What is a $10,000 contract really worth? A Star Wars toy story

I am a HUGE Star Wars fan. I grew up loving every second of the original trilogy and have bins and bins and more bins of old toys from my youth. I recently found a Darth Maul light saber toy while going through one of those bins. I even found the Pez dispenser set my wife bought me a year or so ago that is sitting on a shelf still in the original packaging.

In a way, I am that guy.

There are millions of fans like me, which helps explain the cash cow that is the Star Wars franchise. Ahead of the 2017 release of Star Wars: The Last Jedi, IGN.com featured an article about just how much money each of those movies had made over their opening weekends.

The numbers from the article are staggering, to say the least.
What are the true values of your contracts?

It’s not a surprise then, that the toys and merchandise associated with Star Wars are a highly profitable business. A new Netflix series brings a piece of this to the forefront.

In The Toys That Made Us, the pilot episode is all about Star Wars toys and their beginnings with a small Cincinnati toy maker. In the episode, they discuss the original deal with George Lucas and Fox to produce Star Wars toys, providing only a 5 percent royalty split between the two entities.

To say the toy manufacturer made money off the deal is a gross understatement.

Once the original trilogy had run its course, the manufacturer had to maintain a commitment for at least a $10,000 annual royalty in order to keep their agreement active with Lucas. Even after another toy company acquired the original manufacturer, the Lucas agreement around Star Wars remained in place. All the organization had to do was pay $10,000 a year to keep the contract alive.

This was true, right up until the year it didn’t make the payment.

Soon after the contract lapsed, George Lucas announced that he was releasing a prequel trilogy and a new agreement had to be reached, all because no one had paid attention to a $10,000 annual clause in the contract that maintained a very favorable 5 percent royalty rate. After negotiations for the new deal, that rate jumped all the way up to 18 percent, making profitability far more difficult for the toy manufacturer.

With over a billion Star Wars toys out in the marketplace, that is a significant amount of money the company allowed to walk out the door. All because of a mistake around a small payment mandated in a contract.

Manage your contracts, don’t let them manage you

So ask yourself: What business relationship is worth $10,000 a year for your organization? What relationship do you have that can sell a billion units over the life of a simple contract worth $10,000 a year? What type of agreement can you not afford to have lapse, or your costs will more than triple?

Do you want to run the kind of business that is reliant on someone hopefully remembering when to make contract payments? I didn’t think so.

That’s why organizations all over the world are taking advantage of how OnBase helps prevent Star-Wars-toy-level disasters in their contract management processes.

Whether it is capturing and storing mission-critical information from agreements or automatic notifications of renewals and expiration dates, OnBase provides the tools necessary to take your error-prone, paper-based process and turn it into an efficient, intelligent, electronic one.

But don’t take my word for it. Best-in-class companies are more likely to have searchable contract repositories and automated processes through every step of the contract lifecycle, according to the Aberdeen Group.

Go further with automated contract management

That’s why we recently released a brand new Contract Management Point Application, which offers a rapidly deployable solution with built-in clause libraries and integrations with leading electronic signature provider DocuSign as well as our secure file sharing solution, ShareBase. It also empowers decision makers with real-time reporting dashboards to see updates of all the contracts in your organization.

The packaged solution delivers a flexible contract management offering to centralize access to contract information with an accelerated implementation time frame. By automatically routing contracts for review, approval and execution, as well as using automatic notifications of expirations and auto-renewals, you know exactly where every contract stands.

So ask yourself again: What is a $10,000 contract worth to your organization? Whatever the answer, OnBase can help make sure it doesn’t turn into a billion-dollar mistake.

This blog post was originally published on LinkedIn.

Joe Russo is a strategic account manager at Hyland. Currently, Joe also writes for Factory of Sadness, a Cleveland sports website operated by Fansided, and The OnBase and Hyland Blogs. His work has also appeared on Mic.com and The Fraternity Advisor.
Joe Russo

Joe Russo

Joe Russo is a strategic account manager at Hyland. Currently, Joe also writes for Factory of Sadness, a Cleveland sports website operated by Fansided, and The OnBase and Hyland Blogs.... read more about: Joe Russo