disney and pixar merger case study

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Disney Pixar Case Study: Creativity and Efficiency

This article is an excerpt from the Shortform book guide to "Creativity, Inc." by Ed Catmull. Shortform has the world's best summaries and analyses of books you should be reading.

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Are you looking for a Disney Pixar case study? How was Ed Catmull able to apply his management strategies from Pixar to Disney Animation Studios?

After being an independent company for 20 years, Pixar was sold to Disney. This Disney Pixar case study explores how the Pixar management strategies helped revive the flailing Disney Animation Studios.

Keep reading for a Disney Pixar case study.

Disney Pixar Case Study: Background

In 2005, Jobs told Catmull and Lasseter that he was considering selling Pixar to Disney. This shocked the Pixar leaders because, at the time, Pixar and Disney had hit a rough patch. However, leadership at Disney had recently changed, and the new CEO, Bob Iger, wanted to bring Pixar back into the fold. Disney Animation had been struggling for years, and Iger believed that Catmull and Lasseter could reinvigorate the organization by leading both Pixar and Disney Animation. Iger assured them that Pixar would maintain its autonomy and its company culture.

Ultimately, Jobs gave the decision to Catmull and Lasseter. During negotiations, Catmull drafted a lengthy list of demands that ensured Pixar’s culture wouldn’t be impacted after being bought by a massive entertainment studio such as Disney. These demands ranged from keeping a “no assigned parking” rule to ensuring that Pixar leadership could still distribute bonuses following box office success. In addition to these demands, Catmull insisted that Pixar remain separate from Disney Animation Studios with each company working on their own projects. Once these safeguards were established, Catmull and Lasseter agreed to sell Pixar to Disney.

Reviving Disney Animation Studios

Prior to the Disney/Pixar merger, Disney Animation had been struggling to create new and innovative works. Following the Disney Renaissance of the 1990s, the studio had failed to produce a critically and commercially successful film. Where they had once produced classics such as The Lion King or Beauty and the Beast , their recent output had been critical duds such as Chicken Little and Brother Bear . While these films had some merits, they were nowhere nearly as universally beloved as their predecessors.

The Problems in the Disney Pixar Case Study

Once the merger went through, Catmull immediately began his tenure as the president of both Disney Animation Studios and Pixar. When he arrived at Disney, he saw a number of alarming problems that stifled the studio’s ability to create innovative films:

• A lack of personality. On his first tour of the building, Catmull noticed the sterile environment of the office space. Desks were empty and the walls were barren. The lack of creativity in the space reflected the lack of creativity in Disney’s recent animated films.
• Ineffective floorplans. Disney Animation’s studios were spread out over four floors with teams being floors away from one another. This made it difficult for teams to quickly communicate and removed any impetus to check in on colleagues. Also, the offices for studio leaders were far away from everyone else and had an elitist design with multiple secretary desks and doors. This “executive suite” made it challenging and intimidating for any employee to approach an executive or high-level manager.
• Fear of candidness. Previous leadership at Disney Animation didn’t allow for failure or open feedback. If someone’s idea failed or they openly disagreed with a manager or leader, their job would be on the line. This created constant fear that stifled creative impulses and caused the production of uninspired work.
• No collaborative feedback system. Before Catmull arrived at Disney, teams were given feedback in the form of checklists from three different sources: the studio’s development department, the studio head, and Disney’s former CEO, Michael Eisner. These notes were mandatory and left no room for collaboration. They were also often conflicting, which left creative teams in a tricky situation when trying to implement the feedback. While the teams had developed an unofficial internal feedback system called Story Trusts, the process lacked the structure and management to be effective.
• Unwillingness to change. Though many were open and excited about the new leadership, some high-ranking members of Disney’s studio weren’t thrilled about the new direction. They believed that their system was working, and that they were on the verge of a breakthrough when Iger pulled the plug.

The Solutions in the Disney Pixar Case Study

While Catmull insisted that he didn’t want Disney to become a clone of Pixar, he recognized that the core values of the company were universal. With this in mind, Catmull immediately started making changes:

• He championed individuality. Artists need the room and freedom to express themselves. It helps them feel comfortable in their environment and be more original in their work. At Pixar, employees would make elaborate designs and environments in their cubicles and offices. Catmull brought this same creative freedom to Disney. 
• He redesigned the workplace. Catmull promoted interactivity and collaboration by moving departments so certain teams could be closer together, and he created communal environments where teams could relax and talk with other colleagues. He also moved his and Lasseter’s offices to the middle of the main floor to show that anyone could talk to them at any time.
• He promoted candidness. Catmull insisted that employees could be candid without the fear of retaliation. This was challenging because many of the Disney employees had been told for years that their opinions held no value and expressing them could actually hurt them. Catmull held multiple meetings with creatives and explained the importance of candidness. While it took some time, the Disney team eventually embraced this concept.
• He helped develop Story Trusts. Catmull invited various Disney employees to fly out to Pixar’s studios and observe a Braintrust meeting. Using this information, the Disney team worked with Catmull to develop Story Trusts into a similar feedback mechanism. While Story Trusts did have their own unique elements, the core purpose of delivering candid feedback in a structured setting helped boost the quality of Disney’s future films.
• He removed those unwilling to change. While most employees were retained after the merger, those who refused to make changes were let go. Catmull found the people who he believed were ready and willing to make the necessary adjustments to move the studio forward. 

After implementing changes within Disney, the studio’s work began to improve . In fact, one of the first films under Catmull, Bolt , received an Oscar nomination. This sudden surge of success proved that the Catmull’s concepts could be effectively applied to another creative organization to boost their efficiency and creativity. The Disney Pixar case study shows that Catmull’s principles and results could be replicated.

Shortform Section: Critical Trends in Disney Animation Studios’ Films

Beyond the Disney Pixar case study, there’s important context to know about how Disney Animation Studios was performing. For reference, from 2000-2005, Disney Animation Studios’ theatrical releases had an average score of less than 70% on Rotten Tomatoes. Comparatively, between 2007-2019 (after Catmull had taken over and changed the culture at the studio), almost none of their films dropped below an 85% on Rotten Tomatoes (with the exceptions of Frozen II and Meet the Robinsons ). The changes at Disney allowed for creative collaboration and open feedback. As a result, the critical reception of their films started to improve.

(For more information on how Rotten Tomatoes determines their scores, click here .)

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The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire? An Update

By: Juan Alcacer, David J. Collis, Mary Furey

This four-page update to the case, "The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire?" details the Walt Disney Company's acquisition of Pixar, including deal terms, executive…

• Length: 4 page(s)
• Publication Date: Mar 4, 2009
• Discipline: Strategy
• Product #: 709489-PDF-ENG

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This four-page update to the case, "The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire?" details the Walt Disney Company's acquisition of Pixar, including deal terms, executive appointments, and operating guidelines for the two studios.

Mar 4, 2009 (Revised: Jan 11, 2010)

Discipline:

Harvard Business School

709489-PDF-ENG

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Disney purchased Pixar in 2006 for approximately $7.4 billion and as of July 2019, Disney Pixar feature films have earned the worldwide box office an average gross of $680 million per film.

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Due to the emergence of 3D-Computer graphic films, such as Finding Nemo (a Disney Pixar production), a competitive rise occurred in the computer graphics (CG) industry. Some of the leading companies such as DreamWorks and Pixar emerged as the most promising players in this field. During this period, Walt Disney had a few hits in 2D animation. However, due to the technological limitations of the industry, Disney was struggling to compete with the likes of Pixar.

The case is that if Walt Disney has such technological limitations, then why not acquire a company like Pixar which is skilled at 3D computer graphics? Will Pixar's freedom and creativity fit with Walt Disney's corporate governance, or will it do more harm than good? In this case study, we will investigate Walt Disney's acquisition of Pixar Animation Studios and analyse the relationship that would lead to tremendous success.

Merger of Disney and Pixar

The merger of Disney and Pixar took place in 2006 when Disney bought the Pixar company. Disney was stuck in a conundrum, still producing old-fashioned animation: the company had to innovate; otherwise, it would lose its competitive edge. On the other hand, Pixar's culture and environment were innovative and creative. Therefore, Disney saw this as the perfect opportunity for collaboration. So the two companies merged through a vertical merger.

Introduction to the case

The relationship between Disney and Pixar began in 1991 when they signed a co-production deal to create three animated films, with one of them being Toy Story released in 1995. The success of Toy Story lead to another contract i n 1997, which would allow them to produce five movies together over the next ten years.

Steve Jobs, the previous CEO of Pixar, said that the Disney-Pixar merger would allow the companies to collaborate more effectively, allowing them to focus on what they do best. The merger between Disney and Pixar allowed the two companies to collaborate without any external issues . However, investors were worried that the acquisition would threaten the Disney movie culture.

Disney and Pixar merger

Disney wanted to marry the style of their previous films with the exceptional storytelling techniques of Pixar, eventually resulting in the merger.

Before the merger took place, Disney was caught in a conundrum. The company had two choices: continue making old fashioned hand-drawn movies or make a new type of Disney movie using the digital animation that was now available due to modern technology.

Disney decided to take on the new animation culture with the help of Pixar.

Since the acquisition of Pixar, Disney has implemented some of the company's animation techniques into its films and produced Frozen. This Walt Disney Pixar movie was a box office success.

Disney has been saved in many ways by the work of Pixar Animation Studios. Pixar came in and created eye-catching animated movies that were under the Disney name. However, this also posed a problem, as Disney had lost its animation culture. They were no longer catching the eye of the public with their hand-drawn movies. However, when Disney and Pixar, made films together, they were always big hits.

Pixar case study strategic management

The success of Pixar Animation can be attributed to its unique and distinctive way of creating characters and storylines. Due to the company's unique and innovative approach , they have been able to stand out from the rest of the industry.

Pixar pushed itself to invent its own unique animation techniques. They needed to find a way to attract and retain a creative group of artists that would help them become a successful company.

Aside from technology, Pixar also has a culture that values creativity and innovation. This is evidenced by the company's commitment to continuous improvement and employee education . Ed Catmull has been instrumental in developing the creative department and ensuring that everyone is on the same page. This is also evidenced by the requirement that every new employee spends ten weeks at Pixar University. This program is focused on employee preparation and development . It is also used to prepare new employees for the company's creative department.

To learn more about the internal environment of an organization, take a look at our explanations on human resource management .

Disney and Pixar merger explained

In a vertical merger , two or more companies that produce the same finished products through different supply chain functions team-up. This procedure helps in creating more synergies and cost-efficiency.

A vertical merger can help boost profitability, expand the market, and reduce costs .

For instance, when Walt Disney and Pixar merged, it was a vertical merger because the former has a specialization in distribution whilst also having a strong financial position and the latter owned one of the most innovative animation studios. These two companies were operating at different stages and were responsible for the production of great movies all around the world.

The merger of Walt Disney and Pixar was among the most successful corporate transactions in recent years. It was mainly due to the companies' negotiations. When the preliminary analysis was done, it showed that the merger would be beneficial for both the companies and consumers.

The merger of Disney and Pixar is based on two alliances.

The Sales Alliance involves both the Disney and Pixar companies working together to maximize the profits from their products.

The Investment Alliance, whereby Disney and Pixar have got into an alliance in which they will share profits from the movies.

Disney and Pixar merger analysis

As a result of the merger, Disney and Pixar were able to capitalize on the potential of Pixar to create a brand-new generation of animated movies for Disney. This is also evidenced by the revenue generated from the movies made together by both Disney and Pixar.

Investors saw the potential of the computer-animated character to be used in Disney's vast network market.

The revenue achieved by Cars was about $5 million.

Walt Disney and Pixar also developed other successful films together such as Toy Story and The Incredibles.

Disney kept Pixar's management in place to ensure a smooth transition. This was also necessary for the growth of trust that would allow Steve Jobs to approve the merger. Because of the disruption that Steve had at Disney, the companies had to create a set of guidelines that would safeguard the creative culture of Pixar when acquiring the company.

To allow for the merger, the studios also needed to create a strong team of leaders who would guide the growth of the company.

To learn more about the role of organizational culture have a look at our explanation on change management .

Disney-Pixar merger synergy

Synergy refers to the combined value of two companies, which is greater than the sum of their individual parts. It is often used in the context of mergers and acquisitions (M&A).

Pixar's successful acquisition with Disney has been incredibly profitable, with the company releasing over 10 full feature animated films globally, all of them reaching a total gross of over $360,000,000. Through the years, Disney and Pixar have been able to successfully combine forces and create a profitable business model. Over the course of 18 years, these Disney Pixar films have grossed over $7,244,256,747 worldwide. With a gross profit of $5,893,256,747.

The merger of Disney and Pixar has resulted in greater creative output. Since the acquisition, Disney-Pixar has plans to release movies twice a year as Pixar has the technology to help do so. The value and performance of the Disney and Pixar merger have been very successful because they have made large profits (e.g. Toy Story, A Bugs life, Cars). These have been produced using Pixar technology. This has also benefited Pixar as Disney has given large amounts of funding for their studios so they can create these films and use Disney's name to reach a larger audience, resulting in a synergy.

Pros and cons of the Disney-Pixar merger

One of the most successful mergers in history was the Walt Disney and Pixar merger. Although many mergers fail, they can also be successful.

In most cases, the merger brings advantages such as lower cost of production, better management team, and increased market share but they can also cause job losses and bankruptcy. Most mergers are highly risky but with the right knowledge and intuition, they can succeed. Below is the list of pros and cons of the Walt Disney and Pixar merger.

Pros of Disney-Pixar merger

The acquisition gave Walt Disney access to Pixar's technology, which was very important to them. It also provided Walt Disney with new characters that would help the company create new revenue streams.

Walt Disney also had its existing famous animated characters it could provide Pixar.

Walt Disney also gained market power by acquiring another rival company (Pixar). This would make both Walt Disney and Pixar companies have a stronger position in the market.

Walt Disney had a larger budget , which allowed Pixar to explore other opportunities that they might not have had the resources to pursue. Also, due to Walt Disney having more financial resources, they were able to start more projects and provide more security.

The acquisition would allow Steve Jobs to put Walt Disney content in the App Store, which would provide more revenue for Walt Disney and Pixar.

Walt Disney's large size gives it many advantages, such as a large human resource base, many qualified managers and a large amount of funds.

Pixar is known for its technological expertise in 3D animation. Their in-house creativity is the reason why they can create such innovative films. This was important for Disney to acquire, as they were lacking technological expertise in 3D animation.

Pixar mainly focuses on quality , and this is what makes Pixar different from other companies. They also use the bottom-up approach , where the input of their employees is highly valued.

Cons of Disney-Pixar merger

There were differences in the structure of Walt Disney and Pixar company, with Pixar artists no longer being independent , and Walt Disney now making most of the decisions.

A cultural clash between Walt Disney and Pixar took place. Since Pixar had built an environment based on its innovative culture, Pixar was worried that it would be ruined by Disney.

Conflicts between Walt Disney and Pixar occurred because of the takeover. This happened because of the hostile environment that often accompanies a takeover, which resulted in disagreements between the management and the other parties involved.

When it came to the creative freedom of Pixar, it had a fear that its creation would be restricted under Walt Disney's acquisition.

The main reason for the merger between Disney and Pixar was for Walt Disney to acquire and use the modern animation technology of Pixar to expand its reach in the market, whereas Pixar was now able to use Walt Disney's vast distribution network and funds. The acquisition gave Disney new ideas and technology, which helped the company produce more blockbuster movies. The negotiation that led to the Disney-Pixar merger was also instrumental in the company's success. This was also the reason for the huge revenue that was generated together by both companies.

Disney Pixar Merger Case Study - Key takeaways

In 1991, Walt Disney and Pixar Animation Studios established a relationship that would lead to tremendous success.

Walt Disney purchased Pixar company in 2006 for approximately $7.4 billion.

Walt Disney wanted to marry the style of their previous films with the exceptional storytelling techniques of Pixar.

The merger of Walt Disney and Pixar was among the most successful corporate transactions in recent years. It was mainly due to the companies' negotiations.

Pixar's successful partnership with Walt Disney has been incredibly profitable, with the company releasing over 10 full feature animated films globally, and all of them reaching a total gross of over $360 million.

The main reason for the merger between Disney and Pixar was for Walt Disney to acquire and use the modern animation technology of Pixar to expand its reach in the market, whereas Pixar was now able to use Walt Disney's vast distribution network and funds.

The New York Times: Disney Agrees to Acquire Pixar. https://www.nytimes.com/2006/01/25/business/disney-agrees-to-acquire-pixar-in-a-74-billion-deal.html

Frequently Asked Questions about Disney Pixar Merger Case Study

--> why was the disney pixar merger a success .

The merger of Walt Disney and Pixar was among the most successful corporate transactions in recent years. It was mainly due to the companies' negotiations. When the preliminary analysis was done, it showed that the merger would be beneficial for both the companies and consumers. The value and performance of the Disney and Pixar merger have been very successful because they have made large profits 

--> What type of merger were Disney and Pixar? 

Disney and Pixar merger was a vertical merger. In a   vertical  merger , two or more companies that produce the same finished products through different supply chain functions team up.  This procedure helps in creating more synergies and cost-efficiency. 

--> How can the synergies between Disney and Pixar be developed? 

Since the acquisition, Disney-Pixar has plans to release movies twice a year as Pixar has the technology to help do so. This has also benefited Pixar as Disney has given large amounts of funding for their studios so they can create these films and use Disney's name to reach a larger audience, resulting in a synergy.

--> What happened when Disney bought Pixar? 

Pixar's successful acquisition with Disney has been incredibly profitable, with the company releasing over 10 full feature animated films globally, all of them reaching a total gross of over $360,000,000. 

--> Was acquiring Pixar a good idea? 

Yes, acquiring Pixar was a good idea because Pixar's successful partnership with Walt Disney has been incredibly profitable, with the company releasing over 10 full feature animated films globally, all of them reaching a total gross of over $360 million. 

Test your knowledge with multiple choice flashcards

when Disney and Pixar merged and made films, such as Toy Story and Cars, was it huge hits with consumers?

True or False?The merger of Walt Disney and Pixar was among the most successful corporate transactions in recent years?

True or False?The acquisition gave Walt Disney access to Pixar's technology, which was very important to them. It also provided Walt Disney with new characters that would help the company create new revenue streams. 

Your score:

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Why was the Disney Pixar merger a success? 

The merger between Disney and Pixar was the result of investors' belief that the combined company could use the animation character of Pixar to expand its network market. 

What type of merger was Disney and Pixar? 

When it comes to the merger between Walt Disney and Pixar, it was a vertical merger because Disney's was focusing more on creating animated movies, whereas Pixar's specialty is in animations. 

How can the synergies between Disney and Pixar be developed? 

To maximize the profitability of their films, Pixar focused on creating sequels and direct DVD movies. They also featured their characters in theme parks. 

What happened when Disney bought Pixar? 

Disney purchased Pixar in 2006 for approximately $ 7.4 billion and as of July 2019, Disney Pixar feature films have earned approximately $ 14 billion at the worldwide box office, with an average worldwide gross of $ 680 million per film. 

In which year did Walt Disney and Pixar start working together on the film Toy Story?

In 1991, Walt Disney and Pixar Animation Studios established a relationship that would lead to working together on the film Toy Story, which was released in 1995. It became the world's first computer-generated featured movie.

What technology did Pixar have that Disney didn't have?

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Disney & Pixar Acquisition: Case Analysis

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The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire?

• Format: Print
• | Language: English
• | Pages: 28

About The Authors

Juan Alcacer

David J. Collis

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• The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire?  By: Juan Alcacer, David J. Collis and Mary Furey

Disney To Acquire Pixar

Burbank, CA and Emeryville, CA (January 24, 2006) – Furthering its strategy of delivering outstanding creative content, Robert A. Iger, President and Chief Executive Officer of The Walt Disney Company (NYSE: DIS), announced today that Disney has agreed to acquire computer animation leader Pixar (NASDAQ: PIXR) in an all-stock transaction, expected to be completed by this summer. Under terms of the agreement, 2.3 Disney shares will be issued for each Pixar share. Based on Pixar’s fully diluted shares outstanding, the transaction value is $7.4 billion ($6.3 billion net of Pixar’s cash of just over $1 billion).*

This acquisition combines Pixar’s preeminent creative and technological resources with Disney’s unparalleled portfolio of world-class family entertainment, characters, theme parks and other franchises, resulting in vast potential for new landmark creative output and technological innovation that can fuel future growth across Disney’s businesses. Garnering an impressive 20 Academy Awards, Pixar’s creative team and global box office success have made it a leader in quality family entertainment through incomparable storytelling abilities, creative vision and innovative technical artistry.

“With this transaction, we welcome and embrace Pixar’s unique culture, which for two decades, has fostered some of the most innovative and successful films in history. The talented Pixar team has delivered outstanding animation coupled with compelling stories and enduring characters that have captivated audiences of all ages worldwide and redefined the genre by setting a new standard of excellence,” Iger said. “The addition of Pixar significantly enhances Disney animation, which is a critical creative engine for driving growth across our businesses. This investment significantly advances our strategic priorities, which include – first and foremost – delivering high-quality, compelling creative content to consumers, the application of new technology and global expansion to drive long-term shareholder value.”

Pixar President Ed Catmull will serve as President of the new Pixar and Disney animation studios, reporting to Iger and Dick Cook, Chairman of The Walt Disney Studios. In addition, Pixar Executive Vice President John Lasseter will be Chief Creative Officer of the animation studios, as well as Principal Creative Advisor at Walt Disney Imagineering, where he will provide his expertise in the design of new attractions for Disney theme parks around the world, reporting directly to Iger. Pixar Chairman and CEO Steve Jobs will be appointed to Disney’s Board of Directors as a non-independent member. With the addition of Jobs, 11 of Disney’s 14 directors will be independent. Both Disney and Pixar animation units will retain their current operations and locations.

“Disney and Pixar can now collaborate without the barriers that come from two different companies with two different sets of shareholders,” said Jobs. “Now, everyone can focus on what is most important, creating innovative stories, characters and films that delight millions of people around the world.”

“Pixar’s culture of collaboration and innovation has its roots in Disney Animation. Our story and production processes are derivatives of the Walt Disney ‘school’ of animated filmmaking,” said Dr. Catmull. “Just like the Disney classics, Pixar’s films are made for family audiences the world over and, most importantly, for the child in everyone. We can think of nothing better for us than to continue to make great movies with Disney.”

The acquisition brings to Disney the talented creative teams behind the tremendously popular original Pixar blockbusters, who will now be involved in the nurturing and future development of these properties, including potential feature animation sequels. Pixar’s 20-year unrivaled creative track record includes the hits Toy Story, Toy Story 2, A Bug’s Life, Monsters, Inc., Finding Nemo and The Incredibles. Disney will also have increased ability to fully capitalize on Pixar-created characters and franchises on high-growth digital platforms such as video games, broadband and wireless, as well as traditional media outlets, including theme parks, consumer products and live stage plays.

“For many of us at Pixar, it was the magic of Disney that influenced us to pursue our dreams of becoming animators, artists, storytellers and filmmakers,” said Lasseter. “For 20 years we have created our films in the manner inspired by Walt Disney and the great Disney animators – great stories and characters in an environment made richer by technical advances. It is exciting to continue in this tradition with Disney, the studio that started it all.”

“The wonderfully productive 15-year partnership that exists between Disney and Pixar provides a strong foundation that embodies our collective spirit of creativity and imagination,” said Cook. “Under this new, strengthened animation unit, we expect to continue to grow and flourish.”

Disney first entered into a feature film agreement with Pixar in 1991, resulting in the release of Toy Story, which was hailed as an instant classic upon its release in November 1995. In 1997, Disney extended its relationship with Pixar by entering into a co-production agreement, under which Pixar agreed to produce on an exclusive basis five original computer-animated feature films for distribution by Disney. Pixar is currently in production on the final film under that agreement, Cars, to be distributed by Disney on June 9.

The Boards of Directors of Disney and Pixar have approved the transaction, which is subject to clearance under the Hart-Scott-Rodino Antritrust Improvements Act, certain non-United States merger control regulations, and other customary closing conditions. The agreement will require the approval of Pixar’s shareholders. Jobs, who owns approximately 50.6% of the outstanding Pixar shares, has agreed to vote a number of shares equal to 40% of the outstanding shares in favor of the transaction.

The Disney Board was advised by Goldman, Sachs & Co. and Bear, Stearns & Co. The Pixar Board was advised by Credit Suisse.

Separately, the Disney Board approved the repurchase of approximately 225 million additional shares, bringing the Company’s total available authorization to 400 million shares. Since August 2004 through the end of December 2005, Disney has invested nearly $4 billion to purchase nearly 155 million shares. Disney anticipates further significant share repurchases going forward, reflecting Disney’s continued commitment to returning value to shareholders over time.

* Based on Disney’s closing share price of $25.52 as of 1/23/06.

About The Walt Disney Company :

The Walt Disney Company (NYSE:DIS), together with its subsidiaries and affiliates, is a leading diversified international family entertainment and media enterprise with four business segments: media networks, parks and resorts, studio entertainment and consumer products. Disney is a Dow 30 company, had annual revenues of nearly $32 billion in its most recent fiscal year, and a market capitalization of approximately $50 billion as of January 23, 2006.

Investor Conference Call:

An investor conference call will take place at approximately 2:15 p.m. PT / 5:15 p.m. ET today, January 24, 2006. To listen to the Webcast, turn your browser to www.disney.com/investors/presentations or http://corporate.pixar.com . If you cannot participate in the live Webcast, re-plays will be available for domestic callers at (888) 286-8010 (PIN 56666399) and for international callers at (617) 801-6888 (PIN 56666399), or at www.disney.com/investors/presentations until 4:00 p.m. PT on Tuesday, February 7, 2006. An .mp3 version of this Webcast replay will also be available approximately 24 hours after the Webcast concludes at www.disney.com/investors/presentations .

Forward-Looking Statements:

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of the views and assumptions of the management of The Walt Disney Company and Pixar regarding future events and business performance as of the time the statements are made and they do not undertake any obligation to update these statements. Actual results may differ materially from those expressed or implied. Such differences may result from legal or regulatory proceedings or other factors that affect the timing or ability to complete the transactions contemplated herein, actions taken by either of the companies, including restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions), as well as from developments beyond the companies’ control, including: adverse weather conditions or natural disasters; health concerns; international, political or military developments; technological developments; and changes in domestic and global economic conditions, competitive conditions and consumer preferences. Such developments may affect assumptions regarding the operations of the businesses of The Walt Disney Company and Pixar separately or as combined entities including, among other things, the timing of the transaction, the performance of the companies’ theatrical and home entertainment releases, expenses of providing medical and pension benefits, and demand for products and performance of some or all company businesses either directly or through their impact on those who distribute our products. Additional factors that may affect results are set forth in the Annual Report on Form 10-K of The Walt Disney Company for the year ended October 1, 2005 under the heading “Item 1A—Risk Factors” and in the Quarterly Report on Form 10-Q of Pixar for the quarter ended October 1, 2005 under the heading “Risk Factors” section of Part I, Item 2.

For Additional Information:

This material is not a substitute for the prospectus/proxy statement Disney and Pixar will file with the Securities and Exchange Commission. Investors are urged to read the prospectus/proxy statement which will contain important information, including detailed risk factors, when it becomes available. The prospectus/proxy statement and other documents which will be filed by Disney and Pixar with the Securities and Exchange Commission will be available free of charge at the SEC’s website, www.sec.gov, or by directing a request when such a filing is made to The Walt Disney Company, 500 South Buena Vista Street, Burbank, CA 91521-9722, Attention: Shareholder Services or by directing a request when such a filing is made to Pixar, 1200 Park Avenue, Emeryville, CA 94608.

Pixar, its directors, and certain of its executive officers may be considered participants in the solicitation of proxies in connection with the proposed transactions. Information about the directors and executive officers of Pixar and their ownership of Pixar stock is set forth in the proxy statement for Pixar’s 2005 annual meeting of shareholders. Investors may obtain additional information regarding the interests of such participants by reading the prospectus/proxy statement when it becomes available.

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The Disney-Pixar Merger

The article traces the very powerful Disney-Pixer merger and analyses the various reasons for its success and its repercussions.

By Priyamvada Jain

On May 5, 2006 the two esteemed companies Disney and Pixar merged. Disney acquired shares worth $7.4 billion in Pixar and made it Disney’s subsidiary. Since then it has been reported as one of the most successful mergers of times.

The Walt Disney Company was founded on October 16 th 1923 by brothers Walt and Roy Disney. It is one of the largest media and entertainment corporations in the world. It is the owner of 11 theme parks and several television networks, including the American Broadcasting Company (ABC). Disney started making films in the 1930’s.Some of their first films were Snow White, Bambi and Pinocchio. A lot of their earlier films were animated adaptations of children’s fairytales. Pixar Animation Studios was started  by John Lasseter & George LucasPixar was initially a computer graphics division owned by film maker George Lucas known as Lucas film limited.In 1986, Steve Jobs purchased the computer graphics division of Lucas Film Ltd. for $10 million and established it as an independent company named Pixar , co-founded with Dr. Edwin E. Catmull.  On November 22, 1995, Pixar Animation Studios forever impacted the future of filmmaking with the release of its first feature film, Toy Story. The film went on to become the highest grossing film of 1995 with $362 million.

Prior to the merger in 1997, after the release of Toy Story, a 10-year, 5-picture deal was signed, evenly splitting production costs and profits on subsequent movies. Disney alone retained rights to the films and characters. In addition, Disney collected 10 to 15 percent of each film’s revenue as a distribution fee. But Pixar and Disney had ongoing disagreements since the production of Toy Story 2. Originally intended as a straight-to-video release (and thus not part of Pixar’s five picture deal), the film was upgraded to a theatrical release during production. Pixar demanded that the film then be counted toward the five picture agreement, but Disney refused. There were talks of Pixar searching for new distributors. But with Mr. Iger taking the position of Disney’s CEO the conflicts between Pixar and Disney were resolved and on January 24, 2006, Disney announced that it had agreed to buy Pixar for approximately $7.4 billion. Disney offered 2.3 shares of its stock for each Pixar share. That’s a 3.8% premium on Pixar’s closing price of $57.57.

Overall it was a successful integration. This can be seen from the following.

The key reasons for the success of the merger of the two companies was that investors saw potential for Disney to leverage on Pixar’s computer animated character to be used in its vast networks. One successful example was “cars”. The revenue in retail products from “cars” was over $5 million. Pixar’s willingness to change so as to be a part of the international conglomerate helped. Pixar not only developed new movies but also sequels of original ones. Executives also chained their minds of alternative production channels: direct to dvd was accepted as a part of Disney-Pixar portfolio. The experience of Bob Iger in the field of merger helped the two companies greatly. The companies not only followed normal tactics for successful mergers but also came with some different ones. Pixar created a list of things that would not be changed so as to preserve its culture like Pixar employees didn’t sign employment contracts as it believed “We’ve never had to go back and look at it. Everything they’ve said they would do they have lived up to”. Bob Iger ensured that Pixar employees get mixed in the new environment. He gave Pixar employees new responsibilities and tasks to increase the efficiency of Disney. Finally the transformational leadership at Pixar was brought to Disney. Their ability to lead and motivate employees in a way that they easily adapt to the dynamic environment was legend and Disney adopted it.

Priyamvada Jain : Presently pursuing BCom( Hons) from the Shri Ram College Of Commerce and have successfully completed my 1st year. She aspires to do an MBA in the field of Finance. Has worked with Ernst and Young in the past and is constantly associated with the Rotary Club. She can be contacted at  jainpriyamvada@gmail. com

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Disney Pixar Merger, More Than a Merger

Table of contents.

On January 24th, 2006, a news headline went viral across media outlets, announcing Disney and Pixar merger. Pixar’s acquisition by Walt Disney studios is a great moment for the animation industry since the two giants put an end to rivalry and began joining forces to dominate the animation world. In the following paragraphs, we are going to explain Disney Pixar merger in detail and the pros and cons of this union for both companies. We also mention a few successful feature film were made after the merger. Stay with Pixune!

Before the Merger, Foe and Friend

Pixar was officially founded in 1986 while Disney with the name “Disney Brothers Cartoon Studio” was established in 1923. Disney was the absolute king of cartoons and then the animation world by producing splendid features like Snow white and the seven dwarfs, Cinderella, Allice in wonderland, and so on. However, the rise of Pixar as a game changer with 3D animation services and advanced rendering software made a serious warning to Disney’s empire. In the late 80s, Disney activated more revenue streams to excel at Pixar. They also cut costs by focusing on lucrative yet seemingly cheap movie ideas. Meanwhile, Pixar remained intact and kept its highest standards in filmmaking, plus developing in-house necessary software and devices to produce animations, but in 1991 Disney changed its hostile and competitive strategy into a more hospitable approach and made a historic deal with Pixar where $26 million was passed to the company With the unexpected success of Toy Story as the world’s first 3D feature film, Pixar literally surpassed all competitors. Disney’s decision-makers that already financially supported Pixar, were pondering the situation. On one hand, they were reluctant to lose the market and seriously concerned about increasing reductions in benefits. On the other hand, they wanted to keep traditions at Disney and were not willing to join forces with modern studios that had a loose distribution network. You guessed right, at last, they chose the market to revive their gigantic but weakened enterprise.

Read More: Why is Pixar so successful?

During Walt Disney and Pixar Merger

As you know Disney and Pixar merged on January 24th, 2006 when Bob Iger; CEO of Disney convinced Steve Jobs; principal shareholder of Pixar to accept the merger. Reading news here and there indicates that Jobs absolutely disagreed with the merger and believed that the organizational culture of Disney would kill creativity at Pixar. We do not know exactly what happened during business talks between Jobs and Iger, but Mr. Jobs finally admitted to the acquisition of Pixar by Disney, and then he received $7.4 billion of Disney’s shares. Recently Iger Told CNBC “I’m proud of a lot of the decisions that were made. Certainly for the acquisition of Pixar, because it was the first. And it put us on the path to achieving what I wanted to achieve, which is scale when it comes to storytelling. That was probably the best.” Indeed, It was a winning collaboration for Jobs despite losing Pixar, back in 1986, Jobs paid $5 million to buy Pixar from LucasFilm. At Disney except for Iger, others did not think about the possibility of any merger or consider it unnecessary. Disney was not only a studio but also had other franchises such as theme parks, TV channels, and merchandising toys, so stakeholders and managers were optimistically counted on those static revenues.

Executives and Employees; Distinctive Mindsets

When Iger was appointed as CEO of Disney, started re-evaluating and rethinking Disney’s brand position in the animation industry. He prepared a comprehensive report, implying that Disney steadily lost money between 1980 to 2000. This report had an essential role in illuminating threats to the future of Disney Studios. Employees of both companies also had different mindsets. For example, due to a top to bottom approach at Disney, employees must seek final confirmation from C-level managers some of whom had no or little knowledge about animation or even the Arts. Consequently, the satisfaction rate among Disney employees was low at the time of merging with Pixar. In contrast to Disney employees, people who were working for Pixar had a noticeable degree of autonomy when doing daily tasks. The culturally intensive environment of Pixar let employees share ideas freely with each other and they also got consulted when the company was about to make important decisions. Anyway, Disney and Pixar merger ushered in an era of massively distributed 3D animation.

After Disney Pixar Merger

When Disney acquired Pixar, John Lasseter who had a top position at Pixar promoted to chief creative officer and he did his best to make a balance between two diverse poles of animations by finding the gaps and filling them in. Pixar was suffering from major problems in the areas of distribution and promotion. While they put excessive energy and creativity to develop rendering software based on academic innovations to make perfect feature films, loose distribution networks and lack of access to strong promotional channels could decrease their success chance in near future. Later on, Lasseter corrected the policies of Disney which hinder the company’s progress. For Example, their first priority was the ability to generate money, so they repeatedly rejected brilliant ideas in favor of getting box office. This behavior resulted in a gradual reduction in benefits, though Disney could distribute its movies across the globe through its big network. They also looked at animation as a side business since Disney had other sources of revenue. Lasseter under Bob Iger’s leadership created an environment to foster creativity and agility. He also insisted on producing shorts by Disney After Pixar and Disney merger. “Pixar’s short films convinced Disney that if the company could produce memorable characters within five minutes, then the confidence was there in creating a feature film with those abilities in story and character development.” Lasseter told a local newspaper after the merger.

Features Released After the Merger

Making short animations was like working in a sandbox environment where employees could A/B test their ideas. This sandbox prepared animators, writers, and computer graphic engineers to present big titles in the next years. By joining forces, Pixar and Disney produced Toy Story3, Ratatouille, and wall-E to name a few of those great animations. These feature films met the expectations of both companies that were enjoying an incredible box office and receiving positive feedback from critics. After 16 years, almost any expert in the animation industry praises the merger and states that Disney and Pixar merger was a successful joining strategy for both companies and all active players in the ecosystem. Ed Catmull recently provided us with more details about incidents that occurred after the merger. “After Pixar’s 2006 merger with the Walt Disney Company, its CEO, Bob Iger, asked me, chief creative officer John Lasseter, and other Pixar senior managers to help him revive Disney Animation Studios. The success of our efforts prompted me to share my thinking on how to build a sustainable creative organization.” Anyway, Pixar found a reliable network to distribute its shorts and features and Disney could use advanced technologies for designing and rendering movies.

In this article on Pixune, we analyzed one of the most famous and successful mergers in the world of animation which led to the acquisition of Pixar by Disney. Traditionally, Disney had more conservative views toward filmmaking processes and since they had other businesses such as theme parks and TV channels, did not take animations so seriously which led to a constant reduction in their benefits. 

However, Disney had an omnipotent distribution and promotion network. Pixar was known for its innovation and academician opinion filmmaking before the merger, but it had poor performance in distributing its movies. As we explained the merger helped both companies to fill their gaps and experience a high growth rate.

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Disney Bets $60B Its Parks Will Power the Future

The $9.1 billion that the Josh D’Amaro-led unit reels in is an undeniable bright spot in Bob Iger’s empire. Now it’s being pushed to do even more.

By Caitlin Huston

Caitlin Huston

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On a visit to Anaheim in April, a crowd of parkgoers wearing Loki horns and Ratatouille chef hats cheered as a robotic Spider-Man swung through the air and slid upside down to the ground at Disney California Adventure’s Avengers Campus. Across the way, at Disneyland, the wait times for the sleek battle ride Rise of the Resistance at Star Wars: Galaxy’s Edge stretched to 90 minutes. Undeterred, fans in Jedi costumes clustered to wait beneath the looming cliffs of the fabricated Star Wars planet. 

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“What I’m proud of is that all of our stories continue to resonate as strongly today as they ever have before,” D’Amaro says. 

 The executive is tasked with harnessing that demand into an even bigger growth engine for the company, as he leads Disney’s $60 billion investment in its parks and experiences division over the next 10 years. At his disposal is a wealth of unexploited IP (at least in parks and cruise lines) and more than 1,000 acres of land available for development across the company’s six resorts.

On the way, the exec will have to contend with Comcast’s NBCUniversal, which is launching a highly anticipated Florida park in 2025, as well as workers pushing for increased wages and more unionization, and lingering consumer pain points over pricing. Under former CEO Bob Chapek, fans grew outraged over the introduction of a reservation system to manage crowds post-pandemic as well as paid add-ons to skip lines, which, depending on the option and day, could increase the cost of a ticket that starts at $96 per day in California by as much as $30 for Genie+, less for individual rides. 

The wild card for planning is the Disney succession race, where D’Amaro has seen his name floated as one of the leading contenders to take over from Bob Iger when the CEO’s contract expires at the end of 2026.

D’Amaro’s division, which also includes consumer products and totals about 180,000 employees, has driven profits for the company each quarter, reaching an all-time revenue record in the first quarter of 2024. Income for the segment reached $8.9 billion in 2023, up 23 percent from the previous year, and up from $6.8 billion in 2019. It’s a high-return-on-investment unit, and the Burbank-based company is leaning on it as it pushes for profitability in its Disney+-led streaming businesses.

Analysts and Disney leaders are bullish on the resilience of the business segment. “You look at the returns and where you’re going to place your bets in terms of capital to deliver value to shareholders – that’s the business to do it,” CEO Bob Iger said of the experiences division at a March 5 investors conference. 

“While they’re investing in direct-to-consumer, those theme parks have played a really important role in providing ongoing growth,” notes Bank of America analyst Jessica Reif Ehrlich. 

About 70 percent of the $60 billion investment is earmarked for new experiences in parks and cruise lines, and 30 percent for tech, infrastructure and maintenance. Several new attractions are expected to start opening in 2025.

Several franchise attractions for the area have been floated, with Iger reiterating during the April 3 shareholder meeting an intention to bring a lush, green Avatar land to California.

“We will have enough room to build the equivalent of another Disneyland Park. And so then you start to think about, ‘Well what can we do here?’ ” D’Amaro says. “We haven’t told anything, any stories on Wakanda. We haven’t told any stories on Frozen , although it’s a 10-year old franchise. You think about franchises like Coco and Encanto . We almost have an endless stream of stories that we can tell.”

In Florida, Disney plans to spend $17 billion, which includes a transformation of EPCOT, updating Splash Mountain with a Princess and the Frog theme (also underway in California) and other new rides. The company unveiled a plan to turn Dinoland U.S.A. at Animal Kingdom into a land called Tropical Americas, featuring stories from Encanto and Indiana Jones, with architecture and art inspired by the Mayan civilization.

There’s also a possible merging of the company’s digital and physical ambitions, D’Amaro says. In February, Disney inked a $1.5 billion pact with Fortnite studio Epic Games to create an online universe that features Disney IP.

“I think there’s almost an inevitability that these things will all start to merge,” D’Amaro says. “And that’s why we think it’s so important to be in now early with Epic and create this space and then let it grow.”

 After the company closed parks for about a year during the pandemic, and dealt with various COVID-19 restrictions and caps on capacity after they reopened, attendance has largely been on the rise in recent quarters, particularly at Disneyland and at Disney’s international parks, per earnings reports. (The company does not release exact numbers.) In Florida, Disney World has seen somewhat softer attendance in recent quarters, particularly in comparison to the big numbers it hit during its 50th anniversary celebration the previous year. It is also contending with higher costs related to the decision to close the Star Wars: Galactic Starcruiser hotel in May 2023, after the hotel, with its $1,200 price tag per person per day, failed to take off with consumers. 

At Disney’s California Adventure, the company already has several lands, in addition to Avengers Campus, including a Western-themed  Cars  Land, surrounded by reddish cliffs and a test track with cars zipping through hills, which also saw long lines on a recent visit, of both children and adults, as well as the bustling, colorful Pixar Pier, filled with rides related to properties such as  Inside Out  and sitting underneath a red, tubular  Incredibles -themed roller coaster.

When thinking about what content to turn into theme park attractions, or new lands, D’Amaro says his team works location by location in terms of what consumers want, with an eye to the different demographics of consumers Disney is trying to attract to that park. In the case of the Zootopia -themed land — featuring colorful habitats for each animal depicted in the movie and a police chase-inspired ride — the movie was, at one point, the top animated film in China, so the team wanted to bring it to Shanghai first, knowing that it would resonate with consumers there. 

While there’s no ideal timeline, per se, from movie release to attraction, D’Amaro’s team typically has an early look at coming film and TV projects in order to envision next steps.

“As Kevin Feige in Marvel Studios is thinking about his new storylines, my team from consumer products is in when they’re writing those new episodes,” D’Amaro says. “Imagineers on my team are in with Kevin and his team thinking about those characters and how they might come to life inside of our theme parks, and what an attraction might be. So if you’re looking at some of the recent releases that Kevin and the Marvel team have had, almost day-and-date with those releases, the characters find their way into the theme parks.”

The division tries to learn what consumers want via research teams talking to guests in the parks, as well as those who have visited previously, about what they’d like to see — this includes D’Amaro, who is often in the parks himself — and outside research on where the market may be headed. 

“We’re talking to our guests all the time, and so we have a really good sense of what they’re reacting to on screen and understand then how to translate that into stories inside of our theme parks, cruise lines and experiences around the world. But we [also] have a pretty good sense for when our content partners are creating something that is going to resonate with a specific guest,” D’Amaro says. 

The possibility of an economic downturn, causing a drawback in consumer discretionary spending, could pressure the $60 billion plan, notes Neil Begley, a senior analyst at Moody’s. And there’s the competition.

“Comcast has been investing a lot into their theme parks and getting a strong return on them. And so that kind of forces everybody to have to up their game,” Begley says. 

In hopes of gaining market share, Comcast’s NBCUniversal plans to build a new Epic Universe park in Orlando in 2025, featuring five lands, including popular attractions such as Super Nintendo World, The Wizarding World of Harry Potter and How to Train Your Dragon. Like Disney, Universal also reported reaching record results for its theme parks, with its unit achieving its highest adjusted earnings before interest, taxes, depreciation and amortization on record of $3.3 billion in 2023, up 25 percent from the preceding year.

In the quarter ended Sept 30, 2023, Universal’s five theme parks brought in revenue of $2.4 billion. While the comparison is inexact, given that Disney’s numbers also include its cruise lines and other experiences, in that same time period, Disney reported $7 billion in revenue for that segment.

Begley says Disney and Universal are “much closer competitively than they ever were,” thanks to the popularity of Universal’s newer attractions. 

“We’re always aware of what’s happening around us,” D’Amaro says. “But I think what’s kept Disney Experiences above and beyond anyone else’s [is that] we’re always looking forward. We’re always thinking about technology in a different way than the competitive set. We’re always thinking about how to immerse guests into stories in a completely different way.” 

A version of this story first appeared in the April 24 issue of The Hollywood Reporter magazine.  Click here to subscribe.

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