How Star Wars Makes So Much Money

On October 19 a new trailer for Star Wars: The Force Awakens aired during Monday Night Football:

Close to an hour before, Force Awakens director JJ Abrams tweeted this note:

Three minutes after the trailer was shown, tweets-per-minute spiked to a whopping 17,000 (283 a second).

Where are we going? To how Disney uses its market power.

Star Wars Revenue

Revenue explanations for the December 18 opening weekend focused on screens. Talking about the number of screens–close to 3900–and a p.s.a. (per screen average) of $53,000 or so, Disney is aiming for a box office record of more than $200 million. Wielding some monopoly power, Disney was said to have asked for an unusually high 60 percent cut of ticket revenue and a four-week minimum stay in larger theaters.

For merchandise, when a historic franchise (Star Wars) combines with a massive marketing organization (Disney), the result is a monumental blitz. Retailing blogs have observed an unprecedented level of activity. Think Legos and Hasbro, CoverGirl and Sony all paying hundreds of millions to Disney for permission to produce Star Wars toys and games and make-up.

For those of us who want to look like droids, Cover Girl suggests Gold #40:

From: Forbes

Disney itself has been adding to its California and Florida theme parks with 14-acre Star Wars expansions. It has been streaming and selling DVDs of old Star Wars films. There are stormtrooper necklaces and Star Wars sweatpants and I am sure I have left out a whole list of money makers but you get the idea.

Our Bottom Line: Oligopoly Power

When looking at Star Wars’ massive trailer audience during Monday night football, Disney’s social media presence, its merchandizing network and its pricing power, you can think oligopoly.

The markets in which oligopolies like Disney compete are composed of few sellers and millions of buyers. While those sellers have price making power and huge production capability, many of them face the challenge of product differentiation. And that is one reason Disney spent $4 billion dollars on Lucas Films to get Star Wars.

You can see below how oligopoly compares to the three other market structure categories and where Disney fits into the picture.