Disney Buys LucasFilm, New ‘Star Wars’ Planned

$4.05 billion deal for George Lucas' company also includes 'Indiana Jones,' ILM

George Lucas’ “Star Wars” may be one of Hollywood’s biggest franchises, having earned $4.4 billion globally from six movies, and billions more from TV shows, videogames, theme park rides and merchandise. But if you ask Disney, the sci-fi saga is worth a lot more than that.

The Mouse House shocked the biz Tuesday in unveiling its agreement to buy Lucasfilm Ltd. from Lucas, the company’s sole owner, for $4.05 billion in cash and stock. Kathleen Kennedy, who was tapped by Lucas as his successor at Lucasfilm in June, will serve as prexy of Lucasfilm, overseeing all aspects of the “Star Wars” franchise, reporting to Disney Studios chairman Alan Horn.

Plans for the release of a new “Star Wars” pic in 2015 stole much of the spotlight in the acquisition announcement. But the deal also gives Disney the “Indiana Jones” franchise, and other films in development at Lucasfilm, along with vfx shop Industrial Light & Magic, audio post house Skywalker Sound, and videogame developer LucasArts.

Those post-production facilities, based in and around San Francisco, will continue to operate as they are, according to Walt Disney Co. chairman and CEO Robert Iger. But “Star Wars” is about to get a major reboot.

Disney plans to bow a new “Star Wars” film every two to three years, beginning with “Star Wars: Episode VII,” in 2015 — the same year it has skedded “The Avengers” sequel. First film is in early development, Iger said, but “we have a lengthy treatment that we feel really good about.”

Iger stressed that the Lucasfilm purchase would not spur the Mouse to suddenly increase its investment in making more films. The studio arm will continue to produce four to six live action titles a year, with a “Star Wars” pic taking one of those slots every second or third year. The rest of the sked will continue to be made up of one to two Marvel movies, a Pixar pic and Walt Disney Animation toon.

“We determined we’d be better off as a company to release a sequel to ‘Star Wars’ than not yet determined films,” Iger said.

At the same time, Disney will expand “Star Wars'” presence at the company’s theme parks where “there’s room to grow what we’ve already got,” Iger said, and on TV, where the exec sees kids cabler Disney XD as “being a great home” for “Star Wars” shows. “We really like ‘Star Wars” potential on TV,” he said. “Star Wars: The Clone Wars” currently airs on Time Warner’s Cartoon Network.

Iger called “Star Wars” a “sustainable source of high-quality content with global appeal,” given its cast of 17,000 characters. “It’s incredibly well suited for new business models and digital platforms,” an area that Disney has aggressively pursued with Marvel, he said

Before that, however, Disney will take over control of Lucasfilm’s consumer products biz to grow the amount of coin “Star Wars” generates from licensed merchandise. That includes everything from apparel to games. Lucasfilm is rolling out a co-branded “Angry Birds” game with Rovio on Nov. 8.

“Star Wars” is expected to collect $215 million from licensed product sales this year — impressive for a 35-year-old franchise without a pic in theaters. It earned $550 million in 2005, when “Star Wars: Episode III — Revenge of the Sith” was released.

“With renewed film releases and support on Disney (TV) stations, that will grow for years to come,” said Disney CFO Jay Rasulo during the conference call.

Marvel also was earning around $200 million from products tied to its superheroes when Disney purchased the company, and has since turned the comicbook company into a major moneymaker for the Mouse House from merchandise sales.

It’s done so primarily by exploiting the characters overseas where Marvel didn’t have much distribution at retail. Lucasfilm, surprisingly, is in the same position, with less than 40% of its sales coming from international territories.

“Marvel was ahead of where Lucasfilm is today, internationally,” Rasulo said.

Iger and Rasulo stressed in their call with Wall Street analysts and media on Tuesday that they were eager to recoup their investment in Lucasfilm as quickly as possible, and comparisons to Marvel are unavoidable.

“We’re feeling very good the way Marvel turned out three years hence,” Rasulo said.

Adding “Star Wars” to its portfolio will “give us a great footprint in consumer products globally,” Iger said. “We already had a good one … but this is one of the best branded and most valuable entertainment properties of all time. It’s a great opportunity to run it and grow it.”

While much of the “Star Wars” business has recently focused on toys and TV shows, there is “pent up demand” for more movies, Iger said.

Because Lucasfilm operated as a private company, financial results aren’t readily available.

But Disney disclosed that a quarter of its business was generated from its film and studio-based businesses, while another quarter came from consumer products and games made up less than 20%.

“Lucasfilm reflects the extraordinary passion, vision, and storytelling of its founder, George Lucas,” Iger said. “This transaction combines a world-class portfolio of content including ‘Star Wars,’ one of the greatest family entertainment franchises of all time, with Disney’s unique and unparalleled creativity across multiple platforms, businesses, and markets to generate sustained growth and drive significant long-term value.”

Disney has had a relationship with Lucasfilm since 1987, when the first “Star Tours” theme park ride opened at Disneyland. Since then, the ride has opened at the Mouse House’s other parks in Orlando, Paris and Tokyo, and the companies have paired up on a variety of consumer products that have integrated Mickey Mouse and friends into the “Star Wars” world. Lucasfilm also licensed its “Indiana Jones” ride to the Disney parks, and ABC had been developing a live action “Star Wars” TV show.

As for future “Indiana Jones” sequels, Disney now must work with Paramount to free up that title. The Mouse will handle distribution of future “Star Wars” titles, though Fox may receive some form of credit through its longstanding distrib pact for the previous pics, in the same way Par still has an association with some Marvel titles.

For his part, Lucas made it clear that the sale is the next step in his retirement plans.

“For the past 35 years, one of my greatest pleasures has been to see ‘Star Wars’ passed from one generation to the next,” Lucas said. “It’s now time for me to pass ‘Star Wars’ on to a new generation of filmmakers. 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.”

The appointment of Kennedy, co-producer of the “Indiana Jones” franchise and a co-founder of Steven Spielberg’s Amblin Entertainment, has been crucial to that process. Kennedy will work with all of Disney’s divisions to expand the “Star Wars” brand and will be an exec producer on the new movies. Lucas will act as a creative consultant on the pics.

“I’m confident that with Lucasfilm under the leadership of Kathleen Kennedy, and having a new home within the Disney organization, ‘Star Wars’ will certainly live on and flourish for many generations to come,” Lucas added. “Disney’s reach and experience give Lucasfilm the opportunity to blaze new trails in film, television, interactive media, theme parks, live entertainment, and consumer products.”

The final pricetag Disney is paying for Lucasfilm is based on its Oct. 26 stock price. Disney will pay for half of the acquisition in cash and 40 million shares of stock to Lucas, worth $2 billion, as part of the deal.

Disney and Lucasfilm’s board of directors already have approved the transaction.

George Lucas’ $4 bil graceful exit
Industrial Light & Magic goes to Disney
Disney chief’s internal memo to staff
VIDEO: Lucas, Iger discuss acquisition

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