we have these other properties we can use them to help our future properties.  With Iron Man getting the attention it did, we had the trailer for The Incredible Hulk in front of Iron Man, which was very well-received.  We also introduced the poster and standees, so that was the big kick-off for The Incredible Hulk marketing, and TV marketing, which is a major part of the campaign, will start the week of May 19th, which is the traditional time frame, four weeks before a movie starts, for the major TV marketing of a major motion picture.

The first trailer that we put out, we’ve been told by Universal is the most viewed trailer on the Internet that they’ve ever released. We are very excited with the fan reaction so far to the creative materials that they’ve seen.  As I mentioned, we are also very excited to have Tony Stark as well in The Incredible Hulk to add that level of texture and interest into the film.

A few words about our illustrative model of the films to help you all in terms of analyzing the results.  We only are going to give an update on this call from the illustrative model that we presented back in August of ’06.  Since we’ve now completed or mainly completed one film and almost the second one, we now have some data that would be relevant for this illustrative model and for this update.

First, regarding production costs and worldwide P&A, as we developed these films we made investments in the films and in the P&A to maximize the potential profitability.  So the levels of production costs and worldwide P&A are higher than the ranges than we had seen in the illustrative model at that point in time.  Production costs range for first films and sequels – first

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films in our series, the range that would be appropriate would be $135 to $165 million, and the worldwide P&A excluding the five pre-sold territories, $100 to $120 million.  These ranges also seem to be comparable to what other major tent-pole movies are experiencing.

Another expense item is first-dollar gross participations.  We presented a range of what those might be.  I think it was 0 to 7% or 7.5%.  The point I would like to make here is that for our first movies, given how we approach the films and given the strength of the Marvel characters and the brand, the illustrative suggestion would be that these first-dollar gross participations would be relatively minimal and on the low end of that range.

And then lastly, the income from the reserve territories and the tax incentives, there the number that we are experiencing for these two movies on average is in the $37 million to $38 million number. That is a number that is net of the financing charges and the residuals that are related to the reserved territories.

With that, we complete our prepared remarks, and I will pass it back over to Peter.

Peter Cuneo

Thank you very much, David. Operator, we would like to start Q&A.

Operator

Thank you.  Ladies and gentlemen if you would like to register for a question, please press the 1 followed by the 4 on your telephone.  You will hear a three tone prompt to acknowledge your request.  If your question has been answered and you would like to withdraw your registration, you may press the 1 followed by the 3.  And if you are using a speakerphone, please lift your handset before entering your request.  Our first question is coming from the line of Drew Crum from Stifel Nicolaus. Please go ahead sir.

Drew Crum - Stifel Nicolaus

Good.  Thanks.  Good morning, everyone.  Wonder if you could start by talking about your guidance for 2008.  Looking at the midpoint of that, the implied guidance of $0.87, that’s down year to year.  You are obviously up against a tough comp but to the extent you can, can you talk about how the core business is tracking, are you seeing any weakness from the economy?

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Peter Cuneo

Drew, it’s Peter.  I think I can take that.  We continue to be very guarded in our guidance with regard to the economy, but as we mentioned in the last conference call and I can repeat, we really have seen no material impact of the negative economy on any of our businesses.

Drew Crum

Okay, very good.  And David, maybe you can talk about – I think you addressed this, sort of, but can you talk about the decision not to pursue an ’09 release and just your overall confidence in getting the 2010 films out?

David Maisel

Absolutely.  We are extremely pleased, obviously, with the results in Iron Man . It is something that is somewhat historic in the industry and we could not imagine a better way to start our new studio.  I think the reverberations of this weekend and the success of Iron Man will be significant in the industry and obviously for Marvel.

All that being said, as you all probably know, we are very focused and very analytical on what’s best for our shareholders and what’s best for our company.  And we very much want to approach this business and continue to have the discipline that we’ve had in making the best decisions for our films and for the company and not get tempted into doing things that perhaps would be good for the short-term but not for the long-term.

When we introduce a new property à la Thor, it’s our determination after thinking and analyzing the situation that it is best for that property to be launched in a time period where it has the maximum potential for the movie and for consumer products.  And the May/June/early-July time period is one that we find is best for both the film and for consumer products.

There’s a second advantage too, which is having it come after Iron Man 2.  It allows us to use Iron Man 2 as helpful to launch the second film that year, both by having the trailer in front of Iron Man 2 and the other promotion around Iron Man 2, where we can use it to also introduce the Thor character, in the same way that we have Tony Stark showing up in The Incredible Hulk and what we did with the Hulk with Iron Man this year.

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So after a real assessment of what the best situation is to get the best value for our shareholders, it was clear that the slate we just announced, especially when we saw the success of Iron Man over the past three days, that it was clear coming back with Iron Man 2 as our next movie and then having Thor come five weeks afterwards was the best option for us.

Peter Cuneo

Drew, it’s Peter.  I think, you know, we have said for many years that the one thing that keeps us up at night as an organization is making sure that we have the best creative that is possible for all of our media forms and consumer products.  And we think basically waiting another six months as opposed to possibly rushing a film into late ’09 is the most prudent way to approach this.  We’re on the verge of a major new franchise with Iron Man, and we want to make sure that the second film is absolutely top quality.

Drew Crum

Okay, and then last one, did I hear you correctly in that we should be not modeling a 5% producer fee for the first two films and the –

David Maisel

No, I’m sorry.  I should have said that we – in addition to, you know....  Separate from our 5% of all revenues, the rest of the gross participation should be minimal.

Drew Crum

Okay, very good. Thank you.

David Maisel

We get 5% of all revenues as a producer fee, and that continues.

Drew Crum - Stifel Nicolaus

Right, okay. Thank you.

Operator

Our next question coming from the line of Eric Handler from Lehman Brothers. Please go ahead.

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Eric Handler - Lehman Brothers

Yes, a couple of questions on the illustrative model – as I quickly plug in some numbers, it seems like instead of $100 million domestic box office being a break-even point, it seems like

somewhere in the neighborhood of $130 million is possibly now the new break-even point, if you assume $150 million production budget.  Also, if you kind of flow that through to Iron Man, if you assume Iron Man does about $250 million of box office revenue in the U.S., I’m sort of getting to $1 of EPS, wanting to know how close you think that is.

And then lastly, I noticed you didn’t have Hulk as a sequel title in 2010 or ’11, and how you view that franchise.

David Maisel

On the first one, Eric, unfortunately we can’t give guidance beyond what we did in terms of updating the illustrative model.  We don’t give guidance on our numbers or our forecast or on what the profitability of the movies are.  All we did is, like other studios have done in our situation, you know, given an illustrative model and then, as we’ve learned more, update that illustrative model – and that’s as far as we can go.

On the second question, we have a release of the Hulk coming up in six weeks, and so we didn’t want to wait. We could have waited until after that release.  We thought it was the appropriate time right now to give the update on the future movies.  However, we definitely plan on using the Hulk continuing after this film.  We are very excited about the movie, and we’ll announce the plans for the Hulk and the future for the Hulk, both for his own movies and for his appearances, perhaps, in other people’s movies - all the different combinations that are open for us.  We’ll analyze those and make that announcement after the Hulk release, which is traditional when you have movies. You announce the use of those movies after those movies are released.

Eric Handler - Lehman Brothers

But if the film is successful, would you consider maybe putting him into ‘011 as a sequel and maybe pushing one of the Avengers movies back?

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David Maisel

If the film is successful, we are going to look at every option.  Every option is open to us, Eric.  If the film is successful, we feel like we have a lot of flexibility to make decisions on how to best use the Hulk for our film slate.

Eric Handler - Lehman Brothers

Thanks.

Operator

Our next question is coming from the line of Barton Crockett from J.P. Morgan.  Please go ahead.

Barton Crockett - J.P. Morgan

Okay, great. Thanks for taking the question and congratulations on the start to your Iron Man franchise.  I wanted to ask a little bit about the Spider-Man franchise, where I noticed that’s not on your schedule, you know, of partner kind of film releases.  Where we are we now in terms of the talks with Sony and what, in terms of when that would come out?  And is there some time frame – if they don’t release a movie by a certain time frame, do the rights revert back to Marvel?  You know, I just as a baseline kind of thought that it might be an ‘010 release, but now that looks kind of crowded with your two other movies in there.  And if Spider-Man were scheduled for ‘010, would you then contemplate maybe moving some of your movies around a bit, just to give it more room?

David Maisel

Spider-Man is in development. Spider-Man 4 is in development.  Sony has not yet made a decision on what the release date of that film would be.  We have to make the decisions for what we control, and that’s why we announced our film slate for 2010 and 2011 today.  But we continue to work with Sony in the development of Spider-Man 4.  We are excited working with them on the project, and we look forward to news regarding that.  At this point, we can’t give really any other update than to say that it’s in development, and everyone is very excited about developing Spider-Man 4.

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Barton Crockett

But is there some type of like three to four-year timeframe they have in which to create a sequel, you know, and if they don’t do that, do the rights revert back to Marvel?

John Turitzin

Barton, it’s John Turitzin.  They have – their rights get extended by, in addition to movies, by use in animation on television.  I wouldn’t expect to see the Spider-Man rights coming back to us in the foreseeable future.

Barton Crockett

Okay. All right and then one other question, if I can, in terms of the Iron Man sequel – can you give us a sense of what the expenses would look like for the sequel versus the original?  And also, who you have you signed up, if anyone, to star in it? If Robert Downey Jr. is going to be in Iron Man 2?

David Maisel

At this point in time, besides announcing the sequel, you know we are rolling up our sleeves and getting to work right after this phone call.  So it would be premature to comment on any kind of metrics or any kind of details regarding the production at this point in time.  The guide… The illustrative model updates that we just gave were for what we’ve experienced, which is the first two movies of a franchise, rather than sequels.  At this point in time, we can’t really speak about sequels in general or Iron Man 2 in detail. Again, we are going to roll up our sleeves after this call and get to work.

Barton Crockett

But I assume it would be safe to assume that your aspiration would be to try and get Robert Downey Jr. in the sequel?

David Maisel

We’re extremely, extremely happy, as fans around the world are, with Robert.  He has done a fantastic performance and has been a great partner in making this movie, and we would love to have Robert Downey Jr. continue his role as Iron Man.

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Barton Crockett

Okay, great. Thank you.

Operator

Our next question is coming from the line of David Miller, SMH Capital. Please go ahead.

David Miller - SMH Capital

Yeah, hi.  Good morning. Congratulations, guys, on the stellar Q1 results and on the Iron Man opening.  A question for either David or Ken – just plugging the numbers here into sort of my version of your illustrative model, if you will, and looking at the global ultimates now on this film, it looks as though – and correct me if I’m wrong – that you guys will see this film emerge from its deficit situation vis-à-vis the P&A number with Paramount, and it looks like you guys will make money in the theatrical frame.  So given that, could you talk about the home video release from a unit sell-through standpoint and when you expect to recognize revenues in that frame? Thanks very much.

Peter Cuneo

David, it’s Peter Cuneo.  Let me say first of all that we really don’t know until we run some of our in-house models, which we have not done yet, exactly what we are going to get paid for when.  I think that – remember that the P&A is crossed – that is, the monies that have to be recouped by Paramount as the distributor, the P&A for the film as well as the DVD are crossed. Until those are recouped and they get their distribution fee, we will not see – other than our gross participation fee – we will not see any cash.  If we don’t see any cash, then we are not going to book any profit.

So the timing still is up in the air, and I would again caution everybody for 2008 to look at this very carefully and make sure that you are fairly safe with your projections.

David Miller

Thank you.

Peter Cuneo

We think that the bulk of the return from Iron Man will occur in 2009.

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Operator

Our next question is coming from the line of Arvind Bhatia from Sterne Agee. Please go ahead.

Arvind Bhatia - Sterne, Agee & Leach

Thank you. Good morning.  A couple of questions.  One, I was wondering if you can speak to the merchandise side of Iron Man, as well as Hulk: what you’re hearing from your partners, particularly against Iron Man – you know – any early trends in toys and videogames?

Peter Cuneo

I can’t speak for videogames – I don’t have any information.  But on toys, we are doing very well. Sell-through, which is of course what we care about, to date has been excellent.

Arvind Bhatia

And then on Hulk?

Peter Cuneo

Well, Hulk, there isn’t much to talk about yet because we are still five or six weeks away from the film and as a result – you know, the toy sell-through and the sell-through of other licensed merchandise really wouldn’t pick up until we get closer to that film launch.

Arvind Bhatia

Great. Thank you.

Operator

Our next question is coming from the line of Jason Bazinet from Citigroup. Please go ahead.

Jason Bazinet - Citigroup

Thanks so much. Given the disparity I guess between GAAP EPS and your ability to generate or get the cash out of the film LLC, I was just wondering if you could review those LLC terms, with a particular emphasis on when you could begin to pull cash out of it, assuming things go well for the remaining two films.  Thanks.

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David Maisel

Jason, one comment – this is David – I’d like to make about cash disbursements from our facility.  We have a structured finance facility, a portfolio facility for our films, and as with most or all those facilities, the reason you are able to get the attractive terms that we have – non-recourse, no cash collateral, et cetera – is because you have various borrower-blocked accounts and timing and rules for when you can pull cash from those borrower-blocked accounts.

All that being said, three or four years ago when we negotiated that deal, we negotiated two very specific things which essentially are early cash distributions from the facility.  One is the 5% Marvel producer fee – 5% of all revenues.  That essentially is an early cash distribution from us – to us – from the facility, which is very unique.

And the second was keeping all the merchandising and consumer products revenue – the videogames, et cetera – separate from the waterfall for the films, which in many cases are tied in to the film facility, the movie-related merchandise and the movie-related activities.  So essentially we view that, as well, as an early distribution of capital that is generated from our film projects.  So I just want to point out that of the – you know, there’s two cash streams that come to Marvel that in essence are cash that are generative from our film projects, separate from the money that’s in a borrower blocked account.

Jason Bazinet

Understood. And how about the blocked account? Is that late 2010, is that the right way to think about it, or earlier?

David Maisel

John, do you want to speak to that?

John Turitzin

Sure. There are various financial hurdles that have to be met to get cash out of the account. I don’t have those in front of me now. They are probably filed with our SEC documents.  There are difficult hurdles that we have to cross to have the cash come back to us and sort of cross.  And so, as we’re constantly making movies and using funds from the account to make the new movies, I wouldn’t expect any cash distributions for a while.

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Jason Bazinet

It is as simple as – I mean, at least my reading of the SEC documents is, you have to make at least three films and have a net cash balance of $350 million. Is that wrong?

John Turitzin

I’m sorry, I’d have to go back and check it. I don’t have it currently in my memory.

Jason Bazinet

Okay.

Kenneth West

Jason, this is Ken.  I just want to clarify, just to kind of bring all these responses back together and focus it back on your question in the sense that when you correlate to the earnings potential and the earnings recognition and timing to Marvel associated with the films, it’s not the cash that’s going to be drawn back directly to Marvel; it’s the cash to be thrown off from our distributor to apply to reduce the debt. And it’s that cash flow that generates the revenue recognition at Marvel.  So that’s how we are going to model it for the future.

Jason Bazinet

Understood. Okay. Thank you.

Operator

Our next question is coming from the line of Alan Gould from Natixis.  Please go ahead.

Alan Gould - Natixis Bleichroeder

Thank you and congratulations as well on the Iron Man opening. First, what kind of upside potential is there from the minimum guarantee on the reserved territories?   Are those just locked and you will get that number that you’ve given us earlier in the updated guidance?

David Maisel

No, these are structured in a way where we do still have a participation, an upside in the territories.  Normally we don’t give guidance on revenue streams so we can’t really comment on

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that, but we do structure these as minimum guarantees with some sort of participation and upside beyond that.

Alan Gould

Okay, and David, second, how soon before the video release will Paramount start spending cash on the production of the DVDs?  Or what’s typical in the industry with the studios?

David Maisel

You mean spending cash on the production of the DVDs or on the marketing of the DVDs?

Alan Gould

Production.  I assume the – I’m not sure which starts first, the production or the marketing. Either.

David Maisel

You know, we are entering that phase with Paramount now, so I think it would be wrong for me to comment on that at this point.  We would not be able to comment on that with great accuracy, so I probably should pass on that question.

Alan Gould

But what’s an industry standard?  If they use Technicolor or whomever, do you start producing DVDs six, eight weeks before street date?  Is that typical?

David Maisel

I don’t have my production guy on the phone for the DVDs so I really can’t help you with that one right now. We can have – if you follow-up perhaps with Matt, he can talk with Paramount and get you an answer on that.

Alan Gould

Okay, I will. Thank you. And then the last thing is, which of the upcoming films is Avi Arad involved with?

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David Maisel

Avi, as you know, is a producer on Iron Man and The Incredible Hulk, and we have not made any decisions on whether we are going to have any outside producers from this point on beyond the Marvel production team.

Alan Gould

Okay. Thank you very much.

Operator

Our next question is coming from the line of Joe Hovorka from Raymond James.  Please go ahead.

Joseph Hovorka - Raymond James

A couple quick questions, first on the comments about the actors, I thought I saw a comment from Jon Favreau that said Robert Downey Jr., Gwyneth Paltrow, and Terence Howard were all signed for three films. Is that incorrect?

David Maisel

No, that’s accurate. Marvel has what are called options for two more movies on those actors.

Joseph Hovorka - Raymond James

Okay, and then the $100 to $120 [million] of P&A spend that you talked about, is that theatrical only or would that include DVD spend as well?

David Maisel

That’s theatrical only.

Joseph Hovorka

Okay, and then I know that Burger King and Audi in particular had some marketing spend associated with their product placement.  Is that correct and is that included or is that on top of the $100 to $120 [million]?

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David Maisel

That’s on top of this and in fact, you are exactly right.  I mean, we haven’t commented too much on that on these calls, but we were very happy with the promotional partners for Iron Man.  We especially had four very major ones with Burger King and with Audi and LG and 7-Eleven.  So those revenues that they spend both for product type of packaging, as well as media dollars that they spend, whether it be radio, print, or TV, are all on top of these numbers, as well as the advertising that our partners like Hasbro and Sega do for the toys and the videogames.

Joseph Hovorka

And then going back to your illustrative model on the home video, there’s no changes – we shouldn’t assume a higher P&A spend or a higher advertising spend there, or no?

David Maisel

I think in that model we gave a margin number…

Joseph Hovorka

Right.

David Maisel

…rather than a spend, because we have a worst-case margin number in our contract with our distributor.

Joseph Hovorka

Okay, but inclusive in that margin would be the advertising spend for the DVD?

David Maisel

That’s correct.

Joseph Hovorka

Okay, and then can you talk a little bit on the interactive licenses – you know, two things; one is I know you had two terminate in the quarter, and then secondly, just looking at your game license that you disclosed in your release, you are down to three here, and I know it used to be much longer than that.  Can you talk a bit about where we are at, and whether we expect to see new partners?

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David Maisel

A couple of words on that – we are obviously extremely happy with our videogames and frankly our overall gaming approach.  And as a company right now, we view gaming as a very interesting potential growth area for us going forward, and not just console games but casual games and mobile games and the entire gaming arena.  And we have two executives, Simon Philips, who is not only our president of international, but he is also leading our console videogame effort and our animation effort, who is doing a real assessment, and who is out marketing, with his team, future games.  So there will be future announcements about games.  Our track record is very, very good with console games and with the success of our movies, for example, this past weekend and the elevation of our characters through these movies, we feel like the attractiveness will only increase as a console game partner.

We also hired, and we mentioned in our press release, a senior interactive executive, Ira Rubenstein, and we are very happy to welcome him to Marvel and he’ll be leading the effort on other gaming areas, like the massive multi-player online games, like casual games on the Internet, like mobile games.

And one of the nice things is that Marvel, like we now control our properties for our film studio, we also control our properties for those interactive gaming areas. And for example, even casual games on the Internet, properties like Spider-Man and X-Men, which have been licensed for console games, we retained the casual gaming rights.

So we are very excited about the overall gaming sector, that whole spectrum of activities, and we are putting a lot of time and effort into it.

Joseph Hovorka

And you are still looking at a licensing model in that category, correct?  You are not looking at doing it yourself, as in film?

David Maisel

For console games, yes, we are continuing looking at a licensing model and for casual games and for some of the areas where there are less costly approaches, we’re looking at the whole

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spectrum, from licensing to JVs to self-funding.  So there is an entire spectrum there that we analyze and figure out what’s the best risk/reward ratio for each of those different gaming arenas.

Joseph Hovorka

Okay, and a question for Ken; there was a $35.6 million cash inflow from income taxes payable in the quarter. Can you talk a bit about that and does that reverse?

Kenneth West

That relates to – because it’s presented on the GAAP statement of cash flows as an inflow, it really represents the fact that we’ve accrued that liability, so that’s not actually cash generated from a refund or cash in from the government.  That’s just the accrual associated with earning income and it’s an expectation to pay that next quarter.

Joseph Hovorka

Okay, so it will be paid in ’08?

Kenneth West

It will be paid in ’08. It’s built into our cash flow assumptions.

Joseph Hovorka

Okay, and then one final question – your capitalized film cost of $303 million, is there any non-Iron Man/Hulk capitalized film costs in there?  And if there is, can you quantify that to some extent?

Kenneth West

The answer is yes, there are some other film projects in development.  I don’t have the number handy but it’s all inclusive of all film projects that have been capitalized into that dollar value.

David Maisel

Yeah, and those other non-Iron Man and Hulk projects are relatively minimal in that total.

Joseph Hovorka

Is that like 5% or less or –

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Peter Cuneo

Again, Joe, we really don’t comment on those kinds of details with regard to budgets.

Joseph Hovorka

That’s fair.  Thank you, guys.

Operator

Our next question is coming from the line of David Bank, RBC Capital Markets. Please go ahead.

David Bank - RBC Capital Markets

Thanks. Good morning and congratulations on the performance of Iron Man.  It was a great movie.  I guess I had a couple of questions, they were somewhat of clarifications, or two of them were anyway.  First, when you mentioned that you had the two-picture option on Robert Downey Jr. and Gwyneth Paltrow, can you clarify what that means?  Have you set the terms with them beforehand in terms of what you are going to have to pay them?  And is it just that they have the right of first refusal?

The second question is in terms of the sale of the ancillary rights, something like pay TV, free TV, were those pre-negotiated prior to the release of the movie?  Is there some potential upside there on some of those future windows?

Two other questions – the third one is in terms of GAAP recognizing profitability in 2008, I understand that you have to, the P&A has to be recouped and as soon as it’s done theatrical, you start spending money on DVD so you have to recoup that, but does the pre-sale revenue from the international territories, do you immediately recognize that?  And if so, wouldn’t that generate – kind of necessarily generate some profitability in ’08?

And last, and thanks for taking so many questions, was: can you clarify how many Hasbro-related SKUs you have coming from Iron Man?

David Maisel

Let me answer the first two and I think Ken then can answer the pre-sale question and talk about Hasbro.

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On the first two, I think your first question was about actor options and how those work.  Let me talk a bit generically about those.  When you negotiate for the first movie, many times you also negotiate at the same time the terms for the second and third movie.  That’s what we did with those actors you mentioned, and those are structured as studio options, so it’s – the studio has the option to bring – have that actor continue in that second or that third movie at the terms that have already been pre-negotiated.  And that’s the situation that we have with our film.

David Bank - RBC Capital Markets

Okay, so you’ve locked in those terms already?

David Maisel

Those have already been negotiated, yes.

David Bank - RBC Capital Markets

Okay.

David Maisel

In terms of free television, I’m glad you asked about that.  That’s something that we carved out of our distribution deals for the simple fact that there are a limited number of buyers, the cable networks and the broadcast networks, and we felt that we had the expertise and the capability to make those sales ourselves without paying a distribution fee on those revenues. And we are happy that that deal was done very successfully. About a month ago, we made an arrangement with the FX Network, and they not only purchased the free television rights – this is domestic free TV – for Iron Man and The Incredible Hulk, but they also purchased the rights for our next three movies and at the time, we had not announced and did not share what those next three movies were.  So we took that as a real vote of confidence, not just in the first two movies but in the overall studio.  So we were very appreciative of FX’s confidence in us at that point in time.

The terms of that deal were also very attractive and really state-of-the-art in terms of the amount of money that we can receive from our free television window.  As many of you might be aware, like the pay TV deals, in the free television deals you get paid an increasing amount as your domestic box office increases, so we’re very happy with the rate that we have.  We are very happy with the partnership with FX and in fact, they had a Marvel Super-Hero Day before the

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Iron Man opening, showing all the Marvel movies that they do have the rights for with interstitials, and we think that the FX relationship will be a great partnership going forward.

Ken.

Kenneth West

Yes, there was a question associated with the pre-sale and minimum guarantees, and yes, we will be recognizing revenue associated with those foreign pre-sale amounts, the margin of which will be dependent very much on the ultimate models, you know, the ultimate forecast of revenues and expenses, which we’ll be working on in the next few months.  So yes, those will be recognized in Q2 ‘08.

Peter, do you want to address the Hasbro SKUs?

Peter Cuneo

With regard to the size of the Hasbro line, it’s a modest line.  I think that, though, from Marvel's standpoint and from retailers’ standpoint, there is always a bit of conservatism when it comes to a first film in a franchise.  So retailers were conservative in their ordering patterns, which makes sense, and Hasbro and Marvel also were conservative in the size of the line that we produced.  We certainly think that with the sequel, that that line would be substantially larger.

David Bank

And I’m sorry, just one last follow-up, which is I know you guys don’t want to clarify budgets on particular movies.  Can you humor us and tell us of Hulk and Iron Man, which is the higher budget or are they not materially different?

Peter Cuneo

David, we don’t really talk to that.  Again, I don’t think there is anybody in the entertainment business who will talk directly to its budgets.

David Bank

Okay, thanks, guys.

Operator

Our next question is coming from the line of Doug Creutz from Cowen & Co.  Please go ahead.

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Doug Creutz - Cowen & Company

Hi, thanks.  Just a follow-up on a previous question – with Spider-Man 4 not set, I guess conceptually, are you guys open to doing three Marvel films in a summer or do you think that that is too high of a density for your pictures and you’d be looking to either move one to the holiday or to some other window?  Thanks.

David Maisel

You know… I think it’s – everything is specific in terms of what the competitive set in a summer is and what the films are, but we very much view the success of our movies as dependent upon how good a quality film we can make and market and what the competitive set is around the first couple of weekends around that movie.  We don’t necessarily see any kind of rule on how many Marvel-related films can be out there.  They all I think build on each other, and we have very different storylines to tell.  So it really depends upon the individual – you know, we focus on the best movie we can make and do the best marketing we can and look at the competitive environment in the week of opening, of course, and a few weeks afterwards.

Doug Creutz

Great, thanks.

Operator

Mr. Cuneo, I’ll turn the call back to you for closing remarks.

Peter Cuneo

Thank you very much, Operator and thank you all for participating once again, and we look forward to talking with you all when we report the second quarter.  Thank you again. Good day.

Operator

Ladies and gentlemen, this does conclude the conference call for today.  We thank you all for your participation and ask that you please disconnect your lines.  Have a great day, everyone.