George Lucas On How He Built His $4 Billion ‘Star Wars’ Empire

The Star Wars creator opened up about the series of deals he negotiated to gain full rights to his $4 billion space opera franchise in conversation with Robert Redford at Sundance.

Photo Illustration, Clayton Chase/Getty Images

On Thursday morning, Disney CEO Bob Iger released an annual report to shareholders updating them on the status of the upcoming Star Wars films—the rights to which were acquired when Disney purchased Lucasfilm from George Lucas on December 12, 2012, for a reported $4.05 billion in cash and stock. Since Lucas owned 100 percent of the company, all the money went into his pockets.

“Next year, we’ll release our first standalone movie based on these characters, followed by Star Wars: Episode VIII in 2017, and we’ll finish the trilogy with Episode IX in 2019,” wrote Iger.

J.J. Abrams’ Star Wars: The Force Awakens, the first installment in the new trilogy—and seventh film in the franchise—will hit theaters on December 18, and Looper director Rian Johnson will helm Episode XIII.

That same evening, Star Wars creator George Lucas sat down with Robert Redford for a panel discussion on independent film at the 2015 Sundance Film Festival. The talk was titled Power of Story: Visions of Independence, and took place at the 266-capacity Egyptian Theatre.

One of the themes throughout their discussion was how both men had made most of their films independently—especially Lucas, who became so frustrated by the studios’ handling of his first two films, THX 1138 and American Graffiti, that he nearly lost it. He says they wanted to change the title of American Graffiti because they “didn’t know what ‘graffiti’ meant in those days,” and “thought it was an Italian title about feet.” He added, “Studio executives generally are not the most sophisticated people in the world.”

To make matters worse, the studios demanded 5 minutes of cuts from both THX 1138 and American Graffiti, both of which enraged Lucas. When he asked a studio exec why they were making the cuts to Graffiti, the exec responded, “Well, we did it because we can.” These experiences led Lucas to become very disillusioned with Hollywood. “I didn’t want anything to do with them,” Lucas recalled. “And I didn’t. I never made a movie in Hollywood… as a result, I got to have all my own stuff.”

So, Lucas went and built a miniature studio, Lucasfilm, from the ground up, as well as the visual effects house Industrial Light & Magic, and a post-production sound design company, Skywalker Sound. Then, prior to the release of Star Wars, he obtained sequel rights. And the rest is history.

Here is, in Lucas’ words, the story of how he acquired 100 percent of the rights to the Star Wars franchise.

By the time Star Wars came around, American Graffiti was a huge, huge success. I had a deal with [Fox] that was $125,000 to write and direct Star Wars. After American Graffiti… I was the hottest director in Hollywood. They said, “Oh God! He’s going to ask for $1 million. No director’s ever asked for $1 million. What are we going to do?” And Fox was sort of on the ropes. So I went to them and I said, “Look: I’ll take my salary. I’m not going to ask for $1 million. I signed a deal memo, and that’s what I believe in. Everything that’s not mentioned in the deal memo, I’m going to re-look at.” And that was: sequels. I had already written three movies, and I knew I wanted to make them regardless of whether the first was a hit or not.The licensing, which was the other part of this, didn’t exist. There wasn’t such a thing… It takes a year or two to make toys. You can’t just do it. And the movie comes out and it’s out for 6 weeks, and that’s the end of it. A toy has to be out for 6 months to a year, so nobody wanted to do that.I said, “I want to build an audience with this thing.” The one thing that was in the licensing was posters and t-shirts, and you could make those deals really easy. I thought, “If I get the licensing, I could make a whole bunch of posters and t-shirts and send people out to Disney Land and everywhere and advertise the movie.” Everybody thought it was really brilliant, but I was really just protecting myself.What happened after that was Star Wars came out, then we went to a toy company and helped them build these little action figures… and they became very successful. We ended up making a lot of money—a little bit on the movie. Movies don’t make money, I’ve got news for ya.Then I did the most stupid thing anybody could do in the movie business… I just said, “I will now take over and start financing my own pictures because then they can’t touch me. They cannot come in and recut it afterwards, they can’t make notes on the script, they can’t do anything.”Fox was very, very good to me. The board hated [Star Wars]. Alan Ladd Jr., who was the head of Fox, gave me all the help and cooperation I needed. He gave me some extra money to do retakes. You know, he never wanted to cut anything, so it was like, “This is the way it’s supposed to work.” But I realize that is such a fantasy.I went off and invested everything I had—and more—into The Empire Strikes Back. Took out a big bank loan. There was a thing where we went over-budget and the bank wouldn’t extend our loan, so we had to get another bank loan. That film worked and I made that money, and then I put it into the next film. I kept investing everything I had into the next film, and the company.If you own the movie, which I came to do, you make a lot of money. But you have to own it, and that means you have to put the money in, so you have to take the risk.I was talking to Ladd Jr. on the first Star Wars. I had 50 percent of the net profits because my company was going out and making the movie, and I said, “I know what I’m doing for my 50 percent. I put my heart and soul in this, my whole career is at stake, I have to actually go out and make the movie… What are you doing for your 50 percent?” He said, “Well, I provide the money.” I said, “You don’t provide the money! You go to a bank with a letter of credit and they supply the money, so you’re not doing anything! And you get 50 percent of the movie!”So, I came back for The Empire Strikes Back and, instead of them giving me the boilerplate contract, I gave them the boilerplate contract. I went to my lawyer and I said, “You’re going to do a distribution contract from scratch.” He said, “Do you know how hard that is? That’s really a lot of work! It’s 180 pages!” And I said, “Look: How many chances are you ever gonna get to write a distribution agreement for a studio? Nobody’s ever done it, and nobody’s ever gonna do it again.” I went to Laddy and I said, “Here’s the deal. I’m going to finance the film this time.” And he said, “Well, wait a minute… you’re getting 100 percent of the profits!” And I said, “Yeah. I’m financing it! Remember that 50 percent you had? Well, I’m doing that now. You don’t get that 50 percent, and I get my own 50 percent, so I get 100 percent.”

He added, “Being difficult, as I am, and especially stubborn—that’s how it started.”