Disney in Denial; Part 2: Lucasfilm Devalues its Customers

This is the second in a series of posts regarding missteps taken by The Walt Disney Company. You can navigate to Part 1 here.

Fifteen years ago, the brand managers of Old Spice faced a dilemma. The product hadn’t caught on with younger generations. The managers contemplated a radical change to attract new customers, but if it didn’t work, the brand’s decline would accelerate. That’s because the average future value of any brand’s existing customers is generally much higher than that of newly acquired customers.

Despite the risk, Old Spice adopted a new positioning moving the brand very far from its serious, seafaring roots. It was a radical, do or die strategy that worked brilliantly.

Now, let’s bring this back to Star Wars. Unlike Old Spice, Star Wars was a thriving brand with no end of upside when Disney acquired it for $4 billion in 2012. Expectations were high and Lucasfilm (now a division of Disney) initially exceeded them. The Force Awakens, the first Disney Star Wars release (2015), is still the US’ top grossing film.

But less than a year after the film’s release, Kathleen Kennedy, Lucasfilm’s President, created a significant disturbance in the force. Just before the release of the second Star Wars film, in an interview published in the NY Times (Nov 29, 2016), she put Star Wars fans on notice.

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“I have a responsibility to the company that I work with. I don’t feel that I have a responsibility to cater in some way. . .I would never just seize on saying, ‘Well, this is a franchise that’s appealed primarily to men for many, many years, and therefore I owe men something.’ ” __

Placing this in perspective, PostTrak, a theater exit polling service, estimated men were significantly more engaged with The Force Awakens than were women. They reported that over the first two weeks of the film's release, men comprised 58% of the paying audience. But that figure, no doubt, underestimates men's significance to the success of the film. Among male/female couples, a lot more men got their significant others to see The Force Awakens than the other way around. So, it's reasonable to believe men's actual contribution could be closer to 67%.

With that context, Kennedy’s statement was technically correct, but extraordinarily irresponsible. No, she didn’t owe men anything, but a portion of her responsibility to Disney’s shareholders and cast members entailed recognizing that men represented the easiest sale. Steering content away from them entailed enormous risk. Why? Because, as I wrote above, existing customers generally have greater future value than new customers. Beyond that, with a film franchise like Star Wars, existing customers happen to be the most fertile source for recruiting new customers.

At the time of the interview, Kennedy had already partially delivered on her promise. According to IMDB, female audiences rated The Force Awakens 0.3 points higher than men did. Let's call this the "appreciation gap." It wasn’t the first Star Wars film that women liked more than men did, but it was by the widest margin. But Lucasfilm was just getting started. The Last Jedi, released in December 2017, doubled the appreciation gap to 0.6, spawning what I believe to be the biggest and longest-running online consumer backlash to-date.

I’ll discuss that soon, but in a post tomorrow I’ll provide more detail on how critical a thriving brand's most loyal customers can be to its continued health.

The next post in the series is available here.