Willard Huyck had heard Lucas make similar complaints in the past. “What was upsetting him was the fact that he felt he should be getting more of the movie,” said Huyck. “George looked at it like a businessman, saying, ‘Wait a minute. The studios borrowed money, took a 35 percent distribution fee off the top.… This is crazy. Why don’t we borrow the money ourselves?’ So some of the bravest and/or [most] reckless acts were not aesthetic, but financial.”46
For the sequel, then, Lucas matter-of-factly informed Ladd that he would be financing the film himself, using his profits from Star Wars as collateral for a bank loan, while Fox would be tasked with distribution. “It changed the whole nature of the deal—nobody had expected that,” said Lucas,47 noting with some glee that “when the tables got turned and the same system worked against them, they felt betrayed and cheated.”48 Fox also agreed to give Lucas final cut, promised not to meddle with production, and handed over all merchandising and television rights. With this hands-off approach, the studio would receive a decreasing share of the profits as the film made more money, eventually bottoming out at a 22.5 percent share to Lucasfilm’s whopping 77.5 percent.
Ladd really had little choice. There were plenty of other studios that would have taken a similar deal or worse to get their hands on Star Wars; at least it would still be the 20th Century Fox logo that was seen before the opening credits. Spielberg wasn’t at all surprised by Lucas’s hardball tactics. “If you’re an executive, suddenly you realize that if you’re going to go into business with George Lucas, you are no longer in the 20th Century-Fox business, you are in the George Lucas business,” said Spielberg, “and George is going to call every shot.”49
Lucas had hit Fox hard, but only because—in his view—the studio had played little role in making Star Wars a success. To those whose contributions he valued, however, Lucas could be a most gracious benefactor. As they had done with the profits from American Graffiti, both Lucas and Kurtz shared much of their percentage with collaborators, doling out points—and pieces of points—to the Huycks, John Williams, Ben Burtt, the law firm of Pollock, Rigrod, and Bloom, casting director Fred Roos, and the actors. “I got a quarter of a percentage of ‘Star Wars,’” Mark Hamill excitedly told the Chicago Tribune. “I’ll make a pile of money on that picture.”50 Hamill wouldn’t be the only one; Steven Spielberg, too, would win a piece of Star Wars, the result of an impromptu bet with Lucas over which film—Close Encounters or Star Wars—would be more successful. “[George] said, ‘All right, I’ll tell you what. I’ll trade some points with you.… I’ll give you 2.5% of Star Wars if you give me 2.5% of Close Encounters,’” recalled Spielberg. “So I said, ‘Sure, I’ll gamble with that. Great.’”51 It was a good bet, one that would earn Spielberg more than $40 million over the next four decades.
That fall, Lucas set up a new organization, The Chapter II Company, to oversee production and funding of the still unnamed sequel. That would take care of the administrative side of things for Lucasfilm; but there was still the matter of ILM, which had been all but dissolved after finishing work on Star Wars. Lucas was determined to reboot the company, but this time he wanted his effects wizards in northern California, closer to his home base at Parkhouse. “Moving the effects back north really came out of the Zoetrope idea,” Lucas explained, “which was we’d make our own movies with the support of our own facilities. And if we had the best facilities, we could make better movies and we’d pay it off with the movies. It’s the philosophy I’m trying to continue.”52 What Lucas didn’t have to say was that having ILM up north also made it easier for him to involve himself in production. During work on Star Wars, he’d left ILM on its own in Los Angeles, where—in his view—Dykstra had dawdled and delayed and burned through too much of the budget developing a camera with his own name on it. Lucas wasn’t going to let that happen again.
For one thing, he wouldn’t be bringing Dykstra north. While the official story would be that Dykstra had declined to join ILM so he could remain behind and set up his own company, the truth was “I wasn’t invited,” as Dykstra put it plainly.53 Things had become personal between Lucas and Dykstra. While Lucas had distributed a few percentage points and gifts to some key staff at ILM, Dykstra wasn’t one of them: Lucas saw him merely as work for hire, not a team player. Furious, and in need of a job, Dykstra formed his own company and rented ILM’s equipment to begin producing effects for the ABC television show Battlestar Galactica. It was a deliberate thumb in the eye to Lucas, who had already accused Galactica creator Glen Larson of ripping off Star Wars, a squabble that would continue until practically the moment of the show’s premiere, and with good reason: when the show debuted, critics noted that Dykstra’s effects for Galactica looked strikingly similar to, and sometimes better than, those in Star Wars. “Maybe I feel guilty about that,” Dykstra remarked coyly.54
Instead of Dykstra, Lucas tapped ILM workhorse Dennis Muren, along with Brian Johnson, a veteran of Space: 1999, to lead the effects team. Lucas was particularly pleased to pick up Johnson, who had a reputation for working quickly and cheaply. If faster and more intense had been Lucas’s mantra-like direction for his actors on Star Wars, for its sequel the buzzwords would be cheaper and quicker. And to house the company, Lucas purchased a warehouse on Kerner Boulevard in San Rafael, formerly owned by Kerner Optical, less than six miles from his own home in San Anselmo—close enough for him to drop in unannounced at any time of day. Lucas also left the Kerner Optical signs on the door to throw off prying eyes and snooping fans; several models from Star Wars had been stolen from the ILM warehouse in Los Angeles, and eager fans were already pawing through the trash behind the building, looking for discarded bits of TIE fighters. Ensconced in their unmarked building in San Rafael, Muren and Johnson would slowly begin setting up the new workshop and hiring staff for a film that didn’t yet exist, not even on paper.
Keeping ILM running—especially once production began on the sequel—was going to be expensive, and profits from the movie alone weren’t going to be enough. As it turned out, Lucas would finance the sequel one action figure at a time, tapping into not only the substantial profits from the films themselves but also the revenues from an almost endless stream of Star Wars merchandise. Lucas had envisioned Star Wars merchandise of some sort almost from the very beginning, imagining R2-D2 cookie jars, wind-up toys, and zap guns. “I have a particular affection for games and toys; there’s no doubting that I haven’t grown up,” he told the French magazine Ecran in 1977. “All of this was part of the film, the intention of launching toys in supermarkets, creating books and stuff.”55 But even he had no inkling of the juggernaut he was creating; stock prices for toymakers Mattel and Ideal spiked on the mere rumor that the companies might acquire the rights for Star Wars toys.
When approached by Lippincott, neither Mattel nor Ideal had expressed sufficient interest in making Star Wars toys. Film-based toys, so the common thinking went, had a limited shelf life, with sales sputtering out shortly after the film faded from theater screens. But Bernard Loomis, the head of Kenner, had struck gold with toys based on the Six Million Dollar Man television show; the bionic man’s accessories and enemies lent themselves well to what Loomis called a “toyetic” quality—and he thought he detected a similar quality in Star Wars. Loomis contacted the head of Fox licensing and quickly closed the deal in a May meeting at the Century Plaza Hotel in Los Angeles. (The company’s press release cheekily announced that the agreement was good “galaxywide.”)56 The deal, recalled Loomis, had been made on one condition imposed by Lucas himself in a fit of competitive pique: if Kenner made the toys for Star Wars, it couldn’t also make them for Close Encounters of the Third Kind, or any other science fiction film. “When someone tells me I can’t have something,” said Loomis, “I want to know why.” Shortly after signing the contract in Los Angeles, Loomis met Spielberg on the Columbia lot to learn more about the film he had just been denied rights to. Spielberg enthusiastically described Close Encounters, and Loomis admitted
that while it sounded like a great movie, it didn’t seem toyetic.
“Well,” sighed Spielberg, “it’s not Star Wars.”57
It wasn’t. Nothing was—and Kenner would quickly find itself trying to meet a tidal wave of demands for toys. Although Kenner had secured its licensing contract in May, it had had time to release only a few items, mainly puzzles and board games, by summer. The real toys—the action figures and vehicles—were rushed into development but, to the disappointment of Loomis and millions of kids, wouldn’t be ready in time for Christmas 1977. Scrambling, Kenner announced an “Early Bird Certificate Package” (the “infamous empty box campaign,” Kurtz called it) in which parents could pay $14 for an envelope with a cardboard display stand, a few stickers, and a certificate that could be mailed in to reserve the first four action figures—Luke, Leia, Artoo, and Chewbacca—which would be delivered to your doorstep the moment they were released. Kenner introduced the package at a fall 1977 toy show and sold out almost immediately, but competitors and retailers openly mocked and guffawed. “We sell toys, not promises,” sniffed one retailer, who refused to sell the Early Bird kit,58 while another insisted that “children don’t really care whether they get an officially licensed product or not. A robot is a robot.”59 But Loomis was patient—“Kids will want the real ‘Star Wars’ item,” he contended, “even if they have to wait”—and he was right.60 Kenner would sell 40 million Star Wars figures in 1978.
Another major licensee, Image Factory, had also seen the potential in Star Wars early and offered Lucas $100,000 up front for the exclusive rights to market posters, buttons, and iron-on decals. It was an offer that shocked even the profit-conscious Lippincott. “We figured they either really knew what they were doing or they were crazy,” said Lippincott.61 Until Star Wars, Image Factory had manufactured belt buckles for record companies, and T-shirts featuring rock bands, pulling respectable but not lofty numbers. By the end of the year, Image Factory’s poster of a lightsaber-wielding Darth Vader would outsell posters of a red-swimsuit-clad Farrah Fawcett-Majors—returning to the company nearly $750,000 on its $100,000 investment.
“Star Wars could be a type of Davy Crockett phenomenon,” Lucas suggested, referring to the 1950s television show that had started a marketing fad. “I don’t know whether I’ve done it. I don’t know.”62 But he had, and where the Crockett craze had had its coonskin hats, Star Wars had… well, everything. There were Halloween costumes, lunch boxes, and bubble gum cards. Coca-Cola would market plastic Star Wars cups. Burger Chef would sell posters. A twenty-page souvenir program sold 300,000 copies. The double-LP sound track of Williams’s music sold more than 650,000 copies by mid-July—one of the first, and in some cases only, albums of symphonic music many people would own. Meanwhile, a trombonist turned record producer who called himself Meco would release a disco remix of Williams’s main theme that would sell 2 million copies and sit atop the Billboard charts for two weeks. Ken Films released an eight-minute Super 8 version of the film while the movie was still in the theaters, a practice unheard of at the time. Marvel Comics, rescued from its own perilous financial situation by the success of Star Wars comics, would continue to create new Star Wars stories over the next decade, spanning 107 issues. And Lucas would finally have his R2-D2 cookie jar.63
Not that Lucas would license just anything. That summer he had set up within Lucasfilm yet another company—this one called Black Falcon, a name borrowed from the Blackhawk serials—to oversee all merchandising. It was the only way, he explained, “to control things. I didn’t want the market flooded with junk.… If it bore the Star Wars name, it had to meet our standards.”64 That Lucas would ever reject a licensing offer—he turned down junk jewelry and toilet seat covers—stunned the marketing division at Fox, which had rarely seen a deal it didn’t like. But Lucas didn’t care what Fox thought, and he was irritated by the fact that the studio automatically received half of all merchandising profits for doing nothing but administering the contracts. In his contract for the sequel, then, Lucas made it clear that he would continue to split the merchandising profits evenly with Fox only until July 1, 1978, at which point Black Falcon would receive 80 percent to Fox’s 20. It was yet another lopsided contract clause that Ladd had agreed to in order to keep Lucas and Star Wars on the Fox reservation, but Fox executives were growing increasingly weary with Ladd and what they saw as his inclination to give Lucas nearly everything he wanted.
But what Ladd appreciated, and Fox didn’t—at least not yet—was that Lucas had given the studio more than just a successful movie; he had created a modern mythology that was quickly embedding itself in American popular culture—and Fox’s logo, with its distinctive fanfare, was at the head of it. In August, Threepio, Artoo, and Darth Vader would place their feet in the concrete in front of Grauman’s, where Star Wars was still showing. In the fall, the Los Angeles Philharmonic performed a concert of Star Wars music at the Hollywood Bowl. Critics held their noses, but audiences went wild for it, prompting a repeat performance the next spring. John Milius, with his typical clarity, thought he understood why Star Wars had struck such a nerve with audiences. “What my generation has done is bring back a certain innocence,” explained Milius. “It’s easy to be cynical. It’s hard to be corny.”65
But Milius also understood that innocence had consequences, and that Lucas had changed the very landscape of cinema with his accessible, toyetic, lightweight fun—and not necessarily for the better. In June 1977, George and Marcia had traveled to New York for the premiere of Scorsese’s New York, New York, the kind of serious, arty film that Marcia had continued to hold up to her husband as the brass ring of filmmaking. But Scorsese’s film tanked badly, barely breaking even, a flop that sent its director spiraling into drugs and depression. “Star Wars was in.… We were finished,” said Scorsese bitterly. “Star Wars swept all the chips off the table,” agreed director William Friedkin, who had seen his own arty entry for 1977, Sorcerer, booted from Grauman’s in favor of Lucas’s space opera. “What happened with Star Wars was like when McDonald’s got a foothold; the taste for good food just disappeared.”66
Perhaps there was the “dumbing down” of movies that Canby had bemoaned, or the “infantilization” of film that critic Pauline Kael had condemned in the pages of The New Yorker—but that wasn’t necessarily all Lucas’s fault. True, Star Wars had been the biggest film of 1977, but the second-highest-grossing film that year was the Burt Reynolds car chase romp Smokey and the Bandit. “Popcorn pictures have always ruled,” Lucas said later. “Why do people go see these popcorn pictures when they’re not good? Why is the public so stupid?” he asked rhetorically. “That’s not my fault. I just understand what people liked to see.”67
And it wasn’t just American audiences that liked seeing Star Wars; its timeless themes, straightforward story, and breathtaking special effects played just as well to foreign audiences. Excitement over the film was running high in the weeks leading up to its December release in England; the Super 8 version of the film sold out in two days, merchandise was selling strongly, and fans in nearly every British town called their local cinemas, asking, begging them to show the film. “We’ve never seen anything quite like it,” said one theater manager.68 When the film opened internationally at the end of the year, it immediately set attendance records in Geneva, Sydney, and Melbourne, and sold out regularly in Rome and Milan. The film was very briefly prohibited for children in Brussels—largely because of the lopped-off arm—then reclassified as “for all” when the appropriate edit was made.69 It was even shown at the U.S. embassy in Moscow, to an audience composed of Americans, a few Britons, and a smattering of Russians. Perhaps sensing a Cold War metaphor, several audience members hissed at the destruction of the peaceful Alderaan by the Imperial Death Star. “What a wretched trick!” muttered one viewer diplomatically.70
To no one’s surprise, in December 1977, Star Wars officially became the highest-grossing film of all time, earning $120 million in revenues for Fox, and leapfrogg
ing over Jaws—with $115 million in revenues for Universal—for the top position. Spielberg took it all in good-natured stride and publicly bowed to Lucas with a full-page ad in Variety, showing Artoo snagging a shark with a fishing pole. “Congratulations to the Cantina crowd,” wrote Spielberg, “and all the forces of your imagination that made ‘Star Wars’ so worthy of the throne. Wear it well.”71
“Star Wars is about 25% of what I wanted it to be,” Lucas told Rolling Stone in the fall of 1977. “I think the sequels will be much, much better.”72 Kurtz, too, made it clear that he didn’t want to do a sequel unless it was at least as good as the first film. The story, then, would be critical. As early as June 1977, Lucas and Kurtz casually mentioned to the Chicago Tribune that they were already developing a “sequel novel”—actually Alan Dean Foster’s Luke-and-Leia novel Splinter of the Mind’s Eye—“and if the story works out,” said Kurtz, “we’re seriously considering doing a second picture.”73 By July, Ladd—who had read through multiple drafts and pitches for Star Wars over the previous four years—was assuring the Wall Street Journal that Lucas had plenty of material on hand to write a second film.74
He didn’t. What he did have, however, were plenty of ideas, which he’d typed up into a nine-page sequel treatment he had titled The Empire Strikes Back. It was more sophisticated than his messy first treatment for Star Wars, largely because Lucas had recently read Joseph Campbell’s book on comparative mythology The Hero with a Thousand Faces and was determined to trace Luke’s heroic journey more deliberately. “Intimate that a rewarding, good life is within one’s reach despite adversity,” Lucas jotted in his notes, “but only if one does not shy away from the hazardous struggles without which one can never achieve true identity.”75 Much of the basic structure for what would eventually become Empire was in place in the first treatment, and Lucas had several scenes in mind that would survive all the way through to the final draft. There would be a gambler from Han’s past who would invite Han, Leia, and Chewie to dinner, “and they come into the room and there is Vader.”76 He knew Luke would study the Force under an old Jedi master, have a long fight with Vader, and end up hanging off the bottom of a city in the sky. He wanted to play up the Luke-Leia-Han triangle, and include a moment when Threepio would be destroyed. He had also decided Luke had a twin sister, though at this early stage, it wasn’t clear whether that twin was Leia. Perhaps, Lucas suggested, she was on the other side of the galaxy and Luke could go look for her.
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