Disney Pixar

Introduction:

The partnership between Pixar and Disney has deep roots, going way back to 1991. The first result was 1995’s "Toy Story," which revolutionized the world of computer animation. Ever since, Pixar films have been distributed by the Walt Disney Company, proudly displaying both the Pixar logo "Luxo Jr." and the Disney castle.

Disney recently acquired Pixar Studios at a price of over $7.4 billion. The terms include giving Jobs an estimated 7% stake in Disney and letting Pixar's top creative executive, John Lasseter, have a key role in advising Disney in creative matters.

Which party had more power? Disney or Pixar?

Pixar definitely had more bargaining power while the deal was being negotiated. Though many feel that Disney has paid a premium price for the acquisition, the reality is that Disney does stand to gain in the long run considering the ground realities during the time the deal was struck. For Disney, the acquisition of Pixar seems to represent a strategic "must" for the company. Some would say that they had no choice.

Pixar created dependence for Disney, by accentuating all its strengths and thus had the power in negotiating. Pixar understood the range of approaches available and used the most effective ones to negotiate with Disney.

Ð'* Pixar’s extraordinary talent pool вЂ" It was an acknowledged fact that Pixar had the best talent pool in the animation business especially one person who was considered the “Guru” of the Industry, John Lassiter. The creative talent at Pixar offers great potential in amplification of Disney’s product offerings in the animation arena. The animation unit at Disney now, after the deal, will unquestionably be stronger with the full-time addition of Pixar's resident genius, John Lassiter.

Ð'* Best technology - Robert Iger, of Disney, wanted to adopt new technology of accelerated delivery of entertainment over the Web and through wireless means. Pixar had all the technology and with Jobs playing a key role the company has one of the most creative and visionary leaders in the media and entertainment industry to date.

Ð'* Extraordinary track record - Pixar had a record of making animated blockbusters for Disney as Toy Story, Monsters, Inc., and The Incredibles. On the contrary, Disney’s live-action films, with the exception of a few, had more misses than hits. Pixar also had a sufficient pipeline, in terms of content, for the future projects.

Ð'* Future proofing - Considering, Disney was a mainstay of the old-media world, with capital-intensive assets such as theme parks, radio stations, and consumer products. Pixar had all the technological advancement required to revive Disney’s rundown animation factory. Pixar was also a czar in the animation content that it produced and the distribution possibilities it offered via new technologies. Disney desired to deliver television shows through the 5th generation iPod, which is video-capable. Clearly, Pixar was more geared up for the future and it had something in common with Apple - Steve Jobs.

Ð'* Disney’s own performance - Disney's stock price, has risen by 13% during new President and CEO Robert Iger's three months on the job, but is still down for the year and a shadow of the valuations it hit in the '90s. The parks just had a strong year domestically, but margins were still on the lean side. There was tremendous pressure from the Board and the shareholders to succeed.

Pixar clearly had the upper hand in the negotiations because to create all of the above, Disney would have to spend tons of money on people, technology and content and there was no guarantee that even after doing all this, they would succeed.

While the above were the main reasons for Pixar having the upper-hand in the negotiations, there were a few other reasons due to which Disney could not succeed in dictating terms.

1. Negotiate with one shareholder only: Disney was forced to negotiate directly with Mr. Steve Jobs since he was the one shareholder with a controlling interest in Pixar. Disney agreed to pay $7.4 billion in stock to acquire Pixar Animation Studios where Jobs is chairman, CEO, and

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