Disney buys Star Wars studio for $4B: As the cognoscenti now know, Disney swooped up Lucasfilm, of Star Wars fame, for $4B (half cash, half disney stock). George Lucas, Lucasfilm’s visionary and legendary sole owner became richer and now owns about 40m shares of The Walt Disney Company.
Why did Disney do it? Disney has been building up a war chest of comic book, fictional and mythological characters (its purchase of Marvel a couple of years ago, for example gave it 5000 such characters including Spider Man and many other lesser known ones), with the intent to further monetize them via sequels, prequels, amusement park rides (anyone want to guess how popular and money generating Star Wars themed Disney Park rides will be?). So expect Disney to really milk this one in a way that is tasty for fans and shareholders. Lucasfilm’s video game unit, LucasArts may (not sure or clear at this time) boost Disney’s own highly anemic performance in the ever expanding and growing video game market.
A huge part of the acquisition is the merchandizing. In fact, in terms of cash flow, the Disney will realize the cost of the acquisition in about 5 years (though becoming NPV-positive may take more time, based on costs):
Lucasfilm’s consumer-products revenue this year will be comparable to the $215 million Marvel generated in 2009, when Disney acquired it…suggesting 2012 sales of about $860 million for all of Lucasfilm. Disney seeks to expand “Star Wars” merchandise beyond toys and sees international markets, now 40 percent of consumer-product revenue, as a growth opportunity, he said.
And why did George Lucas do it? He was getting old and at 68, wanted to pass the baton on to someone who would keep the flames burning. Nice way to do it, if you ask me.
Amazon – becoming a book publisher is hard: Amazon, as we know, started with books. And while it tries to sell everything to every customer out there, it hasn’t stood still in the book industry either, where it has tried to integrate forward and backward in the book industry. In terms of backward integration (replacing or supplanting the big publishing houses it bought the books from, for sale on its website), it has been trying very hard to become a publishing house.
The economics are simple. A $10 book might give the author $2 in royalties or so, but generate $3 for the publishing house and $5 for the retailer. So Amazon wanted to see if it could eliminate the $3 that the publishing houses (Penguin, Random House et al, from my post yesterday) captured, capture some more of that value itself and cut customer prices some more.
So why the trouble in paradise? Two things. One, many of the big publishers out there still supply most of the physical books and the eBooks that Amazon sells. And they haven’t been too happy in the past, which means that the number of books they make available to Amazon goes down. Two, and more importantly, authors are getting cold feet – especially the famous ones (whom the publishing houses made famous in the first place) so they are not signing up with Amazon to publish their books. And they are getting cold feet because of what is happening to authors that make Amazon their publishing house:
…But a likely factor in the book’s poor sales is its severely limited availability. It wasn’t stocked in the 689 stores of Barnes & Noble Inc., Wal-Mart Stores, or Target. Some independent booksellers don’t stock the title either. Nor is the digital book for sale in e-book stores operated by Sony Corp., Apple Inc. or Google Inc.
The boycott of Amazon Publishing is deliberate on the part of these book sellers. Like the WSJ article quoted above says, why would a Barnes and Noble store promote a book published by Amazon?
Still, as always, never discount Amazon. It will be interesting to see how it solves this problem.
More rules = corruption: While I find corruption morally repugnant, the sadder thing about corruption is that instead of a million people becoming more prosperous, only a 100 become millionaires because businesses don’t get started, competition doesn’t thrive, jobs are not enabled and prosperity cannot take root.
An interesting article in The Economist argues that as opposed to the lack of no rules like in Somalia which is not exactly known for its thriving multinational corporations, few simple clear (enforced I would imagine) rules go a very long way in promoting businesses – and by implication, the virtuous cycle of value creation and capture (this blog’s raison d’être, as I never tire of reminding my readers).
(Above: The chart lifted from The Economist’s article)
The short piece is worth a read.
Citi’s CEO ouster was a result of its chairman’s Machiavellian moves: A fascinating piece in the New York times details how Citi’s CEO (until a few days ago), Vikram Pandit, was ousted because of its Chairman’s well orchestrated and executed campaign over a number of months that culminated in
…Mr. Pandit, the chief executive of Citigroup, was told (by the Chairman, in a face to face meeting) three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause.
The choice was his.
A longish but fascinating piece.