The phenomenal success of Star Wars: The Force Awakens has prompted Professor Aswath Damodaran (New York University Stern School of Business) to put a value on the Star Wars franchise. Actually, his analysis is an update of a valuation he did in 2012, when Disney acquired the rights from George Lucas.
Good deal: Disney paid $4 billion for the franchise three years ago, but the value has soared to $10 billion now, figures Damodaran (who is a devout Star Wars fan). His blog post includes a full discussion of his approach as well as a link to his valuation spreadsheet.
In addition to box office revenues, the film makes “add-on” revenue from other sources, such as toys, gaming, books, TV shows, and streaming/video. Damodaran’s analysis reveals that, for every dollar the Star Wars films have made at the box office, an extra four dollars in revenue have been generated from these other sources. Interestingly, he cites industry predictions that forecast revenue from streaming to exceed domestic box office receipts by 2017.
Big assumption: Damodaran’s valuation analysis assumes that the next two Star Wars films (due out in 2017 and 2019) will also be big smash hits—as big as the current installment. Over its entire history, Hollywood has tried to duplicate success. Hopefully, it will work out with the Star Wars films because they can be great fun. But most of the time these things do not work out as planned. This editor worked in the industry and saw plenty of examples of this—“surefire” projects that ended up as disappointments or outright disasters. It’s a crapshoot, and the creative people and the executives who believed they could predict a hit were living in a galaxy far, far away.
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