Details on Merger of Pixar by Disney

1. Acquisition of Pixar by
Disney
Presented by Team K
Adwitiya | XLRI

2. Disney & Pixar

3. Disney Overview
• Founded on Oct 16,1923 by brothers Walt and Roy
Disney
• Headquartered at Burbank, California
• World’s second largest broadcasting and cable company
• Owner of 14 theme parks & several TV networks such
as ABC & ESPN
• Walt Disney’s first original animated character –
Oswald the Lucky Rabbit

4. Pixar
• Began in 1979 as the Graphics Group, part of the
computer division of Lucasfilm
• Spin-out as a corporation in 1986 with funding by
Apple Inc. co-founder Steve Jobs
• 14 feature films and several short films
• Released its first film in 1995 – Toy Story
• The film grossed $362 million and became the biggest
grosser of 1995

5. A history of poor relations
• Both companies had a history of acrimony
• Steve Jobs abruptly called off talks to continue a
lucrative partnership with Disney
• Jobs had often clashed with the CEO Michael Eisner
• Eisner disparaged an Apple advertising slogan before a
Congressional committee
• Analysts, investors and media pundits also questioned
the hefty price Disney paid for a small studio that
released only one movie a year
• In an industry where corporate marriages often create
internal warfare, Disney and Pixar have found a way to
make it work

6. Pixar’s Evolution
• Pixar has matured, allowing its strategic thinking
to evolve inside a sprawling corporation
• Some of the studio’s executives once resisted sequels
and direct-to-DVD efforts, arguing that quality
and the brand could suffer
• That has changed with films such as Cars 2
• 4 direct-to-DVD movies built around Tinker Bell
• Pixar team has oversight of Walt Disney
Animation Studios and the DVD-focused
DisneyToon Studios
• Outsourced some direct-to-DVD animation to an
Indian company, a departure from its rigid stance
on outside animators

7. How are they making it work?
• Obvious tactics like effectively communicating changes
to employees
• More unusual decisions on drawing up an explicit map
of what elements of Pixar would remain unchanged
• Robert Iger agreed to an explicit list of guidelines for
protecting Pixar’s creative culture
• Pixar employees were able to keep their relatively
plentiful health benefits and weren’t forced to sign
employment contracts
• The sign on Pixar’s front gate would remain unchanged
• Disney, despite its legendary corporate identity and
strong will, held back
• Pixar kept its email system and no one was shifted to
Walt Disney World in Florida to work a shift
• No Pixar telephone operators had to end with “Have a
magical day”

8. Key Leadership Decisions
• “There is an assumption in the corporate world
that you need to integrate swiftly. My philosophy
is exactly the opposite. You need to be respectful
and patient.” – Robert Iger
• Giving incoming talent added duties
• Pixar was assigned the difficult task of turning
around a storied animation department that had
fallen into disrepair
• E.g., Pixar reworked Disney’s ‘Bolt’
• Original director of Bolt was replaced- led to some
hurt feelings
• “Disney has become a filmmaker-led studio and not
an executive-led studio. We are very proud of
that.” – John Lasseter

9. Issues to work out
• Taken longer than investors anticipated to sort
through the pipeline of existing projects and begin
green-lighting new ones
• Disney’s plans for hand-drawn animation are
unclear
• Pixar has unusual ideas in the pipeline that may
not become merchandising juggernauts like ‘Cars’
• John Lasseter is responsible for Disney and Pixar
animation studios as well as other parts of the
Disney empire, including consumer products and
park design
• Competitors like DreamWorks have received
plaudits for franchises like Kung Fu Panda

10. 1991 1991 1993 1995 1997 1999 2001 2003 2005 2006
Acquisition
consumated
5/5/2006
Walt Disney -
Pixar acquisition is
announced
24/1/2006
Robert Iger
becomes Walt
Disney CEO
1/9/2005
Relationship
soured
1/1/2004
Disney & Pixar
signed
cooperative
agreement for 5
movies
1/1/1991
Timeline

11. Rationale

12. Implementation framework
01/12/15 12
High Integration
Low Autonomy
High Integration
Low Autonomy
Moderate and
selective integration
High autonomy
Moderate and
selective integration
High autonomy
High Integration
High Autonomy
desirable but limited
by need for
integration
Low integration
Autonomy based on
focus other than
relatedness
Low integration
Autonomy based on
focus other than
relatedness
Complementarity
Low High
Similarity
LowHigh
Subhashini Chandran
Frameworks

13. What went right?
• Leadership
• Identity Crisis averted
• Integration strategy
Frameworks

14. The Iger Era- 2005 to present
• Production, distribution deal- on the rocks
• Robert A. Iger- 2005 – Chairman and CEO Disney
• Felt the need to buy Pixar
• John Lasseter (CCO) and Edwin Catmull (Founder
& President Pixar)- wary
• Jobs lobbied for Iger – based on prior experience
• Iger’s priority - Sorting out the relationship
• Restarted acquisition talks, won early support at
Pixar
• Talked candidly and clearly – experiences at
previous employer
• Able to build trust and gain confidence at Pixar
“There is an assumption
in the corporate world
that you need to integrate
swiftly. My philosophy is
exactly the opposite. You
need to be respectful and
patient.”

15. Identity
preserved
• Explicit guidelines – protect Pixar’s
creative culture, promises kept even
after merger
• Pixar HR policies intact -Health
benefits, No employment contracts
• Pixar – separate entity, Studio
remained in California with the
"Pixar" sign
• Branding– Equality – "Disney•Pixar"
• Studios' separate identities and
cultures (though common ownership
and senior management)
• Studio “local ownership”
• Mr. Iger’s decision – give incoming
talent added duties
• Process not rushed
• Pixar – full autonomy
• Pixar’s creative force, John Lasseter,
COO infused Disney with a fresh
spark
• Edwin Catmull- retained position
President Pixar also President of
Disney
• Pixar’s transformational leadership
adopted by Disney
Key to
the
success
Edwin Catmull, Pixar, “We’ve never had to go
back and look at it. Everything they’ve said
they would do they have lived up to.”
• Jobs - largest individual shareholder
7% stake, seat on the Board
• For Pixar shareholders
1 Pixar share = 2.3 Disney shares

16. Potential Risks
Influenced by Steve Jobs
Culture of Disney and Pixar

17. Conflict of Cultures
 Bureaucratic
 Hierarchical
structure of
organization
 Distant upper level
management
 Micromanagement
 Low Morale
 Brain Drain of
creative talent
 Productivity and
not quality, rules
the day
 Bureaucratic
 Hierarchical
structure of
organization
 Distant upper level
management
 Micromanagement
 Low Morale
 Brain Drain of
creative talent
 Productivity and
not quality, rules
the day
 Free spirited
creativity
 Workspace-Huts
instead of cubicles
 Policy against
employment
contracts
 Egalitarian
collaboration
 Theme of team work
 Bonus structure
 Perfectionism
 Free spirited
creativity
 Workspace-Huts
instead of cubicles
 Policy against
employment
contracts
 Egalitarian
collaboration
 Theme of team work
 Bonus structure
 Perfectionism

18. Potential Risks
Influenced by Steve Jobs
Culture of Disney and Pixar

19. Influenced by Steve Jobs
• Pixar may lose rational and independent
business choice
• So there was a discussion regarding if the
decision was right or tight

20. Silo Mentality
• ‘Hard line’ between the studios
• Not allowed to borrow personnel from or lend task
out to other.
• Maintained local ownership
• But when faced with problems asked to solve on
their own

21. What could have been done differently
Post integration Disney and Pixar strictly maintained separate teams
and offices with no cultural integration
An integration to Death – No, Most Definitely Not!
Pixar-Organic Disney - Mechanistic
Relied on valuable intellectual asset that used constant
infusion of better technology and maintained close eye
on academic innovations
Back then in 2006, the human capital at Disney was not at
par with Pixar in terms of its innovation potential -
A cultural integration would have ended in Separation
Collaborative working style
Team centric working culture
Disney endorsed top down managment style leading to an
aggressively competitive culture where employees were
evaluated on individual performance
Concept of “Creative brain Trust – Directors
participated in Brainstorming but ultimate decision
authority to teams
Top managment oversaw entire production process and
dictated Direction
If no work needed on films, employees to work on
R+D Projects . This translated into high employee
loyalty at Pixar
Employees hired and Fired Based on Project Demand

22. What could have been done differently
Has Pixar Lost its Way?
No new ideas. Relying on cash in sequels. New projects postponed due to
layoff
More Integration with Disney?
Back then Disney was not ready to match up to Pixar`s capabilities :
Maintenance of separate technical teams
Growth of Disney`s Ecosystem
• Disney`s non Pixar computer animated effort Wreck-It Ralph`s by
WDAS doing better
• WDAS more open to fresh talent whereas at Pixar – ideas generated in-
house
Utilization of Differences to create a Learning
Organization
• More consolidation for technical and support areas of Production
• Efficient flow of information and Knowledge to support team learning

24. QUESTIONS??