Renowned special effects firm is "Star Wars" bonus for Disney

Mon Nov 5, 2012 8:13pm EST
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By Lisa Richwine

LOS ANGELES (Reuters) - "Star Wars" was the force behind Walt Disney's $4 billion purchase of producer George Lucas's Lucasfilm entertainment holdings. Not so far, far away is Lucas' Industrial Light and Magic, his award-winning special effects shop that will likely save Disney millions of dollars in costs for its big-budget movies.

ILM, started by Lucas in 1975 when he couldn't find a special effects house he liked for "Star Wars," has provided computer-generated dinosaurs, space ships and action characters for a roster of films that includes "Avatar," "Mission Impossible" and the "Harry Potter" series.

As much as one-third of the cost of films with budgets of $200 million and more are for special effects, according to Janney Montgomery Scott analyst Tony Wible, who estimates ILM last year generated at least $100 million in revenue. Disney uses ILM's computer animators for its "Pirates of the Caribbean" series of films and Marvel-inspired characters for films like "The Avengers."

ILM is among the companies producing special effects for the Disney film "The Lone Ranger," a 2013 release estimated to cost more than $200 million to produce.

By bringing ILM in-house, Disney can shave as much as $20 million a year from its films' special effects budgets, a welcome savings at a time when all major studios are trying to rein in production spending, Wible said.

"It's one of the underappreciated aspects of this deal," he said, along with Skywalker Sound, a Lucas sound production company that will also become part of the Disney empire.

Disney executives, in a conference call with Wall Street analysts, scarcely mentioned ILM in explaining the company's valuation of Lucasfilm, instead describing its estimate of the company's rights to its consumer products and the declining value of DVD sales.

Chief Executive Bob Iger praised ILM's work for Disney and other studios. "Our current thinking is that we would let it remain as-is. They do great work," Iger said.   Continued...

Filmmaker and Chairman of the Board of Lucasfilm Ltd. George Lucas waits to do a television interview at the Milken Institute Global Conference in Beverly Hills, California April 30, 2012. Walt Disney Co said it agreed to buy film maker George Lucas's Lucasfilm Ltd for $4.05 billion, according to news reports on October 30, 2012. REUTERS/Fred Prouser