In a shocking announcement linking two of the best known names in the movie business, Disney revealed today that it is buying Lucasfilm, maker of the Star Wars films, for US$4.05 billion.
Disney is buying Lucasfilm for US$4.05 billion.
In addition to bringing the Star Wars franchise under the Disney umbrella, the deal also means that Disney will now be the studio behind Star Wars: Episode 7, which it said is slated to be released in 2015. Disney also said that it will subsequently release Episodes 8 and 9, and then release a new Star Wars film every two or three years. In fact, Disney CFO Jay Rasulo in a conference call about the deal said that Episode 7 is likely "to take the place of our tent pole [film] in 2015".
The merger closes a significant historical loop. Pixar, which Disney bought from Steve Jobs in 2006 for US$7.4 billion, was originally started by George Lucas. But after he and his hand-picked team were unable to make a go of their effects computing business, Lucas sold it to Jobs for a mere US$5 million. Now, after all these years, Lucasfilm is being reunited with Pixar.
Disney CEO Bob Iger and Lucasfilm CEO George Lucas signing the deal that has merged the two entertainment giants.
According to The Pixar Touch, by David Price, Lucas was close to unloading his unwanted Pixar division to a partnership of Philips Electronics and General Motors (GM) subsidiary Electronic Data Systems (EDS) in 1985. And if it wasn't for a boardroom dispute initiated by EDS founder and GM board member Ross Perot over a US$5.2 billion buyout of Hughes Aircraft — and the subsequent souring of GM on anything Perot and EDS were involved in — that deal would have gone through, and it's likely we'd have never heard of anything like "Toy Story" or "Finding Nemo".
But that deal did get scuttled, and shortly thereafter, Jobs came along to save the day. With a US$5 million check in hand, the late Apple founder — at that time in exile from the company he co-founded with Steve Wozniak — bought Pixar on 30 January 30 1986, setting in motion a string of events that would generate some of the best-loved films of the late 20th century. And his faith in the fledgling animation house was rewarded with the 2006 acquisition of Pixar by Disney for US$7.4 billion. Jobs' initial US$5 million purchase price, plus the additional US$5 million in capital he invested in his new baby, made him Disney's largest shareholder and instantly one of the most powerful people in Hollywood.
And now Lucas will be joining as a major Disney stockholder, given that half of the US$4.05 billion is being paid in stock.
Under the terms of the deal, Lucasfilm appears poised to maintain its brand name. And Kathleen Kennedy, the new co-chairman of Lucasfilm, will become its president when it becomes part of Disney. Kennedy will report to Walt Disney Studios chairman Alan Horn.
In an email to CNET, Lucasfilm director of corporate communications Miles Perkins lauded the deal. "People are excited by all the possibilities that Disney brings to Lucasfilm, and are thrilled that we are going into production on new Star Wars films," Perkins said. "They are also excited that Kathleen Kennedy is leading the company and putting the creative team together for Star Wars. She is awesome."
In the investors' call today, Rasulo touted the fact that Disney will be getting the rights to both the Star Wars and Indiana Jones franchises. He also noted that Disney will now own both Industrial Light & Magic (ILM) and Skywalker Sound, as well as other "cutting edge production technologies" that are currently part of Lucasfilm.
Indeed, because of the deal, Disney will now own the pre-eminent animation studio Pixar, as well as the pre-eminent visual effects and sound effects studios ILM and Skywalker Sound. And Disney CEO Bob Iger said that Disney plans to let ILM continue its work. "They do great work," Iger said. "They do great work for multiple studios. We don't see any reason why that should change at all. [It's] a business we intend to stay in."
But while Lucasfilm has made films beyond the Star Wars and Indiana Jones franchises, Rasulo said that the deal is mainly focused, at least on the film side of things, on the production of the next few Star Wars episodes.
Naturally, though, the deal also means that Star Wars is going to play a very large role in Disney's parks and resorts business. Although the company did not say whether it planned to open a dedicated Star Wars park, it's safe to assume that the franchise will some day get a very visible physical location at or near a Disneyland or Disney World resort.
In the conference call, Rasulo likened the financial benefit of the deal to that of its 2009 acquisition of Marvel, not least because of the many different characters Marvel owned, and the many films made about those characters — from Spider Man and X-Men to the Hulk.
At the same time, Disney sees that both Lucasfilm and Marvel generate significant amounts of money with their consumer products business. In fact, Rasulo said that in 2012, Lucasfilm made US$215 million with its consumer products business, about the same as Marvel in 2009, the year Disney bought the comic book powerhouse. "We expect that business to grow substantially and profitably for years," Rasulo said.