20th Century Fox let Lucas pass up an additional $500,000 directing fee for Star Wars in return for keeping licensing and merchandising rights for himself, a decision that would cost the studio billions.
20th Century Fox missed out on as much as $27bn after they let George Lucas keep the merchandising and licensing rights to Star Wars instead of giving him a $350,000 salary raise, as they thought the film would be a flop. Star Wars quickly became the highest-grossing film of all-time, displaced five years later by Spielberg’s E.T. the Extra-Terrestrial.
After the success of American Graffiti and prior to the beginning of filming on Star Wars, Lucas was encouraged to renegotiate for a higher fee for writing and directing Star Wars than the $150,000 agreed. He declined to do so, instead negotiating for advantage in some of the as-yet-unspecified parts of his contract with 20th Century Fox, in particular ownership of licensing and merchandising rights (for novelizations, T-shirts, toys, etc.) and contractual arrangements for sequels. The studio were apparently unconcerned to let go of these rights – at the time, licensed products and merchandising did not represent the significant market that it is now. This negotiation has earned Lucasfilm hundreds of millions of dollars over the years, as Lucas has exploited merchandising rights wisely, and now directly profits from all licensed games, toys, and collectibles created for the franchise.