Acquisition of Pixar by DisneyPresented by Team K
Adwitiya | XLRI
Disney & Pixar
Disney OverviewFounded on Oct 16,1923 by brothers Walt and Roy DisneyHeadquartered at Burbank, CaliforniaWorlds second largest broadcasting and cable companyOwner of 14 theme parks & several TV networks such as ABC & ESPNWalt Disneys first original animated character Oswald the Lucky Rabbit
PixarBegan in 1979 as the Graphics Group, part of the computer division of LucasfilmSpin-out as a corporation in 1986 with funding by Apple Inc. co-founder Steve Jobs14 feature films and several short filmsReleased its first film in 1995 Toy StoryThe film grossed $362 million and became the biggest grosser of 1995
A history of poor relationsBoth companies had a history of acrimonySteve Jobs abruptly called off talks to continue a lucrative partnership with Disney Jobs had often clashed with the CEO Michael EisnerEisner disparaged an Apple advertising slogan before a Congressional committeeAnalysts, investors and media pundits also questioned the hefty price Disney paid for a small studio that released only one movie a yearIn an industry where corporate marriages often create internal warfare, Disney and Pixar have found a way to make it workAfter 2 years, Disneys stock climbed 28% since its 52-week low on Jan 22, 2008
Pixars EvolutionPixar has matured, allowing its strategic thinking to evolve inside a sprawling corporationSome of the studios executives once resisted sequels and direct-to-DVD efforts, arguing that quality and the brand could sufferThat has changed with films such as Cars 24 direct-to-DVD movies built around Tinker BellPixar team has oversight of Walt Disney Animation Studios and the DVD-focused DisneyToon StudiosOutsourced some direct-to-DVD animation to an Indian company, a departure from its rigid stance on outside animators
How are they making it work?Obvious tactics like effectively communicating changes to employeesMore unusual decisions on drawing up an explicit map of what elements of Pixar would remain unchangedRobert Iger agreed to an explicit list of guidelines for protecting Pixars creative culturePixar employees were able to keep their relatively plentiful health benefits and werent forced to sign employment contractsThe sign on Pixars front gate would remain unchangedDisney, despite its legendary corporate identity and strong will, held backPixar kept its email system and no one was shifted to Walt Disney World in Florida to work a shiftNo Pixar telephone operators had to end with Have a magical day
Key Leadership DecisionsThere 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 IgerGiving incoming talent added dutiesPixar was assigned the difficult task of turning around a storied animation department that had fallen into disrepairE.g., Pixar reworked Disneys Bolt Original director of Bolt was replaced- led to some hurt feelingsDisney has become a filmmaker-led studio and not an executive-led studio. We are very proud of that. John Lasseter
Issues to work outTaken longer than investors anticipated to sort through the pipeline of existing projects and begin green-lighting new onesDisneys plans for hand-drawn animation are unclearPixar has unusual ideas in the pipeline that may not become merchandising juggernauts like CarsJohn Lasseter is responsible for Disney and Pixar animation studios as well as other parts of the Disney empire, including consumer products and park designCompetitors like DreamWorks have received plaudits for franchises like Kung Fu Panda
Implementation framework**High Integration
Low AutonomyModerate and selective integration
High autonomyLow integration
Autonomy based on focus other than relatednessComplementarityLowHighSimilarityLowHighSubhashini ChandranFrameworks
What went right?Leadership Identity Crisis avertedIntegration strategy
The Iger Era- 2005 to present
Production, distribution deal- on the rocksRobert A. Iger- 2005 Chairman and CEO DisneyFelt the need to buy PixarJohn Lasseter (CCO) and Edwin Catmull (Founder & President Pixar)- waryJobs lobbied for Iger based on prior experienceIgers priority - Sorting out the relationshipRestarted acquisition talks, won early support at PixarTalked candidly and clearly experiences at previous employerAble to build trust and gain confidence at PixarThere 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.
Identity preservedExplicit guidelines protect Pixars creative culture, promises kept even after mergerPixarHRpolicies intact -Health benefits, No employment contractsPixar separateentity, Studio remained in Californiawith the "Pixar" signBranding Equality "DisneyPixar"Studios' separate identities and cultures (though common ownership and senior management)Studio local ownershipMr. Igers decision give incoming talent added dutiesProcess not rushedPixar full autonomyPixars creative force, John Lasseter, COO infused Disney with a fresh sparkEdwin Catmull- retained position President Pixar also President of DisneyPixars transformational leadership adopted by DisneyKey to the successEdwin Catmull, Pixar, Weve never had to go back and look at it. Everything theyve said they would do they have lived up to.Jobs - largest individual shareholder 7% stake, seat on the BoardFor Pixar shareholders 1 Pixar share = 2.3 Disney shares
Influenced by Steve JobsCulture of Disney and Pixar
Conflict of CulturesBureaucraticHierarchical structure of organizationDistant upper level managementMicromanagementLow MoraleBrain Drain of creative talentProductivity and not quality, rules the day
Free spirited creativityWorkspace-Huts instead of cubiclesPolicy against employment contractsEgalitarian collaborationTheme of team workBonus structurePerfectionism
Influenced by Steve JobsCulture of Disney and Pixar
Influenced by Steve JobsPixar may lose rational and independent business choiceSo there was a discussion regarding if the decision was right or tight
Silo MentalityHard line between the studiosNot allowed to borrow personnel from or lend task out to other.Maintained local ownershipBut when faced with problems asked to solve on their own
What could have been done differentlyPost integration Disney and Pixar strictly maintained separate teams and offices with no cultural integrationAn integration to Death No, Most Definitely Not!
Pixar-Organic Disney - MechanisticRelied on valuable intellectual asset that used constant infusion of better technology and maintained close eye on academic innovationsBack 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 SeparationCollaborative working style Team centric working cultureDisney 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 teamsTop 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
What could have been done differentlyHas Pixar Lost its Way?No new ideas. Relying on cash in sequels. New projects postponed due to layoffMore Integration with Disney? Back then Disney was not ready to match up to Pixar`s capabilities : Maintenance of separate technical teamsGrowth of Disney`s Ecosystem Disney`s non Pixar computer animated effort Wreck-It Ralph`s by WDAS doing betterWDAS more open to fresh talent whereas at Pixar ideas generated in-house Utilization of Differences to create a Learning OrganizationMore consolidation for technical and support areas of Production Efficient flow of information and Knowledge to support team learning
Pixar executives recall Mr. Iger joking that if he ever decided to write a book, it would be titled Ive Been Bought, because the two merger experiences were so formative for him.
Disagreements betweenJobsand then-Disney Chairman and CEOEisnermade the negotiations more difficult than they otherwise might have been. They broke down completely in mid-2004, with Jobs declaring that Pixar was actively seeking partners other than Disney.Despite this announcement, Pixar did not enter negotiations with other distributors. After a lengthy hiatus, negotiations between the two companies resumed following the departure of Eisner from Disney in September 2005.
Pixar and Disney had disagreements after the production ofToy Story 2. **