In 1987, while Warner Bros. was attempting to sign Steven Spielberg for film projects, the director struck a groundbreaking deal with Universal. This agreement, unrelated to film production, would become one of the most lucrative contracts in entertainment history, resulting in more revenue from theme parks than any of his films could ever generate—without an expiration date.
The Origin of the Contract
At the time, Universal Studios lacked the financial resources to compete with Warner Bros. However, it had Sid Sheinberg, the president of MCA, who had long believed in Spielberg’s talent. When Warner Bros. mounted a financial offensive to lure Spielberg away, Sheinberg devised an innovative solution: he named Spielberg a creative consultant for Universal’s theme parks, entitling him to a percentage of gross receipts—forever.
Discovery of the Deal
For nearly two decades, the specifics of Spielberg’s contract remained private, known only to a select few lawyers. It wasn’t until the financial documents from Universal were presented in 2009, coinciding with an economic downturn, that details emerged. Spielberg was revealed to earn 5.25% of gross revenue from two parks built post-agreement (in Orlando and Japan), potentially amounting to around $70 million annually—approximately $120 per ticket sold and $2.38 per ticket. This revenue stream later extended to parks in Singapore and Beijing. However, Universal Studios Hollywood was excluded due to its pre-existing status before the contract’s signing.
Contract Longevity and Implications
The term “in perpetuity” is key. Spielberg’s original contract not only included a 2% cut of box office grosses but also a share of concession sales—this for any and all tickets sold at the parks covered under this agreement, irrespective of any personal ties to the films. Such a deal guarantees Spielberg a continuous stream of income from the theme parks.
The financial crisis of the late 2000s placed Universal in a precarious position. Spielberg had the right to demand a final payment and terminate the contract, estimated around $200 million. However, Universal was developing The Wizarding World of Harry Potter and couldn’t afford this payout. In a strategic maneuver, Spielberg agreed to defer the payment, increasing his share from 2% to 5.25% just as hype for the Harry Potter area promised a significant attendance boost. By 2017, he was set to continue earning these lucrative royalties.
Unique Position in the Industry
Spielberg’s deal stands alone in the entertainment industry. A possible comparison could be made to George Lucas’s situation with the ‘Star Wars’ franchise, sold to Disney in 2012 for $4 billion. However, unlike Spielberg, Lucas receives no ongoing revenue from the franchise’s earnings.
Future Prospects
With the upcoming launch of Epic Universe in Orlando in May 2025, Spielberg’s contract sets him up for even more income potential. Estimates suggest that if visitor numbers align with previous expansions, his annual earnings could soar beyond $100 million in the near future. The strategy employed by Spielberg showcases not only foresight but also profound business acumen.
Image credit: William Warby