The Smartest Business Decision in Hollywood History

Happy Friday to all 61M of my wealthy & attractive subscribers. Your generous (but well-deserved) gifts of cash and jewels are much appreciated.

Before I dive into this morning’s piece, I have some thoughts on my plans for this newsletter I’d like to share…

From the beginning, I emphasized that this would be a casual, structureless project.

That’s going to change.

The content will remain the same — I love having this outlet to write about whatever the fuck I want use as & a sandbox to improve as a writer.

But since I’m doing this, I may as well do it right:

So going forward I’ll be writing weekly rather than my current frenetic schedule. Simple shit, but it’s the first baby step of taking whatever this is & priming it to grow.

I’ll also be adding some recurring sections each week highlighting my favorite reads, quotes, and more. You’ll see them pop up below as little breaks in the story.

Ok, done with the throat clearing. Vote below on which day of the week you’d like the newsletter to be published and then we’ll get to the good stuff.

Today is May 5th. After consulting with my on-call mathematicians, I’ve determined yesterday was May 4th. As some of you may know, May 4th is Star Wars Day (May the Fourth Be With You). After I finished celebrating with loved ones, I published a twitter thread to fulfill my civic duty.

Let’s back up. Before George Lucas turned down $500K & I wrote a dope twitter thread, Lucas was coming off of his directorial debut in ‘American Graffiti’, a critical success which earned him Oscar Nominations for Best Picture & Best Director.

All this despite the fact that Universal thought it was hot garbage and refused to release it, only changing tune once Lucas’ college friend Francis Ford Coppola (fresh off ‘The Godfather’) offered to buy the movie.

Reviews from ‘73 reveal effusive praise, with the NYT calling it a "masterfully executed and profoundly affecting movie" and Roger Ebert giving it his full four stars and declaring it a “brilliant work of historical fiction.”

In other words, Lucas had arrived.

A budding superstar at the top of every Hollywood studio’s list, Lucas had the juice to push through his Space Opera movie, a vision that sounded flat-out idiotic to most executives.

The idea that this goofy flick could be a success, let alone spawn sequels, was hardly a consideration to the studios. So Lucas took an outsized bet on himself, opting to forgo $500K in salary in return for merchandising rights despite the fact he had already shoveled $400K into production.

Seemingly irrational, Lucas was playing the long game. As Lucas’ agent is quoted in “The Making of Star Wars,” he was convinced “the life of Star Wars would exist beyond the making of the first theatrical picture.”

Unbridled self-confidence on a level that would make James Cameron blush.

At the risk of ruining a great narrative, it’s well-documented that Lucas became completely disenchanted by the film during production. The “only one” who believed Star Wars was destined for greatness? His buddy Steve S., who managed to carve out a nice career for himself over the years with films like E.T., Schindler’s List, & Ready Player One (that would be a wild triple feature).

I suppose decades of cultural relevancy have buried the lede for me here, but the payoff is that Star Wars turned out pretty good. 

20th Century Fox President Alan Ladd Jr. called up Lucas after the debut: "It's a fantastic hit! Every single paper! There are lines around the block. You can't believe this!"

Lucas refused to believe it, downplaying the large crowds as a byproduct of science fiction fans, who will “go to anything the first week… Wait a couple of weeks, and you’ll see what it’s really about.”

Once again, I don’t need to fill you in on the next few weeks.

I read it now I’m making you

👉 Since this is our first go-round, I’m coming out hot with not one but two of the greatest profiles in the history of magazine journalism. Penned by legend Gay Talese in 1965 & 1966 respectively, these pieces on Frank Sinatra & Joe DiMaggio are absurdly perfect. From Talese’s prose to his expert ability to weave story and narrative with character-building, I reread both > 4 / year.

• Frank Sinatra Has a Cold

• The Silent Season of a Hero

Now we have a certified hit on our hands & a filmmaker with unprecedented control over his own IP.

Here comes the merch…

Pioneering a strategy of merchandise-led world-building never seen in the industry before, Lucas opened the floodgates. Toys, Comics, VHS… Star Wars became an omnichannel product.

Fans need not keep their cash under the mattresses while they wait for the next sequel, the Star Wars merch machine made sure there was always a new product available to fill the gaps.

That original bet which gave Lucas licensing rights paid off more and more each year. His self-confidence proved to be an asymmetric advantage in those early negotiations. He knew in his gut that the project had legs. The execs had nothing but narrow-minded taste.

It’s hard to separate which trends Lucas predicted, hoped for, or those which simply fell in his favor.

He seemingly had a solid read on the opportunity for revenue generation outside of ticket sales, but 1977 George Lucas probably wasn’t gearing up for the streaming revolution and subsequent nosedive of box office sales.

Regardless, the numbers tell a plain story.

A mere 20% of Star Wars revenue over the years has been generated through the movies themselves. That’s behind Rentals & Merchandise and only double the proportion earned through gaming.

When you look at the numbers, it's pretty clear the dozen films are essentially just high-budget commercials.

👉 Total Box Office Revenue: $10.3B+

👉 Total Merch Revenue: $42.2B+

Though you can find varying numbers across reputable sources, they all fall within that range. Any data that comes within a reasonable margin of error of those figures tell the same story.

Quote of the Week

“Art is whatever you can get away with”

- Andy Warhol*

*So actually it’s originally from Marshall McLuhan, but I don’t care cause that guy sucks.

Star Wars isn’t a movie franchise… it’s a brand that makes films in addition to a slew of other related products.

Coming back to our friend George Lucas, he sold his rights to Disney in 2012 for over $4B.

Half of that deal came in the form of Disney stock, making Lucas ~$450M in dividends between 2013-2019. He's now worth around $6B... not bad ROI on that $500K pay cut.

The lesson?

• The importance of owning your own IP cannot be overstated

• All the best ideas come from one crazy person. Those crazy people eventually become billionaires

• Always take $500K pay cuts, it will make you a billionaire 100% of the time (this is, in fact, financial advice)