The Ride of a Lifetime

by Robert Iger;

  After the funeral, Laurene came up to me and said, “I’ve never told my side of that story.” She described Steve coming home that night. “We had dinner, and then the kids left the dinner table, and I said to Steve, ‘So, did you tell him?’ ‘I told him.’ And I said, ‘Can we trust him?’ ” We were standing there with Steve’s grave behind us, and Laurene, who’d just buried her husband, gave me a gift that I’ve thought about nearly every day since. I’ve certainly thought of Steve every day. “I asked him if we could trust you,” Laurene said. “And Steve said, ‘I love that guy.’ ”

  The feeling was mutual.

  * * *

  —

  WHEN I WENT up to Cupertino to talk with Steve about Marvel, he asked if I was looking at anything else. I mentioned Lucasfilm, and he said, “You should just call George.” Steve had bought Pixar from George Lucas, and he and George had been close for years. “You never know,” he said. “George might be interested. The two of us should go to his ranch and have lunch with him one day.”

  We never did make that lunch. Steve soon became too sick, and his involvement in Disney’s business waned. But Lucas had been at the top of our acquisition list ever since we’d completed the Marvel deal, and I’d been thinking about how to approach George in a way that wouldn’t offend him with the suggestion that he sell us the marvelous worlds that he’d created.

  Michael Eisner had made a licensing agreement with George back in the mid-’80s to build Star Wars– and Indiana Jones–themed attractions at our parks. And in May 2011, we were reopening the Star Wars attractions (Star Tours, they’re called) in Disney World and Disneyland after a yearlong refurbishing. I knew George was going to Orlando to rededicate the attraction as a favor to the company and his friends in Imagineering, and I decided to join him. With the occasional exception, I normally leave the opening of new attractions to the head of Parks and Resorts, but I thought this might give me a chance to at least float the idea with George and get some sense of whether he’d ever consider selling to us.

  Our relationship went back to my days running ABC Entertainment. After the success of Twin Peaks, some of the most respected directors in Hollywood started expressing interest in making television series with us. I met with George and he pitched an idea for a show that would follow a young Indiana Jones as he traveled around the world. “Each episode will be a history lesson,” George said. Indy would interact with historical figures like Churchill and Freud and Degas and Mata Hari. I gave him a very fast yes, and in 1992, we put The Young Indiana Jones Chronicles on Monday nights as a lead-in to Monday Night Football. The show opened to big numbers, but over time the audience lost interest in the historical lessons, and ratings fell. But George had delivered everything he’d said he would, and I felt that because of that, and because this was George Lucas, it deserved a second season and another chance to catch on with viewers. It never did, but George had been grateful at the time that I’d given the show that chance.

  On the day of the rededication of Star Tours in Orlando, I set up a breakfast with him at the Brown Derby, which was near the attraction in our Hollywood Studios Park. The restaurant doesn’t normally open before lunch, but I asked them to set up a table just for us, so we would have privacy. When George and his fiancée, Mellody Hobson, arrived, they were surprised to see that no one was there but me. We sat down and had a lovely breakfast, and about halfway through it I asked George if he’d ever thought about selling. I tried to be clear and direct without offending him. He was sixty-eight years old at the time, and I said, “I don’t want to be fatalistic, George, and please stop me if you would rather not have this conversation, but I think it’s worth putting this on the table. What happens down the road? You don’t have any heirs who are going to run the company for you. They may control it, but they’re not going to run it. Shouldn’t you determine who protects or carries on your legacy?”

  He nodded as I talked. “I’m not really ready to sell,” he said. “But you’re right. And if I decide to, there isn’t anyone I want to sell to but you.” He recalled Young Indiana Jones and how much he appreciated that I’d given the show a chance even when it didn’t have the ratings. And then he brought up what we’d done with Pixar, which at some point Steve must have spoken to him about. “You did that right,” he said. “You took care of them. If I get around to it, you’re the only call I’ll make.”

  He said something else that I kept in mind in every subsequent conversation we had: “When I die, the first line of my obituary is going to read ‘Star Wars creator George Lucas…’ ” It was so much a part of who he was, which of course I knew, but having him look into my eyes and say it like that underscored the most important factor in these conversations. This wasn’t negotiating to buy a business; it was negotiating to be the keeper of George’s legacy, and I needed to be ultra-sensitive to that at all times.

  Much to the chagrin of Kevin Mayer and some others at Disney, who were lusting after Lucasfilm because, like Marvel and Pixar before it, it fit so perfectly into our strategy, I decided not to reach out to George after our discussion in Florida. If the conversation went forward, it would have to be because he decided he wanted it. I had such respect and affection for George, and I needed him to know this was in his hands. So we waited. About seven months after that breakfast, George called me and said, “I’d like to have lunch to talk more about that thing we talked about in Orlando.”

  We met for lunch at Disney in Burbank, and I let George lead the conversation. He quickly got down to business and said he’d been thinking about our conversation and was ready to get serious about selling. Then he said he wanted “the Pixar deal.” I was thrilled he was open to exploring an acquisition, but I understood what he meant by the Pixar deal, and it was immediately clear that the negotiation wasn’t going to be easy. We already sensed Lucasfilm was potentially quite valuable for us, but it wasn’t worth $7.4 billion, at least not based on our analysis at that point. When we were pursuing Pixar, there were six movies already in varying stages of production, and a general sense of when they would be released. That meant they would generate revenue and profits quickly. Pixar also came with a big group of world-class engineers, seasoned directors, artists and writers, and a real production infrastructure. Lucas had many talented employees, particularly on the tech side, but no directors other than George, and no film development or production pipeline, as far as we knew. We’d done some work trying to figure out their value, and Kevin and I had discussions about what we might pay, but because they weren’t a publicly traded company, their financial information wasn’t accessible and there was a lot we didn’t know or couldn’t see. Our analysis was built on a set of guesses, and from those we tried to build a financial model—valuing their library of films and television shows; their publishing and licensing assets; their brand, which was dominated by Star Wars; and their special effects business, Industrial Light and Magic, which George had founded years earlier to provide the dazzling special effects for his films.

  We then projected what we might do if we owned them, which was pure conjecture. We guessed we could produce and release a Star Wars film every other year in the first six years after acquiring them, but it would take us time to get started, since we didn’t detect that anything was in development. This analysis took place in early 2012, so we estimated our first Star Wars release would be in May 2015, if we could acquire them quickly. Other films would follow in 2017 and 2019. Then we estimated what the global box office of the films would bring in, which was even more conjecture, since the last Star Wars film, Revenge of the Sith, was released in 2005, seven years earlier. Kevin gave me a collection of reviews from all of the previously released films and a rundown of what they earned, and we settled on at least a billion dollars in global box office for our first three films.

  Next, we tackled their licensing business. Star Wars remained very popular with kids, particularly young boys, who were still assem
bling Lego Millennium Falcons and playing with lightsabers. Adding that licensing business to our consumer products business would be quite valuable, but we had no access to the actual revenue being generated from licensing. Lastly, we considered what we might do at our theme parks, given the fact that we were already paying Lucasfilm for the rights to the Star Tours attractions in three of our locations. I had big dreams about what we might build, but we decided to ascribe little or no value to them because there were too many unknowns.

  In George’s mind, Lucasfilm was as valuable as Pixar, but even from our relatively uninformed analysis they weren’t. They might be someday, but it would take years of work to get it there, and we’d still have to make great films. I didn’t want to offend him, but I didn’t want to lead him on, either. The worst thing you can do when entering into a negotiation is to suggest or promise something because you know the other person wants to hear it, only to have to reverse course later. You have to be clear about where you stand from the beginning. I knew if I misled George, simply to begin the bargaining process, or to keep the conversation going, it would ultimately backfire on me.

  So I said right away, “There’s no way this is a Pixar deal, George.” And I explained why, recalling my visit to Pixar early on, and the richness of creativity that I discovered.

  He was momentarily taken aback, and I thought the discussions might end right there. Instead, he said, “Well, then, what do we do?”

  I told him we needed to look closely at Lucasfilm and we needed his cooperation. We’d sign a confidentiality agreement, and we would do it in a way that wouldn’t raise too many questions within his company. “We just need your CFO or someone who knows the financial structure to walk us through it,” I said. “I have a small team that will go in there and do it quickly. We’ll keep it very quiet. Other than a few people, your employees won’t know that we’re snooping around.”

  Typically, the price we pay for assets doesn’t vary much from what we believe the value to be in the first place. It’s often possible to start low and hope to pay far less than what you’re valuing an asset at, but in the process you risk alienating the person you’re negotiating with. “I don’t mess around when it comes to these things,” I told George. We would quickly arrive at a number that we believed his company was worth—and one that I believed I could sell to the board, to our shareholders, and to Wall Street—and whatever that number was, I said, “I’m not going to come in low and negotiate toward the middle. I’m going to do it the way I did it with Steve.”

  George allowed us the access we needed, but at the end of that process we still found ourselves struggling to settle on a firm valuation. A lot of our concern had to do with how to assess our own ability to begin making good movies—and quickly. We hadn’t begun to form a long-term creative vision because we had no creative people assigned to the task. We had nothing, really, which meant there was a lot of creative risk, and hitting the schedule we’d set for ourselves—and which our financial analysis was based on—would be daunting and maybe impossible.

  I eventually called George and told him we had narrowed it down to a price range, and we still needed time to home in on a specific price. It would be between $3.5 billion and $3.75 billion. George had come way down from his “Pixar price,” but I could tell he was not going to accept anything lower than Marvel. I met with Kevin and his team and we looked at our analysis again. We didn’t want to falsely raise our box office estimates, but even at the top end of the range I’d given George, there was some room for us to pay more, though it would put a lot more pressure on the timing and performance of the films. Could we make three in six years? These were Star Wars films, and we would have to be very careful. Ultimately, Kevin and I decided we could afford $4.05 billion, or slightly above what we paid for Marvel, and George immediately agreed.

  Then the more difficult negotiations began over what George’s creative involvement would be. In Pixar’s case, the entire acquisition was predicated on John and Ed’s continued involvement not just with Pixar but with Disney Animation. John became chief creative officer, but he still reported to me. With Marvel, I’d met with Kevin Feige and the rest of their team and I knew what they had in the works, and we’d begun collaborating closely to determine the future of Marvel films. With Lucas, there was only one person with creative control—George. He wanted to retain that control without becoming an employee. It would have been a dereliction of my responsibilities to spend more than $4 billion and then say, essentially, This is still yours. Go ahead and make whatever movies you want to make on whatever timeline you can make them.

  Few people in the film business commanded as much respect as George. Star Wars had only ever been his. No matter how much he understood intellectually that he was selling the company and it didn’t make sense that he would retain creative control, his entire self was wrapped up in the fact that he was responsible for what was perhaps the greatest mythology of our time. That’s a hard thing to let go, and I was deeply sensitive to that. The last thing I wanted to do was insult him.

  I also knew we couldn’t spend this money and do what George wanted, and that saying that to him would put the whole deal at risk. That is exactly what happened. We agreed to a price quickly, but then we negotiated back and forth for several months over what his role would be. It was difficult for him to cede control of the ongoing Star Wars saga, and it made no sense for us not to have it. We went over and over the same ground—George saying he couldn’t just hand over his legacy, me saying we couldn’t buy it and not control it—and twice walked away from the table and called the deal off. (We walked the first time and George walked the second.)

  At some point in the process, George told me that he had completed outlines for three new movies. He agreed to send us three copies of the outlines: one for me; one for Alan Braverman; and one for Alan Horn, who’d just been hired to run our studio. Alan Horn and I read George’s outlines and decided we needed to buy them, though we made clear in the purchase agreement that we would not be contractually obligated to adhere to the plot lines he’d laid out.

  It was an upcoming change in capital gains laws that eventually salvaged the negotiations. If we didn’t close the deal by the end of 2012, George, who owned Lucasfilm outright, would take a roughly $500 million hit on the sale. If he was going to sell to us, there was some financial urgency to come to an agreement quickly. He knew that I was going to stand firm on the question of creative control, but it wasn’t an easy thing for him to accept. And so he reluctantly agreed to be available to consult with us at our request. I promised that we would be open to his ideas (this was not a hard promise to make; of course we would be open to George Lucas’s ideas), but like the outlines, we would be under no obligation.

  On October 30, 2012, George came to my office, and we sat at my desk and signed an agreement for Disney to buy Lucasfilm. He was doing everything he could not to show it, but I could tell in the sound of his voice and the look in his eyes how emotional it was for him. He was signing away Star Wars, after all.

  * * *

  —

  A FEW MONTHS before we closed the deal, George hired the producer Kathy Kennedy to run Lucasfilm. Kathy had cofounded Amblin Entertainment along with her husband, Frank Marshall, and Steven Spielberg, and had produced E.T. and the Jurassic Park franchise and dozens of critical and commercial hits. It was an interesting move on George’s part. We were on the verge of buying the company, but he suddenly decided who was going to run it and ultimately produce the upcoming films. It didn’t upset us, but it did come as a surprise, just as it surprised Kathy to learn that the company she was agreeing to run was about to be sold! Kathy is a legendary producer, and she has been a great partner, and this was one final way for George to put someone in whom he trusted to be the steward of his legacy.

  The deal closed at the end of 2012, and Kathy, Alan, and I began searching for a creative team. We eventually convinced
J.J. Abrams to direct our first Star Wars movie and hired Michael Arndt, who’d written Toy Story 3 and Little Miss Sunshine, to write the script. J.J. and I had dinner soon after he decided to take on the project. We’d known each other from back in the ABC days—he’d made Alias and Lost for us, among other things—and it was important to me to sit down and acknowledge what we both knew, that the stakes on this project were higher than anything either of us had ever done before. I joked at some point during dinner that this was a “$4 billion movie”—meaning that the whole acquisition depended on its success—which J.J. later told me wasn’t funny at all.

  I know how he appreciated that I had as much skin in this one as he did, though, and we could share the burden of what it meant to be responsible for the first Star Wars film not made by George Lucas. In all of our interactions, from initial conversations about how the myth should unfold to visits to the set and the editing room, I tried to communicate to J.J. that I was a partner in the project and not just a CEO putting pressure on him to deliver a great film and a big box office success. There was more than enough pressure to go around for both of us, and I wanted him to feel that he could call me at any moment to discuss any problem he was wrestling with, and that I would call him with ideas that I had. I was a resource for him, and a collaborator, but not someone who needed to put my stamp on this film out of vanity or title or obligation. Luckily, we have similar sensibilities and tastes, and we mostly agreed on what was problematic and what was working. Over the lengthy development and production process, in Los Angeles, and then at the Pinewood Studios in London, in Iceland, in Scotland, and in Abu Dhabi, J.J. proved to be a great collaborator and never lost sight of the enormity of the project or the tremendous burden it carried—with George, with Star Wars fans, with the press, and with our investors.