Lucasfilm Ltd. LLC is an American film and television production company based in the Letterman Digital Arts Center in San Francisco, California. The company became known from the Star Wars and Indiana Jones series, as well as the pioneering creation of special effects. Founder of the film company Lukasfilm is the filmmaker George Lukas. The company’s original headquarters in 1971 were in San Rafael, California. Then, in 2005, the company’s activities were transferred to San Francisco.
Walt Disney company, based in Walt Disney Studios in Burbank, California, is an American multinational media and entertainment group. The current Walt Disney Company emerged from the merger of the original Walt Disney Company and Capital Cities / ABC Inc. on January 5, 1996. The original Walt Disney Company, when it was founded on 16 October 1923 by the Walt brothers Roy Disney, became the leader of the American animation industry. Since then it has diversified into the production of live action movies, television and theme parks. On April 5, 1946 in Albany, New York, the company advanced the market of the much larger ABC network. The new company has expanded its existing activities in the field of theater, radio, music, publishing and online media.
Bob Iger, the current CEO of Walt Disney Company, was the President of ABC, Inc. when it purchased from the first one. On January 24, 2006, Disney, led by Bob Iger, will buy Pixar for $ 7.4 billion. Additionally, in August 2009, Iger led Disney into another major market. Marvel Entertainment, along with its other assets, went to Disney company property for $ 4 billion.
These purchases have been commented by a longtime senior executive of The Walt Disney Company ”Animation has always been the heart and soul of The Walt Disney Company, and it is wonderful to see Bob Iger and the company embraces that heritage by bringing the outstanding animation talent of the Pixar team back into the fold. This clearly solidifies The Walt Disney Company’s position as the dominant leader in motion picture animation and we applaud and support Bob Iger’s vision” (Roy E. Disney, 2010).
Following the acquisitions of Pixar and Marvel entertainment, Bob Iger still thinking about the company’s future. Between some choices to invest, such as Lego and Warner Bros., finally choose to expand The Walt Disney Company by acquisition of Lucasfilm Company. In December 2012 the second one was sold to Walt Disney against $ 2.2 billion in cash and $ 1,855 billion in stock. The Walt Disney Company, with the purchase of the Lucasfilm, has inspired something that eventually established the company in the fantasy Industry.
Disney’s Purchase of Lucasfilm
Somebody could ask: ”Why would George Lucas sell his company, and why would Disney buy it? With a first reading the answer is obvious: George Lucas see an opportunity to gain money in return for his company. A company that he established and developed on his own perhaps as far as he can. On the other side Disney see the opportunity to acquire the rights of one of the most important companies in the last 30 years. However, as evidenced, the agreement signed between the two companies was the result of a lengthy and complex negotiation.
As we have seen above, Bob Iger, CEO of Walt Disney Company since 2005, proceeded to the acquisition of Pixar and Marvel entertainment. After these movements, Disney has a character tank that can build franchises. The company produces movies, TV shows, also has theme parks and sell toys. Bob Iger, making his self-assessment, thought that he should do more to ensure the company’s creative competitive future. Rejecting Lego and Warner Bros., which involves big projects like Harry Potter, for a variety of reasons such as the cost of acquiring them or the fact that Harry Potter franchises are not self-sustainable for a large period of time, Bob Iger thought to discuss a merger with George Lucas, the sole share-holder of Lucasfilm. He had already been defined his target, since he was sure that Lucasfilm would make a perfect sense as an asset. On this base, he starts the preparation of negotiations on his side. The Bob’s initial advantage was that he had been worked with George Lucas before, so, this fact helped him to make his counterpart-assessment. He already knew that he strives for creative independence, but he was sure that for George Lucas would be difficult to sell his company. He would be concerned about keeping the Star Wars universe secure. Knowing his opponent’s values, Bob tries to evaluate possible sources of conflict. The first estimation was that George might even expect to get some part of the synergies. Something absolutely right, if we take account that Lucasfilm has the Star Wars and revitalizing the characters already boosts the mark-up a lot. On the other hand, he would have to make sure that anything he agreed with his opponent would be fair, because his company would take all the risks.
After the first stage of negotiations preparation, Bob Iger tried to build the trust with his opponent. Approaches the negotiations personally and invites George Lucas to discuss. He chooses a neutral territory in an attempt to keep the conversation non-committal and in confidence.
After a brief discussion in which Bob showed respect in his opponent’s work, while trying to build relationships of trust in this way, he asked him whether he would sell his company to Walt Disney Company. The question didn’t require a serious commitment, so the conversation continued in the same way. George Lucas explained that he was thinking about retiring, admitting something Bob already knew, that the restructuring of Lucasfilm has been aimed at making the company less dependent on his leadership and vision. But, as he said, he had still some projects to attend to, such as the Clone Wars. He also had some other ideas about movies he might put into production. Finally, George said that he was not ready to sell his company, but he committed to talk when he would be ready to do so.
The period from May 2011 through June 2012, George Lucas work on his best alternative to a negotiation agreement and the reservation point. Making an opponent assessment, George took into account that when Disney bought Pixar, they let the management be. They didn’t meddle and that was brilliant in his opinion. Pixar had all the creative freedom to output great stories. In this direction he considers that it is possible he may be able to retain some influence over the Star Wars universe if he sells Lucasfilm to Disney. Something else that still concerns George Lucas is who will run his company after his retirement. This self-assessment process shows that George Lucas is more emotionally invested in this transition rather than in the direction of money. Utilizing his network, George Lucas, contact Kathleen Kennedy, co-founder of Amblin Entertainment alongside Steven Spielberg, and one of Hollywood’s leading producer. Kennedy is one of more influential woman in Hollywood and Luca’s decades-long friend. He announced her that he is going to retire and that he is making some changes around the management to make Lucasfilm less dependent on him as a head of company. Its purpose was to maintain the CEO’s title and serve as co-chairman for one more year. But he was looking for someone to co-chair with him. This person would ultimately become the head of company. Recognizing Kennedy’s value, proposed her to take up these duties. Lucas knows that getting a new manager on board, especially a high-class producer like Kennedy, who was behind movies like Schindler’s List, and the Indiana Jones franchise, make his target more achievable, and greatly improves his best alternative to a negotiation agreement. Now, other companies will be more interested in buying out Lucasfilm, and he has leverage with Disney, his primary choice. Kennedy accepted the proposal and agreed with Lucas to build the company up so it functions without him. They also agreed to do the new episodes VII, VIII and IX. Kennedy and Lucas invited Michael Arndt, an Oscar-winning screenwriter, and Lawrence Kasdan as an advisor, to write episode VII. This was another move in the direction of improving the company. Improving the value of Lucasfilm for Disney, but also for other players interested in buying the company, increases the power at the negotiating table.
Lucasfilm is a solid brand with a standalone value, but a possible merger with Disney would bring Star Wars back to life, maybe Indiana Jones too, and then the synergies would be enormous. Disney could generate hundreds of millions in consumer product licensing alone, and they will go for a global reach with all retail. The movie franchise will be not just a single cash-flow source anymore. It will be something bigger and a lot more money will through it. All these answer to the question ” what will Walt Disney get out of this transition”. Lucas knowing all of them, wants to have both control over and part of the synergies from the new Star Wars production. Lucas considers he should be a decision-maker in the new releases, and in the revenues, because it’s not just Lucasfilm he will sign over, but it’s his legacy. Besides, he already had ideas about the final Star Wars trilogy. With his team, they could expand the franchise, and market it. ? possible sale of Lucasfilm would enable Disney to use Luca’s top-class digital effects studios. It would add a ton of value, because Disney would, without doubt, use them to help Pixar production and live-action releases like the Marvel movies.
In June 2012 the negotiations begin in earnest. Lucas contacts Bob Iger, ready to revisit the topic of selling Lucasfilm. George Lucas considers that Star Wars will always be linked with him, independently if he owns the company or not. As Iger recalled, ”George said to me once that when he dies, everybody will say Star Wars creator, George Lucas”. George Lucas proposes the best course of action in his opinion. He is willing to hand over the entire company, including Industrial Light & Magic, Skywalker Sound, and the rights to the Indiana Jones franchise, but he would retain complete control over Star Wars. With his team have been growing the franchise for a long time and it is natural that they have the knowledge how to license, market, and produce Star Wars materials. George Lucas presents the business plan to Iger, which, however, require the correct creation of the new films to achieves its goals. For this reason, Lucas suggests to keep the old structure intact.
On the other hand, Bob Iger is willing and happy to offer Lucas some autonomy and to consider his valuation. Regarding autonomy, Disney have done this before with Marvel and Pixar. These studios retain their autonomy, but in a limited way. In Lucasfilm case, they could do something similar. Disney, through its CEO, shows Lucas the respect to his work. They want to build on his vision for Star Wars, not replace or erase it. In an effort to create value for his company, Bob Iger, confesses Lucas that they would like to have him on as an advisor, a consultant. In this way Iger seeks Luca’s stay on board but in limited capacity, and a long-term collaboration and overseeing of the project is on the table. Both sides want the same thing, the universe to remain credible for the fans. In Disney, they are certainly willing to keep Lucasfilm intact, management, creative team, with Kathleen at the helm, but Bob Iger makes clear, that if Disney owns Lucasfilm, it will be Disney, not Lucasfilm, that has final say over all things Star Wars.
George Lucas informs Iger that they have developed the story treatment for the final Star Wars trilogy and that he could relinquish some of the control, if Disney agrees to take them and use them as the basis for any future films. This was something that needed to be added to the acquisition agreement.
This meeting was completed in a good climate while during this there was reciprocity on the concessions. In the context of this long-term relationship, both parties should stand more to gain by integrating their issues. Bob Iger was happy, but he needed to see some scripts before the final agreement.
In September 2012, Bob Iger and a limited number of people, sign a nondisclosure agreement of treatments. Luca’s meeting with Carrie Fisher, Mark Hamill, and Harrison Ford had been preceded in August, in an effort to persuade them to revisit their characters in future movies.