Disney Pixar Acquisition

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Issues:
Robert Iger, CEO of the Walt Disney Company, believes that in order for Disney to be successful in the future they must transition away from hand drawn cell animation to Computer Generated (CG) animation technology. Disney has been reliant on Pixar, the leader in CG animation, for most of its recent animation revenue and the co-production agreement between Disney and Pixar will expire within 1 year. Iger must decide what a deal with Pixar will look like and if it makes most sense to acquire Pixar.

Analysis:
Pixar has a number of strong capabilities, some of which Disney does have and some which Disney does not possess. Pixar is the leader in Computer animation technology where Disney has focused on traditional 2D animation. Research and Development has been a large focus of Pixar and has led to the creation of many proprietary software systems (RenderMan, Marionette, and Ringmaster). This focus on Research and development means that Pixar’s employees are highly technically skilled (most employees hold PhDs) where Disney’s Employees lack CG skill. Where Pixar’s strength lie in innovation and creation, Disney’s strength comes from their vast distribution network and experience in the Movie Industry. Together it is clear that these companies could capitalize on the animated movie market. There are a number of ways Disney could move forward. Below I discuss the alternatives.

Internal Development: Disney could focus on developing competing CG technology internally and forget about partnering with Pixar. This option would require acquiring both human and technology assets and would be very costly. They also face very intense competition from other companies who have already proven to be successful in this capacity such as Pixar and DreamWorks.

Strategic Aliance with Pixar: As the lines of communications have been reopened, Disney has the opportunity to discuss extending the Disney-Pixar co-production agreement. In doing so Pixar will gain access...
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