The Force is Back! The Walt Disney Company (NYSE: DIS) has undoubtedly scored a major victory with its $4.05 billion acquisition of Lucasfilm. Star Wars fans will get to rejoice as the movie franchise has already been put back on the map for future releases. This acquisition price is said to be along the same valuation metrics as Marvel and Pixar, but Disney is truly getting a deal here. The Star Wars franchise value is only going to grow substantially in the years ahead under the power of Disney.

24/7 Wall St. evaluated the value of the Star Wars brand in early 2012, and the sales were already more than $30.5 billion. Disney will get to add untold billions of dollars to its future goodwill and accounts receivable for years and years into the future. If you don’t believe it, that figure of more than $30 billion is not adjusted for inflation and Star Wars is now thirty-five years old.

Could private equity firms step in and try to outbid Disney? It seems very unlikely as the deal has already been approved by George Lucas and by Disney’s board of directors. The buyout is also slated to close in the next few months. Disney can also milk more value out of the franchise than private equity firms because of its leverage with theme parks, television channels, merchandise stores, theater agreements, and ultimately due to Disney’s power in making deals ahead.

We did mention before, “Private equity firms, large media companies, and eccentric billionaires would be clamoring to sign confidentiality pacts to see if they could buy the rights to all of the Star Wars franchise.  Owning the rights and intellectual property in the future would be worth much more than just millions of dollars.  Would it sell for $1 billion? $2 billion? $10 billion?” Now we know. It was just over $4 billion.

The release of the 3D film “Star Wars: The Phantom Menace” and the ‘Star Wars: The Old Republic’ MMORPG video game have not changed the landscape too much since the last $30.5 billion valuation. There are supposed to be two more 3D releases ahead for Episode II and III. The relaunch of the movie franchise in 3D is only an incremental gain. What it will do is add to merchandise and product sales and will add to new media sales.

This figure of more than $30 billion is in real money. Disney has already promised future films as well as the incremental sales that will be generated around the films from television, interactive media, theme parks, live entertainment, and consumer products. Can $4 billion turn into $30 billion again? It should be easy for the likes of Disney.

Star Wars Episode 7 is not projected to hit theaters until 2015, followed by Episode 8 and Episode 9 in two or three year increments. When we valued the Ten Most Valuable Movie Franchises of All-Time, the Star Wars franchise was third behind James Bond and far behind the most valuable franchise of Harry Potter. Now imagine the future blockbuster potential here at modern day ticket sale prices. Avatar has had only one film and its total global sales had been tallied at almost $2.8 billion. Disney will likely be able to milk every bit of what Avatar did from consumers in its next Star Wars release.

It was just in 2007 that Forbes noted, “Star Wars’ initial release was followed by another five blockbuster films and a mini-industry of tapes and DVDs, toys, video games and books. Taken together over its 30 years of cultural dominance, the Star Wars franchise has earned more than $22 billion.” Another figure in late 2011 put the total Star Wars franchise value at a whopping $27 billion from Statistic Brain (using Forbes and Lucasfilm data). The figure of over $30 billion was using more recent data, and some of the calculations were extremely conservative.

George Lucas, the creator of Star Wars, is already a multi-billionaire. A year ago his net worth was listed as $3.2 billion by Forbes. So what if his net worth had been $3.6 billion before? Lucas is effectively the sole owner of Lucasfilm and the assets that are coming along with the sale to Disney. He will now be worth more than $7 billion without considering taxes.

Along with the buyout, Disney is getting Lucasfilm’s operating businesses in live action film production, consumer products, video games, animation, visual effects, and audio postproduction. Disney is also getting the substantial portfolio of entertainment technologies that can be licensed out, something which we never included in any valuation analysis because it was not tied solely to Star Wars. That is potentially hundreds of millions or even billions of dollars more for Disney when you stretch those sales and license fees out for years and years into the future.

Another 2007 figure used by Forbes was a monstrous $9 billion in toys with another $1.6 billion at the time having been generated by Star Wars video games.  More toys have sold since then, and more video game sales have been seen. Data from Electronic Arts Inc. (NASDAQ: EA) showed over 2 million MMORPG have sold of ‘Star Wars: The Old Republic’ through the end of January with some 1.7 million online users, but that was before the international access had been rolled out. The game has moved on to some free versions after a $14.95 purchase, but we used a $180 million total sales value at the time and will stick with that figure for consistency.

Lucas Licensing of Lucasfilm had previously noted over $20 billion in consumer sales worldwide. This included Hasbro, Inc. (NASDAQ: HAS) and Kenner toys, merchandise sold, over 100 million books sold (with over 80 New York Times best sellers), museum exhibitions, apparel, consumer electronics, housewares, and the endless lines of other products. The $20 billion figure is now old, and imagine how large this will become with Disney’s entire sales channel and distribution network. Toys R Us, WalMart, and Target each had hundreds of Star Wars items for sale on their websites.

Worldwide box office sales of Star Wars was previously listed as $4.27 billion in total over the last 35 years, and it is not adjusted for inflation. The $20 billion figure for licensing sales has been used for quite some time now. A modern day calculation averaging out video game prices over the last twenty-plus years was $3 billion because more than 100 million units have sold. Then there are DVD sales which were projected at about $2.5 billion, and there was another $800 million or so if you consider movie rentals among DVD, VHS, and Betamax rentals over the prior generation. What would the download value be now? The big wild card is the future value of all of the intellectual property. On top of Star Wars, there are all of the technologies coming along with the deal.

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The grand total came to more than $30.5 billion. How could Disney not match that success at modern prices spread out over the next generation. Imagine huge Star Wars theme feature attractions at Disney Land and Disney World with sales spread out over a decade ahead. Imagine even more television revenues, and on and on. Disney has a true bargain on its hands here. The past sales value was as if all sales suddenly stopped. Disney can likely match George Lucas’ success in far less than the next 35 years.

The value of future films will probably only be incrementally enhanced when the 3D versions of Episode II and Episode III hit theaters in 2013. It is Episode 7, then Episode 8 and 9 which will bring in billions of dollars more from 2015 to 2020 or so. The first film alone should eclipse Avatar’s $2.78 billion, particularly with new writers behind the scripts. To add to the value, there had been four seasons of Star Wars: The Clone Wars animated shows and we did not even include the value of advertising sales in the valuation. Disney will be able to carry more power in advertising sales.

Imagine just trying to calculate the value of the StarWars.com website and digital properties? Alexa’s traffic ranking gave Starwars.com the rank of 2,993 in the United States early in the year, but this has slid to 4,901 as of today as there has been little new developments until this merger announcement. That website has been around since the 1990s and has had millions of visitors. Traffic spikes and its ranking rises ahead of new Star Wars releases, but imagine the spike ahead of a big new movie under the Disney empire. Facebook’s official Star Wars page had 6.8 million “likes” in early 2012, but that is now almost 9 million now.

There is also the dark side of retail and merchandising. There have been endless knock-offs and rip-offs that could easily be hundreds of millions of dollars or more. Again, Star Wars is 35 years old. We projected just a 10% recapture, but with Disney’s existing inroads being made in China perhaps it can get better results in preventing the knock-off and rip-off sales. To value a $1 billion figure in rip-offs is not even $30 million in illegal sales in each of the last 35 years. Disney will have to curb this ahead.

Then there is the resale market. To assign a value of over $1 billion here is simple. Again, that would be not even $30 million per year on average. If Lucas has been using a $20 billion figure, a $1 billion resale market value is more than conservative. This will also only grow through time when you add up sales of second-hand books, used DVDs, merchandise, eBay, Amazon, garage sales and more is huge. There is also the collectibles sales at Star Wars and comic conventions to consider and very little of that ever goes to the parent company. Still, this would likely be another $1 billion at least. When we threw the valuation of over $30.5 billion early in 2012, Amazon had 80,821 items and eBay had 383,230 results for shoppers or bidders under “Star Wars.”

There have been many offshoots of Star Wars, many of which are documentaries and spoofs. Comedians have used Star Wars as the basis for their skits, and there have probably been thousands of Star Wars fan clubs on campuses which spend money and exchange goods on all things tied to Star Wars. Again, that is over 35 years but these will only continue in the next generation.

Coming up with a franchise value of over $30.5 billion sounded massive at the start of the year. That figure will have grown since then. Now it is Disney’s turn to take its $4 billion or so and go get the next $30 billion. Is there any reason that Star Wars has to end its films after the ninth episode is completed or any reason that Disney would limit itself to 3 films in the next decade? Of course not. Disney has just bought a multigenerational blockbuster to add to its franchise.

24/7 Wall St. originally suggested that perhaps George Lucas could have considered an IPO or a sale. It was the sale route that came to fruition. Buying Lucasfilm for just over $4 billion sounds high, but it isn’t when you consider the chance to generate the next $30 billion. Now Disney gets to put its force behind The Force.

JON C. OGG

Sources: Lucasfilm; Lucas Licensing; Disney; Box Office Mojo; Forbes; Statistic Brain; NPD; GameStop; Electronic Arts; GameStop; StarWars.com; VGchartz.com; HollywoodReporter.com.

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