Reaching for the stars? How merchandising became the film industry’s golden ticket

In a galaxy far, far, away… in a land also known as Hollywood, George Lucas had a vision: to make a Western called Star Wars which was set in outer-space. Over 40 studios, including Disney and Columbia Pictures, turned down the film. They didn’t see the attraction of the movie pitch, which in effect was a sci-fi rom-com featuring constantly arguing androids, a father and son relationship that leaves little to be desired, and a giant dog which could talk.

The prequel

Eventually Twentieth Century Fox agreed to take the project on, namely because the studio wanted to work with Lucas on other movies. Star Wars was set to be a vanity project, a loss leader that would be relegated to the depths of film history. Lucas had other ideas.

Fox and Lucas negotiated a contract where, in return for reducing his director’s salary from $500,000 to $150,000, he would be given all merchandising and sequel rights. Unwittingly, George Lucas had negotiated the most lucrative film-business deal in history – Star Wars has gone on to be the most successful merchandising franchise ever, even earning a place in the Guinness World Record books for this title.

Lucas had been turned down by multiple toy companies for the right to create Star Wars toys. He eventually sold the toy-merchandising rights to his movie to Kenner, which at the time was a division of cereal maker General Foods, in advance of the film opening for a flat fee of $100,000. With limited options, Lucas had little room to negotiate and therefore, he accepted the terms put forward – receiving only five cents for every dollar of toys sold indefinitely  – provided Kenner paid at least $10,000 in royalties to Lucas. Eventually, Kenner was purchased by Hasbro and Lucas was able to negotiate a new deal.

The first merchandising rights deal was possibly the only mistake Lucas made with his IP, one he was sure never to make again.

The launch

Star Wars launched in May 1977 to critical acclaim and quickly became a blockbuster hit. At the end of its initial run it had grossed $410 million, with subsequent releases bringing the total to $775 million.

The toy manufacturer, Kenner, did not anticipate the explosion of interest in the film and therefore Star Wars toys. It was unable to meet demand, ending up selling an ‘Early Bird Certificate Package’ which could be redeemed later for four Star Wars action figures. In effect, it had to provide customers with an IOU.

Between 1977 and 1978, Star Wars sold $100 million worth of toys which was an  incredible return for Kenner’s $100,000 initial investment. Fast forward 35 years, Star Wars themed toys have generated $12 billion in revenue. And today, Star Wars licensed toys produce $3 billion a year in revenues.

While future films released by George Lucas would go on to earn an additional $3.5 billion at the box office, the franchise has also sold $4 billion worth of DVDs and VHS, $3 billion worth of video games, $2 billion worth of books and another $1.3 billion through various other licensing deals. In 2012, the Walt Disney Company purchased the Star Wars franchise in its entirety in a deal which was worth $4.05 billion.

But it is not just the Star Wars franchise which has made money from merchandise. Other films to have made a considerable sum from merchandise – even if some of them did not do so well at the Box Office, includes:

  • Batman – $494 million
  • Teenage Mutant Ninja Turtles – $900 million
  • Avengers – $1 billion
  • Spider-Man – $1.3 billion
  • Frozen – $5.3 billion
  • Transformers – $7 billion
  • Harry Potter – $7.3 billion
  • Toy Story – $9 billion
  • Cars – $10 billion

Whole life merchandising

Star Wars changed the way we see the release of a new film. It is no longer just about the cinema experience; Star Wars made it possible for fans to immerse themselves into the world which was portrayed in the film by purchasing the merchandise released. Consumers demand for merchandise has often meant that interest in a film, continues long after it has stopped being shown in cinemas.

And merchandise can help reach audiences that would not have been interested in the film were it not for the fact they wanted to purchase the merchandise related to it.  Today, film-related merchandising has expanded exponentially, appealing to all demographics and age groups. Last year’s launch of the Barbie movie bore witness to an extensive global marketing campaign including several Barbie-themed promotional partnerships and collaborations that did their best to turn the world Barbie-pink.

With the Barbie film, it appears that everything that can be merchandised is. For instance, a dedicated Barbie fan can start their day rising from their Barbie bedding, taking off their Barbie pyjamas, and cleaning their teeth with a Barbie toothbrush.

They can then get dressed in any number of Barbie clothing items which were available from a variety of major clothing companies including Boohoo, Forever 21, GAP, and Bloomingdales; and put on a pair of Barbie Crocs. Hopefully, they haven’t forgotten to paint their nails with OPI’s Barbie polish, put Barbie perfume on, and accessorised with a Barbie Fossil watch and jewellery.

Breakfast with Barbie cereal, following by lunch at Burger King  where they can enjoy a Barbie-themed burger, and for dinner eat Barbie pasta. Snacks during the day might consist of Barbie frozen yogurt or a visit to the Barbie pop-up café.

Once a Barbie super-fan has finished their day, they can relax by playing on the Barbie-themed XBOX or by playing Barbie UNO. Or they could even take a dip in the pool using a Barbie pool noodle.

Life in plastic truly is fantastic.

But where does IP come into this?

And this is where intellectual property (IP) rights come in; IP rights are crucial tools for providing the owner of the IP rights with exclusivity over usage and the ability to challenge others with legal action should they use those rights without permission. Ensuring you own the exclusive rights to the IP puts you in a position where you can control others to use your IP rights subject to your conditions and for a fee.

According to public records, The Copyright Office in the Library of Congress registered more than 2,000 Barbie-related works including dolls, games, and songs when the movie was released.

Whilst the genre of films may all be different, the one thing they will have in common is that they have robust IP protection. This IP can then be commercialised with all manner of deals, collaborations, and merchandise opportunities.

Having seen the success of Star Wars merchandise, it is highly unlikely a film studio would ever accept an agreement such as the one Lucas brokered. They have truly recognised the power of the brand and are harnessing this as a way to increase profitability for their films. Today, film studios know there is value in the IP. Before a new film is released, it is not uncommon to see a range of trade mark applications being filed relating to the name of the film and its characters in the classes which typically cover mechanising type goods and services.

If you would like to continue the conversation, please contact the author or your usual Barker Brettell trade mark attorney.

This article was originally commissioned and published on the website.