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A marketing Force
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May 19, 1999: 10:18 p.m. ET
George Lucas revolutionized movie merchandising via 'Star Wars' licensing
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NEW YORK (CNNfn) - A short time ago, in a retail establishment not so far away, the scene was played out over and over again. Millions of people crowd retail stores, feeling a force compelling them to own a memento of a movie-going -- and merchandising -- machine.
We're talking "Star Wars," a phenomenon so encompassing and sustained that it even caught the man behind it off guard.
"I was very lucky that we were able to create something that stimulated the imagination of young people," said George Lucas, director of the original "Star Wars" movie and creator of a cultural phenomenon. "They wanted to take that home with them and create their own universe and create their own worlds."
Twenty years after the quirky space serial first launched into our popular culture, the sales of things Jedi and Empire continue to move at warp speed.
No surprise -- Hasbro is reportedly paying a half billion dollars for the right to sell toys. Pepsi reportedly will put characters on eight billion cola cans -- part of the company's $2 billion investment. And don't forget the deals with Pizza Hut, Frito Lay, Taco Bell, Lego, Nintendo and Sony.
This is the largest merchandising campaign in Hollywood history, created by its savviest businessman, said biographer Dale Pollock, author of Skywalking: The Life and Films of George Lucas. "I think he's unparalleled in the history of entertainment in terms of a financial genius who's figured out how to construct an empire and how to keep it funded," Pollock said. "I don't know anybody else who has done that."
A long time ago ...
These days, we may take it all for granted: It's hard to avoid movie merchandising. But it wasn't always this way.
Like "Star Wars," our story begins a long time ago, in a galaxy of stars far, far away -- Hollywood in the early 1970s.
"The Godfather" was the blockbuster hit, making $81 million. But studios frequently produced pictures like "Chinatown," good movies that made modest sums and sold not a single action figure -- or Happy Meal.
Meanwhile, a 30-year-old USC film school grad was shopping a story around town he called "The Star Wars," a tale of good battling evil in space. But even before he finished the script, Lucas was thinking about much more than celluloid and special effects. He was thinking franchise.
"I think his concept of merchandising was not a full-blown one like we ended up with," said Charles Lippincott, "Star Wars'" first merchandising czar, hired by Lucas in 1975. "He said, 'You know, I'd really like to have some merchandise for "Star Wars" and maybe we could open three shops -- one in New York, one in Los Angeles, and one in San Francisco and sell the stuff right out of our stores.' So that was his concept of merchandising at the time."
Lucas wanted to own it all, even though in the 1970s directors rarely had a piece of the action. They usually negotiated a fee for their work and signed on the dotted line.
This was true even for the hottest directors in town like "The Godfather'"s Francis Ford Coppola. Those were the stakes when Lucas went to cut his deal with 20th Century Fox's Alan Ladd Jr. and William Immerman.
"I got a buzz from Laddie. "Can you come down? We've got a problem." And there was Gary Kurtz and George Lucas and Tom Pollock and Laddie sitting there," Immerman recalled. "And I said, 'What's the problem?'"
Immerman ran Fox's day-to-day affairs along with Ladd and David Raphel. Their problem was Lucas, his producer, and his lawyer were demanding ownership of "Star Wars" sequels and merchandising rights.
"My initial reaction as a studio executive is, 'We've never done it before for anybody. Why should we do it ... for George?'" Immerman said.
Cash for control
It took four years for Lucas to get his way. He took control of the franchise in exchange for giving up a fat check for directing "Star Wars." At the time, Fox executives thought they were getting the better end of the deal because merchandising had never amounted to anything.
But Lucas's decision would turn out to be one of the most brilliant business moves in Hollywood history, although even he didn't fully appreciate that at the time.
"I got the licensing rights because I figured they wouldn't promote the film and if I got posters and T-shirts and things out there with the name of the film on them it would help promote the movie," Lucas said. "So, you know, the whole idea that licensing was a revenue stream didn't really occur to anybody, including me."
While merchandising man Lippincott signed those deals, Lucas was working on the movie, shooting in Tunisia and Great Britain. He was over budget and behind schedule. But Lippincott's merchandise was selling well, especially the comic books at newsstands in Los Angeles.
"I went down on Monday and I noticed four tattered copies of the first issue of the comic book on the ground," Lippincott said. "And I said, 'Larry, is that all you got in of the Star Wars comics?' He said, 'No, that's what I got left.'"
Despite the good omen, "Star Wars" opened in just 32 theaters on Memorial Day weekend in 1977. But it was huge hit, to everyone's surprise.
"I was hoping it would, you know, gross somewhere around $30 million or something, which is what most science fiction films -- the best ones -- had done," Lucas said.
But "Star Wars" ended up making an unprecedented $323 million and charted the course for other films to follow, said UCLA film historian Robert Rosen.
"It was the first of those movies that generated this whole food chain of merchandising and objects and sequels and re-releases and what-have-you over a period of time. It wasn't the one movie by itself but everything around," Rosen said.
Merchandise more than movies
"Star Wars" action figures and other merchandise have raked in twice as much money as the movies worldwide -- $4.5 billion.
"It changed the entire nature of Hollywood. I think Hollywood has become a big event movie business now," Pollock said.
By 1998, Hollywood brought in $15 billion through entertainment and character licensing. "Godzilla" alone had more than 200 companies hawking about 3,000 different items. Disney licensed 17,000 products for "101 Dalmations."
It's such big business that without a merchandising campaign these days, some movie scripts would never make it to the big screen. The marketing is sometimes bigger than the movie itself.
"I think you see McDonald's and Taco Bell and Coca-Cola and Pepsi doing merchandising on almost every major film now. And this has really again become part of the American corporate culture. That no major movie event comes out without several merchandising partners," Pollock said. "And it all started with 'Star Wars.'"
So when Lucas announced he would create three new "Star Wars" movies, the biggest names in Corporate America gave him some $3 billion to be part of it.
"I think the mountain comes to Mohammed. They all come up to Lucas. They all had to traipse up there to try to get permission to license. And you know, it's like you have your audience with the king," Pollock said. "He will tell them when they can release their products, how they can advertise them, how much they can reveal. He controls how much they pay, what the royalty is. And he controls what kind of stores the merchandise goes into."
And much of this money could have been 20th Century Fox's, were it not for the savvy deal Lucas struck in the 1970s. It's cost the studio billions and counting.
Degree of control
"It's pretty much unprecedented in film -- or I think in general entertainment history," Pollock said. "There's never been a showman like George Lucas who had this degree of control over his creative intellectual property."
How much control? Consider Jar Jar Binks, a character in "Phantom Menace." Lucas gave the U.S. Patent Office a list of items that may bear Jar Jar's likeness -- hundreds of them, from height charts and subway tokens to candied fruits and three bean salads. But could it be too much of a good thing?
Lucas has set the bar very high for himself and for others who emulate his business model. Reviews of "Phantom Menace" have been lukewarm and in recent years, many movie merchandising efforts have fallen short. It's making retailers a little nervous.
"If this does not work as a licensing campaign, the industry could be fundamentally changed," said Rob Felton, senior editor of License! Magazine. "If this does not work as a licensing and merchandising campaign, they are going to be a lot more skeptical going into the next one. And the level of skepticism may reach such a point that event marketing for licensing and merchandising is no longer viable at retail because retailers don't want to take the risk."
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