Business Model for Pixar

EBM Assignment 3: Business Model Portfolio
Pixar
By: Donald Kelly
12/15/19
Carol Wonsavage, Entertainment Business Models

Why I chose this company:
I chose Pixar for the same reason anybody else would choose their products, I’m
in love with their content! As a child, I recall fond memories of seeing Toy Story for
the first time and being completely fascinated by how clear and concise the imagery
was displayed. Now as a parent, my son enjoys all of the Pixar films and these films
provide common ground for he and I to bond and interact.
Background Information
Pixar is a computer animation studio that is currently owned by the Disney
company. Pixar and Disney agreed to merge on January 24 2006 {web.archive.org}.
Prior to becoming Pixar, the company was first created in 1979 by George Lucas,
known simply as Lucasfilm’s Computer Division. From the years 1982 through
1985, the computer division would continue to hone its craft and techniques by
working on various projects in various film and television projects as well as by
advancement’s in computer technology.
In 1986, Steve Jobs purchases the Lucasfilms Computer Division and establishes the
group “Pixar” {pixar.com}. The very first client the Pixar company had was Disney as
they began collaboration on changing the way animated films were produced and
created. In 1991, Disney and Pixar unveil an agreement “to make and distribute at
least one computer-generated animated movie” {pixar.com}. This initial project
would go on to be the full-length feature film “Toy Story” which was released in the
fall of 1995. Recognizing the films groundbreaking success, Pixar and Disney agreed
on an extension of the previous agreement with a 10-year contract with the promise

of creating five more movies. In 1999, Toy Story 2 is released and is the first film in
history to be entirely created, mastered and exhibited digitally {pixar.com}. From
1999 to 2006, Pixar would continue to create Disney blockbusters such as Monsters
INC, Finding Nemo and Car’s. After the merger deal previously mentioned,
Disney/Pixar continued partnered successes with various spin-offs and sequels to
their popular films: newer films were added to the company’s assets as well with
titles such as Ratatouille, The Incredibles and The Good Dinosaur to name a few. All
in all, Disney/Pixar enjoy vast merchandising profits based off the films they have
created with the “Cars” franchise earning the company annually $2 billion alone in
merchandise sales {Szalai, G, 2011}.
Customer Segments
 Children all ages: Due to the content of the companies feature films, it should
be no surprise that Disney/Pixar strategize marketing heavily around
children and their general likes and requirement’s. The movies produced
have mild toon violence and are void of death: making them acceptable to
most underage audiences.
 Adults 18-44: According to a chart provided by pixarpost.com, it states that
the movies generated by Disney/Pixar are also heavy favored by adult males
and females aged 18-44. College and grad school populations make up the
majority of these populations with an income of $0 dollars to $100K+
{pixarpost.com}.

Value Proposition
 Suitable for all ages: Creating content that has a broad target market assists
Pixar with their continued successes. Films and their respective spin-offs and
sequels are generally accepted by all age groups which enhances the
company’s viewers as well as merchandise sales annually.
 Full of color: Often, Disney/Pixar creates imagery and characters that are rich
in vibrant colors that creates standout for its featured characters which
further provides marketability.
 Good Story: All of the movies and respective sequels that have been created
bring to the table a captivating storyline. Audiences will generally decipher
and process these storylines from their own perspectives, but the story is
generally easy to follow and understand which allows younger audiences to
grasp the message and adults to appreciate the adventure.
 Happy Ending: All content created ends its story on a happy ending. A happy
ending leaves the audience feeling happier about the story which creates
interest for future sequels and spin-offs. Happy endings also resonate “good-
times” for someone which will make the probabilities higher for them to
invest in a product’s merchandising.
 Images Look Real: An example of rich/realistic imagery can be found in The
Good Dinosaur. This realistic imagery creates more believable content which
assists in creating an overall great story that’s appreciated by all age groups.
 Creative: All content that is produced by Disney/Pixar contains very creative
storylines and characters. This out of the box thinking paves the way for

developing original content that is exclusively controlled and marketed by
Disney/Pixar: thus, boosting profitability.
Channels of Distribution
 Disney Channel, Disney XD and Disney Jr: Pixar content is distributed to
cable and satellite subscribing customers through these three main media
outlets. These channels provide previously released movies and sequels,
so they are easily assessable when viewers are browsing channels in
search of something to watch on tv.
 Feature Films: Perhaps the “meat and potatoes” of the Pixar’s blueprint of
success can be cited to their production of full-length feature films. The
first film the company produced was “Toy Story” in 1995 {pixar.com}.
Since Toy Story, the company has produced a long array of films that
often times control the box-offices.
 Online Streaming: Netflix and other streaming giants have also noticed
Disney/Pixar’s continued triumphs and have featured some of their
content on the streaming sites respectively. For example, “Cars” is a Pixar
creation and my son and I enjoy this film occasionally via Netflix.
 Disney Plus: On Nov. 12th, Disney officially launched Disney+. According
to Mike Sorrentino’s article, he states “Disney has called Disney Plus the
future of the company” {Sorrentino, M. 2019}. All generated Pixar films
are assessable through this streaming service which can only boost the
already staggering number of viewers the company generates.

Customer Relationships
 Social Media: Facebook, Instagram, Twitter, YouTube and even Linked In
all serve as a means for Disney/Pixar to stay in touch with their marketed
audiences on how to view previously created material as well as
providing viewers with upcoming teasers for future projects. Generating
this sort of buzz keeps audiences engaged and looking forward to
attending theaters when movies are finished and released.
 Walt Disney Theme Parks: On May 23rd 2019, USA Today listed Disney
World in Orlando, FL as the worlds most visited theme park in 2018. The
articles author Adrienne Jordan wrote “ It drew 18.6 million visitors, with
an average of 51,000 people per day” { Jordan, A. 2019}. Pixar influenced
attractions and rides are a common sight within the park, this greatly
adds to the brands marketability with an international audience that
possesses a disposable income.
 Film Merchandise: Pixar related merchandise creates a huge sum of
profits for the Disney company annually. According to an article from
hollywoodreporter.com, its author Georg Szalai states that Disney/Pixar’s
film “Cars” brings in an average of $2 Billion per year and $8 Billion in
total merchandise sales alone.

Key Activities
 Producing new content to be distributed in film form is a major key activity
that Pixar must do in order to sustain its successes. At this time, Pixar is
rumored to have multiple sequels planned for existing film franchises as well
as all new titles to be released in theaters as early as March 6th 2020 for a
film called “Onward” (Pixar.com, 2019). Keeping a steady tempo of new
content keeps Pixar’s product line fresh and invigorating.
 Pixar markets its products on a grand scale to represent another key activity
in the companies approach for continued profits. Social media marketing is a
cornerstone for the animated film giant’s ability to keep box office profits
flowing. All avenues of mainstream social medias ability to market the Pixar
brand have been utilized, as those successes are also explained in an article
found on notesmatic.com’s article describing these statements (Pratap,
2019).
Key Resources
 A major key resource in which Pixar benefits immensely from is their unique
and fascinating studio, located inside Emeryville, California. The studios
construction was overseen by the late Steve Jobs himself to ensure it was built
precisely to match his standards, expectations and creative inspiration. A recent
Huffington Post article regarding inside understanding of how Pixar Studios is
Designed, they stated inside contained “A full replica of the classic Muppets Show
Stage”!

 Pixar also uses another key resource created by their owned design. Pixar
Uses the animation software “Renderman” for all of their projects which has been
crucial for procucing such realistic scenery within their cartoons. One of the most
recent project RenderMan was used in the Disney remake of “The Lion King”
RenderMan.Pixar.com, 2019).
Key Partners
 The Walt Disney company has long since been a key partner or associate to
Pixar and can be traced back to 1986 (Our Story, 2019). In 2006, The Walt
Disney Company purchased Pixar and re structured the company as a branch
of the Disney business tree. To this very day, Disney and Pixar work in unison
in producing projects for the constantly evolving world of films and
computer animation.
 Star War’s creator founded the baseline of what would become Pixar in 1979
as The Computer Division for LucasFilms (Our Story, 2019). George Lucas is
best known for creating the Star Wars franchise and universe and is a very
influential people within the animation scene. Tying Pixar/Disney to George
Lucas further cementing that partnership, Disney purchased the Star Wars
franchise and rights from Mr. Lucas in 2012 for $4 Billion (usatoda.com,
2019).

Cost Structure
 With great successes in the film industry typically brings about a larger cost
in things, that said Pixar does have a high window when it comes to their cost
structure and the importance of doing well in the box offices. An example of
the high cost of producing a animated film of their caliber can be sourced
from getwrightonit.com when they state that major films such as Toy Story 3
or Monsters University costed over $30,000 for each’s respective cost per
second (getwrightonit, 2017).
 “There is an old saying: How do you make a small fortune in the film
industry? The answer to that is “Start with a large one”, That is what a Pixar
employee stated when asked how much it would cost to build a studio as
large and intricate as Pixar Studios (VandeWettering, 2017). It would be no
surprise that the costs for a studio of this caliber would be extensive and a
major part in Pixar’s cost structure.
Revenue Streams
 Pixar has enjoyed vast success at the theater box offices over the years and
shows no sign of slowing down its main revenue stream. According to Daniel
Kline, his article titled “How Profitable Have Pixar’s Movies Been For Disney”
sheds light on some incredible profits that Pixar has produced. He states that
the movie “Toy Story 3” for instance had a budget of 200 million but turned

around and earned $1.06 billion in box offices around the world (Kline,
2015). That is an extraordinary amount of money and many of the other
popular franchises have also produced similar earnings as well.
 Pixar’s merchandise sales revolving around their film franchises have earned
an astronomical amount of money for the company and Disney alike. An
example of the incredible merchandise sales can be cited to a LA Times
article describing the amount of money Pixar’s “Car’s” had generated only 6
years after its release. Dawn Chimielewki and Rebecca Keegan state: “In the
five years since its 2006 release, “Cars” has generated global retail sales
approaching $10 billion, according to Disney” (latimes.com, 2011). To this
day, the Car’s franchise continues to earn merchandise sales for Pixar/Disney
and their products can be found at almost any retail store and online as well.
Conclusion
In conclusion, I firmly believe that Pixar currently utilizes a powerful business
model is a solid revenue powerhouse for the Disney Corporation. This conclusion
can be cited with the copious amounts of successes the Pixar films have enjoyed
dating back all the way to “Toy Story” in 1996 (Pixar.com, 2019). The Pixar films
typically bring in hundreds of millions of dollars per film, and each of the film
franchises can produce continued profits via merchandising that is marketed to
children around the world. As I stated earlier, the ‘Car’s” franchise alone has raked
in over $10 billion in merchandise sales and is still marketed heavily in large
corporate retail stores such as Walmart. All in all, Pixar shows little to no signs of

slowing down its advancements in the film industry and can be expected to be a
staple in Disney’s own business model for many years to come. In my opinion, the
only advise I could provide Pixar to continue their stellar performance is to always
stay creative and never lose focus on Steve Job’s vision and moral compass that
made them so dynamic out of the gate.
The Business Model Canvas: Pixar December 15 2019
BY: Donald Kelly
Value Proposition Customer Relationships Customer Segments
Suitable for all ages
Full of color
Good Story
Happy ending
Images look real
Creative
Social media: Facebook,
Instagram, Twitter, YouTube and
Linked In.
Walt Disney Theme Parks
Film Merchandise
Children of all ages
Adults both male and
female ages 18-44
Parents with children
Channels Distribution)
Disney Channel
Disney Plus
Online Streaming
Feature Films
Disney XD
Disney Jr.

Key Activities Key Resources Key Partners
Creating new film content and
extending on sequels of
previously installed titles or
Pixar franchises
Social media marketing and
marketing in general
Pixar studios located in
Emeryville, California
RenderMan editing software
Disney Corporation
LucasFilms
Cost Structure
Animated film production and
editing costs
Pixar Studios creation and
upkeep
Employee salaries
Revenue Streams
Box office film earnings
Franchise merchandise
revenue
References
Barr, G. (2015, November 25). Value Proposition Canvas - Pixar. Retrieved December 1,
2019, from https://prezi.com/bibwlv7tfx5z/value-proposition-canvas-pixar/.
Pratap, A. (2019, June 3). Pixar Social Media Marketing. Retrieved December 1, 2019,
from https://notesmatic.com/2019/01/pixar-social-media-marketing/.
Szalai, G. (2011, February 14). Disney: 'Cars' Has Crossed $8 Billion in Global Retail
Sales. Retrieved December 1, 2019, from
https://www.hollywoodreporter.com/news/disney-cars-has-crossed-8-99438.
Spangler, T. (2019, July 18). Disney Merges All Media Sales and TV Channel
Distribution Under Justin Connolly. Retrieved December 1, 2019, from
https://variety.com/2019/tv/exec-shuffle-people-news/disney-justin-connolly-media-tv-
channel-distribution-1203271895/.
Pixar Post. (2016, July 21). Pixar Demographics: What The Average Pixar Fan Looks
Like? Retrieved December 1, 2019, from https://www.pixarpost.com/2016/07/pixar-
demographics.html.
Our Story. (n.d.). Retrieved December 1, 2019, from https://www.pixar.com/our-story-1.

Pixar Company FAQ's. (n.d.). Retrieved December 1, 2019, from
https://web.archive.org/web/20060702123318/http://www.pixar.com/companyinfo/faq/fa
q.htm.
Jordan, A. (2019, May 24). These are the world's most-visited theme parks. Retrieved
December 1, 2019, from https://www.usatoday.com/story/travel/news/2019/05/23/disney-
world-magic-kingdom-world-most-visited-theme-park/1206310001/.
Sorrentino, M. (2019, November 27). Disney Plus: Everything you need to know.
Retrieved December 1, 2019, from https://www.cnet.com/news/disney-plus-streaming-
service-everything-to-know-baby-yoda/.
Upcoming. (n.d.). Retrieved December 14, 2019, from https://www.pixar.com/upcoming.
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&guce_referrer_sig=AQAAAIUCImqCfaysvyg1SQSyzHTH20QeZDIynaJL36-
USVqqIdZwCB1bPHrRs1yq-s1GW6r7BaYKIy_E4CDS2mH6oF-
ICOigkSb590GMrOrAxhwuzFjkbmF6QVZv4-c490jbpQGFCjM2-
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Pixar-today.
Kline, D. B. (2015, August 4). How Profitable Have Pixar's Movies Been for Disney?
Retrieved December 15, 2019, from
https://www.fool.com/investing/general/2015/08/04/how-profitable-has-pixar-been-for-
disney.aspx.

Chmielewski, D. C., & Keegan, R. (2011, June 21). Merchandise sales drive Pixar's 'Cars'
franchise. Retrieved December 15, 2019, from https://www.latimes.com/business/la-
xpm-2011-jun-21-la-fi-ct-cars2-20110621-story.html.
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