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How George Lucas made the best film deal ever

In 1973, George Lucas pitched Fox a “space western” and the studio offered $500k. Lucas took a lower $150k fee in exchange for certain rights.

The film was Star Wars and that negotiation has netted him $10B. It's considered the best Hollywood film deal ever.

Here’s the story🧵 image

Lucas graduated from USC in 1967 and co-founded production firm American Zoetrope w/ Francis Ford Coppola.

In 1971, he released his first film: THX 1138, a dystopian sci-fi film that was an extension of his film school project. (One year later, Coppola released The Godfather). image

With one film under his belt, Lucas launched his own production firm (LucasFilms) and secured a deal for his next 2 projects:

◻️American Graffiti, a coming-of-age tale based on his youth in 1960s California ◻️A 9-part epic space western adventure (yes, it was a 9-part pitch!) image

Universal ultimately made American Graffiti, paying Lucas $150k to write, direct and produce the film.

Before American Graffiti came out in 1973, Universal had the option to produce the “9-part space adventure”...

...but it passed on the project. image

In hindsight, Universal guffed but Lucas’ ask was huge.

Inspired by serialized space westerns like Buck Rogers and Flash Gordon, he was set on a multi-film commitment.

Sci-fi was also a shaky genre: 1959’s “Plan 9 From Outer Space” by Ed Wood was considered the worst film ever. image

American Graffiti went on to be a smash. It made $140m on a $777k budget.

Based on this success, Lucas commanded a higher directing fee. Fox offered him $500k to do his “space western.”

Lucas didn’t want the raise. He was fine staying at a $150k fee but wanted sequel rights. image

Very few sequels were made then and the deal looked great to Fox producer Alan Ladd Jr.

For Lucas, it was never about the money. His OG vision for the space epic was multiple films. The sequel rights afforded him full creative control to follow through on his vision. image

Star Wars came out in 1977 and made $775m on a budget of $11m. It became the biggest movie ever.

Lucas’ negotiation paid off but Fox still had merchandising rights. It was not considered an important revenue stream at the time. But 40m+ Star Wars toys sold in 1978 (worth $100m). image

With Empire Strikes Back in the works, Lucas negotiated hard for merchandising incl. TV, music and toys.

Flush from Star Wars, Lucas self-financed the sequel so Fox had no choice b/c he could walk. Fox kept distribution and video rentals for 7yrs, but the rest reverted to Lucas. image

Fully in control of his Star Wars empire, Lucas would go on to make 5 more franchise films (or 2 more if you want to pretend the prequels don't exist).

Combined, the 6 films made $4.3B: image

Of course, the box office was only part of the haul.

After the first Star Wars, Lucas owned 100% of the franchise and over the next 35 years sold: ◻️$12B worth of toys ◻️$4B of DVDs and home video ◻️$3B of video games ◻️$2B of books / comics image

By the end of the 2000s, Lucas was planning to complete the final 3 films of his “9-part” space epic.

It would be a decade-long commitment, though. Nearing his 70s, Lucas was ready to move on and — in full control of Star Wars — sold LucasFilms to Disney for $4B in 2012. image

It was a 50-50 cash/stock deal. The latter was 37m shares at a price of ~$50 (~2% of $DIS).

He was the 2nd largest DIS shareholder: Steve Jobs got 137m shares (7% of DIS) when Disney bought Pixar in 2006 for $7.4B.

Jobs passed in 2011 and Laurene Powell Jobs sold down to 4%. image

It’s believed that Lucas has kept most of the Disney shares, which has since tripled in value (making his $DIS stake ~$6B).

Add it all up and Lucas’ net worth is $10B, making that 1973 Star Wars salary deferment of $350k ($500k minus $150k) the greatest Hollywood deal ever. image

If you enjoyed that, I write threads breaking down tech and business 1-2x a week.

Def follow @TrungTPhan to catch them in your feed.

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A Netflix user will browse the app for 90 seconds and leave if they find nothing.

Thumbnail artwork is actually NFLX's most effective lever to influence a viewer's choice. A user will look at one for only 1.8 seconds, so NFLX spends huge to optimize them.

Here's a breakdown🧵 image

Also, check out my Saturday Substack for interesting nuggets on business, tech, media and memes: https://trungphan.substack.com/

Sources

IP Leaders: https://blog.ipleaders.in/george-lucas-make-fortune-star-wars/

Inc: https://www.inc.com/jeff-haden/43-years-ago-star-wars-creator-george-lucas-made-a-4-billion-decision-even-though-it-had-nothing-to-do-with-money.html

Celeb Net Worth: https://www.celebritynetworth.com/articles/billionaire-news/george-lucas-disney-stock/

BI:https://www.businessinsider.com/how-star-wars-made-george-lucas-a-billionaire-2015-12

Deadline: https://deadline.com/2015/12/star-wars-franchise-george-lucas-historic-rights-deal-tom-pollock-1201669419/

The other Hollywood deal that may be in the running for "greatest ever" is the Brocolli family and the Bond series.

Tom Pollock was Lucas' lawyer for the Star Wars deal. Here's his take: image

The original Stars Wars treatment was too much like a space opera. The version we know now was heavily influenced by Joseph Campbell's "Hero's Journey".

Here's a scene-by-scene breakdown of the film following Campbell's template:

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You've def heard of "The Hero's Journey", the narrative structure dating back to Homer's Odyssey in ~7th century BC.

A great way to learn the framework is comparing scene-by-scene images from 2 modern classics of the story type: "Star Wars" and "The Matrix". #TheMatrix

THREAD🧵 image

One more note: Steve Jobs bought Pixar from George Lucas back in 1986 for $5m before selling to Disney for $7.4B in 2006.

Here is the original check from Pixar’s “founding documents” archive: image

16 Feb 2022

How Robert Downey Jr made one of the great comebacks

When Iron Man came out in 2008, Robert Downey Jr. was not a marquee star.

He was rebuilding his career and paid a below market rate of $500k.

But the deal terms set him up for one of the great acting comebacks ever and he's earned $450m+ as Tony Stark.

Here’s the story🧵 image

The Marvel Cinematic Universe (MCU) we know today was a long shot in the early 2000s.

Marvel was a public co. coming off bankruptcy in 1996 and had sold rights to its best IP (Spiderman, X-Men, Fantastic 4)

From 2000-07, films based on the IP minted cash but Marvel made little: image

In the early-90s, Downey Jr. was one of the brightest young stars in Hollywood, receiving a Best Actor nomination for "Charlie Chaplin" in 1992 (@ 27yrs old).

In the 2nd half of the decade, though, he dealt with drug addition, arrests and jail stints before going clean in 2001. image

While Downey Jr. resuscitated his career, Marvel bet everything to produce its own content.

In 2005, it signed a 8yr/$525m financing deal with Merrill Lynch to create films around Marvel's remaining "B-list" characters (with the IP as collateral for Merrill): image

Marvel had plans for a full Avengers film, but needed a 1st win.

It wanted to do a character that never had live-action: they chose Iron Man but couldn't even use Merrill cash for it.

Why? New Line Cinema owned the rights that only reverted back after the Merrill deal. image

In 2007, Marvel went all in on Iron Man w/ a budget of $140m (for reference, its operating cash flow in 2006 was $158m).

Tony Stark was not a traditional muscle-bound super hero and needed a specific type of actor to convey both swagger and vulnerability. image

Downey Jr. had acting chops but wasn't an action lead.

Director Jon Favreau wanted him and producer Kevin Feige backed it, calling the decision the "biggest risk" for the MCU.

Crucially, Downey Jr. bet on himself: he took a low base ($500k) in exchange for a % of box office. image

Iron Man (2008)

It was a smash hit and took in $585m globally. Downey Jr. was perfect in the role and made $2m with backend (it would only get bigger from here).

Marvel's ability to make its own smash film attracted a major fish: Disney bought Marvel for $4B in August 2009. image

Iron Man 2 (2010)

The sequel was released a few months after Disney's acquisition. With the success of the first film, Downey Jr. negotiated himself a huge pay raise: $10m base + backend.

The film earned $623m at the box office and Downey Jr's total haul was ~$12m. image

The Avengers (2012)

This film is when Downey Jr.'s take started getting absurd.

Marvel had released films for Hulk, Thor and Cpt. America in the lead-up. And the ensemble project made $1.5B.

Downey Jr's bet on himself paid off: he made $50m ($10m base + $40m backend). image

Iron Man 3 (2013)

The 3rd Iron Man film was the most lucrative. It grossed $1.2B and Downey Jr. made another $50m ($10m base + $40m backend).

Downey Jr's leverage was huge but Marvel didn't make another Iron Man film. It diversified away from him by reducing future screen time. image

Avengers 2 (2015)

The film made $1.4B and Downey notched $60m. In the lead-up to its release, Marvel made a new Thor and Cpt. America flick as well as Guardians of the Galaxy.

By raising the star of the other actors, Marvel was hoping to gain some negotiating leverage. image

Cpt. America: Civil War (2016)

Prior to this film, Chris Evans (Cpt. America) said he might quit MCU to pursue directing.

The threat of losing a leading man put Downey Jr back in driver seat. Civil War made $1.2B and -- in a reduced role -- he still made $64m ($50m + $14m). image

Spider-Man: Homecoming (2017)

This was the first Spidey flicked co-produced by Disney. To do it right, the studio brought in Iron Man for a cameo.

While Downey Jr's screen time commitment was low, it was pricey: he made ~$1m per minute of screen time ($10m total). image

Infinity War (2018) + End Game (2019)

The final two Avengers were the 19th and 22nd MCU films. It was 10+ years in the making.

Infinity Wars made $2B and End Game made $2.8B. Downey Jr's haul -- with backend -- were $75m and $130m, respectively! image

Across 9 films, Robert Downey Jr. has earned an estimated $453m from playing Iron Man.

For Marvel, he's been worth every penny. Without Downey Jr. as Tony Stark, there's no Disney deal. There's no MCU. And there aren't 27 MCU films that earned $25B+.

What a comeback. image

If you enjoyed that, I write interesting threads 1-2x a week. Def follow @TrungTPhan to catch them in your feed.

Here's another one:

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“I spend too much at Starbucks” is a legendary meme.

It's also not an accident: the coffee retailer -- worth $120B -- uses many psychological hacks in its store and menu designs to get you to drop more cash.

Here are 11 of them 🧵 >image

Also, check out my Saturday Substack for interesting nuggets on business, tech, media and s**tposting: https://trungphan.substack.com/

Sources

Hollywood Reporter: https://www.hollywoodreporter.com/movies/movie-news/robert-downey-jrs-massive-payday-tops-avengers-endgame-star-deals-1205835/

10k Marvel (2006): https://www.sec.gov/Archives/edgar/vprr/0704/07049254.pdf

Washington Post: https://www.washingtonpost.com/business/2019/04/29/robert-downey-jr-marvel-created-box-office-streak-that-few-thought-was-possible-now-they-are-doing-something-even-more-surprising/

CNN Money: https://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100034246/index.htm

CBR: https://www.cbr.com/robert-downey-jr-paid-mcu-films/amp/

Last note: Sony once had a chance to own all Marvel characters for $25m

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In 1998, Marvel offered Sony all of its heroes + villains for $25m. Sony said it only wanted Spider-Man (and paid $10m for it)

While “No Way Home” is the first pandemic-era film to make $1B, the other Marvel films grossed $13B+ for Disney.

LESSON: Always take the first offer. image

11 Feb 2022