Disney’s $4 Billion Steal

The force awakens, indeed.

Bob Iger is on one hell of a run. Since he became CEO of Disney in 2005, shareholder returns are more than 3x that of the S&P 500. Last year was the company’s fourth consecutive year of record revenues. The numbers go on. But what’s arguably more impressive is right there on the surface.

Since Iger took over, Disney has made a number of key acquisitions. The three biggest are arguably the three most important deals any company has done over that span. In 2006, Disney bought Pixar for $7.4 billion. In 2009, Disney bought Marvel for $4.3 billion. And in 2012, Disney bought Lucasfilm for $4 billion.

As we saw a couple days ago at Disney’s D23 Expo, the last deal is the focal point for the company for the foreseeable future. And it’s looking like it may be the steal of the bunch.

Everyone knows that Disney’s first Star Wars, The Force Awakens, is set to hit theaters this December. What’s unclear is just how well it will do at the box office. The last Star Wars film, Revenge of the Sith, came out a decade ago and made $380 million domestically. A huge amount, but $50 million less than 1999's The Phantom Menace pulled in.

Worse, when adjusted for inflation, Revenge of the Sith, was only the fifth biggest Star Wars film of the six released. It only barely beats the second most recent in the franchise, 2002's Attack of the Clones. So the data sure makes it seem like interest in Star Wars, while still massive, is perhaps waning. Hence, a $4 billion price tag for parent Lucasfilm.

What the data doesn’t take into account, however, is just how awful those last three Star Wars films were. Each has its moments of breaking free from “painful” into “mediocre” — but not many of them. All of this is made worse, of course, by just how good the original trilogy is/was.

Anyway, assuming J.J. Abrams can make an Episode VII that is even just consistent in mediocrity, it seems pretty clear that these new Star Wars films are going to make a shit ton of money. And the film business is a very different place than it was even a decade ago. IMAX is a key driver padding the numbers. And, of course, the worldwide receipts not only matter just as much, they matter far more — and the Star Wars franchise has always done very well overseas.

Revenge of the Sith, for all its meh-ness, managed to pull in nearly $850 million worldwide in 2005. The Phantom Menace is the leader of the pack (not counting for inflation) at just north of $1 billion worldwide. Yes, only one Star Wars film has ever crossed the $1 billion box office receipt threshold — it’s a number that nearly all of the Marvel movies flirt with these days. Hell, all of the Transformers movies now easily cross that mark.

Based on nothing other than internet reaction, pent-up demand, and the fact that this new Star Wars cannot possibly be as bad as the last three, I’m going to go not-so-far out on a limb and predict that The Force Awakens makes over $2 billion worldwide at the box office. Yes, that would put it third all time behind the James Cameron tentpoles Titanic and Avatar, and ahead of both Avengers films. But I can just see it happening.

And if it does, that means that Disney will have brought in half of its $4 billion investment in just one film. Two more sequels are locked and loaded. As are spin-offs, various other tie-ins, etc. And, of course, merchandising.

And we haven’t even mentioned the theme parks yet. That was the key part of the announcement two days ago: Disney is building massive Star Wars-themed lands in both Disney World and Disneyland. I’m telling you, this $4 billion deal is going to seem like an absolute steal in relative short order.

Yes, you can argue that only Disney, with all its various businesses and expertise, could unlock all this latent value from Star Wars (not to mention, down the road, Indiana Jones, and various other Lucasfilm properties). But whereas it took a little while for the amount paid for Pixar and Marvel to seem like the absolute no-brainers that they are/were for Disney, Star Wars is looking like it’s going to pay off, nearly literally, overnight.

Also, don’t look now, but we’re coming up on three years since the Lucasfilm deal. Just about that time to find that next steal…