Disney Suffered $2.22 Billion Loss From Its Lucasfilm Purchase?

MoneyTree

There is no money tree at Galaxy’s Edge.

The Practical Economics blog has recently posted an article about Disney’s finances with regards to the Star Wars franchise.  He starts off the piece with noting some notables:

One of the Proprietor’s favorite procrastination outlets is listening to Star Wars YouTubers carrying on about how Disney has wrecked the franchise. Lucasfilm President Kathleen Kennedy and The Last Jedi director Rian Johnson are favorite targets.

It’s hilarious, search YouTube for Comic Artist Pro Secrets, Geeks + Gamers, and World Class BS for a great laugh.

The writer does some back-of-the-envelope logic to walk the reader through his reasoning, but his conclusion is this:

The bottom line is that Disney has to date suffered a $2.22 billion loss in 2012 US dollars from its LucasFilm purchase. Certainly not close to recovering its costs as claimed in the media article linked above.

What is also interesting is what would the movies had to have made for Disney to be within striking distance of recovering its costs. Had The Last Jedi and Solo performed as well as The Force Awakens and Rogue One (nominal film profits only), then Disney would still be down US$1.37 billion. Still some work to do but more than possible to break even or better.

To recover such a large purchase price Disney needed its early films to deliver consistently large profits. Unfortunately for Disney it hasn’t managed this.

The financial loss from Solo is well known, but this analysis makes it apparent just how badly The Last Jedi performed. While it was profitable it made far less than Disney needed from films in its flagship Star Wars trilogy. Even The Force Awakens just did barely enough.

Once again, these figures are unlikely to be accurate to the last dollar, but it’s show it’s unlikely Disney will ever recover the cost of its investment in Lucasfilm.

I’m guessing the fading toy and merchandise sales don’t help matters either.

Thanks to Odin’s Movie Blog for the tip.

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23 thoughts on “Disney Suffered $2.22 Billion Loss From Its Lucasfilm Purchase?

  1. I find it funny the dumb ass who wrote the article tries to say comic pros, geeks and gamers, and world class bullshitters were just youtubers he looked up for a laugh yet in the end all he did was show Disney lost more than they intended and haven’t recovered enough of the money they spent to say they’ve been successful.

    Liked by 3 people

    • He’s an economist. This means he can’t write for shit. Pretty sure you’re misunderinterpsterimating him. I’d lay about 7-2 he’s Fandom Menace sympathetic, i.e. he watches for a laugh ’cause it’s funny to hear Di$ney get slagged.

      Like

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  3. Amazing. Is there NO self-awareness?

    “Let’s all laugh at the people saying Disney has wrecked Star Wars, hahahahahaha.”

    “The movies needed to perform a lot better but the performance dropped off and one movie was a solid flop.”

    …. so Mr Analyst, what are your guesses for underperformance? If you’re able to spare a few lines to mock critics of Disney, surely you’re able to hazard a guess? And you can’t use “Fatigue” because you wrote yourself out of that one with “All the early movies needed to perform like TFA.”

    Like

  4. When you count the total production costs and marketing and the various percentages.This film still has a long way to go until its profitable.

    The problem is Shills think that it’s made a Billion, that it’s made a Billion. Forget about the percentages that go to various individuals and areas associated.
    Try telling the “On The Throne” shills. The ones that turn their respect and devotion into an x-rated art form (By the way Kathy I have an idea for a “Star Wars Story”) and you get blocked.

    That is why they deserve to be disenfranchised from the IP when changes begin in early 2020.
    They are going to happen.
    This is the third Star Wars production that so far looks like it’s going to underperform.
    And with the current regime that is not sustainable.

    I would like to point out that Itchy,Ethan,Jeremy,DataRacer and Jeff @ WCS have been invaluable in gathering and reporting all of this evidence.
    I am only sorry these guys don’t have a press pass. Those Q&As would be squeamish for some if not all.

    Like

    • To be fair, that’s been a problem with Star Wars even before Lucas sold it to Disney. In fact, Lucas hadn’t even paid Peter Mayhew his end of the work since apparently the films “never turned a profit” (and bear in mind, this happened well after the prequel and original trilogies, yet before the Disney sale).

      Like

        • Whether I have LDS or not is completely irrelevant, the fact of the matter is, Lucas did claim that Star Wars had “yet to turn out a profit” when not giving Peter Mayhew his cut. It was not meant to be a dig at Lucas.

          Like

      • To be fair, that’s been a problem with Star Wars even before Lucas sold it to Disney. In fact, Lucas forced crew and talent to tie their shoes using the double loop method instead of the rabbit around the tree method (and bear in mind, this happened well after the prequel and original trilogies, yet before the Disney sale).

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            • First of all, it’s not insane conspiracy theories. I actually found that bit about Peter Mayhew on I think Free Republic, one of the posts there. I’ll try to dig it out. I know it was in an article talking about George Lucas.

              Also, it’s actually leftists who are massively biased, and don’t seem to be aware of it. Sure, maybe we right-wingers are biased, but at least we’re honest about it, rather than pretending to be fair and balanced and yet shilling for Fidel Castro all the same. I’ve had to be inundated by far-left professors, teachers, even entertainers like Hideo Kojima and nearly brainwashed by them, so DON’T try to call me a nut. I’ve actually EXPERIENCED that environment.

              Like

              • Look. People aren’t perfect. People have mean streaks in them. People have problems with other people. People act like assholes from time to time. People are petty at times. People exercise poor judgement from time to time. They lie, they hide bad things they’ve done, and they duck responsibility at times for various reasons. Also if there is a disagreement between two people, you will get two different stories out of each of them. If two people are working side by side at the exact same capacity, each will likely feel like they’re doing way more work than the other.

                Regardless of what George did that you might have a problem with, Peter was an adult. He had a contract, and he had legal grounds to pursue money owed to him if he chose to do so. He presumably had a talent agent.

                You have also only mentioned whatever evil George had done without any context as to what the relationship between Peter and George may have been. George famously had problems with David Prowse as well. Shit happens, they’re all adults, there is legal recourse, and if there isn’t, then they should have had someone look over their contracts before they signed them.

                Get over it.

                Like

                • I am not asking that George Lucas be perfect. After all, no one is perfect, like you said. However, after far too many screw-ups and supporting extremely bad people that most people would realize are that, there’s a point where you cross from being flawed to just downright bad. I know if I sang praises for a mass-murdering group that I knew full well was a mass-murdering terrorist group who would happily slaughter people like the Vietcong while bashing those who actually TRIED to defend people from them, I’d be logically decried as evil, not merely flawed. I do the exact same thing with Hideo Kojima as well as you are aware (heck, even ignoring his blatant shilling for Che Guevara and not giving ANY indication that he did bad things at all, probably the closest it got to that was Zadornov basically trying to reenact Che’s death with Big Boss, or heck, the fact that he made MGS2 to be disguised anti-Americanism, he also had Death Stranding be a large anti-Trump and anti-Brexit bash-fest, and largely a walking simulator after claiming it was a never-before-seen type game.), JK Rowling, Linda Woolverton, or JJ Abrams. Heck, I could even call out Michael Eisner for some bad things he did, and he was actually a far better CEO for Disney than Bob Iger even WITH his more bad elements. So don’t think for one second that I only call out George Lucas on this bit. Besides, there have been a few times where I actually agreed George Lucas ultimately did good (I actually gave quite a few bits recently about the Prequel Trilogy doing good, and I even indicated that he did well with Anakin’s fall to the Dark Side overall, with the only real complaint I had being HOW he fell, and I didn’t even mind the Prequel Trilogy delving into politics, just HOW it was done. If anything, Lucas deserves chops for even being bold enough to delve into political stuff to set up why the Republic fell.).

                  And BTW, if he merely sold it to Disney due to, say, thinking Disney would do a good job, and such had been done without blatant self-serving politics behind it, while still not good, I could at least be somewhat sympathetic when Lucas got backstabbed like that. But after doing that just to get out of the tax hikes Obama implemented at HIS request and support, I have absolutely NO sympathy for such callous hypocrisy for a very evil ideology like socialism.

                  And I agree that Peter Mayhew still had those aspects, and was an adult, but it was still a pretty bad thing Lucas did (and heck, I wasn’t even arguing about the morality of Lucas’s decision initially, I was just stating that the person’s point about the budgeting and nuances beyond “it made a billion” predated Disney. It was you guys who decided to just act like I was trying to bash Lucas, when I made absolutely NO indication whatsoever whether I thought Lucas was in the right or wrong about it.). Believe me, if I wanted to bash Lucas, I could also cite how he screwed over David Prowse when he mentioned Vader being unmasked in a Q&A thing before ROTJ where he made sure Sebastian Shaw played Vader instead of Prose, something that even Mark Hamill deemed to be extremely petty (and that’s one of Lucas’s biggest defenders).

                  Like

    • “I would like to point out that Itchy,Ethan,Jeremy,DataRacer and Jeff @ WCS have been invaluable in gathering and reporting all of this evidence.
      I am only sorry these guys don’t have a press pass. Those Q&As would be squeamish for some if not all.”

      I’d like to add Doomcock, Nerdrotic, Clownfish, and Mecharandom to this list. They have all been voracious analysts and have broken stories from sources they have. There are others too of course. Honestly, the passion and focus everyone has on this has been mind blowing.

      Maybe there is justification for a fandom menace con. Bryan Young not invited.

      Like

  5. From the article:

    “We’ll treat Deadline Hollywood’s estimates as Disney’s Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) for each movie.”

    Also from the article:

    “In corporate finance, the adjustment usually occurs in the opposite direction to the mortgage example above, with the initial purchase cost left unchanged but future revenues (and costs) discounted by a firm’s Weighted Average Cost of Capital (WACC).”

    “Ebitda Wacc”… that’s a good bounty-hunter name.

    Like

  6. The most interesting number to me is the opportunity cost of Disney’s investment. Disney paid $4.05 billion for Lucasfilm in October of 2012. If that $4.05 billion was invested in the stock market (S&P 500 with dividends reinvested), today it would be worth $10.28 billion.

    If Disney had done a stock buyback instead of buying Lucasfilm, Disney investors would have been much better off.

    Liked by 1 person

  7. I think there’s a problem with this analysis. Here’s the note I tried to leave on the guy’s blog, but for which I was blocked as a “supposed bot.” Guess they’re on to me. 🙄

    I could be wrong, but it definitely seemed weird to me that he nowhere discussed the terms of the deal, and the implications of the terms when it is cash vs. equity. Or in this case, a mixture of the two.
    ———

    How does this analysis account for the fact that half the deal was in newly issued stock, and not in cash out the door or in notes payable? To my mind this shifts half the risk of this deal off the Company and its books and onto its Shareholders. Yes, stock based ratios decline (eg the denominator in EPS goes up, etc.), but outside the Notes (that nobody reads and most don’t understand) and maybe notation about shares outstanding on the balance sheet, from a P&L perspective half this deal had little, probably effectively no, impact.

    If nothing else, I’d think beginning your analysis at -4.05 billion and rolling forward is a bit misleading, since it was NOT cash or a debt obligation that went to Lucas, (in round numbers) it was $2 billion in cash and $2 billion in was shares of (debased via this deal) equity. Sucks for the other owners of said equity, but the impact on the P&L and the aggregate balance sheet is minimal to nonexistent, I’d suggest.

    Seems to me this a nice bit of risk shifting by Iger and Co., but I’ll assume I’m the one who is missing something here; please make me look silly. I can take it. 😐

    Like

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