Lucasfilm force goes with Hasbro, Galoob
As part of the agreement with Galoob, Lucasfilm will take a major equity stake in the San Francisco-based toymaker in addition to receiving a $140 million advance against future royalties.
The agreements with Hasbro and Galoob will extend well into the next century, and give the companies exclusive rights to their respective categories of "Star Wars" toys.
The companies --- which currently share rights to the sci-fi trilogy's toy line and whose previous agreements were due to expire at the end of 1998 --- also were given long-term preferential negotiation rights from Lucasfilm for the same categories of toys based on other, new Lucasfilm features.
The companies' toy lines based on the films have sold an estimated $2 billion at retail since the first film was released in 1977. Sales of the toys from the new films, according to sources, could reach $1 billion in less than 10 years.
Hasbro, which has been a "Star Wars" licensee since the release of the first pic in '77, was granted the exclusive rights by Lucas Licensing Ltd. to core action figures, vehicles and games, plus additional "Star Wars" categories --- including electronic hand-held games, die-cast vehicles and creative play products.
"This is a major triumph for Hasbro," said Alan Hassenfeld, chairman and CEO of the toymaker. "We know the power of 'the Force,' and this agreement gives Hasbro the wonderful opportunity to develop the 'Star Wars' brand over a broad range of categories well into the next millennium."
"Hasbro's proven creativity, passion for 'Star Wars,' and its worldwide marketing expertise made them the compelling choice to be our key strategic partner in the toy and game arena," said Gordon Radley, prexy of Lucasfilm Ltd. "And we are pleased to extend and expand this alliance."
In its agreement with Lucasfilm, Galoob was granted the worldwide license to make small-scale figures, vehicles, playsets and accessories for the next three films. Galoob became a licensee in 1992 with the introduction of its Star Wars Micro Machines.
Galoob has granted the Lucas companies warrants for nearly 20% of the company's issued and outstanding common stock, equal to approximately 3.6 million shares, at an exercise price of $15 per share. The $140 million advance will be payable as the three new films are released.
The first of the three prequels is slated for release in May 1999. The other two films are expected to be released in 2001 and 2003.
" 'Star Wars' is the most successful film-based merchandising program in history," said Gary Niles, Galoob's exec VP of marketing. "With the highly anticipated new 'Star Wars' films, we expect growth of a magnitude greater than ever experienced in our company's history."
With this deal, Lucasfilm now owns a major equity stake in a company that manufactures the majority of its products in China. In addition to the political tightrope Hollywood film companies have had to walk when dealing with China, Galoob has said it could be adversely affected by political and economic unrest in China and its other foreign manufacturing outposts. Galoob is a beneficiary of China's Most Favored Nation trading status with the U.S., an issue that has become a political football for human-rights advocates.
Industry giants Mattel and Playmates Toys reportedly also made pitches for the licenses, which sources said allowed Lucasfilm to leverage its position and collect the equity stake in Galoob as well as the huge advance and royalty fees from both companies in the 15%-20% range --- more than double the normal amount.
