Sadly, this film was a financial failure and sent Jim Henson into depression; he never directed another film before he died (which itself was a critical blow to his studio and was the deathblow to a buying attempt by Disney).
Labyrinth was also one of two attempts by now ex-Monty Python troupe veteran Terry Jones to write a screenplay (though most of it was rewritten without him). His next attempt after Labyrinth, Erik the Viking, impaled his cinematic screenplay career until 2015, one year before he started showing signs of dementia.
Development Hell: Not the movie, but Archaia Entertainment's graphic novel prequel: Announced in early 2012, initially pushed back to April 2013 then indefinitely. The official explanation is that they don't want it to go out until it's perfect, and considering that it's a backstory for Jareth — the most popular character in the fandom — one can understand the hesitancy, especially given the Broken Base caused by the last attempt at an Expanded Universe with Return to Labyrinth. (Archaia has thrown bones to the fandom in the meantime with stories about other characters, included in their Free Comic Book Day collections from 2012 onward.) It finally got released in 2018-19.
Never Work with Children or Animals: In a making-of special, Jim Henson states that he'd been told never to work with children, animals, or puppets. Labyrinth contains all three, and apparently it was quite a challenge getting everything to work out properly. Going by the special, the puppets were easiest to deal with (helped by the fact that those responsible for the puppets were neither children or animals), followed by the baby with the animals being the hardest, with the special showing Jim Henson having trouble with the chickens in an early maze scene. The baby actually peed on David Bowie's lap the first time they filmed a scene together and was originally supposed to be called Freddie but baby Toby Froud would only respond to his own name.
Old Shame: Despite the film's massive cult following, it's this for its two lead actors to varying extents.
With regards to David Bowie, it's not because he thought it was a bad film, but because he felt, in retrospect, that his costume was inappropriate for the intended demographic. That said, the David Bowie Is touring museum exhibition that launched in 2013, featuring career-spanning memorabilia from his personal archive, includes several items from/related to this film.
Jennifer Connelly simply gets embarrassed by seeing her younger self on screen. It also doesn't help that critics ripped her performance to shreds. But this seems to have diminished with time; she participated in the 30th anniversary DVD release's new bonus features and filmed a special introduction for the Fathom Events two-night theatrical reissue in September 2016.
Screen-to-Stage Adaptation: Shepparton Kids In Theatre adapted it in 1999. The Henson company is currently working on another production.
Screwed by the Lawyers: Minor example. While the film was distributed in theaters by TriStar Pictures and Sony retains the distribution rights, the film itself is owned by The Jim Henson Company and Sony's film studio is not listed on the back of any home video release. The logo remains at the beginning of the film though.
Star-Derailing Role: Labyrinth helped put an unceremonious end to David Bowie's acting career. Combined with the failure of Absolute Beginners the same year and the general mess that was his 80's period, the sheer campiness of Bowie's role as Jareth made it difficult for people to take him as a serious actor anymore. All his later acting stints would be in relatively obscure, critically panned movies and a much-maligned episode of Spongebob Squarepants, with only a few cameos in bigger-name films and the occasional TV show post-Labyrinth.
Stunt Double: Jareth spinning the crystal balls was actually done by the juggler, Michael Moschen who had his arm in Jareth's sleeve instead of Bowie. He kept dropping the balls because he couldn't see what he was doing.
Throw It In!: The production's budget and schedule were so tight that the puppeteers playing the Goblins weren't given any stage directions other than "be Goblins." So nearly all of their behavior is ad-libbed. Strangely enough, it works, giving the Goblin scenes a weird chaotic nature that is very appropriate for them.
This is perhaps the most 1980's of 1980's fantasy films: There's the extensive use of special effects techniques (matte paintings, puppets and animatronic costumes, bluescreen, early CGI) that were largely abandoned by Hollywood once CGI became high-quality and commonplace in the next decade, a synthesizer-heavy underscore, and a serious case of '80s Hair on the villain. Said villain is played by David Bowie, whose international popularity peaked in this decade, and he also wrote the musical numbers.
The musical numbers themselves probably embody this trope more heavily than anything else Bowie did in his music career, being far more Synth-Pop-oriented than the pop rock he was putting out everywhere else in the 1980's.
What Could Have Been: Almost everything up until Sarah eating the peach was written by Terry Jones, with everything afterwards being rewritten by Henson and company before getting sent back to Jones for a final rewrite. This and other changes over the course of production resulted in quite a few alterations and omissions, some of which appeared in the tie-in books.
The Wiseman and his Hat were intended to wander in and out of the good guys' journey, dispensing occasionally useful, accidental advice.
The Fireys offered to help Sarah find the castle, but not only were they easily distracted, but they didn't actually know what a castle was.
The Junk Lady (who was going to be revealed as a disguised Jareth) was part of a whole Junk City, complete with a bar where Hoggle went to drown his sorrows after his betrayal of Sarah.
The other door with a living knocker led to a Crapsaccharine World where no one could stop laughing; this became "The Laughing Forest" in the Japan-only Labyrinth game for the Famicom.
The issue of Sarah's parents' divorce was dealt with more directly in early drafts. The ring Sarah gave the wiseman in the finished film was originally a gift from her mother that she was much more reluctant to part with. The novelization also goes into detail on the glamourous fellow actor who became the mother's lovernote seen only as a photo in the film, but importantly he's "played" by David Bowie — his name is Jeremy and he gave Sarah the music box.
Orignally, Sarah's plot-launching mistake was opening the door to a stranger who claimed to be the writer of the school play she was due to star in; he turned out to be Jareth, who proceeded to kidnap Toby (then called Freddie) For the Evulz. Jareth was indeed a much less charismatic, more lecherous character in early drafts — in the climax Sarah had to physically fight him off to rescue Toby, and defeated him by saying she wouldn't love him if he "were the last goblin on Earth!" This caused him to shrink into a whining goblin himself.
In the project's early stages, the story was set entirely in a Magical Land. Later the Down the Rabbit Hole structure was introduced, with the "real world" setting being the Victorian era; this was subsequently changed to The Present Day. A big reason for the changes was the filmmakers becoming aware of a similar Fairy Tale film, Legend (1985), which went into production around the same time — in fact, the two movies ultimately shared a cinematographer.
Jim Henson — The Biography reveals that the orignal conception of Jareth was simply as another special-effects creation, rather than someone to be played by a live actor. When that was changed, Kevin Kline was considered for the part. Once the creators decided a popular musician should play Jareth and provide songs, Henson initially wanted Sting for the role. It was Henson's sons John and Brian who suggested he should consider David Bowie, arguing that he would have more lasting appeal. Other musiciana considered were Michael Jackson and Prince.