o Should Pixar seek a better distribution deal outside of Disney? o Can it seek a better deal with Disney?
John Pongsajapan Xin Ye
SPRING 2005 BEM 106 FINAL PROJECT
In 1986, Steve Jobs purchased the computer graphics division of Lucas Films Ltd. for $10 million and established Pixar Animation Studios. Since its inception, Pixar established itself as a leader and innovator in computer animation. Its first animated short films garnered many film awards, most notably The Tin Toy, which won the Academy Award for Best Animated Short Film in 1989. In 1991, Pixar entered into a three-picture co-production deal with Disney. Following the success of Toy Story, this relationship was extended to include three more pictures. A string of blockbuster hits followed, each film doing better than its predecessors. A Bug’s Life was the highest grossing film of 1998. Toy Story 2 became the highest grossing animated movie of its time in 1999, later topped by Monsters, Inc. in 2001, and then by Finding Nemo in 2003. On January 30, 2004, it was announced that Pixar and Disney had failed in their negotiations to extend their contract beyond the animated film Cars, to be released in 2006. With the stellar success of Finding Nemo, Pixar felt entitled to a more profitable contract with Disney. The new Disney CEO Robert Iger has stated that he will continue negotiations with Pixar. Before Pixar makes its decision on its future relationship with Disney, it should consider its survivability and likely profitability in seeking distribution deals elsewhere. II. Company Analysis • Company History (1) o 1984: Former Disney animator John Lasseter joins George Lucas’ computer graphics group. He will eventually become one the founders of Pixar and its creative director. o 1986: Steve Jobs purchases the computer graphics division of Lucasfilm, Ltd. for $10 million and establishes Pixar. o 1991: Pixar enters into a 3 feature-length animated film deal with Disney. o 1995: Pixar goes public. Toy Story is released, becoming the highest grossing film of the year o 1996: John Lasseter is given the Special Achievement Award at the Oscars for his leadership in the making of Toy Story. o 1997: Pixar and Disney enter into a new agreement to jointly produce 5 films, superceding their previous agreements. Pixar expands to a second building in Point Richmond. o 1998: A Bug’s Life is released, making over $163 million in domestic box office receipts and $362 million worldwide. o 1999: Toy Story 2 is released, grossing $245 million in domestic box office receipts and $485 million worldwide. o 2001: Co-founder Ed Catmull is named Pixar’s president. John Lasseter signs a ten-year contract to work exclusively with Pixar. Monster’s Inc is released and becomes the 3rd highest grossing animated film ever. o 2003: Finding Nemo is released and becomes 8th highest grossing film of all time. o 2004: Finding Nemo wins Oscar for best animated film. The Incredibles is released. o 2005: The Incredibles wins Oscar for best animated film. Product Strategy o Specialize in 3-D computer generated animated feature films (increased novelty and differentiation from “normal” cartoons) o Create heartwarming stories and memorable characters that target audiences of all ages. o Develop brand reputation through entertaining, and successful box office films o Use brand reputation to sell video products, toys, interactive games, and other merchandise with or without the Disney co-brand. o Develop proprietary animation/production software that can be licensed. A source of revenue that can be exploited to sustain company operations in the future.
Business Model o Strong brand and consistent successes ensure a more profitable future distribution agreement, allowing Pixar full ownership of its future properties o Home video sales are among the largest contributors to lifetime revenues of its films and are a continual source of...