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Presents

Disney-Pixar Acquisition

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Introduction:

In the wake of stagnating share price, Walt Disney Corporation sought to revive its animation capabilities as investors flocked to more successful animation studios such as Pixar Animation Studios and DreamWorks Inc. Disney’s efforts in animated films in recent years have been disappointing. In an industry in which creative talent rules, Disney had simply not been able to assemble the right combination of talent in an environment conducive to creating blockbuster animation films. Disney and Pixar had been in a joint venture involving three pictures since 1991, in which Disney shared the production costs and profits. Disney benefited from Pixar’s success by co-financing and distributing Pixar films. Talks to extend this arrangement disintegrated in 2004 due to failure of Pixar CEO Steve Jobs and Disney CEO Michael Eisner to reach agreement on allowing Pixar to own films it produces in the future.

With the current distribution agreement set to expire in June 2006, Robert Iger, Eisner’s replacement, moved to repair the relationship with Pixar. Consequently, a deal that was unthinkable a few years earlier became possible. Disney announced the acquisition of Pixar, one of the most successful moviemakers in Hollywood history, on January 25, 2006. The move reflected Disney's desire to infuse the firm’s internal animation resources with those from a proven animation company. A key Disney strategy is to use popular Disney movie characters across different venues (i.e., theme parks, merchandise, and television). Disney exchanged its stock for Pixar shares in a deal valued at $7.4 billion for the Pixar stock or $6.4 billion including $1 billion of Pixar cash that Disney would receive

Despite near—term dilution of Disney's earnings per share by as much as 10 percent, investors seem focused on the long—term impact to growth in Disney's shares. Disney's shares rose 1 percent on news of the announcement. Nevertheless, the risk associated with the transaction can be measured in terms of what Disney could have done with the cash raised by issuing the same number of shares to the public. At $6.4 billion, Disney could make 64 sequels at $100 million each. Moreover, Disney was probably paying top dollar for Pixar, as the filmmaker was coming off a string of six consecutive movie blockbusters. Finally, revenue from DVD sales might have been maturing.

The long-term success of the combination hinges on the ability of the two firms to meld their corporate cultures without losing Pixar's creative capabilities. Pixar president, Ed Catmull would become president of the combined Pixar-Disney animation business. John Lasseter, Pixar's creative director, would assume the role of chief creative officer of the combined firms, helping to design attractions for the theme parks and advising Disney's Imagineering division. In an effort to insulate the Pixar culture from the Disney culture, Pixar would remain based in Emeryville, far

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from Disney's Burbank, California, headquarters. As a condition of the closing, all key Pixar employees would have to sign long-term employment contracts.

As part of the deal, Pixar chairman and chief executive Steve Jobs, holder of 50.6 percent of Pixar stock, would become Disney's largest individual shareholder, at about 7 percent of Disney stock, and a member of Disney's board of directors. Job's advice was hoped to rejuvenate the Disney board at a time when the entertainment industry was scrambling to reinvent itself in the digital age. Job's, who is also the chairman and CEO of Apple Computer Inc. (Apple), is in a position to apply Apple's substantial technical skills to Disney's animation effects.

It was unclear if Disney could not have achieved many of these benefits at a much lower cost by partnering with Pixar and offering Steve Jobs a seat on the Disney board. Ultimately, the opportunity to prevent Pixar's acquisition by a competitor may have been the primary reason why Disney moved so aggressively to acquire the animation powerhouse.

Industry analysts were of the view that, apart from gaining access to Pixar’s technology, it was important that Disney got a person of the caliber of Jobs on its board. Asserting this, Tim Bajarin, President, Creative Strategies said, "His biggest impact will be to help guide Disney into the digital age and be the mediator of this major media company's content to the world of next-generation digital content delivery.

Pixar and the Animation Industry

Pixar began in 1979 as the Graphics Group, part of the Computer Division of Lucas film before it was acquired by Apple co-founder Steve Jobs in 1986 shortly after he left Apple computer. Jobs paid $5 million to George Lucas and put $5 million as capital into the company. Initially, Pixar was a high-end computer hardware company whose core product was the Pixar Image Computer, a system primarily sold to government agencies and the medical community. One of the buyers of Pixar Image Computers was Disney Studios, which was using the device as part of their secretive CAPS project, using the machine and custom software to migrate the laborious ink and paint part of the 2-D animation process to a more automated and thus efficient method.

As poor sales of Pixar’s computers threatened to put the company out of business, animation department began producing computer-animated commercials for outside companies. In April 1990 Job's sold Pixar's hardware including all proprietary hardware technology and imaging software, to Vicom Systems. In 1991, after a tough start of the year when about 30 employees in the company's computer department had to go (including the company's president, Chuck Kolstad), Pixar made a $26 million deal with Disney to produce three computer-animated feature

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films, the first of which was Toy Story, animation department, who made television commercials and a few shorts for Sesame Street, was all that was left at Pixar animations. Despite the total income of these products, the company was still losing money, and Jobs often considered selling it, even as late as in late 1994 he contemplated to sell Pixar to other companies, Microsoft being one among them. Only after confirming that Disney would distribute Toy Story for the 1995 holiday season did he decide to give it another chance. The film went on to gross more than $350 million worldwide. Later that year, Pixar held its public offering on November 29, 1995, and the company's stock was priced at US$ 22 per share. The public offering was a strategic decision to increase the working capital of the company, with 14Omillion.

A discussion after Toy Story revealed that there was a growing rift, with animators feeling stifled by producers and producers feeling animators thought of them as second class citizens (a problem not no different from similar issues between “suits” and “coders” that sometimes happen in software development). Catmull‘s conclusion was that in enjoying success it was easy to look at what works and focus on its replication but that for the health of the company it was equally if not more important to ask “what isn't working.” Since Toy Story, after every project Pixar has a detailed, open dialogue to consider parts of the process, or areas of the company need fixing. Catmull characterized the communication as “difficult” but valuable.

It's partly for that reason that Pixar movies intentionally are made to appeal to both adults and children. Children are used to hearing thing they don't understand and they listen to things over and over again because they're trying to figure out the world. If you talk down to children, they know they're being talked down to, and adults can't listen to it. So instead, we make films that we can enjoy. By the virtue of the fact they're animated, we do put in physical humor, which children love, and we don't put in things that would turn families off, clearly. But in terms of the dialogue, we put in things that adults understand. And by putting in things that we enjoy, that we want to see, and then having it for the physical comedy that all of us like, then it has a, it touches people in a very broad way." That broad appeal expands the target market which is shrewd business but it's also very attentive to the customer's needs; that is, needs of both parent and child.

At Pixar, the company's logic seems to be that copying success exacts too high a price from innovation. Instead, the company views each new project as “director driven" - guided by the vision of the staff. They intentionally try to keep each movie fresh and distinct when compared to other films in their library. This intent to innovate rather than replicate arguably is a big part of the company's ability to consistently reign at the top of the animation world.

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Pixar was as busy as ever in the 21st century: the company was preparing to move into its new 225,000-square-foot headquarters in Emeryville, California, due for completion in mid-2000 and was hard at work on its next full-length animated film in collaboration with Disney. The new feature was scheduled for release in 2001, under the working title of 'Monsters, Inc.’. The company's fifth film was tentatively slated for release in 2002, was a top-secret project to be directed by Andrew Stanton, who had worked on both Toy Story and A Bug's Life. Despite a slow, financially difficult beginning, Pixar Animation Studios had landed on the fast track and was known throughout the world. With its technological breakthroughs and brilliantly crafted animated films, the sky was the limit in the coming decade and beyond. As stated in its 1996 annual report, Pixar succeeded because it was well aware of the pitfalls of filmmaking: Though Pixar is the pioneer of computer animation, the essence of our business is to create compelling stories and memorable characters. It is chiseled in stone at our studios that no amount of technology can turn a bad story into a good one.

The Evolution of Walt Disney

Unlike Pixar Animation Studios, Walt Disney was an eight decade old established entertaining company dating back to the silent era. In 1923, Walt Elias Disney arrived in California from Kansas City, bringing with him an animation film, Alice's Wonderland. On October 16, 1923, MJ Winkler, a distributer, agreed to distribute the Alice Comedies and bought each character for US$ 1,500. This marked the beginning of Disney Brothers Cartoon Studio, with Walt's brother Roy Disney sharing an equal partnership in the venture. Later the name was changed to walt Disney Studio. In 1927, after making Alice Comedies for four years, Walt created a new diameter called Oswald the Lucky Rabbit to start a new animation series. By this time, Winkler had handed over the business to her husband Charles Mintz.

After a year, as Oswald gained popularity, Walt tried to re-negotiate his contract for higher money. However, by that time, Mintz had poached Walt’s employees to create an Oswald's series in his own studio. Walt also learned that he did not legally own the rights for Oswald. When Mintz demanded that Walt should work exclusively for him, Walt refused and parted ways.

After his break-up with Mintz, Walt wanted to create a character stronger than Oswald. He visualized a new character in the form of a mouse and planned to name it 'Mortimer,' but on his wife's suggestion changed it to 'Mickey.' This marked the birth of the world famous 'Mickey Mouse’ (Mickey). Initially, it was it was not easy for Walt to sell the new mickey to the distributors as it had to compete with the popular Felix the Cat and Oswald. Walt's first animation film featuring Mickey, Plane Crazy (released in May 1928), failed to impress the audience who felt that Mickey resembled Oswald closely. Walt created the second Mickey feature film titled The

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Ilopin' Gaucho, but couldn't find distributors, but Disney's third Mickey short, Steamboat Willie, was produced with synchronized sound and became a runaway success when it premiered in New York in late 1928. In 1929, the studio changed its name to Walt Disney Productions; deciding to push the boundaries of animation even further, Disney began production of his first feature-length animated film in 1934. Taking three years to complete, Snow White and the Seven Dwarfs, based upon the Grimm Brothers’ fairy tale, premiered in December 1937 and became the highest-grossing film of that time. By 1939, then there was no turning back for Walt Disney.

Using the profits from Snow White, Disney financed the construction of a new 51-acre studio complex in Burbank. The new Walt Disney Studios, in which the company is headquartered to this day, was completed and open for business by the end of 1939. The following year, Walt Disney Productions had its public offering. Disney ended its distribution contract with RKO in 1953, forming its own distribution arm, Buena Vista Distribution. In 1954, Walt Disney used his Disneyland series to unveil what would become Disneyland Park, an idea conceived out of a desire for a place where parents and children could Both have fun at the same time. On July 18, 1955, Walt Disney opened Disneyland to the general public. On July 17, 1955 Disneyland was previewed with a live television broadcast hosted by Art Link-Letter and Ronald Reagan. After a shaky start, Disneyland continued to grow and attract visitors from across the country and around the world. A major expansion in 1959 included the addition of America’s first monorail system. In November 1965, “Disney world” was announced, with plans for theme parks, hotels, and even a model city on thousands of acres of land purchased outside of Orlando, Florida.

Walt Disney after Walt: On December 15, 1966, Walt Disney died of lung cancer, and Roy Disney took over as chairman, CEO, and president of the company. One of his first acts was to rename Disney World as "Walt Disney World," in honor of his brother and his vision. On October 1, 1971, Walt Disney World opened to the public, with Roy Disney dedicating the facility in person later that month. Two months later, on December 20, 1971, Roy Disney died of a stroke, and they both had a very impending effect on the Walt Disney Company. The company remains essentially a tightly knit family affair. The heirs of Walt and Roy O. Disnoy (who died in 1971) retain the largest single block of the stock. President Walker, 57, and Chairman Don B. Tatum, 60, both joined the Disney brothers in the ‘30s; Executive Producer Ronald W. Miller is Walt’s son-in-law, and Roy Disney's son Roy E. Disney heads T.V. projects.

While Walt Disney Productions continued releasing family-friendly films throughout the 1970s Disney CEO Ron Miller created Touchstone Pictures as a brand for Disney to release more adult-oriented material. Touchstone Picture’s first release was the comedy Splash (1984), which was a box office success. Disney launched Walt

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Disney Home Video to take advantage of the newly-emerging video cassette market. On April 18, 1983, The Disney Channel debuted as a subscription-level channel on cable systems nationwide, featuring its large library of classic films and TV series, along with original programming and family-friendly third—party offerings. In 1978, Disney executives announced plans for the second Walt Disney World theme park, EPCOT Center, which would open in October 1982. In Japan, the Oriental Land Company partnered with Walt Disney Productions to build the first Disney theme park outside of the United States, Tokyo Disney land, which opened in April 1983.

Despite the success of the Disney Channel and its new theme park creations Walt Disney Productions was financially vulnerable. Its film library was valuable, but offered few current successes, and its leadership team was unable to keep up with other studios, particularly the works of Don Bluth, who defected from Disney in 1979. In 1984, financier Saul Steinberg launched a hostile takeover bid for Walt Disney Productions, with the intent of selling off its various assets. Disney successfully fought off the bid with the help of friendly investors, and Sid Bass and Roy Disney's son Roy Edward Disney brought in Michael Eisner and Jeffrey Katzenberg from Paramount Pictures and Frank Wells from Warner Bros. Pictures to head up the company.

But this was the end for the hostile takeover bid for Walt Disney On February 11, 2004; Comcast surprised the media industry by announcing an unsolicited $66 billion bid for The Walt Disney Company a deal that would have made Comcast the largest media conglomerate in the world. After rejection by Disney and uncertain response from investors, the bid was abandoned in April. The deal would have also required Comcast to sell off either the Philadelphia Flyers (which they own through Comcast Spectator) or the Disney-owned Mighty Ducks of Anaheim, since they wouldn't be permitted to own two NHL teams. It was later discovered that the deal was mostly for Comcast to acquire one of Disney's most profitable operations, ESPN, in an attempt to expand its sports reach. Comcast has since opted to rename OLN as versus and expand their sports coverage with the Tour de France and the NHL. Comcast's NHL deal also obligated them to launch a U.S. version of NHL Network by the summer of 2007. The network finally launched in October 2007. Disney later sold the now-Anaheim Ducks to Henry Samueli in 2005 in an unrelated transaction.

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The Disney-Pixar Alliance

Disney relationship with Pixar dates back to 1986, when they entered into a joint technical development effort with Disney that resulted in the CAPS, a production system owned and used by Disney in some of its two-dimensional animated feature films. In May 1991, Disney entered into an agreement with Pixar for developing and producing three computer animated feature films. According to the agreement, Disney agreed to produce movies to be developed and directed by Pixar's John Lasseter. Disney agreed to market and distribute these movies. Pixar and Disney had disagreements after the production of Toy Story 2. Originally intended as a straight—to-video release (and thus not a part of Disney’s three picture deal) the film was eventually upgraded to a theatrical release during production. Pixar demanded that the film then be counted toward the three-picture agreement, but Disney refused. Pixar’s first five feature films have collectively grossed more than $25 billion, equivalent to the highest per-film average gross in the industry. Though profitable for both, Pixar later complained that the arrangement was not equitable. Pixar was responsible for creation and production, while Disney handled marketing and distribution. Profits and production costs were split 50-50, but Disney exclusively owned all story and sequel rights and also collected a distribution fee. The lack of story and sequel rights was perhaps the most onerous aspect to Pixar and set the stage for a contentious relationship. The two companies attempted to reach a new agreement in early 2004. The new deal would be only for distribution, as Pixar intended to control production and own the resulting film properties themselves. The company also wanted to finance their films on their own and collect 100 percent of the profits, paying Disney only the 10 to 15 percent distribution fee. More importantly, as part of any distribution agreement with Disney, Pixar demanded control over films already in production under their old agreement, including The Incredibles and Cars. Disney considered these conditions unacceptable, but Pixar would not concede.

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Disagreements between Steve Jobs and then Disney chairman and CEO Michael Eisner made 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. 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 February 2005. In preparation for potential fallout between Pixar and Disney, Jobs announced in late 2004 that Pixar would no longer release movies at the Disney-dictated November time frame, but during the more lucrative early summer months. This would also allow Pixar to release DVDs for their major releases during the Christmas shopping season. An added benefit of delaying Cars was to extend the time frame remaining on the Pixar-Disney contract to see how things would play out between the two companies.

SWOT Analysis of Disney

Strength: Strong financial background, well-known brand, has a diversified business, global presence, good distribution network.

Weakness: Unchanged visual merchandising, passive staff attitude, depleting creativity

Opportunity: Opening of different branches such as Hong Kong Disneyland, financial strength to undertake new ventures.

Threats: Online stores and illegal websites, decrease in the frequency of consumer outings

SWOT Analysis of Pixar

Strength: High level of creativity, high employee participation and enthusiasm.

Weakness: Financial deficiency, lack of proper distribution network

Opportunity: capacity to reach new demographics, series of existing movies can be directed.

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Threats: Competition in this field is very high, new technology can produce better moviesby competitors.

As can be seen from the above SWOT analysis Walt Disney and Pixar complement each other and hence bridge the other’s weaknesses.

A Strategic Acquisition

In March 2005, the Disney Board elected Iger as the company’s CEO to succeed Eisner on September 30, 2005. Iger got a call from Jobs who hinted at a possible discussion on working together again. Analysts felt that Iger would find it difficult to strike a new deal as proposed by Jobs as it was heavily loaded in favor of Pixar. However, Iger handled the proposal his own way. He asked for Disney’s content to be distributed over the Internet through Apple's online store - iTunes. In October 2005, Iger and Jobs signed a deal to sell the past and current episodes of television shows of its ABC and Disney channels through I-tunes. It started with five shows which included the popular shows Desperate Housewives and Lost. Job's was pleased with the Iger’s suggestion of linking up to offer videos through iTunes. Iger said that the deal with Apple was finalized in just three days. Meanwhile, Jobs also started re-negotiating on the Disney-Pixar agreement. With this rapprochement, there was speculation that Disney might acquire Pixar.

It was thought the marriage happened when Disney announced on January 24, 2005 that it had agreed to buy Pixar for approximately $7.4 billion in an all-stock deal. Following Pixar shareholder approval, the acquisition was completed May 5, 2006. The transaction catapulted Steve Jobs, who was the majority shareholder of Pixar with 50.6%, to Disney's largest individual shareholder with 7% and a new seat on its

board of directors. Jobs’ new Disney holdings exceed holdings belonging to ex-CEO Michael Eisner, the previous top shareholder, who still held 1.7%; and Disney Director Emeritus Roy E. Disney, who held almost 1% of the corporation's shares. As a result of the acquisition, each of your Pixar shares have been converted into the right to receive 2.3 shares of The Walt Disney Company common stock.

As part of the deal, Pixar co-founder John Lasseter, by then Executive Vice President, became Chief Creative Officer (reporting to President and CEO Robert

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Iger and consulting with Disney Director Roy Disney) of Pixar and the Walt Disney Animation Studios, as well as the Principal Creative Adviser at Walt Disney Imagineering, which designs and builds the company's theme parks. Catmull retained his position as President of Pixar, while also becoming President of Walt Disney Animation Studios, reporting to Bob Iger and Dick Cook, chairman of Walt Disney Studio Entertainment. Steve Jobs’ position as Pixar's Chairman and Chief Executive Officer was also removed, and instead he took a place on the Disney board of directors.

Strategic Rational - Integration & Operation

Analysts said this deal was more important to Disney than to Pixar. For Disney, the acquisition gave it ownership of the world's most famous computer animation studio and its talent, with whom it had teamed up to create blockbusters since the 1990s.

Company will form Pixar and Disney feature animation studios. Newly combined animation division will share talents and best practices as each unit will retain current production facilities to preserve creative cultures and capabilities.

When Disney bought its rival, Pixar, in 2006 for $7.4 billion, many people assumed the deal would play out like most big media takeovers: abysmally. The worries were twofold: that either Disney would trample Pixar‘s esprit de corps (turning Mr. Lasseter into a drone, chanting “Hi Ho" en route to Mickey's animation mines) or those Pixar animators would act like spoiled brats and rebuke their new owner. Both companies had a history of acrimony, and Robert A. Iger, the new chief executive of Disney, was a mystery.

How Disney and Pixar are making the integration work holds lessons for other Executives, faced with the delicate task of uniting two cultures. Tactics that have served the companies well include the obvious, like effectively communicating changes to employees. Other decisions, including drawing up an explicit map of what elements of Pixar would not change, have been more unusual. Mutual respect between the two companies enhanced their relationship and served to bring down the barriers. The new Pixar and Disney feature animation studios formed, retained

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their current operations and locations of production facilities. Pixar shall retain its existing compensation philosophies and practices, including not using employment contracts, the granting of employee stock options, the maintenance of executive employee bonus plans and employee medial benefits and other fundamental human resource policies and practices for at least five years or such shorter period as the Committee may decide. Branding agreements with Pixar ensured the name “Pixar” would be used for their animated films. The branding of Pixar‘s previous films and products will not be altered. Future films produced by Pixar will be branded Disney Pixar. Pixar‘s operations will continue to be based in Emeryville. The Pixar sign at the gate shall not be altered. In fact, additional conditions were laid out as part of the deal to ensure that Pixar remains a separate entity, a concern that many analysts had about the Disney deal. Some other points of interest concerning the deal:

If Pixar had pulled out of the deal, they would have been required to pay Disney a penalty of US$210 million.

John Lasseter has the authority to approve films for both Disney and Pixar studios, with Bob Iger and Roy Disney carrying final approving authority.

The deal required that Pixar's primary directors and creative executives must also join the combined company. This includes Andrew Stanton, Pete Docter, Brad Bird, Bob Peterson, Brenda Chapman, Lee Unkrich, and Gary Rydstrom.

There will be a steering committee that will oversee animation for both Disney and Pixar studios, with a mission to maintain and spread the Pixar culture. This committee will consist of Catmull, Lasseter, Jobs, Iger, Cook and Tom Staggs. They will meet at Pixar headquarters at least once every two months.

Pixar HR policies will remain intact, including the lack of employment contracts.

Results of the Acquisition

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At Disney Pixar, the functions of transformational leadership are well defined. In this organization, creative power comes from creative leadership. Leadership builds the support structures, the necessary resources, and access to an organization wide brain trust led by John Lasseter and other directors on the Steering Committee. To successfully manage the changes resulting from the acquisition, Disney wanted Steve Jobs, the head of both Pixar and Apple, to join Disney as a corporate, director and Disney's largest shareholder. Commenting on Jobs and the Disney Pixar merger, a director at the Institute for the Future says: “He's the only guy who has applied systems thinking to media, he's the only person who bridges both hardware and software.

This makes it possible to manage the increased complexity of economies of scale and scope in a unique way, making it more difficult for competitors to easily copy. Mergers and acquisitions represent a means to accelerate this process. This process seems to be happening in the Disney-Pixar where a formal team of leaders has been created to integrate Pixar with Disney. One result has been the appointment of Pixar Vice President, Lasseter, as the chief creative officer of the Pixar and Disney animation studios. He has the authority to “green light" films for both studios, although Disney CEO Iger has the final approval. To ensure those two leaders can effectively work with each other, a steering committee has been created which includes Iger, Jobs, and Lasseter. Their task is to oversee feature animation at both studios, and to help maintain the Pixar “culture”. The partnership has grown from strength to strength mainly due to the respectful relationship that has built over time. Iger agreed to an explicit list of guidelines to protect Pixar's creative culture and prevent employees from becoming Disney drones. “None of this has been easy," said Richard Cook, chairman of Walt Disney Studios in a piece featured in the New York Times “but it helps when everyone has tremendous respect both professionally and personally for one another."

The hits kept coming in the form of Cars. Although some critics thought this the weakest of the of any Pixar film, it was the sixth most successful feature in overall takings worldwide in 2006. The studio had nothing to worry about, though, as all three subsequent films won Best Animated Feature at the Oscars. Ratatouille,

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WALL.E and Up (the second highest-grossing Pixar film worldwide) also received typically glowing reviews from virtually every review portal and media available. As Toy Story-3 continues the almost flawless string of Pixar-Disney hits, the future looks even brighter. For the first time, since December 2005, Pixar has held exhibitions celebrating the art and artists of Pixar, over their first twenty years in animation.

As a result of these improvements the share prices of the Pixar-Disney stock increased by approximately $10 in the year of announcement of the acquisition.

Thanks to the acquisition of Pixar animation Studio, Disney-Pixar has now climbed up the ladder to position itself as the third largest giant in the entertainment industry, holding a market share of 15.7%

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The Road Ahead

The Disney-Pixar combination seems to have the necessary ingredients for successfully sustaining their merger for years to come. While there were several possible synergies that could arise from the acquisition, there were also some potential trouble spots for Disney. The rise of Jobs to the Disney board as the single largest shareholder could become a major worry for lger as Jobs was slightly unpredictable. The acquisition, in place of the partnership with Pixar, might make Iger second to the powerful and experienced Jobs. An industry analyst termed the

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move bold but predicted that Iger might leave Disney in a year, saying, "Iger just put a gun to his head." Analysis felt Iger has to be careful as he was still trying to create his own identity after being under the shadow of Eisner, who had been at the helm for more than twenty years.

Pixar is scheduled to deliver two movies in a single year in 2012, when Brave and the long-awaited sequel to Monsters Inc. will be released. In June 2011, Cars 2 also hit multiplexes, giving the partnership a chance to improve on the one movie in the 15 years of partnership that got mixed reviews. The Studio Entertainment division's revenues are subject to conditions in the larger movie industry, including the rate of movie attendance. In recent years, the advent of online video and a rising amount of piracy has led to slow or flat growth in movie attendance, causing studios such as Disney to reevaluate their film distribution methods. One way the company has addressed declining cinemas viewership is through enhancing the consumer movie experience, such as filming shows in I-MAX and 3-D. In 2009, Disney Pixar's 3-D "Up" grossed $68.1 million, coming only second to News Corp's "Avatar." In the future, film studios are expected to focus more on the higher-margin DVD and television broadcast segments as a result of this decline in cinema viewership. Pixar celebrated 25 years of animation in 2011, the same time its film, Cars2, was released. Success is contingent upon the Disney-Pixar effort to consolidate and systematize their animation divisions, in addition to understanding the market's ever developing needs/desires. The road to happily-ever-after customarily consists of management reform, artistic adaptation and intense market research; however, concerns of corporate direction, creative direction, and franchise control as well as intellectual and creative chemistry still remain. This acquisition is a corporate assemblage: that will reverberate for years to come. Disney President and CEO Bob Iger commented: ‘The goal here, above all else, is to make great animated films. . . the rest kind of takes care of itself."

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