Is there life after 'Star Wars' for Lucasfilm?

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(Full New York Times Article can be seen - www.nytimes.com/2005/05/01/business/yourmoney/01star.html)

Is there life after 'Star Wars' for Lucasfilm?

By LAURA M. HOLSON
Published: May 1, 2005

HERE is a question fit for Yoda: Now that the director George Lucas has finished the last of his six "Star Wars" movies, what will become of his company, Lucasfilm, the entertainment empire that Anakin Skywalker built?

o hear Mr. Lucas tell it, Lucasfilm will be less ambitious, not more. There will be no more live-action, blockbuster movies, he said, and that means fewer peaks and troughs. In the past, the company's profits would soar during years when a "Star Wars" film was released, only to fall off a cliff between movies.

From now on, he said, Lucasfilm will be a "widget driven" enterprise, churning out books, video games and television shows, with a more predictable rate of return of 10 to 20 percent a year. Eventually, he said, the hit-driven cult of personality surrounding both him and "Star Wars" will give way to "a sane reality."

"I have no intention of running a film company," said Mr. Lucas, whose new film, "Star Wars: Episode III - Revenge of the Sith," will be released this month. "That is the last thing in the world I'd do."

"I'm trying to get back to that place that the company functions without me and 'Star Wars,' where they don't need some genius at the head to run the company," this multibillionaire added. "What I am doing is so I don't need to be a visionary."

But as Lucasfilm enters its post-"Star Wars" phase, it is far from clear whether the handpicked executives who have worked so closely with Mr. Lucas for decades will emerge as leaders in their own right. More to the point, those who know him wonder how much control he is ready to give up.

Mr. Lucas, 61, started the company in 1971 in Marin County, north of San Francisco, as a production vehicle for his movies, but he has since compiled a dizzying array of entertainment businesses that would make any Hollywood studio chief jealous. They include video games (LucasArts), special effects (Industrial Light and Magic), sound editing (Skywalker Sound) and "Star Wars" product licensing (Lucas Licensing).

As the sole owner of Lucasfilm, a company that analysts estimate has nearly $1 billion in annual revenue and virtually no debt, Mr. Lucas has no one to answer to - and he can manage the transition from "Star Wars" as he sees fit. "I don't have to do anything," he said in an interview last week from his office at Skywalker Ranch near San Rafael, Calif. "I can work for a year to get the company in gear without rationalizing it."

Over the next several months, he said, he plans to concentrate on revving up future projects, including two recently announced "Star Wars" television series. The goal, he said, is to build the Lucasfilm archives with hundreds of hours of digital programming, so that one day the company's executives can start their own television channel or form some other new concern.

COLLEAGUES who have known Mr. Lucas the longest said a revamping of the company - including a rethinking of his own role - was inevitable. "Is it a time of change? Yes," said Jim Morris, a 17-year Lucasfilm veteran who oversaw its special effects and sound divisions before he joined Pixar Animation Studios last year as a producer. "Are there issues with him letting go? Probably. But when you take the whole package, I wouldn't bet against him. In George's mind, he would see, over time, building a creative bench."

Above all, he said, "George wants options." And those options include, of course, taking the company public one day.

This summer, Lucasfilm's roughly 1,500 employees will move into the Letterman Digital Arts Center, the company's newly built headquarters in San Francisco. Mr. Lucas spared no expense in designing the $350 million campus, which is in the Presidio, a former military base, and offers sweeping views of the Golden Gate Bridge. He added, among other things, a serpentine creek constructed from the remnants of a stream bed he bought from a Northern California farmer.

Some Lucasfilm employees have protested the move to the new headquarters, saying they would have to uproot their families in Marin County or suffer a commute of an hour or more. But several top executives say that having nearly all the employees together in one facility for the first time, far from the mystique of Skywalker Ranch and Mr. Lucas, may aid the evolution to a less Lucas-dependent environment.

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"It makes clear sense to be looking at a life without George to some degree," said Howard Roffman, president of Lucas Licensing, who joined the company in 1980 and has served both as Lucasfilm's general counsel and chief operating officer over the years.

Alan Keith, vice president for administration at Lucasfilm, added: "George's challenge is coming up with the next creative generation."

Over lunch at the dining hall at Big Rock, Lucasfilm's corporate campus next to Skywalker Ranch, Micheline Chau, the president and chief operating officer, said Mr. Lucas began thinking about overhauling the company in 2002, just after the release of "Attack of the Clones," the fifth "Star Wars" film made.

Back then, the company was criticized for several missteps, she said. Licensees were stung by lackluster merchandise sales after the release of "The Phantom Menace" in 1999 and were worried about more of the same with "Attack of the Clones." Poorly conceived "Star Wars" video games flooded the market, turning off fans. And I.L.M., the special-effects division, was facing increasing competition as filmmakers became more adept at creating their own effects.

Lucasfilm executives were getting antsy, too. Some left; others sought new opportunities. "We wanted to set ourselves up after 'Episode III,' " said Mr. Keith, referring to the new film, "Revenge of the Sith," the sixth in the series but third in the chronology.

Mr. Lucas faced a similar quandary before and after the release of "Return of the Jedi" in 1983, when many people were predicting the demise of both "Star Wars" and Lucasfilm. During a noon meeting in 2002 in Mr. Lucas's office overlooking a vineyard and an artificial lake, Ms. Chao recalled recently, she posed this question to him: "What do we want to be?"

In a sense, Lucasfilm has always served two masters: Mr. Lucas and everyone else. I.L.M., and Skywalker Sound earn the bulk of their revenue working for people other than Mr. Lucas. Skywalker Sound, for instance, derives at least 90 percent of its business from audio post-production for films. In the last 10 years, almost 90 percent of I.L.M.'s business has been for non-"Star Wars" movies.

By contrast, the video game maker LucasArts and Lucas Licensing have concentrated mainly on creating and distributing "Star Wars" merchandise.

Indeed, the "Star Wars" movies and products have generated most of the profits. All told, the movies have earned revenue of more than $3.4 billion at the worldwide box office, which includes $1.8 billion in the United States. The company has reported sales of $9 billion in merchandise. Lucasfilm has also sold 130 million "Star Wars" DVD's. "The success of 'Star Wars' has allowed George to do many things," said Jim Gianopulos, chairman at Fox Filmed Entertainment, which distributes Mr. Lucas's movies.

Ms. Chau's conversation with Mr. Lucas prompted two years of talks involving them and other top executives, resulting in the mandate to make the company driven less by both "Star Wars" and Mr. Lucas. While major decisions are not made without consulting the director, Ms. Chau and others have much leeway. "We are not a democracy," she said. Still, she added, "We've never been, 'What would George think?' We've never run our businesses like that. We have to stand on our own two feet."

THE technological heart of Lucasfilm is I.L.M., the place where many of Mr. Lucas's most interesting concepts are born. Pixar Animation Studios, for one, got its start there. (It was sold to Steven P. Jobs, the Apple Computer co-founder, in 1986.) Some of I.L.M.'s advanced film-editing technology was sold to Avid Technology in 1991 and became a cornerstone of that company.

I.L.M. has worked on the "Harry Potter" and "Pirates of the Caribbean" movies, among others. But in recent years, the division's dominance in special effects has been tested as competitors have blossomed.

Chrissie England, the president of I.L.M., said the effects division would be more flexible in the future. It has already lent some visual-effects supervisors and producers to work specifically with directors outside Lucasfilm on special-effects projects, she said, and has been sharing proprietary information. And once I.L.M. moves to San Francisco this summer, its executives expect to work more closely with the video game division and the new television animation team.

"The key here is to be able to share people and technology," Mr. Keith said. "Ultimately, there will be crossover when we get further down the road."

One division ripe for an overhaul was LucasArts, the video game business that was formed in 1982 and is vital to the post-"Star Wars" success of the company. Last year, Ms. Chau interviewed several candidates to run the division and handed the job, after a three-month tryout, to Jim Ward, who joined Lucasfilm in 1997 to head a newly formed marketing division.

For inspiration, Mr. Ward keeps two 12-inch-high figures on the credenza behind his desk: one of Gen. George S. Patton, the other of President Dwight D. Eisenhower, also a general. In the corner of the office, Mr. Ward has a life-size replica of a red-and-black-tattooed Darth Maul from "Phantom Menace."

Under Mr. Ward, LucasArts has shown signs of renewed life, although it is facing brutal competition. It will distribute five or six video games a year, some made by outside developers. Last August, Mr. Ward streamlined the division, laying off 31 people. He demanded that game developers meet their proposed deadlines and develop better stories. And he is adamant about creating new intellectual property.

"It's not without challenges," he said. "We can't sit here and say we've got everything figured out."

In January, LucasArts released one of its fastest-selling non-"Star Wars" video games in recent history, a combat game called "Mercenaries"; 1.1 million have been sold. Mr. Ward also wants to revive the "Indiana Jones" franchise.

Ms. Chau, who was recruited in 1991 to be chief financial officer, brings a solid corporate sensibility to Lucasfilm. When Mr. Lucas wanted to buy a corporate jet in the early 1990's, she said, she told him that it was too expensive. (He still asks for one, she said, but less often. Instead, she charters him a jet.) More recently, she told Mr. Lucas to stay away from the unfinished site of the San Francisco headquarters unless he was invited. So far, he has been asked to drop by three times.

"George and I had a conversation about freedom and letting go," she said. Still, she acknowledged that the detail-obsessed Mr. Lucas had seen hundreds of photographs and illustrations for the new complex, and that the two had pored over 20 outside window designs and more than 100 fabric swatches for the material-lined walls of the main movie theater.

But as much authority as is afforded to Ms. Chau, Mr. Lucas remains the arbiter of all things "Star Wars." And that is unlikely to change. Mr. Roffman recalled that in 1990, he asked Mr. Lucas for permission to hire science-fiction writers to create novels based on the series. Mr. Lucas was skeptical at first but finally agreed. Mr. Roffman has released more than 65 titles, and the books have become a steady profit center.

"You know we're unusual in the sense that we're bounded by this visionary legend who has created things that have stretched the boundaries of this world's culture," he said.

It is precisely that sentiment, though, that may limit Lucasfilm. Critics warn that the company is so tied up in the "Star Wars" mythology that it will be difficult for Mr. Lucas to distance himself.

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INDEED, despite his stated desire to pull back, Mr. Lucas announced at a "Star Wars" fan convention in Indianapolis two weeks ago plans to make two television series based on - what else? - "Star Wars." These include a 3-D, animated, half-hour show based on the "Clone Wars" series, which Lucasfilm created for the Cartoon Network, as well as a live-action series based on supporting "Star Wars" characters.

What is more, Lucasfilm's new animation team will be located at Skywalker Ranch, near Mr. Lucas, not in the new San Francisco complex with most of the rest of the employees. (Lucasfilm recently started a Singapore operation, which is not yet up and running.) And Rob Coleman, a creative executive from I.L.M. who was Mr. Lucas's animation director for the last three "Star Wars" movies, will be among those working with Mr. Lucas on the TV shows.

In fact, Ms. Chau said that the company had hired a handful of writers and directors to work with Mr. Lucas and that she hoped they could do projects on their own once they gained the director's trust.

"What is important for management," Ms. Chau said, "is that we put people in front of George who can interact with him, work well with him and who are not afraid of George."

But Mr. Lucas has made it clear that he is not interested in training a ready army of filmmakers. "It's not like we have to come up with a movie every year," he said, concerned about what has become a hit-driven business. "I don't want to be Pixar."

His ambition for Lucasfilm, he said, is far more ordinary. "I'm not depending on these people or a new group of people to take the company into a megahit reality," he said. "I'm trying to build a company where we don't make miracles but we do a good job."

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Yes, I know Fishyahoo started a topic on the television series a long time ago... but this is more of a business article.

So, for all those highlighted (in orange) bits, check out the original thread - myscififan.proboards40.com/index.cgi?board=starwars&action=display&thread=1114566671