Episode 6 Lucasfilm

Summary Notes


In episode six of Acquired, hosts Ben Gilbert and David Rosenthal discuss Disney's acquisition of Lucasfilm, emphasizing the strategic alignment with Disney's content-centric business model and the potential for leveraging Lucasfilm's iconic franchises like Star Wars and Indiana Jones. They explore the historical significance of Lucasfilm, founded by George Lucas in 1971, and its innovative contributions to film and technology, including ILM and Skywalker Sound. The acquisition, valued at $4.1 billion, is seen as a continuation of Disney's approach to nurturing acquired brands, akin to their handling of Pixar and Marvel, allowing them to operate with a degree of autonomy while integrating them into the larger Disney ecosystem. The hosts also touch upon the financial success of the Star Wars sequel trilogy, particularly The Force Awakens, and the implications of Disney's ability to generate new content beyond existing franchises.

Summary Notes

Pilot's Role in Startups and Growth Companies

  • Pilot is a comprehensive accounting, tax, and bookkeeping service for startups and growth companies.
  • It is now the largest startup-focused accounting firm in the U.S.
  • Pilot is backed by notable investors such as Sequoia, Index, Stripe, and Jeff Bezos.
  • The company operates on the principle that startups should focus on their core product and outsource non-core activities like accounting.
  • Pilot offers a full suite of financial services, including CFO services and investor reporting.
  • They have a broad range of clients, including OpenAI, Airtable, and Scale, and can support companies from the startup phase to the growth phase and beyond.
  • Pilot offers a discount for listeners who use a special link provided in the show notes.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs and in fact now is the largest startup focused accounting firm in the US."

This quote summarizes Pilot's role as a comprehensive service provider for accounting needs, emphasizing its status as the largest firm of its kind in the U.S. for startups.

"Every company needs it. It needs to be done by a professional. You don't want to take any risk of anything going wrong, but at the same time, it has zero impact on your product or customers, things you do uniquely well."

This quote explains the importance of professional accounting services for companies and the rationale for outsourcing it: to minimize risk while allowing the company to focus on its unique product and customer experience.

Acquired Podcast Introduction

  • The podcast "Acquired" discusses successful technology acquisitions.
  • Hosts Ben Gilbert and David Rosenthal encourage listeners to rate the podcast on iTunes and provide feedback via Twitter or their website.
  • The podcast covers a range of topics, including administrative details and acquisition history and facts.

"Welcome to episode six of acquired, the podcast, where we talk about technology acquisitions. That actually went well."

Ben Gilbert introduces the podcast and its focus on successful technology acquisitions, setting the stage for the episode's discussion.

"Just a quick administrative thing. If you like the show, we would love for you to rate us on iTunes."

Ben Gilbert requests listeners to rate the podcast on iTunes to help with visibility, highlighting the importance of audience engagement for the podcast's success.

Disney's Acquisition of Lucasfilm

  • Lucasfilm was founded by George Lucas in 1971 and has produced iconic films and franchises such as Star Wars and Indiana Jones.
  • The acquisition of Lucasfilm by Disney was for $4.1 billion, a significant investment focused on the future potential of the franchises.
  • Despite acquiring Lucasfilm, Disney did not initially have the distribution rights to the original Star Wars movies, which were held by Fox.
  • The relationship between George Lucas and Bob Iger, CEO of Disney, played a crucial role in the acquisition.
  • Lucasfilm's contributions to the industry extend beyond film production to include Industrial Light & Magic, Skywalker Sound, a video game publishing arm, and the licensing of THX sound technology.

"Lucasfilm, Star wars. What more can you say? So George Lucas obviously founded Lucasfilm 1971 in San Rafel, California."

David Rosenthal provides a brief introduction to Lucasfilm and its significance, highlighting its foundation by George Lucas and the creation of the Star Wars franchise.

"Disney announces the acquisition, $4.1 billion."

David Rosenthal states the acquisition price, indicating the significant financial commitment Disney made to purchase Lucasfilm and its associated properties.

"The distribution rights to the original Star wars movies were held by Fox and still are. So Disney was really making a big bet on the future with this acquisition."

David Rosenthal points out that Disney's acquisition was a forward-looking investment, as they did not acquire the distribution rights to the original films, which remained with Fox.

Acquisition and Business Strategy

  • Disney's acquisition of Lucasfilm is discussed in terms of its immediate and long-term implications.
  • The acquisition is characterized as a product acquisition in the near term but has broader implications for Disney's business line in the future.
  • Disney's ability to learn from acquisitions and produce content in-house, as seen with Pixar and Frozen, is highlighted.
  • The conversation touches on Bob Iger's influence and his return to Disney's roots, emphasizing feature-length films and content.
  • Disney's business model and ecosystem are described, showcasing how various elements of the business interconnect and support each other.
  • The sustainability of Disney's revenue streams, particularly from cable subsidiaries like ESPN, is questioned in light of cord-cutting trends.

"This, to me, is a product acquisition in the near term, but it's a lot more in the kind of far reaching future."

This quote summarizes the dual nature of Disney's acquisition of Lucasfilm, indicating that while it is a product acquisition at present, it has the potential to influence Disney's business strategy significantly in the future.

"Disney has this unbelievable ecosystem where everything flows into each other."

This quote describes Disney's business model as an interconnected ecosystem, with each component supporting and enhancing the others, creating a strong and resilient business structure.

Content Creation and Intellectual Property

  • The discussion touches on the importance of creating phenomenal content and the role of feature-length films in Disney's business model.
  • The potential for Disney to leverage the content creation capabilities of Lucasfilm to produce in-house content is explored.
  • The conversation raises questions about whether Disney can internalize the "muscle" that made Lucasfilm's content successful.
  • The concept of "reverse acquiring" capabilities from acquired companies, such as Pixar and Lucasfilm, is introduced.

"Can Disney reacquire that muscle to build their own incredible content of all types henceforth?"

This quote raises the question of whether Disney will be able to assimilate the creative capabilities of Lucasfilm to produce high-quality content independently in the future.

Disney's Flywheel and Business Strategy

  • The discussion highlights Disney's flywheel business strategy, as illustrated by Walt Disney, and how it creates a self-reinforcing system.
  • The flywheel concept is compared to Amazon's business model, emphasizing the importance of interconnected business segments.
  • The acquisition of Star Wars is seen as adding momentum to Disney's flywheel, with the franchise's potential to enhance various parts of Disney's business.

"My frame on it that I was going to say is this is a product acquisition, but what the product is, is the product is the juice that flows through the Disney flywheel."

This quote frames the acquisition of Lucasfilm as a means to energize Disney's flywheel strategy, suggesting that Star Wars serves as a catalyst for the entire business system.

Speculation on Alternative Scenarios

  • The conversation speculates on what might have happened if Disney had not acquired Lucasfilm, considering George Lucas's reluctance to produce more Star Wars films or license the property.
  • The unique circumstances of the Disney-Lucasfilm deal are discussed, including the relationship and trust between the companies and the precedent set by Pixar's acquisition.
  • The possibility of Lucasfilm remaining dormant or being sold to a different company is considered, with Disney's acquisition seen as a unique and perhaps inevitable outcome.

"I get the sense that Lucas doesn't have that trust lightly, that this wouldn't have been sold to someone that he didn't feel, know, keep it in that sort of form."

This quote suggests that George Lucas's decision to sell Lucasfilm to Disney was based on a deep level of trust and confidence in Disney's ability to respect and nurture the legacy of Lucasfilm's properties.

Acquisitions as a Form of Investing

  • The concept of acquisitions is equated with investing, where the goal is to identify mispriced assets.
  • Disney's acquisition of Lucasfilm is used as a case study, with the value of Lucasfilm being assessed at $4.1 billion.
  • The potential of Lucasfilm, especially with the release of new Star Wars content, suggests that it may have been undervalued.
  • The success of "The Force Awakens" is seen as an indication of the lucrative nature of the acquisition.

"At the core of investing is about identifying mispriced assets." This quote emphasizes the fundamental goal of investing, which is to recognize assets that are not accurately priced by the market.

"The worth of Lucasfilm sitting there as an independent entity was x, call it 4.1 billion, but was that mispriced relative to the opportunity that Lucasfilm had?" This quote raises the question of whether Lucasfilm's pre-acquisition valuation truly reflected its future revenue-generating potential, suggesting that Disney may have made a strategic investment by acquiring it at that price.

The Impact of Disney's Acquisition

  • The acquisition of Lucasfilm by Disney led to the continuation and expansion of the Star Wars franchise.
  • "The Force Awakens" has been financially successful, grossing $1.78 billion on a $200 million budget.
  • Disney's acquisition strategy includes leveraging the franchise through spin-off movies and merchandise.
  • The discussion includes the potential financial impact of Star Wars licensed products and the effectiveness of Disney's licensing team.

"We've got five films queued up before 2020." This quote highlights Disney's aggressive content rollout strategy following the acquisition of Lucasfilm.

"The Economist quotes that they imagine that 5 billion in Star wars licensed products will be sold in 2016." The quote underscores the significant additional revenue streams that Disney anticipates from merchandise sales, beyond box office receipts.

The Role of Technology in Media Companies

  • Technology is recognized as a crucial amplifier of business, particularly in the media sector.
  • The discussion reflects on the acquisition of companies that are at the intersection of technology and media.
  • The role of technology in enhancing the reach and impact of media content is acknowledged.
  • The example of Disney's marketing strategy for "The Force Awakens" illustrates the use of technology to generate earned media and public attention.

"Technology is the best amplifier of a business." This quote, attributed to Sequoia Capital, encapsulates the idea that technology can significantly enhance the capabilities and reach of a company.

"Disney didn't do a big marketing blowout budget for it." This quote is part of a discussion about Disney's marketing approach for "The Force Awakens," where the company relied heavily on social media and earned media, rather than traditional advertising, to promote the film.

Statsig as a Sponsor

  • Statsig is introduced as a new sponsor for the podcast, providing a feature management and experimentation platform.
  • The platform's capabilities include A/B testing, product feature impact analysis, and data-driven decision-making.
  • Statsig is used by various companies, including Notion, Brex, and Microsoft, to manage and test product features.

"Statsig is a feature management and experimentation platform that helps product teams ship faster, automate a b testing, and see the impact every feature is having on the core business metrics." This quote describes the primary functions of Statsig, emphasizing its role in helping product teams improve their development and testing processes.

"Statsig is a great platform for rolling out and testing AI product features." The quote points to the specific utility of Statsig in deploying and evaluating AI-driven product features, which is particularly relevant given the rapid growth of AI in various applications.

Marketing Strategy for Star Wars: The Force Awakens

  • Disney's approach to marketing for Star Wars was unconventional, focusing less on traditional marketing and more on leveraging internal assets.
  • The company capitalized on owned properties and viral content to promote the film.
  • A sports segment on athletic training behind Star Wars was featured on ESPN (Disney-owned) the day before the movie release.

"At sports center, the day before the movie came out, there was a 15 minutes segment in the middle of sports center on the athletic training behind Star wars as a gigantic star."

This quote illustrates Disney's strategic use of its own media channels to market Star Wars, showcasing the film's behind-the-scenes aspects on a major sports platform.

The Power of the Flywheel in Disney's Business

  • The concept of the flywheel effect is significant in the context of Lucasfilm's integration into Disney.
  • Lucasfilm's technology is not the sole focus but rather the synergy created within Disney's ecosystem.
  • The flywheel represents the momentum gained by Disney through leveraging Lucasfilm's assets and Disney's existing infrastructure.

"The power of the flywheel both within Lucasfilm and within Disney is incredible here."

The quote emphasizes the importance of the flywheel concept, where the combined assets of Lucasfilm and Disney create a self-reinforcing cycle of success.

Acquisition Strategy and Integration

  • Disney's acquisition of Lucasfilm is compared to Facebook's approach to acquisitions, emphasizing learning and slow integration.
  • The absence of the Disney logo at the beginning of Star Wars highlights the company's hands-off approach.
  • The discussion also touches on other acquisitions like Pixar, Instagram, Twitch, and Bungie, noting the importance of maintaining acquired companies' cultures.

"That is the theme of the modern acquisition."

The quote summarizes the overarching theme of modern acquisitions where companies are acquired and allowed to operate semi-autonomously to preserve their unique value.

Future Content Creation and Sustainability

  • Concerns are raised about Disney's ability to continue producing successful content without relying on acquisitions.
  • The conversation points to a trend in the entertainment industry where original content is scarce, and most blockbusters are reboots or sequels.
  • The shift of experimentation and original content creation from movies to television is noted.

"What does that flywheel look like after 2025?"

This quote questions the long-term sustainability of Disney's content creation strategy and whether they can maintain their success without further acquisitions.

Lucasfilm's Value as a Depreciating Asset

  • Lucasfilm is seen as a depreciating asset that Disney is utilizing effectively.
  • The distinction is made between Lucasfilm and Pixar, with Pixar being an appreciating asset due to its creative processes and talent.
  • There's skepticism about Lucasfilm's ability to generate new franchises and the long-term value it adds to Disney.

"Lucasfilm is a depreciating asset. It was a mispriced one that Disney correctly identified, and they're going to be able to get a ton of juice out of it by feeding it through their flywheel."

This quote reflects on Lucasfilm's value to Disney, suggesting that while it offers short-term benefits, its long-term contribution to Disney's growth may be limited compared to other acquisitions like Pixar.

Grades for Disney's Strategy

  • The speakers give grades to Disney's strategy with Lucasfilm, acknowledging the financial success but expressing concern over future content generation.
  • The conversation concludes with a reflection on the different types of assets and their contributions to Disney's flywheel.

"I'm going to give it an a and not an a plus, even though financially I think spectacular."

This quote conveys a positive yet cautious assessment of Disney's strategy, recognizing its financial success but also considering potential challenges ahead.

Crusoe's Clean Compute Cloud for AI Workloads

  • Crusoe is highlighted as a clean compute cloud provider, partnering with Nvidia and focusing on AI workloads.
  • The company's environmental benefits and cost advantages are discussed, with Crusoe using stranded energy to power data centers.
  • The unique positioning of Crusoe's data centers allows for lower costs and better performance for AI workloads.

"Energy is the second largest cost of running AI, after of course, the price you pay Nvidia for the chips. And these lower energy costs get passed on to customers."

This quote explains the significance of energy costs in AI and how Crusoe's model provides a cost-effective solution by utilizing stranded energy.

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