'Star Wars' heading to the Magic Kingdom: Disney snags Lucasfilm

The Hollywood giant is paying $4.05 billion for George Lucas' wholly owned media empire. And Disney said the seventh "Star Wars" film will be released in 2015, with Episodes 8 and 9 to follow.

Daniel Terdiman Former Senior Writer / News
Daniel Terdiman is a senior writer at CNET News covering Twitter, Net culture, and everything in between.
Daniel Terdiman
4 min read
Disney is buying Lucasfilm for $4.05 billion. Lucasfilm

In a shocking announcement linking two of the best-known names in the movie business, Disney said today that it is buying Lucasfilm, maker of the "Star Wars" films, for $4.05 billion.

In addition to bringing the "Star Wars" franchise under the Disney umbrella, the deal also means that Disney will now be the studio behind "Star Wars: Episode 7," which it said is slated to be released in 2015. Disney also said that it will subsequently release Episodes 8 and 9, and then release a new "Star Wars" film every two or three years. In fact, said Disney CFO Jay Rasulo in a conference call about the deal, Episode 7 is likely "to take the place of our tent pole (film) in 2015."

The merger closes a significant historical loop. Pixar, which Disney bought from Steve Jobs in 2006 for $7.4 billion, was originally started by George Lucas. But after he and his handpicked team were unable to make a go of their effects computing business, Lucas sold it to Jobs for a mere $5 million. Now, after all these years, Lucasfilm is being reunited with Pixar.

Disney CEO Bob Iger and Lucasfilm CEO George Lucas signing the deal that merged the two entertainment giants. Disney

According to "The Pixar Touch," by David Price, Lucas was close to unloading his unwanted Pixar division to a partnership of Philips Electronics and General Motors subsidiary Electronic Data Systems in 1985. And if it wasn't for a boardroom dispute initiated by EDS founder and GM board member Ross Perot over a $5.2 billion buyout of Hughes Aircraft -- and the subsequent souring of GM on anything Perot and EDS were involved in -- that deal would have gone through and it's likely we'd have never heard of anything like "Toy Story" or "Finding Nemo."

Disneyfilm: Decades of movie spectacle, together at last (pictures)

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But that deal did get scuttled, and shortly thereafter, Jobs came along to save the day. With a $5 million check in hand, the late Apple founder -- at that time in exile from the company he co-founded with Steve Wozniak -- bought Pixar on January 30, 1986, setting in motion a string of events that would generate some of the best-loved films of the late 20th century. And his faith in the fledgling animation house was rewarded with the 2006 acquisition by Disney of Pixar for $7.4 billion. Jobs' initial $5 million purchase price, plus the additional $5 million in capital he invested in his new baby, made him Disney's largest shareholder and instantly one of the most powerful people in Hollywood.

Now, though Jobs has died, his family maintains that Disney stock. And Lucas will be joining as a major Disney stockholder, given that half of the $4.05 billion he is being paid is in stock.

Under the terms of the deal, Lucasfilm appears poised to maintain its brand name. And Kathleen Kennedy, the new co-chairman of Lucasfilm, will become its president when it becomes part of Disney. Kennedy will report to Walt Disney Studios Chairman Alan Horn.

Kennedy, who joined Lucasfilm as co-chairman last June upon Lucas' official retirement, is considered a big shot in Hollywood. She has received seven Academy Award nominations and has been a producer on mega-franchises like Steven Spielberg's "Indiana Jones" and "Jurassic Park" series, as well as many other hits including "War Horse," "The Curious Case of Benjamin Button," "Seabiscuit." She ado worked alongside major filmmakers like Peter Jackson, Martin Scorsese, Barry Levinson, Robert Zemeckis, David Fincher, and Clint Eastwood.

In an e-mail to CNET, Lucasfilm Director of Corporate Communications Miles Perkins lauded the deal. "People are excited by all the possibilities that Disney brings to Lucasfilm and are thrilled that we are going into production on new 'Star Wars' films," Perkins said. "They are also excited that Kathleen Kennedy is leading the company and putting the creative team together for 'Star Wars.' She is awesome."

In the investors' call today, Rasulo touted the fact that Disney will be getting the rights to both the "Star Wars" and "Indiana Jones" franchises. He also noted that Disney will now own both Industrial Light & Magic and Skywalker Sound, as well as other "cutting-edge production technologies" that are currently part of Lucasfilm.

Indeed, because of the deal, Disney will now own the pre-eminent animation studio (Pixar), as well as the pre-eminent visual effects and sound effects studios (ILM and Skywalker Sound). And Disney CEO Bob Iger said Disney plans to let ILM continue its work. "They do great work," Iger said. "They do great work for multiple studios. We don't see any reason why that should change at all. [It's] a business we intend to stay in."

But while Lucasfilm has made films beyond the "Star Wars" and "Indiana Jones" franchises, Rasulo said that the deal is mainly focused, at least on the film side of things, on the production of the next few "Star Wars" episodes.

Naturally, though, the deal also means that "Star Wars" is going to play a very large role in Disney's parks and resorts business. Though the company didn't say whether it planned to open a dedicated "Star Wars" park, it's safe to assume that the franchise will some day get a very visible physical location at or near a Disneyland or Disney World resort.

In the conference call, Rasulo likened the financial benefit of the deal to that of its 2009 acquisition of Marvel, not least because of the many different characters Marvel owned, and the many films made about those characters -- from Spider-Man to the X-Men to the Hulk.

At the same time, Disney sees that both Lucasfilm and Marvel generate significant amounts of money with their consumer-products business. In fact, Rasulo said, in 2012, Lucasfilm made $215 million with that business, about the same as Marvel in 2009, the year Disney bought the comic-book powerhouse. "We expect that business to grow substantially, and profitably, for years," Rasulo said.