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The Walt Disney Company and Pixar Inc.:

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on 25 March 2015

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Transcript of The Walt Disney Company and Pixar Inc.:

Disney SWOT
Guessing Game
Pixar History
The Walt Disney Company and
Pixar Inc.:
To Acquire or Not to Acquire?

2006: Disney buys Pixar for $7.4 Billion
Inside Out- 2015
Finding Dory- 2016
7 more through 2018

2009: Disney buys Marvel for $4 Billion
Captain America Civil War- 2016
Guardians of the Galaxy 2- 2017
Black Panther- 2017
2012: Disney buys LucasFilm for $4 Billion
Star Wars: Episode 7- 2015
Star Wars: Episodes 8 and 9- 2017/2019

Where are they now?
Should Disney acquire Pixar?
“The importance of animation to Disney over the years is obvious. Nothing creates more of an impact at this company than a successful animated film.”

Options:
Compete with Pixar
Strike a deal with another studio
Renegotiate deal with Pixar


Suggestion:
Acquire Pixar
“Near-perfect strategic fit”

Strength

Cash flow
Brand image
Theme parks, attractions, merchandise
History
Cable networks
Long tail revenues related to classic movies
Weakness
2D animation
Target mostly to children
Continuously changing management
High turnover
Inconsistent salaries
Opportunities
Acquiring Pixar
Improve their own CG department
More disposable income
Expand to other countries
Build international brand
Threat
Competitive market
Competition could produce more movies per year
Piracy
1980s
1986
2004
1991
1979
1970s
While working there in the early 1980s, Catmull met
John Lasseter
, who left Disney and joined Lucasfilm.
In 1986,
Steve Jobs
bought the Lucasfilm computer business, then called Pixar for $10 million.

Jobs, Catmull and Lasseter all had one ambition in common: to make an animated feature film.
In 1991, Lasseter believed Pixar was finally ready to break into film. At the same year, Disney and Pixar signed a deal.

In 2004, Disney and Pixar's deal broke up.
Pixar traced its origins to the University of Utah in 1970s.

Around the same time,
Alexander Schure
hired a team of animators to make a film version of "Tubby the Tuba". He flew to the University of Utah and recruited
Catmull
.
In 1979,
George Lucas
approached Catmull's team with an offer to work on special effects for Lucasfilm.
2000
2004
1984
1934
Disney History
Joe Roth,
the

former chairman of 20th century Fox, became chairman after Katzenberg’s departure

Peter Schneider,
the former

head of Disney Animation, took over in 2000 after Roth left

In the late 1990s, Disney set up a
“Secret Lab”
, the first CG project-
Dinosaur
, disappointed the box office

In 2001, back to 2D projects, such as
Atlantis: The Lost Empire

Disney History
In 2002, new feature-animation chief
Thomas Schumacher
, cost-cutting mission.
Lilo& Stitch
($80m)
In 2003, finally set up its own CG animation department
From 1998 to 2004, Disney came to
rely on revenue
and characters produced by its partner, Pixar

Disney History
Animation began with Snow white and seven dwarfs in 1934


Struggled for decades after Walt Disney’s death
Michael Eisner
and
Jeffrey Katzenberg
, in 1984

Gained success on The Little Mermaid, The Beauty and The Beast, and The Lion King($1b in net income)

In 1994, Katzenberg left Disney

Fell below expectation after The Lion King

In 1997, Katzenberg, along with Steven Spielberg and others started rival animation studio -- Dream Works, which lured away Disney's best animators




Disney History
Disney History
Disney Studio Productions
Value Chain
Upstream
Downstream
Actors/Voice Actors
Writers
Artists (2D/CGI)
Creation of stories
Animation/Video Editing
Artwork/CGI
Production/Distribution of Film
Promotion/Advertising
Broadcasting on network TV
Additions to theme parks
Maintaining characters
Blu-ray/DVD
Disney Value Chain Analysis
Factors Affecting the Value Chain
Introduction of new technology
CGI & 3D
Licensing
Copyrights & Trademarks

Experience of Employees
Artists (2D vs. CGI)
Voice Actors
Where Can Pixar Fit In?
Upstream
Downstream
Actors/Voice Actors
Writers
Artists (2D/CG)
Creation of stories
Animation/Video Editing
Artwork/CGI
Production/Distribution of Film
Promotion/Advertising
Broadcasting on network TV
Additions to theme parks
Maintaining characters
Blu-ray/DVD
k
Forbes May 2014:
Market Cap = $142.92 Billion
#14 World’s Most Valuable Brand

Horizontal Integration

•From 2D animation to live action movies
•Merging with Pixar
•Pixar University
•Acquire other companies to capture new audiences
Geographical Integration

•Expanding internationally
•More theme parks

Pixar SWOT
Strength
Recognizable characters
Animation studio, software, hardware
Highly talented staff
Good work atmosphere, culture
Technology innovation
Quality of their work
Pixar University
Employees had high loyalty
Weakness
Did not fully own their characters
Long developing time per movie
Steve Jobs focus on Apple as well
Only received 40% of profits
Brand name not as strong as Disney’s; forced to give up identity
Threat
Competition produced more movies per year
Piracy
Substitutes
Opportunity
Collaborate with other big movie producers/studios
Build a theme park to expand their brand name
Focus on marketing
Enter video game market
Build their international brand
Feature Film Agreement
Renegotiations
2002- Pixar in position to renegotiate for deal with more favorable terms after previous successes
Pixar began shopping around for new partners
Relations among executives were also a concern for the future of both companies
Co-production Agreement
10 year deal- Pixar would exclsuively produce 5 original full length animated movies
Share 50/50 production costs
Net result with distribution and marketing fees and split revenue streams, Disney- 60% and Pixar- 40% movie profits
1991- produce 3 full length CG animated movies
Disney funds production and owns movie rights
Pixar paid based on revenue and pays production costs over budget
Edwin Catmull
Alexander Schure
Pixar History
Pixar History
Pixar History
Pixar History
Pixar History
Full transcript