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Walt Disney buys Lucasfilm

November 06, 2012  | Subscribers Only

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Walt Disney has agreed to buy Lucasfilm for $4.05bn, roughly split half in cash and half in stock to the owner George Lucas, issuing around 40m shares and making Lucas a two per cent shareholder in Disney.  Deal includes Lucasfilm's Star Wars franchise and related merchandise business, and Lucasfilm subsidiaries Industrial Light & Magic and Skywalker Sound, as well as the rights to the Indiana Jones franchise. 

George Lucas will remain as a creative consultant but will not be involved with the production of the movies. Recently appointed chair of Lucasfilm, Kathleen Kennedy, will remain in charge of the brand, reporting to studio head Alan Horn. 

The deal is explicitly driven by the Star Wars franchise, which Disney aims to continue with a first (seventh) film due in 2015 (Episode VII) and two more planned titles with further potential projects every two or three years. Disney will also explore a Star Wars TV series, for its Disney XD channel. 

The move by Disney comes as a surprise, but discussions began last year and reportedly Lucasfilms was not offered to other parties. Disney already has a relationship with Star Wars through its theme parks, but up until now the films have all been distributed by Fox-and have ranked among the highest-grossing titles for Fox. In 2011, approximately 25 per cent of Lucasfilm's revenue came from movie business and a further 25 per cent from merchandising. The remaining half came from video games and the post-production business. Lucasfilm also owns the Indiana Jones franchise, but this was not factored into the value of the acquisition; neither were the post-production activities of Lucasfilm. The move echoes Disney's acquisition of Marvel for $4.2bn in 2009 and its acquisition of Pixar Animation in 2006 for $7.4bn, and thus underlines that Disney's strategy is moving towards acquiring recognised brands as well as developing them in-house.

Star Wars is, of course, a particularly strong franchise and it's one that George Lucas always insisted was aimed at a younger audience; and as such, it is a great fit for Disney and its core customer focus. 

The long-awaited confirmation that the Star Wars franchise will run to at least another three full-length features-representing the last of the three trilogies in the fictional sci-fi saga-will no doubt be warmly welcomed by the fans of the franchise. George Lucas had not planned to do any more Star Wars films, but Disney felt the brand has further to run especially once combined with the marketing and cross-platform exploitation potential of the films in Disney's hands. The last three Star Wars titles grossed around $2.5bn at the US and global box office at the time of release (from 1999 to 2005), and this would be worth more now with the expansion of international markets. 

With Star Wars in hand, Disney becomes an even bigger force in driving 3D. Lucasfilms have already committed to converting the Star Wars trilogy from 2D-to-3D: A Phantom Menace has already been converted to 3D and released theatrically and released to 3D home video viewers-although the film is currently exclusively bundled on Blu-ray Disc 3D (BD3D) with Panasonic 3D BD players in the US. The two other films from the first trilogy are due in 2013 and 2014, while the original trilogy (or second trilogy by episode order) is scheduled for 3D re-release in 2015, 2016 and 2017. Converting the six-film franchise to 3D is a major undertaking, but one that will be no doubt benefit from the backing of Disney-which has proven to be a major driving force behind modern digital 3D. Notably, however, all media distribution rights of the original 1977 Star Wars movie are exclusively owned by 20th Century Fox.  

On the flipside, when it comes to UltraViolet, the video industry's other major initiative, that Disney has acquired the rights to the Star Wars franchise may be a potential sticking point, as Disney is not a member of the UltraViolet industry consortium, instead having opted to develop its own digital locker, the Disney Treasure Chest

From the games perspective, this acquisition brings together two companies that have something in common: both Disney and LucasArts have conducted high-profile attempts to enter the console market as publishers with in-house development teams, founding studios and apportioning significant investment that failed to perform. Examples include Fracture and a big-budget attempt to reboot the Indiana Jones franchise from LucasArts, as well as highly-praised driving games Pure and Split Second from Disney that sold poorly at retail. The situation was not an out-and-out bust, however: Disney's Epic Mickey found sufficient traction to earn a forthcoming multi-platform sequel, while LucasArts' Star Wars: The Force Unleashed sired both a follow-up and moderate reception. 

As a single games entity, Disney and LucasArts are due to focus on more casual markets for non-dedicated games devices. Disney already has a strong track record in online gaming for PC, via virtual worlds such as Club Penguin, Toontown Online and Pixie Hollow. The company also has a solid presence in PC social network gaming, thanks to its $763m purchase of Playdom in July 2010; however, its role as a Facebook game operator remains relatively underwhelming, due to its minimal leveraging of Disney's sizeable trove of world-class IP. The March 2012 release of Marvel: Avengers Alliance was a welcome and worthwhile attempt to employ some of that IP, but there's still much room for Playdom to explore the possibilities of franchise-driven content, especially when achieving differentiation in such a commoditised market as Facebook gaming is becoming key. With the acquisition of LucasArts, the opportunity for implementing such games has grown even further, but the fact still stands that games based on strong external properties remain a little-explored facet of the Facebook gaming landscape.

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