January 24, 2006 4:39 PM PST

Disney buys Pixar

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Disney's own digital divide

February 12, 2004
Walt Disney announced Tuesday that it's paying $7.4 billion in stock to acquire Pixar Animation Studios--a deal that puts Apple Computer CEO Steve Jobs on Disney's board of directors.

For the venerable animation giant, the move is a significant bet on Pixar's digital approach as the successor to the pen-and-ink industry popularized by Walt Disney. The purchase is also the latest indication of a tectonic collision between technology and Hollywood.

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As part of the deal, expected to be completed this summer, two Pixar veterans will head Disney's animation efforts. Ed Catmull, who had served as Pixar's president, was named president of the combined Pixar and Disney Animation Studios. John Lasseter, the Pixar executive vice president who is widely regarded as the studio's creative leader, was named chief creative officer. Pixar will remain in its San Francisco Bay Area headquarters.

Jobs said Pixar's main choices came down to selling out to Disney or working with another studio under a deal like Lucasfilm has with Twentieth Century Fox, in which the larger studio gets only a distribution fee. The latter option was somewhat attractive, Jobs said, but would still result in an arrangement with "two companies with two separate sets of shareholders and two different agendas."

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"Disney is the only company with animation in their DNA, and the only company that we think has this incredible collection of unique assets like the theme parks, that are very attractive to us as well," Jobs said on a conference call with investors. "They're the only company who has Bob Iger, who we like a lot and have grown to trust."

Though Disney is issuing $7.4 billion worth of stock, it's paying closer to $6.3 billion after factoring in Pixar's cash holdings of slightly more than $1 billion. Pixar shareholders will receive 2.3 Disney shares for every Pixar share they own, a move that will make Jobs the largest individual shareholder of Disney.

Pixar and Disney have had a long history together, though the recent past has been rocky. Pixar has had an uninterrupted string of hit features with "Toy Story," "Toy Story 2," "A Bug's Life," "Monsters Inc.," "Finding Nemo" and "The Incredibles." Disney has distributed all of them.

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However, talks to extend the deal turned sour, with allegations flying back and forth between Jobs, who is also Pixar's CEO, and Disney's then-CEO Michael Eisner. In January 2004, Pixar announced it was breaking off talks with Disney and would look elsewhere for a studio partner to release its films.

Things seem to have improved of late, though, as Disney has emerged as a major iTunes partner for Apple, with Jobs and newly installed Disney CEO Robert Iger appearing onstage at last year's launch of the video iPod.

In addition to his role at the animation studio, Lasseter will serve as principal creative adviser at Walt Disney Imagineering, reporting to Iger, and will help design Disney theme parks.

The deal is subject to regulatory approval as well as the nod from Pixar shareholders, though Jobs owns 50.6 percent of Pixar. He has agreed to vote shares representing at least 40 percent of Pixar in favor of the deal--enough to push the deal through even if significant opposition arises, though none is expected.

Pixar's stock rose $1.43, or 2.48 percent, in after-hours trading, to $59. Disney's fell 5 cents, or 0.19 percent, to $25.94.

"New Yorker" media writer Ken Auletta, who has followed Disney for many years, compared the deal to Time Warner's merger with America Online. Both Disney and Time Warner represent venerable media companies that stumbled as their businesses went high tech, and looked to a native of the new media environment for help, he said.

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The Time Warner-AOL merger has been rocky, aptly illustrating the potential pitfalls of Old World-New World links. But Disney's decision to ally itself with Jobs could be a savvy choice, Auletta added.

"This is a guy who has an amazing track record over a long period of time," Auletta said. "He's not a one-shot wonder. If you can get Jobs on your team, and then make sure he has a stake in the company succeeding, that's a desirable thing."

The deal merges two opposites in the animation world: the historic leader in the art form, now grown into one of the biggest corporate entities in the world, and the high-tech trailblazer that former employees say has kept an intensely "family" feeling while creating a string of hugely popular hits.

"The great thing about working (at Pixar) is the directors are in-house," said Bobby Beck, a seven-year Pixar veteran who left in 2004 to start online animation school Animationmentor.com. "You really develop a relationship with the directors. They get to know you on a first-name basis."

That disparity could set the stage for a distinct culture clash between the large and the small.

Indeed, the prospect of the purchase has dismayed some fans of Pixar, who are wary of seeing the independent studio lose its spark of originality.

"Pixar is a remarkable place," said Doug Ward, the manager of the animation program at the University of California at Los Angeles. "The concern that we would have...is who's going to run it? Is it going to become another big corporate arm of Disney?"

Both Jobs and Iger said they would do everything they could to preserve the organic nature of Pixar's culture, however.

"Most of the time that Bob and I have spent talking about this hasn't been about economics," Jobs said. "It's been about preserving the Pixar culture--because we all know that's the thing that's going to determine the success here in the long run."

"We spent a lot of time talking about that when we negotiated the deal," Iger agreed. "I am really deeply committed to seeing that Pixar is allowed to exist in the form it has existed."


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Add your comment
What a Shame.
I love Pixar as much as anyone, but this is really sad for the Walt Disney Company. Everything that the SaveDisney.com campaign fought for is lost as the board got what it wanted and has completely marginalized Roy E. Disney from the company.

The last ounce of Disney in the Walt Disney Company is effectively gone with Jobs now the majority shareholder.
Posted by dbthree (22 comments )
Reply Link Flag
Jobs is not...
the majority shareholder. He has the biggest individual share of the
company. Read somewhere, around 6% of the company, 6% is not a
The good thing that comes out of this. Is that it shows that Disney
knows where the money is. Pixar has made more money for Disney,
even with the splitting of profits, than almost all of their latest
animated pictures.
And with the last ounce of Disney gone from the company. That is
inevitable for such a huge company that Disney is.
Posted by MidniteRaider (94 comments )
Link Flag
I understand the Roy Disney was trying to do something for Disney,
and I'm glad getting rid of Eisner will be part of his legacy. That
said, I don't understand how Roy Disney is at all relevant to the
future of Disney as pertains to the pending future of Jobs being on
the Board. Could you elaborate?
Posted by ronjay (109 comments )
Link Flag
I wonder if,
Jobs ever thought, that his $10 million investment, would get him
to this point.
Even to the board of directors. Makes me wonder what Eisner is
thinking now?
Posted by MidniteRaider (94 comments )
Reply Link Flag
SON OF A #$@$#
I'm gonna &$&^%$#$#@ my #@%^$#@ in the ^$#^%# with a #^$# and #^%$#%$#@ his $#@%#@$ with a ^@#%#@% in my @#$@#$@!!!!!!!

Heh, Eisner was a fool. Jobs has now shown that what he does succeeds. I think if Pixar can claim to be the revival of Disney and animation, that Apple will soon see that in the PC sector.
Posted by (461 comments )
Link Flag
History repeating?
Is this going to go the same way as when Apple bought Next? With
Next taking over Apple while getting paid for it? :)
Posted by (1 comment )
Reply Link Flag
Can Jobs still Manage Apple?
I'm concerned that he'll be slightly "distracted" with all this
responsibility! I 've been amazed at the fact that he Managed (CEO)
Apple AND Pixar, both exceptional innovators.

How will this effect his performance and concentration on Apple
innovations. (?)
Posted by technewsjunkie (1265 comments )
Reply Link Flag
Pixar can still be "independent"! Fear not.
The way the Mac Business unit of Microsoft is.

I'm SURE Steve Jobs fought to have Pixar remain in control and
"independent" because he knows that Lassiter hates Disney (after
being burned) and the same for other Pixar employees (the
"cultural issues").
I presume this independence and control was a large part of the
Posted by technewsjunkie (1265 comments )
Reply Link Flag
One more time Steve!
We all knew this deal was coming.

My one wish is that Steve will start another company.

Starting companies, creating jobs, bringing unwieldy talented
people together and focusing their efforts is what Steve does
best. He did it at Apple, NeXT, Pixar and he should do it one
more time!

Maybe Gil Amelio had it right in that silly book he wrote after
being booted from Apple: Steve may become CEO of Disney.
Posted by sipeter (17 comments )
Reply Link Flag
Lasseter hates Disney
Somehow, with all that Lasseter has to lose by going back to Disney
(over 35 million unexercisable shares of Pixar at filing of 10-K in
2005), he would not be going there to take on such a high position
in a company "he hates".
Posted by ronjay (109 comments )
Reply Link Flag
Well maybe the public will get to finally see Destino through iTunes one of these days then, I can only hope, jeez.
Posted by chuchucuhi (233 comments )
Reply Link Flag
Does the guy from Incredibles look a bit like Steve Ballmer?
Posted by deeplyaware (91 comments )
Reply Link Flag
Walt would have approved
Walt Disney was a non-traditional, forward thinking person who
reveled in thinking outside the box. Steve Jobs has allowed those
creative minds at Pixar -- everyone at Pixar -- to flourish in
their creativity by nurturing a very non-traditional climate.
Pixar's creativity shows in the quality not just of their animation
but MOST importantly, their storytelling and awesome character
development. THAT is what has been missing from Disney's
efforts post-animated musicals, and THAT is exactly the gold
that Disney has acquired here, today. And Bob Iger knows this.

John Lassiter will now also be approving all Disney theme park
designs??! LOL! That is absolutely perfect and you can see why
they did this: the quality is not in awesome animation; it is in
awesome creativity. And now Lassiter can apply that insight and
creativity to even theme park attractions and it'll work.

Dreamworks is another company whose creativity just SUCKS.
Shrek, while having some annoying current-culture references
like so many of their films, at least had wonderful characters
that you cared about and excellent voice acting. But Shark's
Tale? TERRIBLE. It had SO MUCH current culture riffing it made
me sick. And one could care less about the story-line and the
characters. This type of thing, of morphing a real-world popular
entity into the movie's world (say like... "Donald Trout" instead
of Trump, for example) is a LAZY attempt at humour. And by the
way you will never EVER catch Pixar succumbing to this crass
attempt to appeal to the audience-- mark my words.
Posted by MacDuff (62 comments )
Reply Link Flag
And Walt would have fired Eisner at the beginning...
,,,, and avoided the years of low grade animation and
inappropriate variations of classic literature, etc, that dominated
Disney fare over the last ten years. He also would not have tried
to continue the original author's fraud that 'Hildalgo' was in any
way a true story. There was just so much that the Disney
Company lost when Eisner tried to run the place.

And with Eisner gone, before he could do any damage, the
Disney Company might have evolved into a modern animation
house, a la Pixar. Now, it's hopefully a turnaround. If not, it's a
disaster for Pixar.
Posted by Earl Benser (4310 comments )
Link Flag
steve jobs will now be more influential than ever. i cant wait to see
if apple offer full length disney films on itunes. this is the start of
something big!
Posted by thebignoticeboard.com (23 comments )
Reply Link Flag
Oh well!
Watch, the talented pixar team become vaporware, for disney has become a basket case!
Posted by heystoopid (691 comments )
Reply Link Flag

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