A visionary filmmaker and one of America’s richest people, George Lucas knows a thing or two about building empires.
The "Star Wars" creator’s properties include LucasFilm, LucasArts and Industrial Light & Magic, which generate as much as $2.5 billion in annual revenue.
The "Star Wars" movie series has made $4 billion and counting plus another $9 billion in merchandising. The video game “Star Wars Battlefront” pulled in $115 million the day it went on sale. Now Lucas is setting his sights on transforming an entire industry.
This past weekend, Lucas took the wraps off a first-of-its-kind, $350 million digital studio built on a decommissioned military base on San Francisco’s Presidio. It’s a massive investment designed to consolidate and integrate his many divisions in the face of increased competition from Hollywood and illegal online file-sharing.
Even before Monday’s U.S. Supreme Court decision to crack down on online entertainment piracy, ruling that file-swapping Web sites like Grokster can be held liable for copyright infringement, Lucas was already adapting the way he does business.
At his new 23-acre digital headquarters, his films and the video games on which they are based can be simultaneously produced using the same equipment — a strategic shift that Lucas, in a rare television interview with CNBC, calls a matter of survival in an industry where the future is digital.
“We’re doing it primarily just to stay alive in a very, very tough marketplace,” Lucas said. “What we do in a year in revenues is minuscule to what the big studios, the conglomerates make.”
CNBC: It’s no secret that Hollywood has had a challenging summer. Is the movie-going experience starting to evaporate?
Lucas: We’re in a giant transition. As digital technology takes over, it’s going to change the business paradigm they have to work under, and they haven’t accepted that yet. So it’s not like this is news to anybody.
CNBC: But these companies are now all publicly traded.
Lucas: They’re all publicly traded, so everybody talks about them. And the real problem is they’re corporations and it’s very hard having corporations running an art form.
CNBC: What’s your sense of file-sharing? You've got Grokster, you’ve got BitTorrent. Is this the scourge everybody’s talking about, or is this the future of Hollywood?
Lucas: I think eventually this will be the future of Hollywood, once they get the technology sorted out. Hollywood isn’t interested in investing in any new technologies, or following new directions. The business is going to go down, down, down before they finally realize what Steve Jobs and a few others have already realized — that there is a way to make a business model out of this.
CNBC: As a filmmaker, does it concern you that this kind of thing is going on?
Lucas: I wouldn’t make any more expensive movies, and I won’t. I wouldn’t walk into that and spend $100 million on a movie, because you’re not going to get your money back. I mean, we’ve lost tens of millions of dollars on piracy.
CNBC: Pixar did it. Dreamworks just did it. I think everyone wants to know: What’s going to come next, another Star Wars or a LucasFilm IPO?
Lucas: Neither one [laughter]. No more Star Wars. The advantage I have of not doing an IPO is I can say we’re not going to do another Star Wars. It’s a finished work; the story has been told. And if I were in a corporation they’d say, “No, this is a franchise. We have to exploit this.” And they would beat it to death.
CNBC: So no IPO?
Lucas: And no IPO. Running a public corporation is not something I have any desire to do. So anything that happens to my movies that are good, bad or indifferent, whether people like them or not, is all my fault, and I feel good about that.
