Disney and Pixar

[DancingBear]

Just saw Nemo yesterday for the first time. The theater was full at a 1:00 showing (rainy day, and it was in one of the smaller theaters in a 22-theater multiplex, but still...) Great fun! The animation of the water was superb, as I had heard. Loved the "whalespeak."

 

[lucky_bunni]

IMP, Disney has screwed Pixar for all it's worth, and for all Steve Jobs is going to let them. How fair has it been for Disney to first expect 90% of the profits, then 50%, with having no labor in the making of the film. Sure, Disney has really shown us what they can do on the CGI side... Dinosaur... hehe!! Steve Jobs is no dummy, he knew exactly how this all would play out , and he is one tough mother when it comes to negotiations. Just look at the deal he pounded out with the music industries BIG 5 to get iTunes up and running. No other MP3 site had been able to do what he did before, and they are still trying and can't get a deal close to what Jobs has got.

As I see it, Disney can either take what Jobs wants to give them, or let him go off to some other studio to make somebody else money. ME should have saw this coming from Toy Story and bought a stake in Pixar, instead of just doing deals with them.

Maybe at this point, Pixar/Apple should just buy out Disney. Think, Jobs has always been an expert on reinventing his company, and insane about the quality of his products. I say kick ME out and put Jobs in charge of Disney/Pixar/Apple.

 

[DancingBear]

Originally posted by lucky_bunni How fair has it been for Disney to first expect 90% of the profits, then 50%, with having no labor in the making of the film.

They entered into a long-term deal with a fledgling company which required them to bear 50% of the risk.

Steve Jobs is no dummy, he knew exactly how this all would play out....

(1) If Job$ knew that Pixar was going to have a string of tremendous hits, then he was an idiot to enter into such a long term deal. (2) If Job$ knew exactly how it would play out, why was he trying to renegotiate the deal and make Toy Story 2 count toward the minimum commitment? (3) If Jobs knew how it was going to play out, then just what are you proposing that ME should have done differently? Give Job$ what he wanted earlier?

As I see it, Disney can either take what Jobs wants to give them, or let him go off to some other studio to make somebody else money.

Nope, Job$ isn't going off to make some other distributor big money, but he's going to keep more of the money in Pixar (which is his right).

ME should have saw this coming from Toy Story and bought a stake in Pixar, instead of just doing deals with them.

Why?

I don't understand the concept that Disney "screwed" Pixar. Because they held them to the original deal? This isn't a morality play, it's big business between grown-up businessmen.

 

[Another Voice]

The original deal envisioned that all sequels would be direct-to-video or television based. That how Toy Story 2 started out life – as a direct to video. However, Pixar hated the story line that Disney was trying to force on them (signing Mexican bandits and all), so Pixar did their own script. It quickly became apparent that the new film was going to be special and – after a battle with Disney – went ahead and made it a feature film. Since the expense and effort in making a feature is so much greater than a direct, Pixar ask if they could consider part a "feature" in terms of the contract. They had, after all, just delivered a mega hit to the Mouse.

While Disney is technically right in holding to the contract, they've come off as the cop who gives you a ticket for going 46 mph in a 45 zone. Hollywood doesn't much follow contracts to begin with – it's all about the relationship. By being a stickler Disney destroyed its working relationship with Pixar (they was almost no Disney input into Monsters or Nemo from what I've heard) and their treatment of Pixar has been noticed by everyone else around town. It's gotten very, very expensive for Disney to keep people around.

No one knew how much money was going to be involved when the first deal was signed (it was mostly so Disney could get software cheap). When the first two movies produced so much, Jobs tried to renegotiate for a longer deal at terms closer to industry standards. Eisner refused. The rumor is because Eisner was confident in Disney's ability to turn out direct-to-video traditional animation and the all the millions he was pouring into The Secret Lab. Dinosaur was going to be a major bargaining point (as in "we don't need you") to squeeze even more money from Pixar.

But things didn't turn out that way.

"…Big business between grown-up businessmen" is more than watching lawyers argue over the tiny print. It's knowing what's in the best interest of the company – even if that means changing things and writing new agreements; it's giving up a little to gain a lot. Eisner endangered Disney's long term interest for the sake of short term gains. If you're interest is to sell-off Disney as quickly as you can, it's a good move. But if want to see Disney grow and thrive, than it was a really stupid thing to do.


P.S. Pixar was hardly "fledgling" when Disney signed the deal - they were making a nice living off making commericals and selling software. They need Disney to get their movies into theaters. Disney put up nothing for Pixar's films (all that Disney spends on marketing they subtract from Pixar's check) and they got all that fancy computer software used in traditional animation since Beauty. There was never any risk whatsoever on Disney's part.

 

[DancingBear]

Originally posted by Another Voice The original deal envisioned that all sequels would be direct-to-video or television based.

This is simply not true, as I showed in the sequence of quotes from Pixar's 10-K in this thread:

http://disboards.com/showthread.php?s=&threadid=423709&highlight=pixar+sequel

Those quotes--again, from Pixar itself--show that even when Toy Story 2 was still being developed as DTV, the contract--again, as summarized by Pixar itself--clearly contemplated that sequels might be theatrical releases.

Hollywood doesn't much follow contracts to begin with – it's all about the relationship.

Well, the string of highly-publicized business litigation coming out of Hollywood indicates that at least some people deem contracts to be important. In any event, however, every business I've worked with is about relationships, and most of them only rely on written contracts for major transactions. I find it hard to believe that long-term development deals and such are just ignored. [And just what are all those "entertainment lawyers" in Century City doing all day, anyway.]

Again, we're not really talking here about screwing around with "talent," but really just how much Job$ gets to put in his pocket. ME may have screwed around too much with animators, actors and directors, but that's a separate issue. I mean, if ME had renegotiated the deal at Job$ request, wouldn't animators still want to work for Pixar instead of Disney?

No one knew how much money was going to be involved when the first deal was signed (it was mostly so Disney could get software cheap).

What deal are you talking about here? Prior to the Production Agreement? 'Cause I don't see how the Production Agreement (signed post Toy-Story) was for the purpose of getting software cheap----it's a content deal. They had prior relationships involving software, including the technology they co-developed that won a technical Oscar.

"…Big business between grown-up businessmen" is more than watching lawyers argue over the tiny print. It's knowing what's in the best interest of the company – even if that means changing things and writing new agreements; it's giving up a little to gain a lot.

The problem with this is I don't see any indication that Job$ was offering any significant quid pro quo for counting TS2 toward the minimum commitment---he was just trying to get out of the commitment sooner. I also don't see any indication that if ME had been nicer to Job$ back then, Disney would be in any better position right now.

Eisner endangered Disney's long term interest for the sake of short term gains. If you're interest is to sell-off Disney as quickly as you can, it's a good move. But if want to see Disney grow and thrive, than it was a really stupid thing to do.

Assuming that ME's goal is to sell off Disney, explain to me how losing the relationship with Pixar now helps achieve that goal.

P.S. Pixar was hardly "fledgling" when Disney signed the deal - they were making a nice living off making commericals and selling software.

They were certainly fledgling in the feature film business, and after they signed the Production Agreement they quickly made feature films the focus of their business. Read the 10-Ks and you see this progression clearly. There's a big difference between making a nice living and where they are now.

They need Disney to get their movies into theaters. Disney put up nothing for Pixar's films (all that Disney spends on marketing they subtract from Pixar's check) and they got all that fancy computer software used in traditional animation since Beauty. There was never any risk whatsoever on Disney's part.

Stay with me here. Disney pays half of the production costs. Then they pay all of the marketing costs. If the film isn't successful, they lose money. That's the definition of risk in business. As it happens, the films have all been successful, and have more than paid back the production and marketing costs, but Disney definitely took on shared risk in the Production Agreement. Why do you think Pixar wanted the production contribution in the first place---why didn't they just borrow the money?

According to boxofficemojo.com, Finding Nemo had a $90 million production budget, and $40 million in marketing costs. That's $85 million that Disney fronted for that picture.

 

[KNWVIKING]

***" Eisner endangered Disney's long term interest for the sake of short term gains. "***

When the last film is complete and all the profits have been divided up, won't this relation have lasted about twelve years ? That's not considered "long term" ?

Disney is still reaping profits ToyS and Monsters. They will be reaping profits on Nemo for years to come. These are considered "short term gains" ?

 

[crusader]

The basic reality is simple:
Pixar tried to get disney to restructure the deal with TS2. When they failed, there was a wave of ill-will within the company. So why then does Pixar produce an excellent sequel? Why not put the ball back in ME's court and walk?

If the answer was "emotional attachment" and an underlying fear that a mediocre sequel could prove detrimental to Pixar's value then how does it become the fault of disney?

If the answer is also - that they wanted the money - then it becomes difficult to argue that they are solely in it for the art.

Pixar had an agenda from day 1. There is no evidence in the reports to indicate a willingness on the part of their organization to make a sustained long-term commitment with disney. They were always vying for an exit strategy and continued to produce exceptional quality features in order to achieve that goal.

ME can't afford to trust Jobs any more than Jobs can afford to trust ME. A handshake and "forget about the language" backhanded sidedeal is not going to cut it when you're two corporate bigwigs with equally matched negotiable skill. The writing is what governs not the smoke - particularly in a town where talk is cheap and inevitably scripted.

 

[KNWVIKING]

**"They both just wanted as much cash as possible. And, in this case at least, Eisner had better lawyers."**

After reading the info posted by DancingBear, I don't think ME had or needed better lawyers. He had a better contract.

 

[Walt's Frozen Head]

The only major difference is that Jobs is occassionally adept enough to get out of the way of the creative types while Eisner isn't so adept

Your understatement borders on disingenuousness.

Jobs has very often,nearly always, in success and failure, been at the cutting edge of creative innovation. Eisner has very often, nearly always, in success and failure, been the cutting edge that hacked off Disney's creative arms.

In my opinion, the only thing that will prevent Pixar under Jobs from taking the same approach that Disney did under Eisner is for Jobs to be gone.

What killed Disney was that Eisner stopped investing in his company's creativity. Jobs' biggest failure to date, the Next box, failed mostly for being to ahead of its time.

Disney doesn't make good stuff anymore... they have to buy it from someone. Jobs' companies, by and large, make very good stuff. Good enough stuff that Disney can't afford to buy it anymore, it would appear.

And it doesn't take tea leaves, eight balls, or even Miss Cleo to see that real potential...

It only takes ignoring Steve Jobs' history as a business decision maker.

 

[Another Voice]

I kinda like that the magic snow globe has come back with an answer that says "Steve Jobs' been out to rip-off Michael Eisner from the beginning - we're better off without Pixar".

As much as I really want to believe that someone stagged a multi-year, billion dollar business deal from the beginning just to get Eisner, sadly it isn't the case.

It's a case of two self-appointed alpha males strutting about to gain the best leverage for their business. Eisner took advantage of a small company (one he intended to gobble up one day); Jobs knows that he has the stronger position and wanted to align the deal to his advantage.

Shake that snow globe as hard as you can - it won't change the fact that Disney can't make a movie and Pixar can. Everyone at Disney knows it, everyone in Pixar knows it, everyone in Hollywood knows it.

It's why every studio in town has been wining and dining Pixar, and why Disney has been chasing to signs deals with anyone that might get a line of credit from Office Max to buy a computer.

Scream about "we're just following the contract" as they take the talent out the door. There were lots of deals signed for Treasure Planet and Atlantis and Piglet's Big Movie and Jungle Book 2 and that meant nothing to those movies. You can be smug about "having the better contract", but I've seen a bunch of lawyers try to write a script.

It ain't pretty.

Eisner's dealing with Pixar is short sighted. Toy Story has a revenue life of probably thrity years - the franshise could have been longer than that. They alredy went to court over TS and Disney lost signifacnt rights; imagine what the ligiation is going to be when a liberated Pixar tries to stop Disney's TS3. Instead of working together on a movie that would have made everyone some nice coin, Eisner wanted it all for himself. He'd rather have nothing than share.

Monsters, Inc., Nemo everything else could have lasted a long time too. And what about all those films beyond the first five? Think about all those movies. Imagine if Pixar animators helped Disney with Treasure Planet - think of what the film would have looked like then! (Better yet, think about if they hepled on the script!). Disney got where it was because of a body of work - not just a couple of hits. Eisner straggled a few more pennies up front and gave up potential big bucks later on.

It's also inaccurate to hold up Eisner as a champion of contract rights. Both Katzenberg and Ovtiz are extremely wealthy men today becasue Eisner intentionally violated their contracts. We have yet to hear the final on 'Pooh', but that little contract dealing will probably soak up all the profits Disney ever made from Pixar.

Pixar has the goods. Rather than facing reality Eisner settled on squeezing whatever he could in the shortest amount of time.

But then, that's how's he treating everything associated with Disney these days, isn't it.

 

[DancingBear]

A-V, it's still unclear to me exactly what you think Eisner should have done? Do you really think Jobs was saying, "Just ignore the contract and count TS2 toward the minimum, and we'll enter into a mutually profitable extension of the Co-Production Agreement, on terms you'll be happy with."?

Eisner's dealing with Pixar is short sighted. Toy Story has a revenue life of probably thrity years - the franshise could have been longer than that....Instead of working together on a movie that would have made everyone some nice coin, Eisner wanted it all for himself. He'd rather have nothing than share....Monsters, Inc., Nemo everything else could have lasted a long time too.

Isn't this equally applicable to the Pixar side of the deal?

 

[DancingBear]

Originally posted by Another Voice
Eisner took advantage of a small company (one he intended to gobble up one day)...

Hmmmm. A couple of posts ago, "Pixar was hardly "fledgling" when Disney signed the deal - they were making a nice living off making commericals and selling software." Now they were a small company being taken advantage of by big, bad Disney.

Just how were they taken advantage of? Did they not have high-priced lawyers of their own? Did they not understand the concept that signing a long-term contract was a hedge bet, and that they might make more money (but at higher risk) without a long-term deal?

 

[raidermatt]

The only major difference is that Jobs is occassionally adept enough to get out of the way of the creative types while Eisner isn't so adept (unless you consider Breck one of the creative types...).

The Head's already pointed out how vast an understatement this is, but even if it weren't, it would still be enough to put Jobs at least a couple of levels above Eisner.

You (not just you, Scoop) can deflect all you want, but the bottom line remains that Disney has been moving out of the business of creating, and into the business of distributing, relying solely on the name value that was built up over decades.

It won't work over the long term.

 

[Another Voice]

"Do you really think Jobs was saying, "Just ignore the contract and count TS2 toward the minimum, and we'll enter into a mutually profitable extension of the Co-Production Agreement, on terms you'll be happy with."?

It was pretty much along the lines of "let's count TS2 as a feature film under the contract and we'll work out a deal for films #6 and on out."

Give a little, get a lot.

Imagine a Pixar short running in front of Disney movies? Imagine Pixar taking over the aged Muppets spots in the parks. Imagine a real Pixar television series. Imagine happy Pixar workers teaching Disney Feature Animation how to use a computer, imagine Glenn Keane teaching Pixar animators how to draw out even more emotion from the characters.

Grab a little, loose a lot.

Imagine business papers filled with Ben-J'Lo type gossip about the future relationship between the two companies. Imagine the two stars of Disney's mega hit films both being intereviewed on Entertainment Tonight and saying "We really want to make a third one, but the studio can't get it's act together". Imagine a bunch of Disney suits bad mouthing Nemo in hopes the film would flop and Pixar would come crawling back. Imagine those same suits watching their "we'll show them who's boss" Treasure Planet die such a gruesome death at the box office that it causes Disney to restate earnings. Imagine Disney giving up on animation, turning over all poduction to Korean pencil shops and Irish state-supported computer mills.

Yup - I think Eisner should have checked his ego just a little bit.

 

[DisneyKidds]

Pixar has the goods. Rather than facing reality Eisner settled on squeezing whatever he could in the shortest amount of time.

You make some very good points AV. This whole Disney/Pixar thing is a mess.............for Disney. Unfortunately, is there really any proof that, whatever ME did with respect to TS2 or renegotiated contracts, the outcome would be any different? Whether this outcome comes about in 2003, or 2005, or 2007 is really irrelevant. Sure, there might have been a few more years of benefitting from Pixar's successes, but as you and others have pointed out the only way for Disney to return to the glory days and real success is to start creating something again, not living off of the crumbs of those who are doing it right now. Pixar has the goods. Everyone knows that. Is it realistic to think that these goods would ever have been considered joint Disney/Pixar goods? I don't really know, but is it possible that ME in a way did face some of this reality and squeezing out what he could when he could was the best he thought he could do given that reality? You paint a picture that if ME wasn't such an idiot Pixar and Disney would sail happily into the sunset as partners until the end of time. Maybe that would be the case.......................but given Pixars talent and successes I don't think they ever would have settled for that, do you? I'm not trying to excuse Ei$ners actions and the results they have led to today as I'm sure he could have handled some of this stuff better, but I can't just agree with you that ME had a sure long term thing in Pixar and foolishly shot the goose that was going to lay all those golden eggs and share them with Disney.

 

[crusader]

Gates used Jobs like a Ziploc baggie from day one.

And he's never gotten over it.

One could also argue that Jobs lack of creativity is clearly evident in the failed projects which came from his own hands.

Not surprising he packed up his charisma and went to hollywood where you really don't need to be the talent - you just need to control it.

 

[DancingBear]

Originally posted by Another Voice
It was pretty much along the lines of "let's count TS2 as a feature film under the contract and we'll work out a deal for films #6 and on out."

Give a little, get a lot.

Imagine.....

Just what do you call "a little." Just what do you call "a lot." Just what kind of a deal do you think Job$ was willing to "work out"?

 

[d-r]

'What killed Disney

Disney doesn't make good stuff anymore"


Come on, Jeff. Let's see, what, 10 of the top 50 movies this year are from Disney, now of those ten, one (OK, yes the #1 film of the year) is Disney-Pixar - yet Disney doesn't make good stuff anymore? Disney has been killed? Come on.

I've said it before, and I'll probably end up saying it again, but next year will belong to Dreamworks and there will be much screaming and gnashing of teeth on here, and I imagine that someone will proclaim Disney "dead" = but right now when three of the top 10 movies (2 of the top 5) are Disney? The number one album? The number 2 cable channel? The highest attended theme park in the world? If someone said "what killed ABC" I would listen, but "what killed Disney?" That is over the top.

DR

 

[Walt's Frozen Head]

Now, my friend, please. I hope the above doesn't result in an angry response because I'm making no comment about you

Not angry, just frustrated. I believe you talk out of both sides of your mouth.

It appears to me that you knock Jobs as being a businessman just like Eisner, then when that statement was questioned you knock Jobs' career on the basis that he wasn't a businessman like Eisner.

Sometimes it seems as though you say "business" as a positive thing when you are trying to rationalize short-sighted cash grabs by certain executives, but as a negative thing when you are trying to suggest the folly of creative innovation by other executives.

Jobs, Disney (Walt and Roy), Eisner... they are/were all businessmen, and that is inherently neither good nor bad. As far as I can see, Jobs' career has long been associated with creating new and innovative products; whereas Eisner's rise to power is demonstrably associated with creating less but marketing more.

To that extent, I believe Jobs is a relatively good businessman and Eisner is a relatively bad one... particularly for a company like Disney or Pixar.

As far as this topic in particular is concerned... hey, it's not like I haven't been telling you this would probably happen for literally years. Eisner and Jobs both want money, but Jobs is the only one of the two that believes creative innovation is the way to do that. Jobs is behaving exactly as his business history suggested, and Eisner is behaving exactly as his business history suggested.

It was my belief, back then, that Jobs' approach would be the better, from a business perspective. It is my belief, now, that that has been borne out.

The Disney/Pixar deal is a symptom of a disease, not an unforeseeable accident. There will always be some X factor to blame, but the root cause was and remains the business decision Michael Eisner made, makes, and likely will make.

Eisner's still in charge and things take time in business... losing Pixar is not the sign that Disney has hit bottom. You can bank on that.

 

[gtrist4life]

I know this is the rumor forum, and from the start of the thread, are we absolutely sure that what Eisner said to the board has been confirmed? or is this an info "leak" to influence negotiations?

Negotiations are an art and perceptions on both sides will be used to leverage for postitioning to each sides' wants and desires. Both have said, "We'd PREFER to stay with Disney/Pixar".

If there's so much bad blood from the attempted re-neg around TS2, then why the preference? Success.

People are naturally inclined to stay with a proven partnership......it's just Pixar wants more of their fair share. Rightly so.

Eisner has said that he knows Pixar deserves a better deal.

We'll just have to wait and see if they both can agree on "better"

Peace,
G4L