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Disney’s Purchase of Lucasfilm Report (Assessment)

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Updated: Feb 17th, 2022

Introduction

Negotiations are an integral part of every person’s life, and they are considered in several areas of applied research. For instance, management technologies, communication practices, and conflict studies of social and international relations are crucial for this process. In professional terms, negotiations previously constituted a significant part of the activities of a narrow circle of politicians and diplomats. Now, as the world becomes more open and interdependent, the negotiation process has become an integral attribute of the life of a more significant number of individuals and organizations. According to Caputo (2019, p. 2), there are always “differences between the interests of the parties and the resulting conflict between opposing positions.” In this regard, the problem of training professional personnel with negotiation skills is of great importance.

The term negotiation is most often understood as communication between the parties to reach an agreement. Negotiations are also defined as the relationship between people, designed to reach an agreement when both parties have coinciding or opposing interests. Negotiations are a complicated process, the participants of which enter into various relationships, using at the same time a variety of methods of influence on each other. According to Jung and Krebs (2019, p. 6), “the choice of tactics used within negotiations depends inter alia upon the prioritization of negotiation objectives, bargaining power, the tactic applied by the negotiating partner and the individuals’ personal attitude towards negotiations.” One of the most considerable difficulties is to organize the negotiation process as a whole and to manage it from beginning to end.

It is essential to save all the information related to negotiations. Kling, Nugent, and Van Dyke (2019, p. 75) state that “the process should be well documented and reflected in minutes of meetings, but generally not to the extent of the minutes including specific answers to specific questions.” Another essential detail of negotiations is a particular form of communication. The fact that communication means information exchange between people to deliver something or, for example, to induce action. Moreover, the purpose is to convince the counterparty, get consent for something and cause it to take some action.

One of the biggest deals in the film industry in recent years was the purchase of Lucasfilm Ltd for $4.05 billion by Disney. Under the leadership of CEO Robert Iger, Disney used an acquisition strategy. Disney was looking for companies with assets in the form of technical knowledge or intellectual property, thanks to which he subsequently intended to increase their value. This way, in addition to Lucasfilm, they also acquired Pixar Animation, Marvel Entertainment,t and most of Fox’s entertainment assets (FBC) (Shonk, 2019). The purpose of this paper is to discuss this case and consider the main negotiations strategies and concepts used in it.

Case Description

For George Lucas, Lucasfilm Ltd was the work of his life. He was the progenitor, director, and mastermind of the Star Wars universe. Working on the future of his company, Lucas began to prepare a negotiating position long before the sale negotiations themselves. His trustees were appointed to senior positions in the company, and the creative process of the next episodes of Star Wars encompassed long-term prospects. Lucas not only enlisted the support of screenwriters but also provided the opportunity for the participation of the original star cast for future filming.

Thus, Lucas strengthened his BATNA (best alternative to a negotiated agreement) in sales negotiations. He understood they t by taking the above measures, the sale object gets an additional value that can be appreciated not only by Disney but also by other potential buyers. George Lucas understood that another trilogy could take another ten years of his life. It is also important to note that according to the terms of the deal, Lucas has secured his participation in the creation of future episodes of Star Wars as a creative consultant and project mentor. This condition satisfied the interests of both the seller, who takes care of his “brainchild” and the buyer. Disney understood the importance of the ancestor’s involvement in the creation of the fictional Star Wars universe for fans around the world.

After the deal took place, in a Disney press release, Lucas said he was happy to pass on his “brainchild” to a new generation of filmmakers. Lucas regarded this deal as something irreversible and binding and wanted to get the most out of it: transfer the franchise in good hands and get the appropriate reward. Thus, by strengthening the BATNA, one can also increase its value in the eyes of the counterparty (Maaravi, 2018). This is a vital lesson for negotiators of any kind.

At the same time, Disney CEO Robert Iger, during negotiations, defended the position that the final decision on any future franchise films would belong to Disney. It was quite complicated because Lucas was used to controlling all aspects of Star Wars. Although the terms of the deal involved collegiate decision-making king, Lucas accepted the fact that Disney would ultimately control Star Wars (Star Wars stories: Lucas and a strong BATNA, passed over, 2019). Lucas postponed the transfer of Disney his plot developments for the next episodes of Star Wars to the last. Eventually, the deal was completed, and Lucasfilm, along with franchise rights, was sold for $4.05 billion.

After some time, Disney decided to use his right and changed the storyline of Star Wars. What happened is what Lucas was most afraid of: Star Wars didn’t follow the creator’s intended path, and creative control was lost. This is an example of how expectations sometimes remain unjustified in negotiations. Undoubtedly, Lucas understood that in the future, there is a high probability that his real influence on the world of Star Wars will only decrease. In any case, the measures he took to strengthen his BATNA were the most successful tactics for negotiating. This allowed him to sell his company for a high price, as well as obtain the right to participate in the creative process.

Therefore, competently developing the BATNA, people get an advantage in negotiations. The best negotiators achieve the desired result, understanding what their alternatives are if the transaction fails. However, once the deal is signed, even the best BATNA can lose its strength. Star Wars the and strong BATNA of Lucas are left behind. The price of the agreement seemed huge, but after a few years, Disney paid off these expenses, and George Lucas, thanks to this sale, became America’s richest celebrity. However, judging by the public statements of Lucas, he experienced grief and frustration, because his expectation that the continuation of the filming will take place under his leadership was not implemented.

Negotiations Theories and Concepts

International negotiations in business and politics are aimed at solving very rational and pragmatic tasks, pursuing primarily material interests, but they contain not just a simple psychological context. Negotiations are often filled with passions, intertwining ingenious intrigues, clash of characters, and ambitions. Lochner (2017, p. 1) claims that “negotiating involves a dimension that is most often underestimated or ignored: emotions.” Negotiations can also be seen as the science and art of reaching agreements in the communication process. The theory of international negotiations as science should provide answers to very complex questions. For example, it is crucial to correctly interpret the position of negotiating partners belonging to different cultures in a conflict situation. It is also important how to ensure that foreign partners understand another party correctly and how to come to an agreement if neither side gives up their business interests.

Today, theorists of different directions offer contradictory answers to these questions. Nevertheless, everyone agrees that negotiations are a special kind of interaction between people that can and should be learned (Fells, 2016). However, the art of mastering negotiation strategies comes only in practice. If people talk about international negotiations as an art, this is primarily the art of the possible. It balances on a fine line between “convincing” and “winning,” which is always associated with risk. According to Zartman (2019, p. 16), “critical risk is defined as a comparative calculation.” Participation in the negotiation game, as in any other, makes sense, since its results are not predetermined and, therefore, each of the players has a chance.

Negotiations are a form of risky activity during which participants dispute with each other the opportunity to determine the nature of future business agreements. The principle of uncertainty is critical here; it is reflected in the concept of risk, and the skill of an experienced negotiator is to minimize this risk. According to Triantis (2018, p. 213), “the risk prioritization analysis helps to order which risk factors and events need to be addressed first.” Considering negotiations as the art of compromise, it is crucial to pay attention to the techniquesmaneuvering anand ando tolerance (Rojot, 2016). Each negotiator needs subtle intuition, high skills, and knowledge of the cultural traditions of the negotiating partners to put their ideas into practice.

Approaching international negotiations from the standpoint of science, people must first separate this form of business communications from other interactions in the field of politics and business. Comparing negotiations with different business practices (consultations or business meetings), one can notice that negotiations have a pronounced procedural aspect (Cellich and Jain, 2016). Negotiations as a process represent an integral unity of the content, the process of communication,n and specific procedures, despite cultural differences of the participants. The procedural aspect of negotiations is a regulation, an agenda, and an agreement of the participants on the rules for negotiating (Bradlow and Finkelstein, 2018). Negotiations are also distinguished from other types of communication by the presence of a common problem among the contracting parties, which must be solved by joint efforts. The focus on a collective solution to the problem is the primary function of negotiations. Its implementation depends on the degree of interest of the participants in finding a mutually acceptable solution.

With the advent of the global information web and new electronic communications, negotiations are becoming part of global information flows. The modern technological revolution dictates new principles and rules of communication. Harkiolakis, Halk,ias, and Abadir (2016, p. 212) state that “the richness of the Web as a medium that encompasses more and more of our senses, will reduce the need for face-to-face negotiations.” It is also impossible to imagine a modern concept of negotiations without information technology public relations. For this reason, today the negotiating partners are often closely following not even each other, but the media coverage of the negotiations.

The struggle for the economic and political spheres of influence, for capital and power now unfolds more in the virtual information space and acquire new, post-traditional virtual forms. The task of the negotiators is now not to foresee the next step of the partners, but to understand what impact this will have on public opinion (Balks, 2016). Propaganda techniques and advertising are often more important than the real practical steps of partners at the negotiating table. Information technology can change the course of public discussion, reverse an undesirable topic or, on the contrary, build a subjective understanding of the problem in the form of public opinion. The modern concept of negotiations requires a review of old schemes and rules, relying on the latest information technology and sociocultural priorities (Schranner, 2018). Today, being prepared for negotiations means not only to select the negotiation dossier dedeveloping ESOP strategy but also to conduct an information campaign in the media. It is necessary to use new information technologies to build public relations, subtly influencing world public opinion.

Case Analysis and Discussion

The Lucasfilm case study is an interesting negotiation example to which the theories described above apply. It is worth starting with the fact that George Lucas, understanding the full value of his creation, was interested in presenting it to the buyer in the most favorable light. At the same time, he wanted to keep many rights: assistance in working on new films and the participation of actors from past films in new ones. Undoubtedly, Lucas developed a strategy ofbehavior inn in potential negotiations for many years and long prepared for the sale of Lucasfilm. Thus, using the “science” of negotiation, he created a unique selling proposition that made his product the most valuable.

However, even after assessing all the possible risks, Lucas could not influence the outcome of the transaction. From the very beginning, he realized that his main threat was to lose control of the films. He wanted to keep the ability to manage the shooting process as a creative consultant. For him, this franchise was one of the essential parts of his life, so he was not ready to completely give it into the wrong hands. However, it can be seen now that these expectations were not met. The main risk that Lucas feared was embodied in reality, and he was no longer responsible for working on films.

Unfortunately, he could not do anything, because, during the negotiations, Iger took a more competitive position. He insisted that any final decision on new films would be made by Disney. This gave him a certain level of freedom in creating the new Star Wars, as Iger and his company could change the plot at their discretion. Formally, the right of Lucas to participate in decision-making about films was retained, and he can be a part of their discussion. However, he can no longer influence the final result, and the reason for this is the not well thought out position in the negotiations.

It is worth noting the importance of the media sphere in the negotiations under discussion. In this situation, the most considerable popularity of both parties is undeniable. The result is a massive interest of the media and the public in the conflict. In addition, given the level of development of the Internet, anyone could freely express their point of view on this issue. For this reason, negotiations between Lucasfilm and Disney have become a highlight in recent years. The severity of the conflict is fuelled by the number of Star Wars auaudiencesOne of the big problems was that the idea of ​​selling a franchise did not inspire many of these thousands of fans. Many were afraid that this would ruin the film and make Star Wars utterly different from what it used to be (Shonk, 2019).

Given these characteristics of the time, Iger’s critical task was to calm this army of fans. This was partly necessary because when buying Lucasfilm, the attention of these people switched to his work. This imposes a substantial level of responsibility on him, partly for moral reasons, partly because the more extensive the audience is, the more Disney could earn. In addition, working with the audience through various media was important for Lucas. He made a firm decision to sell the company, so he needed to reassure his audience. It was essential for him to convey to them the idea that the films would remain the same as before. For him, in this situation, issues of loyalty to the audience rather than money were more important. Star Wars, undoubtedly, occupied a considerable place in his life, so he realized that their fans should not lose anything after he sells this company.

Thus, one of the most important reasons for not having the most favourable outcome of the negotiations for Lucas is that he compromised his terms and agreed with Iger. Undoubtedly, this transaction is financially profitable for him; however, in the end, letting Disney make all the final decisions regarding Star Wars, he seems more like a losing party. This may indicate his lack of preparation for the negotiations, which is crucial for the process (Mautner-Markhof, 2019). In addition, perhaps he was not firm enough during direct communication with Disney. In any case, as a result, the Star Wars franchise continues to thrive under the leadership of Iger. Moreover, thanks to the popularity of the franchise, Iger’s investments paid off very quickly. Thus, the deal can be called not the most correct from a moral point of view, but competent about finances.

Conclusion

The described case is a vivid example of negotiations on a tremendous deal. It is unusual and noticeable since the main object of sale is a franchise with a vast audience that has been popular for decades. This means that the number of people interested in the transaction is incredibly high. For this reason, the parties must behave carefully, make the right decisions and show, a high level of morality and responsibility.

The financial side of the issue also plays a critical role, since the transaction value exceeds four billion dollars. This forces both parties to consider all the details of the negotiations so as not to lose in something unnoticed. As a result, for instance, Lucas significantly won in terms of money but was not satisfied with the moral consequence. Iger, on the contrary, was able to recoup costs while gaining full control over the franchise quickly. This indicates his more correct and firm approach to these negotiations.

It is worth noting the importance of risk assessment in these negotiations. It is a crucial point for the phenomenon of negotiations in general. For example, if Lucas imagined the consequences of the deal, he would reconsider his view on the transfer of rights to Disney. However, taking a risk, he found himself in a situation that he was most afraid of, and lost the ability to influence films. Undoubtedly, his position has advantages, such as financial well-being, which is likely to remain with him until the end of his days. However, he remained demoralized because he could not defend his position in communication with Disney or did not take into account the details of the transaction.

The described case seems to be extremely interesting for studying negotiations in general and, in particular, international negotiations. The size of the transaction is so large that any action can lead to significant consequences. The amount of money invested in the project by Disney and the audience, which excitedly watched the process, play a vital role in the deal. With a competent negotiation strategy, the parties were able to conduct the transaction accurately and competently enough so that both parties would benefit, and the audience remained satisfied. However, it is worth remembering moral issues, and in this situation, this side of the transaction is less successful, since one of the parties stayed at a disadvantage.

References

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  3. Caputo, A. (2019) Strategic corporate negotiations: a framework for win-win agreements. Lincoln: Palgrave Macmillan.
  4. Cellich, C. and Jain, S. C. (2016) Creative solutions to global business negotiations, 2nd ed. New York: Business Expert Press.
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  6. Harkiolakis, N., Halkias, D. and Abadir, S. (2016) E-negotiations: networking and cross-cultural business transactions. New York: Routledge.
  7. Jung, S. and Krebs, P. (2019) The essentials of contract negotiation. Cham: Springer.
  8. Kling, L. R., Nugent, E. and Van Dyke, B. (2019) Negotiated acquisitions of companies, subsidiaries, and divisions. New York: Law Journal Press.
  9. Lochner, N. (2017) The role of emotions in effective negotiations. Munich: GRIN Verlag.
  10. Maaravi, Y. (2018) You deserve better: success in real-life negotiations! Herzliya: Yossi Maaravi.
  11. Mautner-Markhof, F., editor (2019) Processes of international negotiations. New York: Routledge.
  12. Rojot, J. (2016) Negotiation: from theory to practice. London: Palgrave Macmillan.
  13. Schranner, M. (2018) Costly mistakes: the 7 biggest errors in negotiations. Zurich: Schranner.
  14. K. Shonk (2019).. Web.
  15. Triantis, J. E. (2018) Project finance for business development. Hoboken: John Wiley & Sons.
  16. Zartman, W. I., editor (2019) How negotiations end. Cambridge: Cambridge University Press.
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