Idea for buy hatched over a year ago amid secrecy
It’s fitting that a seventh “Star Wars” movie, a sequel to “The Avengers,” and a Pixar toon will unspool in theaters in 2015, the same year that Robert Iger is skedded to step down as chairman-CEO of the Walt Disney Co.
Iger’s legacy, when he retires, will be that he significantly boosted Disney’s bottom line by buying brand factories Lucasfilm, Marvel Entertainment and Pixar Animation Studios since taking the reins of the Mouse House from Michael Eisner in 2005.
Disney’s decision to buy Lucasfilm surprised the biz, but the first outreach from Iger to Lucasfilm chief George Lucas was made nearly 18 months ago, proving that even in the Internet age, it’s still possible to keep a secret in Hollywood.
Iger, a shrewd dealmaker, has been given much of the credit. But Kevin Mayer, exec VP of corporate strategy and business development at Disney, also gets considerable credit for brokering the $4.05 billion deal that puts “Star Wars,” “Indiana Jones” and iconic facilities like Industrial Light & Magic and Skywalker Sound in the Mouse House’s control. He is credited for leading the negotiations with Lucasfilm.
At the time, Iger told Lucas he’d heard of his retirement plans and said to let him know that if the “Star Wars” creator ever became interested in selling his company.
Lucas wasn’t ready to sell. But that changed this summer after Lucas tapped producer Kathleen Kennedy as co-chair of Lucasfilm. Over the past five months, Mayer has overseen a team to assess Lucasfilm’s holdings and financial situation and led the acquisition negotiations for Disney.
The board itself didn’t approve the final deal until this week, with the deal officially signed on Tuesday in Iger’s office. Sources said there’s been no talk of Lucas taking a seat on Disney’s board, but that isn’t being ruled out as Lucas will be a major shareholder through the cash-and-stock acquisition.
“It was amazing,” with so many people involved with the transaction, that “it didn’t get out,” one source close to the deal told Variety .
Lucas emphasized that he agreed to the sale with Disney because he admires the company and is confident that his own legacy will be in good hands. In fact, many point out that his willingness to take half of the $4.05 billion purchase price in Disney stock underscores that confidence. It was clear that Lucas was emotional about the decision when discussing it with media and while recording the videos that were shot in Iger’s office on the Burbank lot and released on YouTube by Disney. After the signing ceremony and a round of media calls, Lucas flew back to Marin County to address Lucasfilm and its employees.
One nuance to the acquisition that came to light on Wednesday is that Disney is not acquiring Lucasfilm’s substantial real estate holdings. Lucas will retain ownership of the Letterman Digital Arts Center complex in San Francisco’s Presidio; Skywalker Ranch and Big Rock Ranch in Marin County; and the new Industrial Light & Magic facility under construction in Singapore. Disney will lease all those facilities from Lucas.
Since Lucas will remain the landlord, his vast collection of vintage European movie posters will continue to adorn the walls at ILM. (The framing cost alone on the collection is said to have run to several million dollars.) Lucas also is keeping his personal papers and other archives, which includes some of the memorabilia on display at ILM.
On the “Star Wars” movies, Lucasfilm has long relied on having the resources of ILM inhouse to control vfx costs. A Lucasfilm spokesman said Kennedy will continue to have autonomy to use ILM on future “Star Wars” films. However, that doesn’t guarantee that all work will be done in San Francisco. ILM has offices in Singapore and Vancouver and has alliances with companies in Beijing and Europe. It will continue to leverage those alliances and offshore locations to keep costs down.
ILM has roughly 800 employees, including 200 in Singapore and about 100 in Vancouver.
Disney will quickly take over control of the franchise in order to get the first of many “Star Wars” films up on the bigscreen. Disney controls the “Star Wars” vault with one significant exception — the original 1977 pic, for which 20th Century Fox has distribution rights in all media in perpetuity.
Another big priority is to find ways to generate more coin from consumer products overseas, where its relationship with retailers isn’t as strong as it is in North America. Disney said Tuesday that “Star Wars” is set to earn $215 million from the sale of licensed merchandise this year — impressive for a franchise that hasn’t had a film in theaters since 2005’s “Star Wars: Episode III — Revenge of the Sith.”
Even if Disney never released another “Star Wars” film, the series would still be expected to generate at least another $1 billion from merchandise alone, according to Rick Medress, president of film valuation firm Cineval.
But Iger intends to wring far more from the property at Disney. New films, theme park rides, games and TV shows are expected to get auds, especially in foreign territories, interested in a new line of merchandise to get up to an annual $550 million or more, as when “Sith” was released.
Clearly, Iger is banking on the Force to help take Disney to new heights during his last three years at the helm. Under a succession plan outlined last year, Iger will step down as CEO on March 31, 2015, remaining chairman until he ankles entirely on June 30, 2016.
(Cynthia Littleton and Rachel Abrams contributed to this report.)