George Lucas directed American Graffiti in 1973, and it became one of history’s most profitable films. It was produced on a $777,000 budget, and earned the equivalent of nearly $400 million in 2025 dollars. Over the years, between box office and video sales, it earned nearly $600 million in 2025 dollars. After that unexpected success, Lucas decided that his next project would be a “western in space”. The resultant film was one of history’s most successful movie franchises. The first movie, Star Wars: A New Hope, grossed $775,398,007, which was huge back then. As of 2025, the Star Wars franchise has grossed more than $10 billion in movie sales alone. As seen below, in one of Hollywood’s costliest mistakes, the studio ceded the even more profitable merchandising to Lucas for next to nothing.

20^th Century Fox’s Costliest Mistake

In hindsight, it now seems obvious that Star Wars was always destined for great success. Things did not seem so clear in the 1970s, however. Nothing like Star Wars had ever been seen before, and nobody knew what to expect. Hollywood was not sure whether Lucas’s “western in space” would resonate with audiences, or flop at the box office. Various studios passed, before 20^th Century Fox finally agreed to make the film.

The studio’s execs were still a bit wary about the movie’s prospects, however, and were eager to hedge their bets if at all possible. So when Lucas offered to give up $500,000 of his director’s fee in exchange for complete ownership of merchandise and licensing fees, the studio accepted. It was a costly mistake that 20^th Century Fox came to greatly regret.

Star Wars: A New Hope received rave reviews. Roger Ebert of the Chicago-Sun Times, for example, described the film as “an out of body experience“. The movie became a runaway box office success once it was released in 1977. The original movie generated massive demand for toys and merchandise based on characters and vehicles. George Lucas had contracted with Kenner.

Like 20^th Century Fox, however, the toy manufacturer had not expected the movie to become so popular. Nor had it anticipated the resultant demand for tie-in movie merchandise to be so gargantuan. Demand outran supplies, and seven months after the film hit theaters, Kenner had to sell empty boxes, with certificates redeemable for action figures once they became available.

By 2012, the first six Star Wars films had produced about $20 billion in merchandise revenue. By 2023, after the release of three more sequels and other standalone films and TV series, that figure had jumped to $32 billion. In what turned out to an epically costly mistake, 20^th Century Fox had given up on that lucre when it agreed to cede it all to Lucas in exchange for $500,000.

It was arguably the most shortsighted decision in Hollywood history. However, one major studio’s flub turned out to be another major studio’s gain. Decades after 20^th Century’s Fox’s costly mistake, Disney bought both that studio and Lucas’s Star Wars empire. So now both the movie the movie and merchandising rights belong to the same owner.

_________________

Some Sources & Further Reading

History Halls – Fashion History: 1970s Fish Tank Shoes

Hollywood Reporter, February 9^th, 2012 – The Real Force Behind ‘Star Wars’: How George Lucas Built an Empire

Phasr – The Star Wars Merchandise Empire: How George Lucas Revolutionized Pop Culture Merch