The business deals that have turned Star Wars into a money making empire

Star Wars: Brought to you by good business decisions.

When The Force Awakens, the seventh installment in the nearly four decade long Star Wars series, tears through the little hearts of budding jedis and jedettes (yeah, we made that up) at Christmas time, there’s a realistic chance it’ll break any billion-dollar domestic box office records out there.

A month before the December 18 opening, presales had already reached $50 million and opening weekend is projected to earn $185 million, give or take, which puts it 2.5 times over Avatar’s $77 million, according to a research note by FBR & Co. analyst Barton Crockett.

“Our base assumption remains that Force Awakens has $730 million domestic box office, ranking just behind Avatar’s all-time record of $761 million,” he wrote. “Big December movies typically earn nearly five times opening weekend in total domestic box, suggesting Force could fetch nearly $1 billion in domestic box over its total run.”


Not bad, for a franchise spun out by Hollywood weirdo George Lucas in 1973 using a $150,000 gamble from 20th Century Fox.

In honor of this incredibly successful franchise now worth over $28 billion, The DealRoom has drawn up a financial history of the franchise and where it’s going.

The genius (and genus) of George

In 1973, Lucas set out to write a space opera that would resonate with a generation disinterested in sci-fi. With an $11 million budget, considered low at the time, Lucas and co. produced the film, readying it for a May 1977 release. The film earned $1.5 million through its opening weekend. Within six months, A New Hope had replaced Jaws as the highest-earning film, pulling in $220 million during its theatrical run. As worldwide interest piqued, revenue grew, and over the past four decades of proliferation and the special edition release in 1997, the film has earned $775 million.

Twentieth Century Fox made a killing with stocks jumping from $6 a share in June 1976 to nearly $27 after the release. The company’s revenue followed suit, climbing from $195 million in 1976 to $301 million in 1977.

As for Lucas, his genius was revealed when he waived a portion of his directing salary in exchange for 40 per cent of merchandising rights. Today Mr. Lucas is worth $3.6 billion.

Second and, er, third times a charm

With newly flush pockets, Lucas aimed to finance The Empire Strikes Back himself with $33 million from loans and the previous film’s earnings. With an initial production budget of $18 million, filming began in March of 1979. By July, that budget had grown to $25 million. But it paid off, since within three months of its May 1980 release, Lucas had recovered his $33 million investment and doled out $5 million in bonuses to employees. The film grossed $10.8 million on opening weekend and $209 million during its 1980 run. With its own special edition and re-releases over the years, the sequel has reached over $538 million in box office revenue.

Three years later, Lucas was ready to do it again, releasing Return of the Jedi in May 1983. With a $32.5 million budget, the film did only marginally better, earning the franchise $572.1 million in box office sales over its lifetime, but proved to be a fitting conclusion for a solid franchise.

As for Lucas, with a full bank account, he spent the majority of the next twenty years producing and writing, continuously scrapping his plans to produce the prequels to the existing Star Wars trilogy.

The Dark Side starts here

In 1983, Lucas’s wife Marcia stripped him of $50 million in a less-than-amicable divorce settlement, but it wouldn’t be until 1994 that the director sat down and got back to Star Wars. The plan: produce the initial prequels, this time centered on Anakin Skywalker, his cute li’l bowl cut, and how he’d eventually become a mass murderer. Light stuff.

With a budget of $115 million, the first of the prequels, The Phantom Menace, hit theaters in May 1999. Lucasfilm spent $20 million on advertising and tethered the brand to promo deals with companies like Hasbro, Lego and PepsiCo.

Unsurprisingly, the much-anticipated prequel broke Jurassic Park’s opening day record, earning more than $28 million, and became the fastest film to gross $100 million. It took five days. This was almost enough to pay for all that lost time, given that, according to John Challenger, chief executive at Chicago-based work-issues consulting firm Challenger, Gray & Christmas Inc., an estimated 2.2 million full-time employees skipped work to see the premiere, amounting to around $293 million in lost productivity.

Between the $924 million in box office sales and the 2012 re-release in 3D, The Phantom Menace has since cracked the worldwide billion-dollar film mark.

Within three years, Lucas was over the kick-back for writing a character like Jar Jar Binks, and Lucasfilm had released Star Wars Episode II: Attack of the Clones. Echoing the $115 million budget, and in spite of its own criticism, the second prequel earned over $310 million in North American box offices and $338 million overseas, netting it a worldwide total of more than $649 million – a financial success in its own right.

But the third prequel, and bridge between the initial three films and the prequels, Revenge of the Sith, proved to be more successful despite its marginally smaller budget of $113 million. Released in May 2005 in 115 countries, worldwide sales climbed to $860 million, giving it top honors as the most financially successful film of 2005. In North America alone, the film pocketed $16.9 million from midnight screenings and earned a record-shattering $50 million on opening day.

A New Hope

In 2012, Lucas cashed in on the franchise, handing it over to Disney in a $4 billion deal.

Since the acquisition, Disney stock has more than doubled, outpacing a growing market by an additional 50 percent. In September, retailers also tapped into the swelling anticipation for the December release, dubbing September 4 Force Friday. According to analysts, toy sales between Force Friday and the end of the year should reach $2 billion, and at around $1 billion wholesale, and an estimated 15 per cent royalty rate for Disney, that’s another $150 million.

But if there’s any takeaway from this forty-year dynasty of the moneymaking behemoth, the money is in the residuals. Between 1978 and 1985, toy company Kenner made 90 Figures, sold 300 million piece,s and earned $3.8 billion. Hasbro one-upped them, producing 15 collections between 1995 and 2011, and earning $5.5 billion.

Even if The Force Awakens doesn’t meet expectations, all Disney has to do is take Lucas’s lead and play the long game – it’ll pay off in lightsabers.

Andrew Seale

Andrew Seale is a Toronto-based business writer who contributes frequently to Yahoo Canada Finance, The Globe and Mail's Report on Business and The Toronto Star.