What Disney is really buying
By Matt Vella, deputy technology editor
On Oct. 31, the company agreed to acquire Lucasfilm for $4.05 billion, a surprise move that will give it control of the lucrative “Star Wars” franchise. The deal seals Iger’s legacy of growing Disney (DIS) through large acquisitions that expand the Burbank company’s store of unique intellectual property. In 2009, Disney acquired Marvel Entertainment for $4 billion, a deal that resulted in this year’s blockbuster “The Avengers.” Three years earlier, it bought “Toy Story”-maker Pixar Animation Studios for $7.4 billion.
Iger, 61, will step down as CEO in March 2015 and stay on as chairman until June 2016. His mark on the company is likely to be felt for decades to come. (For more on how Iger runs Disney, please see Fortune‘s May feature story.) But the deal is something of a coming full circle for Hollywood. George Lucas and his long-time licensing chief Howard Roffman more or less invented the playbook that major media companies, Disney chief among them, now depend on.
When Roffman joined Lucasfilm in 1980, the firm had produced the first Star Wars, a mega-hit, but not much else. “In the beginning, nobody knew what we had,” he told me earlier this year. “In the first year or two, nobody could say ‘franchise,'” he said of the buzzword currently favored by studio executives. Roffman, who became the company’s chief operating officer in the mid-1980s and would head its licensing division for 25 years, says Lucasfilm was almost exclusively focused on finishing the original trilogy in 1983. During the late 1980s, the company produced a Saturday morning cartoon, but Star Wars’ retail presence was nonexistent.
Then, in 1991, Roffman convinced Lucas to publish the first Star Wars-themed novel. It became a New York Times best-seller and stayed on the list for sixteen weeks. By 1994, the long-term plan had come into focus: Lucas began working on another three films and Roffman plotted a course that included VHS editions, a theatrical re-release, and retail partnerships all building up to another round of box office releases. They were creating the commercial blueprint Hollywood has now almost entirely adopted.
Lucasfilm became a money machine. “Star Wars” films have grossed a modest-sounding $4.6 billion globally, according the company. But total retail sales — everything from action figures and Halloween costumes to video games — have topped a staggering $25 billion. And according to NPD data, it has been the top toy brand for boys during six of the last seven years. “Lucas created the summer movie season aimed at the youth market,” argues Hollywood.com analyst Paul Dergarabedian. (Lucasfilm referred follow-up inquiries to its press release announcing the deal.)
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Under Iger, Disney seems to have perfected the formula. This year’s “Avengers,” which brought together the cast of various Marvel comic movies, shows the extent to which this is true. The film has been a phenomenal success on its own, bringing in over $200 million in domestic box office ticket sales during its first weekend, topping the previous record set by “Harry Potter and the Deathly Hallows Part 2.” More importantly, it is the capstone of a long-term, Lucas-style rollout which began in 2003 with the first “Hulk” movie. The six films since, including the likes of “Iron Man” and “Thor,” have grossed over $2.5 billion total worldwide. That does not include toys, video games and other merchandise.
On a Tuesday conference call, the company’s executives began mapping out Lucasfilm’s future. Disney will, for one, make more “Star Wars” movies. Following one slated for release in 2015, the company said “more feature films [are] expected to continue the ‘Star Wars’ saga and grow the franchise well into the future.” It will also find ways to use “Star Wars” throughout its businesses, including theme parks, consumer products, television and so on. “I’ve always believed that ‘Star Wars’ could live beyond me, and I thought it was important to set up the transition during my lifetime,” George Lucas said in a statement. “I’m confident ‘Star Wars’ will certainly live on and flourish for many generations to come.”
There are plenty of unanswered questions, many of which are sure to light up chat rooms on the Internet. One thing is for sure: Disney is getting much more than meets the eye.