George Lucas turned his merchandising deal and sequel to Star Wars into $5 billion sale to disney.

How George Lucas Turned $150,000 to $5 Billion Making Star Wars

In 1973, George Lucas was struggling to make it in Hollywood. His first major directorial debut was in 1971’s THT1138 that starred Robert Duvall in a futuristic world.

His next movie in 1973 was American Graffiti. American Graffiti was a monster hit. It became one of the most profitable movies of all time earning $200 million with a budget of $775,000.

Lucas got the idea for Star Wars in 1971. He described the concept of the movie as “Western set in space,” called The Star Wars. He worked on the Star Wars script over 2 years as his debt kept growing and his career not making any major strides.

He pitched the movie to Alan Ladd, Jr., an executive at Fox Studios who loved his previous film, American Graffiti, but didn’t understand the “Star Wars” concept. No other executive at Fox believed in the movie other than Ladd. Ladd secured the deal for Lucas to direct Star Wars in 1976 for a budget of $11 million.

When Lucas directed American Graffiti, he only earned $150,000. His managers asked him to ask for a salary increase to $500,000.

At the time, the premise was that nobody took sci-fi movies seriously. Fox Studios offered Lucas a salary bump of $500,000 to direct Star Wars. He turned down this salary bump to keep his salary to $150,000. What he wanted was:

  1. Retain all merchandising rights to Star Wars.
  2. Retain the rights to any sequels.

Fox Studios thought this was a great deal because they had lost a lot of money to the merchandising of Doctor Dolittle. They weren’t enthusiastic about going back into the merchandising business as it wasn’t meaningful revenue. For the sequel, Fox didn’t even even bother with it because they didn’t believe in the movie making the money the first time around.

Star Wars has grown to be one of the most successful movie franchises ever. It has grown to be a merchandising behemoth and loved by everyone who is a fan of the film. 

Lucas had a vision in seeing that if the film did exceptionally well, the people who loved his film would want to exist in the world of that film. They would want to purchase the products and experiences that were an extension of his films.  

Star Wars has generated more than $32 billion in merchandising sales. The merchandising sales increase by $1.5 billion per year. The estimated $42 billion generated by the Star Wars franchise trumps the Harry Potter’s $25 billion in revenue earned by the books, movies, and toys. James Bond is estimated to only do $8 billion.

Disney ended up purchasing the entire Star Wars franchise outright in 2012 for $4 billion.

George Lucas essentially traded $350,000 for more than $5 billion. This is a great lesson in believing in your idea no matter how insignificant it might appear to others. Hold on to your vision and never waiver. 

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