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Star Wars will make its real money in the mall, not the cinema


On Wednesday night I went to the London Star Wars premiere. Or, if you want to get technical, I was a very lost tourist caught up in the mass of people trying to catch a glimpse of Carrie Fisher’s dog, Gary.

London’s Odeon Theatre was transformed into a sprawling red carpet, running the length of a city block. A line of luxury cars, each more impressive than the last, stretched as far as you could see towards Piccadilly Circus. Paparazzi swarmed around the entrance of the W Hotel, craning to snap the stars milling around the official preparty.

The scale of the whole thing was overwhelming, but it shouldn’t come as a surprise given the numbers around this release.

The Star Wars franchise has generated more than $32 billion in revenue over the past 38 years. The Force Awakens is expected to be its biggest earner yet, but the film’s fortune won’t be made in the cinema. It will be in the mall, where shoppers are expected to pick up $5 billion worth of merchandise over the next 12 months.

Branded bags of oranges, a $3999 Millennium Falcon kid’s bed and toy lightsabers — these are the real force behind Star Wars.

Disney made a huge bet on the Star Wars franchise

Back in 2012, Disney bought Lucasfilm — the studio that created Star Wars — for $4.02 billion. The pair’s first foray together, Strange Magic, was released in January this year. It was a total flop, one of the worst ever opening weekends for a widely released film.

But Disney wasn’t worried. Buying Lucasfilm had one purpose: to acquire the rights to Star Wars. It’s the world’s most lucrative franchise, and it has been sitting on the shelf for 10 years since Star Wars Episode III: Return of the Sith.

Javier Zarracina / Vox

Star Wars: The Force Awakens is widely expected to be a huge hit for Disney, easily making back its $200 million budget. It’s on track to become the third highest-grossing film of all time, behind James Cameron’s blockbusters Avatar ($2.8 billion) and Titanic ($2.2 billion).

Branded products are the real force behind Star Wars

When the Star Wars franchise launched in 1977, it transformed the movie industry. Creator George Lucas suspected that people actually going to see a film in the cinema would represent only a tiny fraction of its potential revenue; the real money would be in merchandise. It was an insight that made Lucas a billionaire.

Back in the early 1970s, Lucas was a young director with just two films on his résumé and a curious idea for an epic space opera. When 20th Century Fox decided to pick up Star Wars, Lucas came back with a deal: He was willing to accept a $350,000 pay cut as director in order to keep the film’s merchandise rights, along with the rights to any sequels.

Not anticipating how popular the film would be, Fox accepted. Lucas is now worth more than $5 billion, having made one of the most profitable bets in history. In the 38 years since Episode IV: A New Hope, Star Wars has grossed $28 billion in revenue. And less than a sixth of this has come from ticket sales.

Javier Zarracina / Vox

For a new era, there a new collector’s item (or a hundred)

In buying Lucasfilm, Disney has secured both Star Wars’ film and merchandise rights. Already, the studio has laid out extensive plans to profit from the deal between now and 2020.

There will be two more "saga" films in 2017 and 2019, plus the "anthology" series — three standalone films within the Star Wars universe. The first, Rogue One: A Star Wars Story, is set between Episode III: Revenge of the Sith (2005) and Episode IV: A New Hope (1977) and will be released in December 2016.

Then, of course, there are the collector’s items. Disney has always been good at merchandising, pioneering the practice with Mickey Mouse toys in the 1930s. For the release of 101 Dalmatians in 1996, the studio made deals with more than 130 companies, including McDonald’s and Dr. Pepper.

Disney is already the world’s biggest licensor, selling more than $45.2 billion in 2014. Merchandise is particularly important for the studio in this age of illegal downloading. It’s much easier to torrent a film than a to-scale toy replica of the Death Star.

Disney has made deals with scores of companies to create Star Wars branded products, from CoverGirl to Lego. Hasbro released more than 100 new toys in the lead-up to the release of The Force Awakens. Walmart announced it would carry more than 500 products in store and thousands more online.

How much does the studio stand to make? It’s estimated that for every branded item sold, Disney takes a cut between 10 and 15 percent. Star Wars merch is expected to bring in $5 billion in sales over the coming 12 months, rising to as much as $20 billion in the next five years.

Javier Zarracina / Vox

Star Wars is embracing its diverse fan base

While the typical image of a Star Wars collector is a fanboy, women are a big focus of The Force Awakens’ merchandise campaign. This is likely the effect of two forces — the popularity of the new film’s heroine Rey and a growing awareness of the female market.

CoverGirl has released a Star Wars–branded makeup collection, Hot Topic has a clothing line. In one Walmart ad, a young girl plays with Star Wars toys as her mom asks why the princess doesn’t let boys rescue her. "Because she’s a modern, empowered women," the girl replies, "unfettered by the antiquated gender roles of a bygone era." It has been viewed nearly 21 million times.

China’s maturing market also offers big opportunities for Disney. This month, the studio’s chair, Andy Bird, pitched Star Wars: The Force Awakens–branded merchandise to more than 800 Chinese cinema owners, opening the door to millions of potential collectors.

At the moment, box office takings still account for around 80 to 90 percent of film revenue in China. Over the next few years, though, it’s expected the country will come to account for a huge chunk of the $241.5 billion in global annual licensed merchandise retail sales.

All this hype doesn’t come cheap

While there’s been a lot of focus on Star Wars products, building excitement around the film and actually getting people into cinemas is still vitally important. If you’ve stepped outside your house in the past few weeks, you would’ve seen Star Wars everywhere — on billboards as you walk to work, TV ads, radio spots, endless articles analyzing the teaser trailers as you scroll through Facebook. Disney didn’t get all that hype for free.

The average global marketing budget for a "tentpole" film (a release whose profits fund smaller productions) is around $100 million. Building hype overseas is increasingly important for blockbusters. Since 1999’s Phantom Menace, the franchise has been making more money overseas than at the US box office.

Star Wars worldwide box office

Long before Star Wars was on every billboard, though, Disney started building hype for the merchandise. In September, the film’s YouTube channel hosted a worldwide "unboxing," where fans in 12 countries unveiled the new toys via live stream. This came just ahead of Force Friday, the first release of official Force Awakens merch.

Javier Zarracina / Vox

Much like the film’s plot, the tie-in merchandise was shrouded in secrecy, protected by nondisclosure agreements between Disney and its retail partners. What we do know is that companies making Star War–branded merchandise have already smashed the previous advertising record of $26.5 million spent to promote Minions.

Subway and Dodge have both released ads. Duracell’s "Fight for Christmas Morning" has been viewed 15 million times on YouTube. The ubiquitous Star Wars ad even earned itself a spoof on Saturday Night Live.

Star Wars merchandise occupies a unique position in the film world. Don’t get me wrong — there are certainly some ghastly offerings. Suggestive C-3PO tape dispenser, anyone?

But on the whole, the Star Wars merchandise isn’t foisted on fans; they covet it. It’s this love that Disney will be riding all the way to the bank. It’s just a bonus the film is pretty great as well.

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