2. The Walt Disney Company is the largest media
conglomerate in the world in terms of revenue and with
profits in 2012 exceeding $5.7
On 30th October 2012 the global giant, The Walt Disney
Company acquired 100% of the iconic company Lucasfilm
Ltd, in a stock and cash transaction.
Lucas film was 100% owned by Lucasfilm Chairman and
Founder, George Lucas and was responsible for the Star
Wars franchise
3. The Deal and Strategy
The transaction value was $4.05 billion, Disney paid
approximately half in cash and issued 40 million shares at
closing. Lucas Film is now a 100% owned subsidiary of The Walt
Disney Company.
Disney’s strategy is to acquire companies that could be described
as mini-Disney’s such as Pixar and Marvel—reservoirs of
franchise-worthy characters that can drive all of Disney’s
businesses, from movies and television shows to theme
parks, toys, and beyond.
Lucasfilm, Star Wars merchandise and videogames earned $1.5
billion in revenue in 2012 alone more than other high-profile
movie franchises, including Superman, Spider-Man and Pirates of
the Caribbean.
4. Walt Disney Highest Grossing films:
Disney Studios are famous for both live action and animated feature films, with a
staggering top 10 most profitable films as follows:
1. The Avengers (2012) – Worldwide gross: $1.51 billion
2. Pirates of the Caribbean: Dead Man’s Chest (2006) – Worldwide gross: $1.07 billion
3. Pirates of the Caribbean: On Stranger Tides (2011) – Worldwide gross: $1.04 billion
4. Alice in Wonderland (2010) – Worldwide gross: $1.02 billion
5. Pirates of the Caribbean: At World’s End (2007) – Worldwide gross: $960 million
6. The Lion King (1994) – Worldwide gross: $952 million
7. The Chronicles of Narnia: The Lion, the Witch, and the Wardrobe (2005),Worldwide gross: $745m
8. Pirates of the Caribbean (2003) – Worldwide gross: $654 million
9. Tangled (2010) – Worldwide gross: $591 million
10. Cars 2 (2011) – Worldwide gross: $560 million
http://www.therichest.com/business/top-10-most-profitable-walt-disney-movies/
5. Lucasfilms highest grossing films and value of the franchise:
Lucas’ first Star Wars film grossed $1.17 billion at the box office, becoming the second-highestgrossing film of all time behind 1939′s Gone With the Wind. At an original cost of only 13 million
1977 dollars, that makes Star Wars an incredible steal for studio 20th Century Fox.
StarWars box office:
Star Wars’ initial release was followed by another five blockbuster films and a mini-industry of tapes
and DVDs, toys, videogames and books. Taken together over its 30 years of cultural dominance,
the Star Wars franchise has earned more than $22 billion.
(http://en.wikipedia.org/wiki/Lucasfilm)
6. Deal benefits for Disney:
The acquisition combines two highly compatible family entertainment
brands, and strengthens the long-standing beneficial relationship between
them that already includes successful integration of Star Wars content
into Disney theme parks in Anaheim, Orlando, Paris and Tokyo.
The Lucasfilm acquisition follows Disney's very successful acquisitions of
Pixar and Marvel, which demonstrated the company's unique ability to
fully develop and expand the financial potential of high quality creative
content with compelling characters and storytelling through the
application of innovative technology and multiplatform distribution on a
truly global basis to create maximum value.
Adding Lucasfilm to Disney's portfolio of world class brands significantly
enhances the company's ability to serve consumers with a broad variety
of the world's highest-quality content and to create additional long-term
value for our shareholders.
7. Is Disney as an Oligopoly?
Disney can afford to take huge risks and can influence market conditions
- although there is debate as to whether Disney is a true Oligopoly there
is no doubt it has huge power in the market.
The television and high speed internet industry is mostly an oligopoly of
seven companies: The Walt Disney Company, CBS
Corporation, Viacom, Comcast, Hearst Corporation, Time Warner,
and News Corporation.
The Walt Disney Company has 5 primary units: Parks and Resorts, Disney
Consumer Products, Media Networks, Disney Interactive and at the heart
The Walt Disney Studios whose features and holding include; Disney
studios itself, Disney Music, Disney Theatrical Group, Pixar animation,
Marvel Entertainment and Lucasfilm.
8. Key issues with this ownership
Creative freedom: George Lucas has a patchy history dealing with big studios; On THX1138 Warner Bros took the movie out of his hands and recut it before it was released
in 1971. Universal did the same thing with his next film, American Graffiti. In 1971
on Star Wars Episode IV: A New Hope. He turned down a $500,000 fee to direct his
own script, instead asking for $50,000 and the rights to all sequels. Post the sale of
Lucasfilm to Disney George Lucas will no longer have the control over the franchise
he created – which may lead to conflict if a creative vision can not be agreed upon.
Detrimental to creative free market:
Creates a Market where only the strong and commercial can compete, because they
control all areas from production to distribution, it means Disney is partly vertically
integrated.
Is Disney too powerful:
Now that Disney are very powerful, they are able to control the social messages and
role models for children and possibly even set public agenda.
9. Overview: ownership practices work within the film industry
Disney and Lucasfilm are a perfect example of how big business needs to
diversify and not only control the creation of content but it’s distribution
This is also an example of how in a crowded market big film/media
business look to own brands that can break through and can allow the
sale of a huge amount of merchandising
The money behind a loved brand like Disney corporation or indeed
Lucasfilm is astronomical and demonstrates the premium business place
on brand recognition as well as quality of output
Disney is a floated business, which means it’s shares are traded on the
stock market. This allows it to acquire other business’ for
‘share/stocks/paper’ as well as for cash – so it can leverage it position to
grow without depending on bank debt to do this.
10. Funding and the film industry
There are many different ways in which the film industry funds projects for example;
Development funds in the UK from the likes of Film 4 or BBC Films often get a project
going, the Film Distributors or Studios may invest in a project, Film Distributors are
willing to make an ‘advance’ payment into the film budget so they get the rights to take
the film to cinemas or release it on DVD - they will charge a commission for this service
which in success could be worth much more than the advance. Private and Corporate
investors often contribute to film budgets – they will both be looking for a better return
on their cash than could be got by putting money in the bank – as with the film
distributor they will be looking to firstly get their money back and then secondly taking
a ‘cut of the back end’ in success this can be deliver them a very good return on their
investment. Kids films in particular will often feature characters that allow for a huge
amount of toys/merchandising that can be very lucrative if the film is a success, so Toy
manufacturers will often give ‘advances’ to producers to ensure they are able to make
the toys and take a cut of the profits from their sales. Other product related funding
can come from product placement and sponsorship – the former sees products given air
time with in the film itself for a fee and the latter is about the association of a product
with a film which doesn’t necessary feature in the film itself.
11. Development funds
Sponsorship
£
Eg. From Broadcasters like Film 4,
BBC Films, A+E Indie films or
Studios help producers get a
script and an idea going - in
return for a back end postion and
credit
Finance
and
funding
Will often invest and make an
advance investment into a film to
get the distribution rights – to
screen films and exploit on DVD
£
Film Distributors
Private investment
The
Film
£
Corporate investment
Investors get their money from thea
split of the box office, DVD,
merchandising and any other
exploitation of a film – they more
successful the more their % is worth
Private investment
Eg. Individuals (or funds) invest in a film by
helping to fund it’s production in return for a
cut of the projected profits that in success
could give them a good return on the
investement
£
Eg. Where companies (eg. Pension
funds) invest in films/media funds
in the hope that a hit movie will
deliver big profits
Product Placement
The value returns to the product/brand
when the film is released – they do not
receive money from the film but
publicity for their product/sales
Corporate investment
£
Individuals who invest in a film by
helping to fund it’s production in return
for a cut of the projected profits that in
success could give them a good return
on the investment
The more successful a film the more publicity a
sponsors product gets to justify the money they
contributed to the film/producers
Eg. Pepsi will give the producers
money in return for screen time
of their product – this can go
towards the cost of the
production
£
Product Placement
Box office
DVD’s
Merchandising
Eg. Where companies (eg. Pension funds)
invest in films/media funds in the hope
that a hit movie will deliver big profits –
so they get a high return on their
investment
£
Sponsorship
The association of a brand with a film
can be valuable
Film Distributors
Merchandising/Toy makers
A big toy company like Hasbros may invest in
the film so they can produce toys or books of
characters in films
Development funds
A Film4 will recoup their development
funding from the profits of the film
Merchandising/Toy makers
Eg. A big toy company like Hasbros may invest in the film so
they can produce toys or books of characters in films
12. Product placement:
This is an advertising technique used by
companies to subtly promote their product
through a non-traditional advertising technique,
usually through appearances in film, television or
other media. Product placements are often
initiated through an agreement between a
product manufacturer and the media company in
which the media company receives economic
benefit. A company will often pay a fee to have
their product used, displayed or significantly
featured in a movie. For example in the film
‘Back to the future’, the brand of drink Pepsi is
used almost throughout the entire film, but very
subtly.
13. Sponsorship:
Sponsorship is a cash and/or in-kind fee paid to a property (typically in
sports, arts, entertainment or causes) in return for access to the exploitable
commercial potential associated with that property. Sponsorship is a great
way to access new customers and gain a higher awareness level for your
brand. An example of this is clearly seen on the popular show, XFactor, because just before the adverts begin this short sponsor comes
up, to remind the viewers about the brand and gain some awareness.
Another example of sponsorship can be seen with ‘The Avengers’ movie, as
they were sponsored by the car brand Acura, which can bee seen when
Robert Downey Jr. drives into the premier of the film in an Acura car, giving
the brand recognition and publicity.
14. Development funds:
Getting a film into development is the first hurdle for producers and in order to finance a film
they will usually need a script - but it costs money to commission a script from a writer and
time to source the idea hence the need for support and partners at this stage in the process.
Organisations like Film 4 are set up to support the UK film industry and have a role to help
develop new projects rather than fully fund lots of films – so they will work with producers to
find and option ideas from books or to commission original treatments and then scripts from
writers. Once a script is written the process of finding backing can start, this is usually pieced
together from a number or sources which is why at the end of some films you often see lots of
co-producers and credits.
Producers might sell rights to different territories to raise funds – the first port of call is often
the film distributor who is responsible for the theatrical distribution (i.e.. getting it into the
cinema e.g. Global or Lionsgate) they will often pay an advance to the producer for these rights.
Alongside this there are numerous funds that are set up either by investors (such as Ingenious)
who represent people/companies who want to invest in this sector or there are schemes that
offer incentives for film makers and can be backed by the likes of the BFI or indeed the National
lottery to support the film and creative community in the UK.
Producers also look to film in places around the world where there are tax credits – this is where
the local government offers to pay the producers a percentage of their budget for bringing the
business to their territory (and helping this becomes a strong part of their economy) , for US
producers Canada offers fantastic tax credits and for the UK Ireland also offers incentives to
producers to film there.
The fact is film production is a risky business and many more films fail to make a profit than
becomes hits and make everyone involved rich!