There's no one in Hollywood history quite like George Lucas. He parlayed the reputation he earned with THX 1138 and, more importantly, American Graffiti, into Star Wars: Episode IV – A New Hope in 1977. The result? One of the most ambitious films ever made, spawning one of the biggest multimedia franchises. This is all quite remarkable, considering Lucas literally couldn't afford to make any mistakes with Star Wars, as the budget was so tight.
Lucas became a billionaire thanks to a galaxy far, far away, but what you might not know is that, yes, a significant portion of his empire was built on the films themselves. However, a much larger portion of the director's bank account was filled by merchandising generated by the Star Wars saga. Frankly, the difference is enormous.
As explained in a February 2012 article in The Hollywood Reporter, 20th Century Fox, which had initially been reluctant to produce Star Wars, allowed Lucas to retain licensing and merchandising rights in exchange for a $500,000 reduction in his director's salary. The resulting multi-billion-dollar deal will serve as a lesson for every Hollywood studio going forward.
The fact is, Fox had serious doubts about the success of Star Wars. However, Lucas's space opera became a cultural event the likes of which the world had never seen. Star Wars literally caused a crisis on Halloween 1977, as there simply weren't enough Star Wars costumes produced to meet demand. This was doubly true for Kenner's Star Wars action figures at the time. But that was just the tip of the iceberg, as merchandise related to the franchise has generated billions of dollars over the decades.
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George Lucas made his fortune from Star Wars merchandise, not the films.
A photo of the interior of the Jabba's Sail Barge toy set from Hasbro Labs — Hasbro
A 2012 THR article explained that Star Wars was still "consistently among the top five most popular licensed toy brands" at the time, generating over $3 billion in retail sales in 2011. That's just one year. Over the franchise's lifetime, licensed merchandise had sold $20 billion by that point, compared to $4.4 billion from theatrical ticket sales and $3.8 billion from home viewing products like VHS, DVD, and so on.
From releasing Star Wars special editions in 1997 and turning generations' nostalgia into gold, to developing The Clone Wars for Cartoon Network, George Lucas made the most of his opportunities. In turn, he earned untold billions and helped transform Lucasfilm into a powerhouse. Meanwhile, Fox lost a significant portion of those billions. $500,000 in 1977 would have been, in essence, a license to print money.
Howard Roffman, former head of licensing at Lucasfilm, who joined the company in 1986, explained that Lucas had the final say in all decisions regarding Star Wars and related products throughout his ownership of the company. According to Roffman:
«"We don't release anything that there isn't consumer demand for. George doesn't want to harm Star Wars' reputation in the retail market in any way.".
When the prequel trilogy Star Wars: Episode I – The Phantom Menace launched in 1999, it spawned a new generation of Star Wars fans—those who would later spend billions on toy lightsabers, LEGO sets, and more. Lucas built his empire and his legacy largely thanks to these fans and the money he earned from merchandise sales.
Disney's purchase of Lucasfilm was driven by more than just the success of the Star Wars films.
BB-8 on Jakku in Star Wars: The Force Awakens — Lucasfilm
Just a few months after that THR article was published, it was announced that Disney had acquired Lucasfilm in October 2012, with Star Wars Episode VII slated for release in 2015. It ultimately arrived as Star Wars: The Force Awakens. The purchase price? $4 billion. Remarkably, that sum represents a relatively small fraction of what George Lucas earned during the franchise's entire existence before the sale.
But the fact is that Lucasfilm's sale price was, yes, based on the idea of creating new films in the franchise. This included spin-offs like the billion-dollar hit Rogue One: A Star Wars Story. But it was also largely based on the fact that selling merchandise set in a galaxy far, far away was then, and remains, incredibly profitable. Disney currently makes a fortune annually from books, comics, toys, T-shirts, theme parks, and more thanks to Star Wars. The films are only part of the equation. For Disney, those $4 billion were well spent.
It's no coincidence that the deal Lucas struck almost 50 years ago is so often remembered, almost like legend. There are events in Hollywood history that have such a profound impact that they become stories of triumph for one side and warnings for the other. For Lucas, it was an example of how a director truly circumvented the studio system, allowing himself to create Star Wars his own way, and his own way alone, until the day he sold Lucasfilm.
In retrospect, it was one of the worst business decisions in Fox's history. No one else in such a powerful position ever made such a mistake.
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Read the original article on SlashFilm.