Yesterday, entertainment giant Walt Disney agreed to purchase Pixar Animation Studios, Inc. It was an all stock agreement worth $7.4 billion. Under the terms of the deal, Pixar shareholders will receive 2.3 shares of Disney stock for each share of Pixar they own. Pixar CEO Steve Jobs will become the largest single shareholder in Disney, will become a director at the company and hold a seat on the board. (More information on the deal can be found here.) The two parties hope to continue to capitalize on the lucrative relationship they have enjoyed for the last decade. Disney has been the sole distributor of all Pixar films and also co-financed the productions. This arrangement was due to expire once Pixar delivers Cars this summer.
This could be a great move for both companies if the two sides play their cards right. Pixar is the modern gold standard when it comes to animation. Beginning in 1995 and continuing to 2004′s The Incredibles, Pixar has had a steady stream of commercial and critical successes with films like Toy Story, Toy Story 2, A Bug’s Life, Monsters Inc. and Finding Nemo. Only the “Golden Age” Disney (with classics like Snow White and the Seven Dwarfs, Pinocchio, Fantasia, Bambi, Dumbo and Mary Poppins) could be seen as more successful. The films Pixar has produced so far will stand the test of time and be watched by families for years, just like the Disney classics of so long ago. Pixar’s competitors (with films like Shrek, Shark Tale and Robots) don’t even come close. By the time the novelty of Ricky Martin jokes and other dated pop-culture references fade away, Pixar’s movies will be regarded as true classics. Living la vida what?
The good news for Disney is that Pixar gives them the potential to reclaim their crown in the world of animation. In 2004, Disney dismantled its traditional animation department. The company is floundering with a lack of creative talent that has produced such abysmal films as Home on the Range and Brother Bear. Disney’s last genuine hit was 1994′s The Lion King. Throughout the late 1990′s Disney mangement (led by CEO Michael Eisner) began to meddle in the affairs of its creative staff. Scripts and story ideas became subject to the whims of “suits” in board rooms and conference calls. After The Lion King, Disney began hemorrhaging creative talent. The Walt Disney Company, once the place animators dreamed of working, became reviled within the industry. Pixar picked up many of these individuals and offered an environment where they could flourish. John Lasseter, Pixar’s Creative Executive Vice President created an organization that encouraged new ideas and thrived on creativity. The formula obviously worked.
One concern that some people have expressed is that Disney will squelch this creative haven and absorb Pixar into its own bureaucratic hierarchy. Animators who once left Disney for Pixar are naturally wary of their new/old bosses. However, I think this concern is misguided. Michael Eisner is no longer at the helm of Disney. After practically sabotaging Disney’s relationship with Pixar and running off key board members Roy Disney and Stanley Gold (who literally threatened a hostile takeover of the company), Eisner finally stepped aside. New CEO Robert Iger seems intent upon not repeating the mistakes made in recent years by his predecessor. It would appear that Disney will manage Pixar with a hands-off attitude and let Pixar do what Pixar does best ?? create blockbuster movies.
Iger must take a lot of credit here. When he took over the company in 2005, he immediately moved to try to steer the company back on course. Recognizing the dire condition of Disney’s vital relationship with Pixar, he immediately reached out to Pixar CEO Steve Jobs. Iger permitted Jobs to offer ABC television hits Lost and Desperate Housewives for download via iTunes to be viewed on Apple’s iPod. ABC is a subsidiary of the Walt Disney Company and Steve Jobs is CEO if Apple Computer, maker of the iPod. The two men began discussing the possible renewal of Disney’s distribution deal with Pixar. Obviously, the talks went well and the Mouse House purchased Pixar. In all fairness, former CEO Michael Eisner probably saved the company years ago. When he took over as CEO in 1984, Disney was in terrible shape. Eisner successfully revitalized the Disney theme parks and engineered four incredibly successful films with The Little Mermaid, Beauty and the Beast, Aladdin and The Lion King. Within the last several years though, it became apparent that a changing of the guard was necessary and Iger was brought into replace him. Just as Eisner did in ’84, it appears the Iger is willing and able to do what is necessary to invigorate the Walt Disney Company and transform it into a market powerhouse.
Overall, I think Disney’s purchase of Pixar is an excellent strategy for both companies. I grew up with Disney. Their movies and theme parks are forever etched in my memory. I have been saddened to see the once-great animation powerhouse self-destruct over the last several years. I hope that through its acquisition of Pixar, Disney can once again regain its proper place as the premiere source for quality family entertainment.
Tags: Animation, Bob Iger, Disney, Imagineering, Michael Eisner, Pixar, Steve Jobs
Update: I just found out that John Lasseter will become Chief Creative Officer at Walt Disney Feature Animation and that he will report directly Robert Iger. This can be nothing but a wonderful signal of the direction Disney plans to go with this deal. Lasseter is nothing short of a creative genius and his leadership role at WDFA and his ability to bypass the red tape and report only to Iger is excellent news! This information came from the Disney investor’s conference call. You can listen to it here and read another good article here.
Zack
January 26th, 2006