How and when did Disney buy Pixar? Why was Disney’s CEO Bob Iger so adamant on making the deal?<\/p>\n\n\n\n
In 2005, Disney was struggling. It had not released any blockbuster titles in years and was being outshined by other studios. Bob Iger had only just been named CEO but he knew that in order for Disney to thrive, it would have to take some huge risks. That’s why Disney bought Pixar.<\/p>\n\n\n\n
Keep reading to learn about Bob Iger’s fight when Disney bought Pixar.<\/p>\n\n\n\n\n\n\n\n
At the end of September 2005, Michael Eisner had his last day at Disney. A few days later, Bob Iger officially became only the sixth CEO of Disney. <\/p>\n\n\n\n
Iger\u2019s first priority was to resuscitate Disney Animation.<\/strong> The failure of the department to generate new hit movies was a big contributor to Disney\u2019s financial malaise. Over the past decade, they had only produced lukewarm movies\u2014The Hunchback of Notre Dame<\/em>, Mulan<\/em>, Lilo and Stitch<\/em>\u2014a far cry from the iconic early 1990s blockbusters The Little Mermaid<\/em>, Aladdin<\/em>, The Lion King<\/em>, and Beauty and the Beast<\/em>. Over the past decade, Animation spent over a billion dollars making films but lost nearly $400 million.<\/p>\n\n\n\n Beyond their financial difficulties, Disney was losing ground with its core consumers. Iger asked his deputies to do market research on how their key demographic, mothers with children under twelve, felt about Disney relative to other competitors. The results were depressing: Pixar had overtaken Disney as \u201cgood for their family\u201d and was the more beloved brand. No surprise\u2014Pixar had recently produced the hits that Disney couldn\u2019t, like Toy Story<\/em>, Monsters Inc.<\/em>, and Finding Nemo<\/em>.<\/p>\n\n\n\n If Disney couldn\u2019t produce beloved content, all the other engines of the business would fail, such as consumer products and theme parks.<\/p>\n\n\n\n In this environment, Iger thought of four possible paths:<\/p>\n\n\n\n Iger knew Disney buying Pixar was a crazy option, and his deputies told him so.<\/strong> There were many reasons: Steve Jobs owned half of Pixar\u2019s stock and was stubborn; he loved Pixar, and he had such a rotten experience with Eisner he wouldn\u2019t possibly sell to Disney; even if he did, he had so much leverage he\u2019d ask for a skyhigh price (the market capitalization of Pixar then was about $6 billion); ultimately, the risk would be too great and the board and shareholders would never go for it.<\/p>\n\n\n\n Still, Iger felt this was the right move.<\/strong> His wife Willow had told him that the average tenure of a Fortune 500 CEO was 4 years. The point was that he had little to lose with taking big risks, and little time to do it.<\/p>\n\n\n\n For his first board presentation as CEO, he focused on all of the above: the crippled state of Disney Animation, Disney\u2019s loss of brand loyalty, and the various options they had. Then he pitched his final option: if Disney bought Pixar. The room nearly exploded. They gave all the usual reasons it wouldn\u2019t work and tried thinking of alternatives, but ultimately they recognized there might be some fruit in the idea. They gave Iger permission to explore the idea further.<\/p>\n\n\n\n At this point, Iger merely had an idea; now he had to execute it. In sum, he would have to convince three key sets of people, in sequence:<\/p>\n\n\n\n Iger thought Steve Jobs might be the hardest challenge, and there was a chance he\u2019d simply nip the entire deal in the bud. The day after the board meeting, he was on a call with Jobs about the video iPod, which they were due to announce in about a week. Iger said he had a crazy idea he wanted to run by Jobs and asked to fly up to introduce it. Jobs, who liked hearing crazy ideas, asked to hear it right then. <\/p>\n\n\n\n Iger wondered aloud what Jobs thought about the idea of Disney buying Pixar. Jobs was quiet for a moment, and Iger expected him to burst out into laughter or into an angry tirade. Instead, Jobs replied it wasn\u2019t the craziest idea in the world.<\/p>\n\n\n\n A few weeks later, Iger met with Jobs at Apple in a conference room with a long whiteboard. On the board, Jobs wrote \u201cPros\u201d and \u201cCons\u201d and tasked them both with filling them in. To the Cons list, Jobs added concerns like the death of Pixar\u2019s creativity, burning out John and Ed, and the opposition of Wall Street and the board. To the Pros, Iger volunteered that Pixar would save Disney and \u201cwe\u2019ll all live happily ever after.\u201d<\/p>\n\n\n\n A few hours later, they had a long list of Cons, and scanty Pros. Iger was dejected, but Jobs seemed nonplused. To Jobs, a few big Pros outweighed dozens of minor Cons.<\/p>\n\n\n\n The deal was far from over, but Jobs didn\u2019t shoot it down immediately like Iger had feared. Iger thought a good next step would be to visit Pixar, where he\u2019d be able to meet with both John Lasseter and Ed Catmull, Pixar\u2019s leaders. Jobs made clear that he was committing to nothing and that he\u2019d never sell Pixar without John and Ed onboard, but he immediately agreed to a visit. <\/p>\n\n\n\n The following week, Iger visited the Pixar office. Iger was excited to learn how Pixar made its magic. He wanted to meet the people working there, feel their culture, and understand their technology. <\/p>\n\n\n\n Iger was warmly greeted by John and Ed. John Lasseter was the creative head of Pixar and oversaw its films. Ed Catmull was the technology head of Pixar and oversaw the computing resources that made their animation work. Iger\u2019s visit would consist of visiting each person\u2019s domain.<\/p>\n\n\n\n First, with Lasseter, Iger got a preview of every movie they were working on. He saw works in progress for Cars<\/em>, Ratatouille<\/em>, Wall-E<\/em>, Up, <\/em>and Brave<\/em>, all of which would be commercial and critical successes. Iger was blown away with the narrative authenticity of each project and the quality of the animation.<\/p>\n\n\n\n Next, with Catmull, Iger got a tour of the technology side that powered the movies. The creative team and engineers worked in harmony\u2014the creative team would challenge engineers to create tools that made their visions real, while the engineers would come up with new tools (like a new way to render snow) and ask the creative team what they could do with it.<\/p>\n\n\n\n Finally, as Iger toured the campus, he felt a giddy creative energy buzzing throughout the campus and the employees. Everyone seemed happy to be working at Pixar. Even the space was designed to improve creativity\u2014wide open areas let groups mingle, like in a university.<\/p>\n\n\n\n After his visit, Iger knew Pixar was magical, and if Disney bought Pixar, it would be transformative<\/strong>. Iger called Jobs and breathlessly described how amazing Pixar was and how eager he was in making the transaction work. Standard negotiation practice suggests you should make the other side think you don\u2019t want them all that much; Iger couldn\u2019t help being honest and enthusiastic. In response, Jobs reiterated that a deal would only happen if Lasseter and Catmull were on board, and he arranged for Iger to meet with them.<\/p>\n\n\n\n In the following week, Iger met with both Lasseter and Catmull. He knew that both people loved Pixar and were wary of Pixar losing its soul, regardless of how much money they could make in a sale. Iger knew how they felt\u2014he had been through multiple acquisitions himself, first by Capital Cities, then by Disney. Iger\u2019s message to both was the same\u2014Pixar was magic, and Disney knew it. The goal of Disney buying Pixar was to power Disney\u2019s creative products; if Disney destroyed what made Pixar work, the deal would be worthless to them. Iger committed to protecting Pixar\u2019s culture. <\/p>\n\n\n\n Iger made another irresistible offer\u2014Lasseter and Catmull would both run Disney Animation. Lasseter had started his career as an animator at Disney, before being fired for pushing computer animation in its early days. To return in a triumph and run the legendary department would be a dream.<\/p>\n\n\n\n The day after, Jobs called Iger and said Lasseter and Catmull were onboard to sell. Iger met with his board and got permission to start negotiations, though they were still skeptical of the deal\u2019s closing.<\/p>\n\n\n\n Iger met Jobs at Apple to negotiate the deal. He knew that Jobs was intolerant of long, drawn-out processes, particularly with Eisner, and he signaled that he was different. He made clear that he wanted to make the deal happen, and they\u2019d try to make it as straightforward as possible. Jobs seemed to respond to this honesty well, and he didn\u2019t invoke his leverage as a weapon like before.<\/p>\n\n\n\n Over the following month, Jobs and Disney\u2019s CFO worked out a deal\u2014an all-stock transaction worth $7.4 billion, exchanging 2.3 Disney shares for each Pixar share. It was a high price, but not unfairly so. In addition to negotiating price, Disney promised to keep Pixar\u2019s culture intact through a list of specific items, and they agreed on branding joint features as Disney-Pixar.<\/p>\n\n\n\n The deal was now nominally set to go. Iger had one last challenge\u2014convincing the board.<\/p>\n\n\n\n Disney\u2019s board was still skeptical, and Iger had to give it his best shot. He knew that the best way to persuade them was to have Jobs, Lasseter, and Catmull talk to the board directly<\/strong>. <\/p>\n\n\n\n In January 2006, the board, the Pixar trio, and Iger met in a Goldman Sachs conference room in Los Angeles. There were no slide decks; each member of Pixar simply shared their vision for the partnership. Lasseter shared his childhood love of Disney and his desire to take Animation to new heights. Catmull shared the future of technology<\/a> and the cutting-edge work they could achieve together. Jobs emphasized the need for big companies to take big risks, and that Disney needed to make big moves like this to stay relevant. Initially skeptical, the board started turning around; Pixar\u2019s enthusiasm was infectious.<\/p>\n\n\n\nConvincing Steve Jobs<\/strong><\/h3>\n\n\n\n
Convincing John Lasseter and Ed Catmull<\/strong><\/h3>\n\n\n\n
Negotiating the Deal<\/strong><\/h4>\n\n\n\n
Convincing the Board<\/strong><\/h3>\n\n\n\n