WALT DISNEY-PIXAR STUDIOS

BACKGROUND
WALT DISNEY PICTURES
• Founded on Oct. 16th 1923 by
brothers Walt Disney & Roy Disney
• One of the largest media and
entertainment company in the world.
• Owns 11 theme parks and several
television networks
• Started making films in the 1930’s, a
lot of them being animated
adaptations of children’s fairy tales.
BACKGROUND
PIXAR ANIMATION STUDIOS

• Founded in 1979; originally

began as a tech company
named Lucasfilm's Computer
Division
• The division was purchased by
Steve Jobs in 1986;
establishment of Pixar
Animation Studio.
 STRENGTHS
Pixar Disney

Area Short films and commercials Animation movies

Animation 3D 2D animations
Leading computer animation
technology

Software RenderMan N/A

Marionette

Assets CG Movie industry knowhow and

Story telling creativity experience
 THE BEGINNING
• In the wake of stagnating share prices, Walt Disney
Corporation sought to revive its animation capabilities as
investors flocked to more successful animation studios.
• Impressed by the computer animation technology used
in Oscar-winning short animation movie “Tin Toy”, Disney
& Pixar entered into an agreement. for developing at
least 3 computer animated feature films, in 1991, with
Pixar developing and directing the movies while Disney
markets and distributes the movies.
 THE BEGINNING
• After the release of Toy Story in 1995, a 10
years, 5 films deal was signed, evenly splitting
the production cost and profits on subsequent
movies.
• In addition, Disney alone held the rights to the
film and characters.
• Also, 10-15 per cent of each film’s revenue was
to be collected by Disney as distribution fees.
THE BEGINNING
• Jobs and Eisner had their differences when it came to re-negotiate their
contract.
• Pixar wanted more of the profits and rights, while proposing that Disney would
only receive a small distribution fee.
• This was in contrast to their previous agreements that favored Disney, where
Disney kept the lion's share of profits as well as rights to the story and sequels.
• Steve Jobs ended up announcing that Pixar was going to actively pursue other
distributors besides Disney for their future movies.
ALTERNATIVES FOR DISNEY
Internal Development
• Acquiring human & technology asset
• Developing 3D technology internally
• Too much development cost & fierce competition.

Strategic Alliance (with Pixar)

• Re-negotiation of agreement between Pixar and Disney
• 100% ownership to Pixar, distribution fees to Disney.
ALTERNATIVES FOR DISNEY
Strategic Alliance (with other studios)
• Hard to build a new relationship
• Also, Pixar could become their biggest competitor

M&A
• Revitalize animation department
• Eliminate competition
• Access to technology and human capital.
THE MERGER
THE MERGER
• With Eisner stepping down as CEO,
Bob Iger, his replacement, resolved
the conflicts between Disney and
Pixar
• On January 24th 2006, Disney
announced to buy Pixar for
approximately $7.4 billion.
• This made Jobs the major
shareholder in Disney, and also a
member of the Board of Directors.
ACQUIRE OR NOT?
oCombining Disney and Pixar brands would allow the combined company to
exploit full market potential.
oCost reductions associated with Pixar, no longer paying distribution fees to
a third party if it had remained an independent company, and any other
expenses associated with operating as an independent public company.
oPixar’s shareholders would experience the benefits of Disney’s earnings
stream and integrated portfolio of entertainment assets.
oDue to the great success of Pixar’s animation films, each movie had
generated over $3 billion in revenues, landing the firm as a large player in
this market segment. Disney, therefore, could not afford to let Pixar fall into
the hands of another competitor or simply rely on the possibility of
partnership arrangements for future films.
THE MERGER
• While the merger failed in 2003 under the negotiation of Steve Jobs,
the acquisition passed with a stock purchase in which 2.3 shares of
Disney would be given to every shareholder of Pixar in exchange for
their ownership.
• The merger, however, did not result in merging of the two studios –
additional conditions were laid out as a part of the deal ensuring Pixar
to remain a separate entity.
• Pixar, if it decided to pull out of the deal, has to pay a penalty of
US$210 million.
• John Lasseter has the authority to approve films for both Disney and
Pixar studios, with Disney CEO Robert Iger and Disney Director Roy E.
Disney carrying final approving authority.
REASONS FOR SUCCESS
• The acquisition yielded ongoing competitive advantage as Pixar marketed its
content through Disney's well established distribution system. The distribution
costs of the films for Pixar are lower than that of its competitors.
• Disney got access to key Pixar technologies which enabled it to produce
movies at a lower cost and faster than its rivals, thus helping revive Disney's
own animation unit.
• Apart from technology, Disney also got access to all the Pixar characters,
which could be used at its theme parks, merchandise stores and its other
related businesses. Disney and Pixar could also share costs of producing the
movies and also the benefits from the movies.
REASONS FOR SUCCESS
• Pixar and DreamWorks were two of the
biggest and most successful animation
studios in the industry. Hence
acquisition of Pixar helped Disney to
reduce the competition it faced. Also it
allowed Disney to create and distribute
its own content, thus reducing its
dependency on Pixar or any other
animation studios.
REFERENCES
• http://docslide.us/documents/case-study-of-disney-pixar.html
• http://tomatoes-craig.blogspot.in/2014/03/case-analysis-walt-disney-
company-and.html
• https://www.slideshare.net/ericmoon/the-walt-disney-company-and-
pixar-inc-to-acquire-or-not-to-acquire
• http://animationalley.blogspot.in/2015/04/a-brief-history-of-pixar-
disney.html
• https://www.slideshare.net/ericmoon/the-walt-disney-company-and-
pixar-inc-to-acquire-or-not-to-acquire
• Donald DePamphilis, “Mergers, Acquisitions and Other Restructuring
Activities”
REFERENCES
• http://www.inaglobal.fr/en/cinema/article/pixar-tale-hollywood-s-
most-innovative-studio
• http://theindianeconomist.com/the-disney-pixar-merger/
• http://www.academia.edu/9364657/Disney_and_Pixar_Acquisition_C
ase_Analysis
• https://www.scribd.com/doc/124639369/Disney-and-Pixar-Merger
• http://community.mis.temple.edu/laurenpatterson/files/2014/03/wal
t-disney-pixar-case-analysis.pdf
THANK YOU
EFFORT BY:
ISHA
RICHA DHYANI