[NOTE: Happy holidays!!! I hope everyone is having a good holiday season, safely and warmly! I missed out on my annual Harry Potter marathon with my brother, something I look forward to every Christmas, but found a ton of joy watching Soul and Wonder Woman 1984.

In keeping with the spirit of the holidays, this will be the last newsletter of the year. It’s a little longer than normal, but I wanted to end 2020 with a Star Wars essay, and address The Mandalorian’s second season finale. I hope you all enjoy it! When I started Musings on Mouse, I genuinely didn’t think it would become anything other than a place for me to exorcise my obsessions. It’s grown into a pretty successful project since then, and I can’t even begin to tell you how much your weekly reading/opening the newsletter/support means. Sincerely, thank you all for making this crummy year a little bit better. 🥰

Have a great — and safe! — New Year’s. Here’s to hoping 2021 isn’t, well, 2020.]

“As we increase our output, the emphasis will always be on quality, not volume.” 

That’s what Disney executive chairman Bob Iger told investors during the company’s recent four-hour event. Sure, there may be more annual Star Wars projects, Marvel installments, and general Pixar/Disney titles, but Disney wasn’t going to sacrifice quality to justify rolling out one new thing after another. 

Critics may disagree with Iger. Quality, some may argue, isn’t just representative of one episode or one movie, but the franchise as a whole. Case in point: The Mandalorian finale.

[This is where I put the obligatory spoiler warning for The Mandalorian’s second season finale. Don’t worry — I promise this is still a business newsletter.] 

The Mandalorian’s second season finale ended with a CGI version of Mark Hamill’s Luke Skywalker showing up to save Din Djarin, Grogu, and their merry band of miscreants from Moff Gideon. Next to Boba Fett or Ahsoka Tano popping up, Luke Skywalker’s appearance was peak Star Wars. 

That, many critics argued in the days after the episode aired, is precisely the problem. As Matt Zoller Seitz wrote on Vulture, “the series succumbs to the dark side of parent company Disney’s quarterly earnings statements, which keeps dragging Star Wars back toward nostalgia-sploitation and knee-jerk intellectual-property maintenance.” Other fans rolled their eyes at the criticism, pointing out that Star Wars has always returned to the franchise’s most popular characters, most noticeably in the Expanded Universe’s novels, comics, and video games. 

Sound familiar? It should — it’s the exact same debate that popped up in 2017 after Rian Johnson’s The Last Jedi hit theaters. What is Star Wars? It’s an argument we’ve come back to with The Mandalorian’s second season finale. I’m not a critic, and this newsletter doesn’t exist to critique art. What I’m more acutely interested in is determining Star Wars’ future business. Let’s be clear: Star Wars is more than fine, but as Star Wars expands under Disney, there’s always room to figure out how to ensure it grows at a healthy rate instead of risking alienating parts of its consumer base every year.

Now that Disney has two primary homes for its entertainment products (theatrical releases and Disney+), how does Star Wars move into a new era in a fresh way while weaving in some of that precious nostalgic magnetism? How does Disney divvy up its sea of installments, all while working to try and limit risks that could lead to disappointing revenue? 

To figure it out, we have to go back to where it all started.

A quick history lesson

When A New Hope was released in May 1977, there was some competition, but there wasn’t anything like Star Wars. A New Hope, The Empire Strikes Back, and Return of the Jedi, full of exciting storytelling and combined with elements of spaghetti westerns and samurai films of decades past, helped make Star Wars some of the successful films in the late ‘70s, when theater attendance was experiencing a boom. A pretty remarkable feat considering A New Hope was only released on 32 US screens when it debuted, forcing 20th Century Fox executives to crank out as many prints as they could to satiate a wave of phenomena exhibitors didn’t predict. 

Fast forward to 1999. Star Wars: Episode I — The Phantom Menace hits theaters, and does pretty well. If we adjust for inflation, the movie grosses about $806 million domestically, according to Forbes. Even with lackluster reviews, The Phantom Menace has one key advantage on its side: a 16-year period between its release and Return of the Jedi. People are excited for any type of new Star Wars even as blockbusters become more frequent in cinemas. Though attendance at theaters hit a record low in the ‘90s just a few years before The Phantom Menace’s release — in part driven by the arrival of VHS — a new Star Wars movie is enough to get people into theater seats. 

Things falter slightly by 2002 when Attack of the Clones comes out. Reviews are once again poor and, for the first time, Star Wars has real competition — Spider-Man. The early aughts bring with it a wave of franchise developments based on comic book superheroes and popular fantasy books that forever change studio development slates. Warner Bros., under Alan Horn’s leadership, starts releasing the Harry Potter films, Christopher Nolan’s Dark Knight trilogy, Sherlock Holmes, and Lord of the Rings. Paramount, once owners of Iron Man, is an actual player. Sony debuts its massively popular Spider-Man trilogy, while Fox fights for its time in the spotlight with a bunch of non-Star Wars movies, including X-Men and the Fantastic Four. Star Wars isn’t the only giant, fantastical epic that people want to watch — it’s not even the only set of movies that look like Star Wars — and every other studio is trying to get its slice. 

Between the prequel trilogy and The Force Awakens in 2015, competition for people’s attention only increases. It’s the blockbuster age — a sea of movies that coincide with a massively important international box office, and the key development of one specific market: China. In 2009, Avatar’s unprecedented success overseas was impossible to ignore. The film made $72 million in China in just two weeks alone, released at a time when the country was seeing big increases in the number of screens rolling out. There was an audience of more than one billion people very interested in going out to theaters, and blockbusters traveled spectacularly well. 

In the three years between Disney buying Lucasfilm and The Force Awakens’ release, another important development shakes up the world. Marvel Studios becomes a juggernaut. This is key. The Avengers in 2012 amassed more than $1.5 billion, with China accounting for 10% of the international box office alone. Between Iron Man 3 in 2013 and Captain America: Winter Soldier in 2014, the Chinese box office for Marvel movies jumps from 15.1% of all international box office revenue to 25.5%. Things are still strong in 2015 with the release of Avengers: Age of Ultron, which brings in roughly 25% of the international box office revenue. 

On the Star Wars front, The Force Awakens grosses more than $121 million in China alone, even with a less stellar $52 million opening weekend. Still, Star Wars struggles to travel. By 2019, the global box office hit $42 billion. The three biggest international markets were China, Japan, and South Korea, with China accounting for $9.3 billion, or 22% of all global ticket sales, reiterating its importance.

For the Walt Disney Corporation, which just years before set up one of its biggest theme park expansions to date with Shanghai Disney, there’s a new primary market to be served. Under new Disney ownership, there’s a Star Wars movie every year. Rogue One and Solo exist alongside the main Skywalker trilogy. Though Rogue One ultimately performed well, grossing more than $1 billion worldwide, including $70 million in China, Solo is a financial disaster. Of the 11 Star Wars movies that have come out, Solo and The Rise of Skywalker are two of the three worst performing when adjusted for inflation. 

Not great, Bob. Even Iger acknowledged there was some Star Wars fatigue, telling the New York Times “we might’ve put a little bit too much in the marketplace too fast.” Although the general interest in Star Wars hasn’t waned, but three key factors have entered the equation that make “just release a Star Wars film” more of a gamble: more competition, streaming, and less attendance at theaters year over year. Star Wars tried to replicate the Marvel formula, but Star Wars doesn’t operate the same way Marvel does. Marvel is a series of tiny franchises inside a big, well-oiled franchise universe. Star Wars isn’t that. 

“I think there is a larger expectation that Disney has,” Lucasfilm CEO Kathleen Kennedy said in 2019, talking about the larger Star Wars universe. “You can’t even do what Marvel does, necessarily, where you pick characters and build new franchises around those characters. This needs to evolve differently.”

What’s missing from that point is the importance of medium and distribution. Clone Wars built an entire world around Ahsoka Tano and the Expanded Universe has turned new characters into fan favorites that demand more stories. The Mandalorian’s success, much of which was built off entirely new characters with deeper ties to Star Wars lore, speaks for itself. It’s not that Star Wars fatigue has set in, but when the strategy is to release more Star Wars titles than ever before, diversifying that output is key. 

Ironically, the most important lesson for Kennedy and Lucasfilm isn’t Disney’s Marvel Studios, but the comics industry in the late ‘80s and early- to mid-90s. 

Star Wars thrives, Marvel almost dies

Between 1988 and 1996, Marvel Entertainment as we know it today went from being on top of the world to filing for bankruptcy. 

Between 1960 and 1990, the comics industry saw some of its most prosperous times. In the 1970s and 1980s, the speculator market grew exponentially; people who thought comic books were major investments started going all in on buying single issues. The industry responded. Simple supply and demand economics took over. Instead of printing the same number of issues and accepting that comics could be a valuable collectors game if quantity was limited (think of the clothing brand, Supreme), the various publishers printed more than ever, driving the worth of single issue comics way, way down. As comics became less valuable, speculator consumers stopped purchasing, and suddenly the comics boom of the late ‘70s, ‘80s, and early ‘90s dried up. 

Majority investor Ron Perelman assumed the best way to tap into a once flourishing market was to appeal directly to hardcore fans. Raising prices on comics and increasing output for the most active consumer base worked for a period of time, according to Chuck Rozanski, CEO of Mile High Comics. It was a good bet for a short while. Part of the problem with raising prices alongside output is that quality also needs to remain high to justify more costly expenses. Marvel’s decision to flood a fractured market with an army of new pitiful characters and variant covers that screamed cash grab, alongside confusing, interweaving plots between books that were developed seemingly with the sole purpose of selling more comics instead of telling good stories, ultimately worked against the company.

“The flaw in [Perelman’s] plan, however, was that he promised investors in Marvel even further brand extensions, and more price increases,” Rozanski wrote. “That this plan was clearly impossible became evident to most comics retailers early in 1993, as more and more fans simply quit collecting due to the high cost, and amid a widespread perception of declining quality in Marvel comics.”

At the same time that Marvel is going through its issues, another future Disney business is learning something about its fans — Star Wars. While the ‘80s and early ‘90s were prosperous for Marvel and DC, Star Wars fans were left in the cold. Return of the Jedi was released in 1983 and, aside from a few television specials that Star Wars fans may try to forget, there wasn’t anything official to satiate demand. Even Marvel’s monthly Star Wars comic stopped running in 1986. 

To try and continue tapping into a hungry consumer base, the industry birthed the Expanded Universe. Author Timothy Zahn and comic book writer Tom Veitch tapped into a post-Return of the Jedi world, and started creating their own stories set within Lucas’ universe. It started with Veitch’s Dark Empire and Zahn's Heir to the Empire, and grew from there. To try and make it as distinctly unique as possible, while also feeding Star Wars fans’ cravings, they did something very simple.

"The main point I made to George, at the time, was that I wanted to do something really mind-blowing,” Veitch wrote, according to IGN. “We wanted to include familiar characters, machines and environments, so the readers would feel right at home. But we also wanted to convey the feeling of continually unfolding imagination — just as the films did."

While creating fresh stories and introducing new characters — Zahn wrote Admiral Thrawn into existence, who is now a fan favorite villain — neither Veitch or Zahn lost sight of Star Wars’ serial origins. Characters like Boba Fett and Chancellor Palpatine kept popping up, while the Skywalker name littered the pages. Even when some people got upset about certain characters returning because it diminished the story (sound familiar?), Veitch pointed to Star Wars’ core identity as why they returned. It worked pretty well.

“But these folks were probably unfamiliar with the history of movie serials and comics, where great villains never completely die — they always return,” he wrote in his memoir, noting the same was true for heroes. “Of course Fett had to come back. That's a no-brainer, imho. Fett was a fan-favorite.”

So: While Marvel drowned its consumer base in comics with shoddy writing and art, more consistently than ever before, and based on new characters no one cared about, Star Wars found a more reasonable output rate that kept quality high, and tied in just enough to favorite characters, that ongoing investment from fans didn’t feel as burdensome. 

Let’s translate this back to Star Wars’ current transitional moment under Disney. 

The beauty of Disney+ — it’s not really an investment

Remember: raising prices alongside output means quality on average must remain high to ensure consumers will justify more costly expenses. 

Movies are not necessarily more expensive now than they were in 1977 when the average price of a movie ticket in the United States was $2.77. In 2018, ticket prices were $9.38 — roughly the same price as an average movie ticket in 1977 when adjusted for inflation. What that figure leaves out, however, is that median income has roughly stayed the same. For the average person, going to the movies is more expensive. Not to mention the cost of concessions. In a pre-video on demand/home entertainment/streaming world, there was nothing to do about it. If you wanted to watch a movie, you had to go to theaters. Suddenly, there’s choice, some of which is far more economically feasible for families. 

If people are going to a theater to watch something, there’s an expectation that the product will justify the cost. If a family of four is going to watch something, it’s about $40 for tickets and another $40 on concessions. That’s $80 in one night, not including gas for the car or metro pass. An $80-$100 movie experience has more weight then sitting on the couch at home, eating leftover mashed potatoes, and watching something on Netflix or Disney+. It’s not that quality should be worse because it’s on a streamer (that’s especially true now with more competition than ever), but we’re more forgiving. 

Or, if studios want to start releasing three to five movies a year, theatrically, that tie into a greater universe, the quality can’t degrade too much. Otherwise, we get into a Marvel Comics situation: consumers may turn to other forms of entertainment that are cheaper, readily available and more rewarding. Consumers are far less forgiving in a theatrical setting. On streaming services, however, that form of experimentation and possible lesser quality isn’t an automatic dealbreaker. Even if a movie is bad, the library should make up for the monthly price tag. Consistency and new titles are exciting, but the library retains subscribers.

The Mandalorian on Disney+ is part of the offering, but it’s not the whole product. Star Wars: The Rise of Skywalker is the entire product people are paying for in theaters. When Rey learns she’s Palpatine’s granddaughter in The Rise of Skywalker and people audibly groan, that’s a feeling of an $80 loss. When Luke Skywalker appears for one minute in The Mandalorian’s second season finale, it’s an eye-roll for some, but people are unlikely to stop subscribing to Disney+ — especially since The Mandalorian is almost universally praised for just about everything else. But The Rise of Skywalker and Solo may make some audiences more wary to go see the next Star Wars movie in theaters instead of waiting to watch it at home. (I use “may” because this is still Star Wars and, even though The Rise of Skywalker didn’t hit analyst expectations, it still passed $1 billion.) 

If we look at the current market, it becomes abundantly clear that Star Wars is a universe better expanded consistently on platforms or in mediums where consumer investment is lower. Theatrical releases should be more spaced out and reserved for event-style installments that excel technically and work for international audiences. As Sony Pictures CEO Tony Vinciquerra recently told CNBC, China will eventually become the biggest film market in the world and 60-65% of box office revenue is international. Figuring out how to appeal to China’s audience is crucial. 

Learning from Marvel Comics’ mistake and Star Wars’ Expanded Universe moment, finding a reasonable output rate (every two years) that keeps quality high (storytelling, acting, production) and tells new stories while tying into aspects of a wider universe (Rogue One compared to Solo) is key for Star Wars’ theatrical planning. It works as a theatrical release when it feels special; releasing a new movie every year — or every six months in the case of The Last Jedi and Solo — diminishes the spectacle. If people are on average going to theaters for spectacles (theater attendance is down overall, but movies are hitting $1 billion as general audiences seek out specific types of entertainment), Star Wars can’t run the risk of being rudimentary. That’s especially true when there are thousands of Star Wars-like movies.

But Star Wars is also a valuable IP. Disney isn’t suddenly going to stop making shows and specials, especially when those shows help sell thousands of tiny Baby Yoda plush figures or drives families to Galaxy’s Edge at DisneyWorld. Here’s the thing: if enjoyment on average outweighs overall ongoing cost, people won’t have an issue paying. This is why critiques about Netflix shows and films mainly being mediocre don’t hold up financially. People are still paying for Netflix more often than not because overall enjoyment and use outweighs* the average $10-$14 monthly fee. (*As more competition and exclusive libraries start to form on new streamers, this may change.) 

Everything that Veitch and Zahn worked to do with the Expanded Universe in books and comics now works as a strategy for Disney+ expansion. The storytelling is good, the production is great, and the serials aspect that Star Wars was always influenced by can thrive. Tying an episode of The Mandalorian into Luke Skywalker — or Ahsoka Tano or Boba Fett — isn’t just reiterating an IP, but is core to Star Wars’ identity. The fact that it also works for business helps Disney executives feel better about making more; during a specific arc in this season’s Mandalorian, viewership and interest in Clone Wars and Rebels on Disney+also grew. Star Wars helps Disney+ grow, Disney+ allows Star Wars to build new stories without worrying about box office flops, all under the security of recurring revenue. 

Everything boils down to perceived value. The value of a theatrical release is an experience, people willing to pay more for extravaganza. As such, perceived value of a theatrical release is tied into extraordinary quality, excitement or fun. Streaming’s value is consistency and availability. Subscribers want something new, consistently, and have it whenever they wish. There are moments that Star Wars storytellers can work into Disney+ shows because the platform by nature allows for more interconnected story weaving and experimentation. On the big screen, however, Disney has to find new ways to recapture the magic of George Lucas’ creation. 

If the question remains, “How does Disney divide its sea of installments, all while working to try and limit risks that could lead to disappointing revenue?”, the answer is to not fall into the same traps that nearly devastated Marvel Comics. Ironically, Disney just needs to do what Lucasfilm did in the late ‘80s and ‘90s — find the best medium to expand. People will always show up.