Pixar Article

Which means Disney is taking more of Pixar's potential profits than it is bearing of Pixar's costs.

We don't know that.

Unless you mean philosophically when you say "they get more than they put in". OK they get to keep what they contracted to buy but they had to share the label.

Which even then it's a loss isn't it? They lost the internal development and they lost the critical adulation for their staff and they had to share the limelight.

But at the end of the day, Pixar has a gold statue on its" shelf collecting dust for a movie it doesn't own. That's a huge loss on thier side.
 
once again we can't get out the exact numbers...

but based on the fact that everything you read about disneys great money making last year included money off of nemo both in box office and on video...forgetting about merchandise...

means that

We don't know that.
doesn't equal
the production costs plus 100% marketing/distribution tips the scales in at least a 3 to 1 ratio the other way.

Can't see how we would know one if we don't know the other.

I guess this arguement is that it won't be possible for another animated company to ever come on and even feasibly make a profit. Pixar made a relatively cheap movie, 90 million in production 40 million in advertising, the movie made 864 million worldwide in the box office alone.

First quarter of this year Pixar had a 26.7 million dollar profit. As in after the Xmas season sales from Nemo the year before...and with disney taking half.

So I'm trying to figure out after all of that, how if Disney wasn't there helping in the production and marketing costs...would swing a 7:1 profit number is to a 3:1 loss. So what 2.3 billion dollar cost am I missing?
 
DB, I can't and won't agree to your supposition that renegotiating in midstream was a bad idea. I proved to you that they did it once, and should have done it again. The only thing I can't prove, but I know to be true, is that TS2 was intended by the parties to be part of the five picture deal. (I bow to you now and say I can't prove it, because the lawyers seem to have won on that one...but Pixar's founders still are peeved that they were snookered on that one according to rumor.)

And if this deal goes south, I will be vindicated. Ei$ner gave up 20 years of profit for 3 or 4 films.

Short term v. long term. (sound familiar? It is a common theme when one dissects Ei$ner's managerial style.)

Either way I'm vindicated because Disney will either sign up with a deal similar to what you and I talked about oh so long ago...meaning I was right...or Disney will let Pixar walk away and some other player will have Lassiter and co's gift of story even though Disney had the chance to sign on the dotted line and end this nonsense...meaning I was right again.

Where you and I disagree is on Ei$ner's stubborn refusal to cut the deal...not on Job$'s greed. (We also disagreed I believe on whether or not Pixar was worth it...but I think we know who's won that argument, too). Whether or not Job$ was greedy does NOT absolve Ei$ner of the very real, very personal blame for blowing the Pixar deal.

Refresh my memory. What exactly have you proved by proving Job$ is greedier than Ei$ner in the grand scheme of things?
 
Bret

You missed the analysis completely. The scales don't tip the ratio on the profit side. That remains the same.

I'm talking about the affect on Pixar's profit margin if they had to fully absorb all costs. There's no way they'd generate numbers above 50% in my view.
 

OK Crusader,

This is my final offer :-)

The most expensive Pixar movie so far has been Monsters, Inc with a published cost of $165M (Production Cost plus Prints plus Advertising).

Now according to a Washington Post article :

In today's Hollywood, box office revenue makes up less than a quarter of a film's total take. The largest piece of a movie's money pie comes from sales and rentals of its DVDs. If "Monsters, Inc." meets only routine DVD projections, Walt Disney Co. and Pixar Inc., which is part-owned by Disney, will end up splitting more than $380 million, far outstripping what the movie earned in theaters.

As it turns out Monsters, Inc. was not routine - it set the record for one day DVD sales that year - so if Pixar had paid all the costs they would certainly have received at least an additional $190M from DVD sales/rentals alone.

Worldwide ticket sales were $522M.

Merchandising sales were ??

There is NO doubt in my military mind that Pixar has been sending much more money to Disney than Disney was paying - Pixar's margins would have been even better.
 
Truce time.

A few years back PBS did an analysis between revenues and operating income by segment in the entertainment industry.

Here it is:

http://www.pbs.org/wgbh/pages/frontline/shows/hollywood/business/rev.html

Not one of these entities have operating income at the 50+% levels you are trying to establish here.

It's because of all the overhead - Selling/general administrative/employment et al. expenses which are an intregal part of running the entire enterprise in house.

Pixar has nothing on their books even remotely close to the multitiered divisional segments intregal to full operations.

But in fairness, I will say that animation may generate a higher return in and of itself and with Pixar's capabilities that would certainly hold true. It's still not at the levels we'd like to believe.
 
The other studios haven't been batting 1.000

I don't know that it's animation per se - although it might be a significant contributor.

Pixar's Net Profit is actually not that critical (I was just astonished by it) - The article referenced at the start of thread seemed to be concerned that Pixar - by showing people that computers could be used to generate animated films created the competition that will doom them.

Well IMHO Pixar always had competition - there were plenty of movies out there in 1995.

Pixar didn't make their money because they developed the first feature movie done on a computer instead of an easel, or because they were the first company to animate fur successfully, or IMHO even because Pixar was partnered with the most successful animation studio prior to them - Walt Disney (although Toy Story certainly was helped Big Time by that relationship).

Personally I think it's that Pixar simply has the best, and certainly the most consistent, story tellers in the movie business today. As long as they recognize, reward and encourage those people they are going to do just fine - no matter how many other studios can now spell 'render-farm'.
 
Originally posted by YoHo
Apple failed and has since struggled, because they refused to follow IBM's hardware model of an open architecture. They were unable to then create a cost effective product nore were they able to maintain as many developers.

Pixar will live and die with or without Disney on the quality of story and production. Apple only exists because they figured out a way to make money with online music.

Someone's been living under a rock. Ever heard of the iMac? Best selling computer ever? Ringing any bells?

How about the Apple system which is growing at a mad rate and is used by militaries and home users alike?

Or even the iPod? THAT must ring a bell?

The only reason Apple is still around now is because it is innovative. It went along a different route with it's system - they are now the fastest growing around and survey says that between one in fifty and one in eighty computers is made by Apple. They currently have a LOT of money just in the bank, own 80% of the online music market and provide the US Government as well as universities with supercomputers. The whole reason Apple was reborn was because it made the iMac out of colourful plastic and was innovative in going all out for USB.

Innovation holds more sway than you think. Given Jobs' record, I'd bet that there's a fair few surprises to come with Pixar...



Rich::
 
Oh - don't get me wrong - I totally agree that Pixar has indeed been VERY innovative technically.

They developed Renderman, and they have pushed the CG technical envelope forward as well as - if not better than - ANY of the other 'digital' animation studios.

But IMHO the success of Pixar's movies has MUCH more to do with the story telling than it has with their pushing the technical side of things forward.
 
Originally posted by airlarry!
DB, I can't and won't agree to your supposition that renegotiating in midstream was a bad idea. I proved to you that they did it once, and should have done it again. The only thing I can't prove, but I know to be true, is that TS2 was intended by the parties to be part of the five picture deal. (I bow to you now and say I can't prove it, because the lawyers seem to have won on that one...but Pixar's founders still are peeved that they were snookered on that one according to rumor.)
Such a rumor is belied by the fact that Pixar's own initial SEC filings describing the Disney deal clearly described that sequels didn't count. This is a fact which you simply have to accept. What a joke to think that Job$ and his army of well-paid lawyers were snookered by Ei$ner and his legal team.

If you accept that fact, that Job$ knew very well that TS2 was not included, then why did Job$ make such a fuss about getting it counted? Clearly he wanted to change the deal so he could get out of the Disney relationship ASAP. How else could this be interpreted? Job$ figured out he was sitting on a gold mine, and didn't want to share the gold with his major investor any more.

So, given this situation, why does anyone believe that (1) Eisner could have struck a new longer-term deal with Pixar some years ago, or (2) Jobs is looking for the best deal for him and Pixar, and either Disney will be it or not. Unless you think Eisner had the chance to cut a long-term deal at below market (which I clearly think he did not have, given Jobs actions and attitude), I don't think you can blame Eisner for the breakup. No doubt Eisner could have kissed up to Jobs more over the years, but I'm not convinced that would have gotten Disney a better deal.
 
Rumor, eh? Couldn't possibly be spinning by Ei$ner, eh?

First, rolling over contracts to get a new deal done is nothing new. Happens all the time in the world of sports and entertainment.
This is a common practice in Hollywood when a studio seeks to secure a new, longer term deal with a valued partner.
Yes, you could and should at the very least partly blame Ei$ner for not getting it done. But let's not stop there.

Not only did your favorite executive NOT get the deal done, he tried to strong arm Pixar. Not once but twice, first with the Dinosaur movie (and there, I have no problem with Disney doing CGI, really I don't, but they way it was done was dispicable first to PDI and then to Disney's bottom line), and then second by spreading a bad movie, bad result rumor about Finding Nemo.
"Several weeks before last year's release of 'Finding Nemo,' Walt Disney Company Chairman Michael Eisner told his board not to expect a blockbuster and suggested that such a fate might not be all that bad. Although Pixar Animation Studio was high on its film, Eisner said that he was not impressed by early cuts he had seen, according to people who were familiar with the matter. 'Should the movie falter,' Eisner said, 'Disney could gain negotiating leverage to expand its partnership with the high flying animation company. Pixar, Eisner concluded, may be headed for a reality check. "
La Times, 2003.

Nice, Cou$in Mikey. John Lassiter, your supposed friend. A guy who worshiped Uncle Walt. A guy who had a dream that he could make CGI movies with the same touch of warmth and humor that he saw in all of the classic Disney movies. And this is what you do? Tell people that the movie isn't impressive? I know you think that you're the Central Park version of "The Art Of The Deal," but that was petty, crappy, and below even the nadir of your worst ethical moves.

But let's get off of Ei$ner for a second (even though it is so much easier to criticize him than DB makes it out to be). Is DB right that I'm just making up this rumor about Ei$ner putting the screws to Job$ on the second deal?

Pixar and Disney had a five-film co-production deal and with Pixar's string of successes, the company looked to renegotiate a new deal that would give it a bigger cut of the box-office take. However, Disney argued that as a sequel Toy Story 2 should not count as one of the five films in the deal. This issue became a particularly sore spot for Pixar, leading to a fallout between Pixar CEO Steve Jobs and Disney CEO Michael Eisner, concluding in Pixar's 2004 announcement that it would not extend its deal with Disney and would instead seek other distribution partners.
http://www.wordiq.com/definition/Toy_Story_2Ah, but that's just industry speak? Job$ has already admitted that DB's right and I'm wrong, right? In this day and age of ironclad agreements, no one EVER disputes contract language. No one ever goes to court because one party thought language in an agreement meant one thing, and another party thought something else. Nah! (Boy, if that were true, I'd be out of a job!).

Sequels do not count because back in 1997 when Disney and Pixar originally signed this new deal, it was assumed that any and all sequels that would be done to earlier Pixar productions would be done on the cheap (like all those direct-to-video film sequels to their traditionally animated fare).
http://www.darkhorizons.com/news/020930.php

Exactly. Contrary to DB's information, EVERYONE thought that the contract meant that sequels were supposed to be DTV type stuff...things that wouldn't qualify. And how do we know that? BECAUSE TS2 WAS SUPPOSED TO BE DTV, remember? It wasn't supposed to go the theaters. It was only after it started in production and people realized that this story was even better than the first one (IMO), that it could be a big hit in the theaters.

Our second work-in-progress is Toy Story II, a made for home video sequel to Toy Story, with Tom Hanks and Tim Allen reprising their roles as Woody and Buzz. In creating Toy Story II, we have the enormous head start of being able to draw from our "digital back lot"; the rich library of computer models, sets, textures, surface appearances and motion sequences that we created for the original Toy Story production. We only recently announced Toy Story II, but we’ve been working on it since last summer. We are really excited about bringing new adventures of Woody and Buzz to audiences in our studio’s first made for home video sequel, scheduled for release in the fall of 1998
http://www.pixar.com/companyinfo/investors/annualreports/1996/index.html
Hence, they ramped up production, and went back to Disney, saying, this is a big one, and its gonna count. And Mike said, "No, no, no, I don't look long term, I've got shareholders to worry about, and my penthouse on Central Park needs new fixtures."

And little tiny Pixar had to bow.
Per the new Disney agreement, Toy Story 2 will now be treated under the same terms as our other theatrical releases, except that it will not count as one of the pictures in our five picture deal. This is because when we negotiated the new agreement, we acceded to Disney's position of wanting five original casts of characters for their theme parks, which sequels do not provide. The fact that we were so easily able to accommodate the major change from a direct to video to a theatrical sequel speaks to the depth, scope and enduring nature of this important agreement, as well as to the close working relationship between Pixar and Disney.
Steve's original comments from his letter to shareholders. But note Job$ says, "TS2 will now be treated..." I thought DB said it was just rumors? Nope, Ei$ner, modus operandi intact, strong-armed Pixar, and the little company agreed, mainly (I think) because they knew that they couldn't prove without an expensive lawsuit (that I'll admit they may not have won), and they could still get 50% of a ton of money from a great project (except that which Disney screws...err...except the accounting thingamajigs that goes on anytime a management company accounts to its artist)

So obviously, DB's right, the issue is settled, hunky dorky, and TS3 is a done deal...meaning it would not have counted toward the five picture deal (had it been done when Disney wanted it inbetween Finding Nemo and The Incredibles.
NOT-SO-SIMPLE ARITHMETIC. Insiders tell me the interpretation of parts of that second deal is the crux of the companies' current issue. After Toy Story 2, Disney started pushing to make a third installment starring Woody, Buzz Lightyear, and crew. Would it count against the three films that Pixar still owes Disney under the 1997 deal? (A Bug's Life and Monsters, Inc. are the first two.) Disney doesn't want Toy Story 3, if there is one, to count against the five-picture deal, insiders say, while Pixar will only make the film if it does.
Yep, it's been a 'rumor' since 2001...says Business Week. But didn't you tell us that was all fixed because the language is so clear in the contract? If it was fixed for #2, why is it still an issue for #3? http://www.businessweek.com/bwdaily/dnflash/sep2001/nf20010928_5607.htm
But DB, if I were the ONLY one who thought all this, then maybe I would think I'm just a crazy old Car #3er (NOT CAR 4--get it right!) mouthing off at that guy we love to blame for everything bad in the world of Disney. But see, I'm not. Alex Stroup from Mouseplanet had this to say:
There is nothing wrong with trying to get everything you can, for as little as possible. It only makes sense. At times, Disney has reaped some incredible rewards from this - for example, early in his tenure, Eisner's emphasis on budget turned Disney's live- action studio into a cash cow - but they have also suffered severe consequences. When Disney has twisted an arm to hard, they have damaged some very fruitful relationships. There are actors, producers, and directors who won't work with a Disney studio because of perceived slights in the past. Many feel that manhandling by Disney has soured the relationship with George Lucas, Steven Spielberg, and the Henson family to bad effect.
Scroll down the entire article at http://www.mouseplanet.com/notebook/rn011025.htm to read how everyone thought that sequels were not going to count, because they thought that Disney's idea of sequels was DTV stuff. Funny thing, DB, is that Pixar was right. DISNEY"S IDEA OF SEQUELS IS DTV JUNK--you know like Peter Pan II, Bambi II, Cinderella II, Aladdin II, Aladdin III, all those movies that are enjoyable for a time or two, but really don't make a dent anywhere in your collective conscience or will last any time in theannals of animated feature history, except when people try to analyze why the company made so many wrong moves.

Boy, it sucks when the facts stand in the way of a good story, eh?

The real issue is whether or not Disney should make the deal with Pixar, not whether or not Disney is in this sorry position because Ei$ner consistently tried to screw the company. (It should be recognized as about as close to fact as two guys talking on computers a million miles away from the Northern Carlifornia boardroom where Job$ hotlines Ei$ner each week--let's face it, you know that I can't provide you with the tapes that proves I'm right, but at least the circumstantial evidence--overwhelming, mind you--suggests that Ei$ner got what he wanted but at a price we will have to pay).

Is Pixar willing to go it along, finance their pictures themselves, and pay various studios distribution fees? Maybe, but they lose direct control over the characters they've already created. Unlike Walt, who created Oswald and dumped him when he had to, Pixar is SEVEN pictures into the deal--that's a lot of history to walk away from.

All I'm saying, is that had Ei$ner played this as an honorable man, he'd have a deal with Pixar in place. No, not at the 50/50 terms he had, but who in his right mind thinks that after Pixar's string of hits that the contract should remain that way anyway?

Finally, if Ei$ner had put as much effort into saving traditional animation as he has into screwing Pixar, we'd all be anxiously awaiting the studios next masterpiece. Are you happy about that, DB, that Ei$ner himself has basically killed Disney's history of producing 2d masterpieces? If you are, I suggest you re-read that Brad Bird quote I used to have until Mr. Boo hogtied me.

Whew. My fingers are tired.
 
Comeon Larry!

Making an assumption in 97 that sequels would be done on the cheap is a weak argument. Particularly where Pixar is concerned.

Did Eisner put the screws to Jobs? yeah. Jobs lost.

And guess what - the market caught up. Shark Tale leads for the second straight week. This was a great venture in its' day but it couldn't last. Pixar wants to own what it makes. They should move in that direction - and Disney should go back to doing what it does best, animation.

I am not an advocate of the Pixar relationship continuing at this time. Let them compete right along side everybody else.
 
Originally posted by airlarry! Is DB right that I'm just making up this rumor about Ei$ner putting the screws to Job$ on the second deal?...Contrary to DB's information, EVERYONE thought that the contract meant that sequels were supposed to be DTV type stuff...things that wouldn't qualify.
{Sigh!} Why do I need to keep doing this over and over and over? "DB's information" is not from any secondary source, IT'S FROM PIXAR'S 1996 10-K filed March 31, 1997, about a month after the 5-picture deal was signed. Once again, I quote from PIXAR'S summary of the deal:

On February 24, 1997 Pixar and Walt Disney Pictures and Television, a wholly-owned subsidiary of Disney, entered into the Co-Production Agreement ("Co-Production Agreement") pursuant to which Pixar, on an exclusive basis, will produce five computer animated feature-length theatrical motion pictures (the "Pictures") for distribution by Disney over approximately the next ten years....

...The Co-Production Agreement also contemplates that with respect to theatrical sequels, made-for-home video sequels, television productions, interactive media products and other derivative works related to the Pictures...

...The following is a summary of the Co-Production Agreement, which has been filed as an exhibit to this Annual Report on Form 10-K...

...Subject to certain exceptions, Disney and Pixar have mutual control of the decision to develop, produce or otherwise exploit any derivative works (or to transfer or license any rights to exploit any derivative works) during the term of the Co-Production Agreement or thereafter. Derivative works include theatrical sequels, made-for-home video sequels, television productions, interactive media products and other derivative works as more specifically provided in the Co-Production Agreement (collectively, "Derivative Works"). Except in certain very limited circumstances, in the event of a disagreement over whether to proceed with a Derivative Work, Disney's decision governs. Pixar is to be given the option to co-finance and produce, or to participate on a passive financial basis with respect to, a Derivative Work that is (i) a theatrical motion picture, a (ii) a made-for-home video production...

...A Derivative Work that is a theatrical motion picture would not count towards the five Pictures to be produced under the Co-Production Agreement...
http://www.sec.gov/Archives/edgar/data/1002114/0000891618-97-001519.txt [You can read the actual contract there as well if you wish]

Again, this is PIXAR'S summary of the terms of the Co-Production Agreement, filed with the SEC just a month after the deal was signed. Note that both theatrical sequels and DTV videos are specifically contemplated. Note that the last paragraph clearly says theatrical sequels DON'T COUNT!!! Just when did Job$ become confused about this?

Asi you said:
Boy, it sucks when the facts stand in the way of a good story, eh?
 
DB, not Job$. Just when did EVERYONE get confused about this?

It is a subtle point...sort of like when the spider subtly weaves his web.

It was to be a DTV production. When Disney asked Pixar to ramp up TS2 to a theatrical sequel, with new characters, a tighter story line, and better animation, Job$ had every right to question the terms of the contract.

Do you really disagree? Even after reading the contract?

Here's why Job$ had a strong argument. (You did a nice cut and paste job, but left out the juiciest most important parts):

Derivative works include theatrical sequels, made-for-home video sequels, television productions, interactive media products and other derivative works as more specifically provided in the Co-Production Agreement (collectively, "Derivative Works").
A Derivative Work that is a theatrical motion picture would not count towards the five Pictures to be produced under the Co-Production Agreement. The Toy Story Video Sequel is the first such Derivative Work that Pixar has elected to co-finance and produce.

Well, well, well. That's strange. They define Derivative works as being theatrical sequels AND made-for-home video sequels. And then they say that a derivative work that is a THEATRICAL MOTION PICTURE would NOT count. And then Pixar says that TS2 is a VIDEO SEQUEL that is the first such Derivative Work. Ergo, the companies INTENDED that DTV videos that are released into the theaters would not count...but Lassiter knew that he had a hit on his hands, and so did the "Disney independent rep" that was assigned to oversee the production. Everyone reads this agreement, and everyone agrees that if TS2 is ramped up to a quality production, with new characters blah blah blah, then it should be part of the five. Job$ knew it. Lassiter knew it. Disney knew it. Ei$ner knew it.

This was the not the first or last time Ei$ner has tried to use contract language to his advantage. (DB, read HIS book, for crying out loud!)

I know you will have some comeback, because you are a logical thinker and generally make well-reasoned arguments. But I will anticipate this, and try close the door.

Come on, DB, the wall of water is weakening. Just admit that there was a basis for the rumors, and I'm fine with that. You don't have to admit that I'm right. ;)

Made-For-Home Video Sequels. Disney and Pixar have announced their
intention to produce a made-for- home video sequel to Toy Story, such as
Disney's made-for-home video sequel to Aladdin entitled The Return of Jafar, and
Pixar has begun work on the Toy Story Video Sequel under the terms of the
Co-Production Agreement. Pixar intends in the future to continue to produce
made-for-home video sequels generally based on the same characters as the
original feature film. The Toy Story Video Sequel will also be distributed
pursuant to the Co-Production Agreement. Pixar expects that the Toy Story Video
Sequel and other made-for-home video sequels will be shorter in length and lower
in cost and quality than the theatrical films then under development.
Clearly, Pixar signed the contract (and so did Disney) knowing that derivitave works (even those that may later be scheduled for theatrical release--anyone remember PP2 or any of the others that were released?) were lesser quality, lesser man-power needing works that would not interfere with Pixar's planned ramped up production (Job$ stated way back when that their "holy grail" was to release one quality CGI production a year).

But TS2 did interfere with that schedule. It took money, people, brains, creativity, output away from the rest of their productions, and Pixar should have been treated accordingly.

Ei$ner didn't, Job$ and Lassiter got teed off, and whoops, we're in the mess we are in.

Checkmate.
 
Originally posted by airlarry!
...Well, well, well. That's strange. They define Derivative works as being theatrical sequels AND made-for-home video sequels. And then they say that a derivative work that is a THEATRICAL MOTION PICTURE would NOT count. And then Pixar says that TS2 is a VIDEO SEQUEL that is the first such Derivative Work. Ergo, the companies INTENDED that DTV videos that are released into the theaters would not count...

...Clearly, Pixar signed the contract (and so did Disney) knowing that derivitave works (even those that may later be scheduled for theatrical release--anyone remember PP2 or any of the others that were released?) were lesser quality, lesser man-power needing works.
WRONG! Why are you trying to read things into the contract that aren't there? Sequels were understood to be LESSER QUALITY???? "Theatrical sequels" means "DTV videos that are released into the theaters"???

You're arguing with yourself here--go back to your previous post, quoting Job$:

This is because when we negotiated the new agreement, we acceded to Disney's position of wanting five original casts of characters for their theme parks, which sequels do not provide.
There's the reason sequels don't count, NOT because they are lesser quality. Jobs tried to muddy the waters here, but he lost because his argument had no legs to stand on.

Let's skip the 10-K language and go straight to the contract. Under Section 15, "Derivative Works", there are SEPARATE SUBSECTIONS for "Theatrical Motion Pictures" and "Made-for-Home Video Productions". Where do you see any support for the idea that "Theatrical Motion Pictures" means "cheap direct-to-video stuff that we show in movie theaters for a couple of weeks"?
 
Why are you quoting Job$ language after the fact, instead of Pixar's language at the time of the contract?

Remember our particular little brou-ha-ha here. You said I was wrong that the parties (or at least Pixar) never intended that derivative theatrical works (like TS2 came to be) would be considered part of the five.

You won't let me go outside the contract to do so, but that's how one determines the 'intent of the parties' where the contract can be considered unclear.

Pixar's statement BEFORE the problems with Ei$ner occurred would be a good source of its intent, wouldn't you agree?

Pixar stated in its 10k report BEFORE Ei$ner screwed up that it "expects that the Toy Story Video Sequel and other made-for-home video sequels will be shorter in length and lower in cost and quality than the theatrical films then under development."

Shorter. Lower in Cost. Lower in Quality. That's where I see support for the idea that "Theatrical Motion Pictures" means "cheap direct-to-video stuff that we show in movie theaters for a couple of weeks."

It's true that the lawyers didn't use your particular language, I know, but clearly where DTV releases are shorter, lower in cost, and lower in quality means that the theatrical motion pictures would be longer, higher in cost, and higher in quality unless I misunderstand the Rules of Inverse Logic.

The language you quoted in Job$ was his explanation as to why they cut the deal with Disney the way they did. But Pixar's own 10k hangs him earlier. DTV jobs are much less expensive, labor intensive, and take less investment to make. Works like Bugs and TS2 required (at the time) almost all of the production capabilities of the little studio. Finish out the 10k statement:

"Disney and Pixar have announced their intention to produce a made-for- home video sequel to Toy Story...Made for home video sequels are derivative works...Derivative works that are theatrical releases do not count toward the five pictures...Toy Story 2 is such a derivative work." If we read this paragraph with your interpretation, it makes NO sense. How can a derivative theatrical release be a made-for-home video sequal? The common sense reading is that DTV sequels that are (or not) released into theaters do not count toward the five pictures.

Clearly, there is a way of reviewing the contract in Disney's favor that mandates five new stories and sets of characters. But that's never been the point.

What did the parties intend? Five new pictures, and cheap easy to produce sequels on top of those that makes buckets of money and ends up in the $5 discount section of Wallyworld.

What did Disney get? A picture many critics agree was better than the first one, and a delay in the production of the other pictures under the contract. Yes, DB, that's the real reason why crappy sequels don't count, because they don't take time away from the company for fullifiling its mandated 5 picture deal, at least on Pixar's side.

(Obviously, on Disney's side, they want new stories, new chacters--and I'm not even going to argue that Bullseye, Jessie, and Stinky Pete were new characters, because I can anticipate your reply already--yes, you're technically correct, but this is Hollywood man, not Widgets Are Us, and only lawyers and MBAs would argue that TS2 didn't deserve treatment as one of the five, or that those three characters should be considered in the same breath as Ariel's little daughter or Aladdin's father or any of the other forgettable characters churned out by DTV).

Oh yeah. So why did Job$ accede? Because with or without TS2, he knew that clock was ticking on this deal. Tick...tick...tick...

Let's play secret agent for a second. Let's assume that Lassiter adores Disney and its history. Let's assume that Job$ has a big ego. You're with me so far. Is it so hard to imagine that Job$ would see that capitulating to Ei$ner then would make it easier for Job$ to convince Lassiter to let go of Disney later on?

It's a rough and tumble world amongst the media superegos. Ei$ner may have won the battle, dear DB, but he may lose the war.

In hindsight, and even during the time, it made more sense to reward Pixar with applying ramped up production like TS2 as one of the five but expecting (and getting) good terms on the new deal. But we all know why Ei$ner was thinking short term at the time, now don't we?

Checkmate, again, but I'll play you best 3 out of 5. ;)
 
I would like to look at the original contract, however, but can't find the link on Edgar. Do you have it handy?
 
Scroll down on the link from DB. The contract is there.

From the derivative works section referenced:

15. DERIVATIVE WORKS.

a. Definition of Derivative Works. For purposes of this Agreement,
"Derivative Works" means any work based upon any of the Pictures or Toy Story,
or any original

[*] - Confidential treatment requested.


-23-
<PAGE> 28
characters therefrom or story or other elements thereof, including without
limitation sequels, prequels, remakes, made-for-home video productions,
television productions, Interactive Works, shorts, commercials and interstitial
works, stage plays, [*], Internet websites, [*], [*] and [*].

b. Decision to Produce.

(i) Subject to the provisions of this paragraph 15, Disney and
Pixar shall have mutual control of whether or not to develop, produce or
otherwise exploit any Derivative Works (or transfer or license any rights to
exploit any Derivative Works) during the Term or thereafter. Within a reasonable
time after request of Disney or Pixar, Disney and Pixar will seek to reach
agreement on the terms of development and production of any Derivative Work. In
the event of a disagreement of whether or not to develop, produce or otherwise
exploit any Derivative Work, Disney's decision shall govern, [*]. Prior to
commencement of the development or production of any Derivative Work (or
transfer or license of any rights to exploit any Derivative Work), Disney shall
notify Pixar and afford Pixar the opportunity to make its election with respect
to such work as provided in this paragraph

Sounds pretty clear to me.
 
Shorter. Lower in Cost. Lower in Quality. That's where I see support for the idea that "Theatrical Motion Pictures" means "cheap direct-to-video stuff that we show in movie theaters for a couple of weeks."

I don't know why you think this.

here:

c. Theatrical Motion Pictures. In the case of any Derivative
Work which is a theatrical motion picture, including a sequel, prequel or
remake, whether during the Term or thereafter, Pixar shall be entitled, at its
election, to do any one of the following:

- -------
[*] Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.


-24-
<PAGE> 29
(i) Co-finance and produce such Derivative Work. If Pixar
elects to co-finance and produce such work, such motion picture shall be added
to the definition of Pictures produced and financed hereunder and all the
provisions of this Agreement shall apply to such motion picture, subject to the
following: Such Derivative Work shall not count toward the five Pictures to be
produced under this Agreement.
Disney shall be entitled to approve the
Treatment. The provisions of paragraphs) 3(a)(i) and (ii) shall not apply to
such Derivative Work.

There is no indication of what you are implying anywhere in this language. They are clearly identifying the fact that a derivative work could be a full-blown motion picture.
 
Originally posted by airlarry! You won't let me go outside the contract to do so, but that's how one determines the 'intent of the parties' where the contract can be considered unclear.
BUT, the contract is perfectly clear on this point. It's too bad the "Glossary of Terms" exhibit to the Co-Production Agreement is not included in the EDGAR filing, as I'm sure it defines the term "Theatrical Motion Picture" and would definitively put an end to your silly argument that somehow "Theatrical Motion Picture" and "Made-for-Home Video Productions" somehow mean the same thing.

Let's look at your own language again:

Pixar stated in its 10k report BEFORE Ei$ner screwed up that it "expects that the Toy Story Video Sequel and other made-for-home video sequels will be shorter in length and lower in cost and quality than the theatrical films then under development."
EVEN THAT QUOTE distinguishes between "made-for-home" videos and "theatrical films."

"Disney and Pixar have announced their intention to produce a made-for- home video sequel to Toy Story...Made for home video sequels are derivative works...Derivative works that are theatrical releases do not count toward the five pictures...Toy Story 2 is such a derivative work." If we read this paragraph with your interpretation, it makes NO sense. How can a derivative theatrical release be a made-for-home video sequal?
Ehhh, what? Section 15 of the Co-Production Agreement says:

15. DERIVATIVE WORKS.

a. Definition of Derivative Works. For purposes of this Agreement, "Derivative Works" means any work based upon any of the Pictures or Toy Story, or any original characters therefrom or story or other elements thereof, including without limitation sequels, prequels, remakes, made-for-home video productions, television productions, Interactive Works, shorts, commercials and interstitial works, stage plays...Internet websites....
So "Derivative Works" includes many different contemplated uses of the existing stories and characters. So, TS2 as a DTV was a "Derivative Work", and so was TS2 as a "Theatrical Motion Picture." So, Pixar's statement at the time that TS2 DTV was "such a derivative work" was correct, but doesn't mean TS2 full-blown theatrical release was not "such a derivative work."

The remainder of Section 15 includes the following TWO SEPARATE subsections:

c. Theatrical Motion Pictures. In the case of any Derivative Work which is a theatrical motion picture, including a sequel, prequel or remake....
AND

d. Made-for-Home Video Productions. In the case of any Derivative Work which is a made-for-home video production, including a sequel, prequel or remake...
Ain't it odd that the word "sequel" turns up in both sections?

Yes, DB, that's the real reason why crappy sequels don't count, because they don't take time away from the company for fullifiling its mandated 5 picture deal, at least on Pixar's side.
BUT, (1) Pixar doesn't have to produce any "Derivative Works" of any kind--they just get the option to do so--and by doing TS2 for theatrical release, they made a boatload of cash, and

(2) YOU JUST MADE MY ORIGINAL POINT!! Job$ wanted out of the 5-picture deal ASAP!! So why would you think Job$ was looking to enter into some longer-term, more picture deal with Disney? No, Job$ was looking to get into the free market bidding for Pixar's product ASAP!
 












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