© 2003, DOW JONES & COMPANY, INC. ALL RIGHTS RESERVED
www.barrons.com
MONDAY, OCTOBER 13, 2003
Coy Story
Will Steve Jobs jilt Disney? No matter what happens, Pixar stock seems overvalued
TINY PIXAR IS THE HOTTEST TICKET in Hollywood. Fresh off the huge success of its latest animated movie, "Finding Nemo," an emboldened Pixar is bargaining hard over a new film-distribution agreement with its partner, Disney, while weighing offers from other studios. "Finding Nemo" is the highestgrossing movie in the U.S. this year, with projected domestic box-office revenue of more than $335 million. "Nemo" is expected to generate over $1 billion of revenue after international distribution and video sales, netting about $500 million in total profits.
…show more content…
On Pixar' s August earnings conference call, Jobs said Pixar would "prefer to continue our relationship with Disney" but that there are other studios "anxious" to align with it. A confident Jobs said that "the right deal is more important than the quick deal." Yet Disney, too, has leverage because of its marketing clout, born of its position as the world' s top producer of family entertainment. Disney' s bargaining position is enhanced because it' s entitled to half the profits on the next two Pixar movies, including DVD and video rights. Disney also can use Pixar characters for theme parks and other entertainment. While Disney and Pixar co-own the five films covered under the current agreement, Disney has more clout when it comes to any sequels. According to Pixar' s 2002 10-K report, "Disney' s decision governs" if there are disagreements between Disney and Pixar about whether to proceed with a sequel, except in very limited circumstances. ANIMATED ARGUMENT If Pixar dumps Disney for Warner Brothers, Sony or another Hollywood studio, Disney probably will force Pixar to abide by the 50-50 profit split on the next two films called for in the existing contract. That would delay a marked upturn in Pixar' s profits until 2007, the year after
After having a very successful performance and getting second place on the first Littlefield simulation game we knew what we needed to do to win the second simulation game. We were very eager to outperform our competition and we almost did so, but ended up in second place again with a cash balance of $2,660,393.
IRTC spoke with CPS, Cari Covahey, who reported that she observed the subject child and her siblings and there were no visible injury. CPS stated that there are no present issue regarding the subject child being sexual abused, but she seems to have a strong attraction to sexual related content. CPS uttered that she was told that the child is making comments about wanting to get pregnant and she frequently make remarks which are sexual in nature. Based on the above statement, this case does not meet the criteria for an IRT. However, if there is any suspicion pertaining to the subject child begin sexually abused in a physical manner, CPS is to contact IRTC or an IRTC at ECS (after hours) for a case reassessment.
Disney used the character of Mickey Mouse and others to create movies that customers enjoyed like “Beauty and the Beast” while Pixar was producing made up animated characters to create films like “Cars” and “Wall-E”. Disney was creating animated movies but struggling to generate the amount of money Pixar was making on producing only one movie a year. Disney wanted to grow in creating more animated movies and decided to buy out Pixar in 2006 for $7.4 million dollars. (Barnes, 2008) According to Disney’s CEO Robert
Managing conflict for organizations is very important in maintaining business relationships, especially ones that are profitable like that of Disney-Pixar. At the helm of the Walt Disney Company during the begging and end of these feuds was Michael Eisner and Bob Iger. Even though Michael Eisner is the one responsible for the conflict with Disney and Pixar, he should be equally responsible for trying to fix the damaged relationship. When trying to manage conflict there are several approaches that can be taken to resolve the conflict at hand: dominating, accommodating, problem solving, avoiding and compromising.
Buying energetic, young and creative Pixar, Disney intends to regain lost ground. But, they must do that in a smart way, to satisfy the needs of the Pixar owners, shareholders and employees. Back to the ownership test, the Disney ownership of Pixar will produce a greater competitive advantage for them. They will lose a powerful competitor, and will produce something
Disney’s tentpole strategy has been fairly successful throughout the Disney Studios lifetime. Even though this strategy worked in the past it may not be the best strategy moving forward, as there are advantages and disadvantages to this strategy. One advantage of this strategy is that the tentpole films attract movie going customers that think of the movies more as an event rather than just a film they want to see.“A $200 million movie is more likely than a $20 million movie to have elements that appeal to moviegoers--to have special value for them.”, said Horn. Just as with any bet, there could also be a risk and disadvantage. If the film fails, they would both have to take the fall instead of just Disney Studios. “When our
Introduction: The Walt Disney Company is on the threshold of a new era. Michael Eisner has stepped down from his position as CEO and turned over the reigns to Robert Iger. A lot of turmoil has been brewing through the company over the last four years; many people are hoping that this change in leadership will put Disney back on the road to success. Issues began around mid-2002; when declining earnings, fleeing shareholders, and
Disney’s acquisition of Pixar had both benefits and implications for both parties involved. By acquiring Pixar, Disney was given access to Pixar’s proprietary technology, which was an important factor, as well as access to new characters. These characters provided a new source of income for Disney, not just for movies, but also to use in theme parks, merchandise stores, etc., meaning new characters would supply immense revenue streams for Disney in several forms. Disney also gained strengthened market power, as acquiring one of their rivals would give them a competitive advantage and would simultaneously make them more powerful in the market. Additionally, Disney was never very successful with their animated movies, and acquiring Pixar would
In addition, by having access to the Pixar brand and its characters, they would help to supplement Disney’s existing characters across its different businesses like theme parks, merchandise, and television, which provide more sales opportunities. Despite the dilution of Disney’s earnings per share, it is for the short-term. The acquisition fills a crucial strategic gap for Disney and can create long-term value for its shareholders. As such, Pixar is a “near perfect strategic fit” for Disney and hence should be acquired by Disney to remain competitive.
The case is related with a decision regarding The walt Disney Company’s relation with Pixar. Though, history defined their collaboration and success. Pixar’s CEO Mr. Steve Jobs has tried to negotiate the contract but with no success because The Walt Disney Company wants to stay with previous terms. This pushed Steve Jobs to find for partnership with others. This search is a big threat for The Walt Disney Company and it has to decide whether to acquire Pixar or not.
As a subsidiary company of Disney, one of the biggest companies in the entertainment industry, Pixar has strong financial support. Disney provides the production cost of the films, and it handles marketing and films promotions as well as distributions. Each of Pixar’s films made between $300 million and $1 billion at the box office, and two of them have exceeded $1 billion in income (Lynch, 2016).
To conclude, Pixar has many opportunities that can be explored, in both the global and local markets. There is a lot of potential for
Known to be one of the largest producers of multi-media content, Walt Disney and Pixar greatly impacted the entertainment industry with the use of three-dimensional generated content. It quickly gained popularity with the release of its animated movies and especially got the attention of children from their sequels. With the growing popularity, the competition in the media industry began to increase. Disney was then faced with a difficult decision regarding its relationship with Pixar on whether they should acquire or not acquire the company.
Established in 1923, Disney Studios released the first ever full-length animated feature film, Snow White and the Seven Dwarfs in 1937. By 2015, Disney Studios employed about “6,500 employees, and spent $2 billion producing films annually”. Alan Horn, Chairman of the Walt Disney Studios, oversees five studios, that together made up Disney Studios. The Walt Disney Studios Motion Pictures ‘Disney Live Action’ and Walt Disney Animation Studios ‘Disney Animation’ are directly from Walt Disney’s original studio. The three others were acquisitions made during Bob Iger’s time as chief executive officer of The Walt Disney Company. The first was Disney's competitor animation studio, Pixar, which was purchased for $7.4 billion in 2006; second, Marvel Entertainment, which had its roots in comic books, for $4 billion in 2009; and finally the legendary filmmaker George Lucas’ Lucasfilm for $4.05 billion in 2012. During this time, Disney Studios began pursuing a “tentpole” strategy, which entails investing in higher budget films that would hopefully produce a larger profit by pulling in a large portion of the market. The larger profit would also help compensate for losses that may occur in smaller budgeted films. As it stands, Disney studios currently produces 10-12 films annually with approximately eight of them with production budgets in excess of $150 million. The current breakdown of tentpole films expected annually is as follows: two from Marvel, one from Lucasfilm, one from Pixar,
Another creative and profitable partnership with Pixar’s Steve Jobs was eventually damaged because of Eisner’s “abrasive style and tendency toward micromanagement” (Ivancevich, Konopaske & Matteson, 2011, p. 337). Disney had joined forces with Pixar to finance and distribute films produced with new digital technology. Eisner claimed that “Disney didn 't really need Pixar anymore, since the Mouse already legally had the right to make sequels to Toy Story and all of the other films that Pixar had produced” (Hill, 2012). Also, Eisner’s degrading comments about Apple Computer during the testimony he