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The Honolulu Advertiser

Posted on: Sunday, May 22, 2005

'Sith' happens ... and then you buy

 •  Island-born artist helped flesh out 'Sith'

By Wendy Tanaka
Knight Ridder News Service

Not a "Star Wars" fan? Doesn't matter.

Gregory Yamamoto • The Honolulu Advertiser

Because like it or not, you're already surrounded by the toys, food, video games, clothing and other paraphernalia bearing the sounds and images of Darth Vader and Yoda.

At the grocery, you'll find "Star Wars" Pop-Tarts, "Star Wars" M&Ms, "Star Wars" Mountain Dew, and "Star Wars" cereal. At the toy store, figurines such as a Darth Tater Mr. Potato Head. For your cell phone, Chewbacca ring tones. At Burger King, "Star Wars" Kids Meal toys.

Indeed, "Star Wars" has long been much more than a movie series — it's an industry unto itself, generating billions of dollars more in merchandise sales than it does at the box office.

Since the saga of Jedi knight Luke Skywalker debuted in 1977, merchandise sales and promotions tied to the movies have reached more than $9 billion — nearly triple the value of box-office sales for the first five movies combined.

Richard Lancioni, a professor who heads the marketing department at Temple University's Fox School of Business and Management, estimated that merchandise and promotions tied to the coming finale, "Episode III: Revenge of the Sith," could bring in at least $500 million, not including home-video sales. (Lucasfilm Ltd., the company belonging to the series' creator, would not provide video sales figures.)

Overall, merchandise licensing is big business, generating $104 billion in sales last year, according to the International Licensing Industry Merchandisers' Association in New York.

Here's how it works in the movie industry: A company, such as a toy-maker, pays a movie studio a fixed fee to use the movie's name and characters to promote certain products or services. After sales reach a threshold set by the royalty agreement, the studio also receives a percentage from each sale.

Although Disney has been licensing merchandise connected to its creations since at least the 1930s, experts say such activity tied to specific movies didn't really take off until 1977's "Star Wars." They credit "Star Wars" creator George Lucas with taking licensing to its new level.

"The very first 'Star Wars' movie represented the birth of the modern movie merchandising business," said Martin Brochstein, executive editor of the trade publication The Licensing Letter.

After "Star Wars," revenue from merchandise went from "being ancillary income to a line item on the budget that everyone depended on," Brochstein said.

Brochstein said movie merchandising kicked into really high gear a decade ago with Disney's 1994 release of "The Lion King," which generated an estimated $1.5 billion in retail sales.

While licensing has become an important part of movie budgets, it can be tricky business, even for a franchise as successful as "Star Wars."

In 1999, following a 16-year break in the series, Lucas produced the highly anticipated prequel "Episode I: The Phantom Menace" — and overdid the merchandising.

Charles Riotto, president of the merchandisers' association, said Lucasfilm required such high up-front fees that manufacturers had to make large quantities of products in hopes of recouping their investments.

Stores couldn't sell it all.

"It was a lesson learned by the industry," Riotto said. "What seems to be the golden goose still has its limits."

For the final two "Star Wars" movies, Riotto said, Lucasfilm has scaled back on its initial fee requirements.

"It doesn't do a property owner any good if they have unhappy licensees out there," he said.

Lucasfilm representatives declined to be interviewed for this article. Licensees for "Revenge of the Sith" would not disclose financial details of their agreements, but most said they were pleased with their partnerships so far.

"For us, it's part of our DNA," said Eric Nyman, director of marketing for "Star Wars" products at toymaker Hasbro Inc. "We've been a part of this since 1977. In many ways, we've helped build it."

For "Revenge of the Sith," Hasbro has introduced a number of toys and games, including the Darth Tater and the Darth Vader Voice Changer Mask, which makes the wearer sound like the menacing villain.

Masterfoods USA, the Mars Inc. division that makes M&M candies, had not been licensed by Lucasfilm before, but said its new dark-chocolate M&M candy was an appropriate tie-in for the movie. In television commercials, animated M&Ms interact with "Star Wars" characters.

"M&M characters are celebrities in and of themselves," Joan Buyce, a spokeswoman for Masterfoods USA, said. "This was an appropriate icon-meets-icon opportunity for us."

Other "Sith" tie-ins include a limited-edition Kellogg Co. cereal containing marshmallows shaped like R2-D2, C3PO and light sabers; a Call Upon Yoda sweepstakes game sponsored by PepsiCo Inc.; and "Star Wars" theme songs, screen savers and handset games that work on cell phones marketed by Cingular Wireless.

"It sets their products apart from generic stuff on shelves," Riotto said. "You're buying the recognition that consumers relate to."