IM 551 IT Strategy & Management Prof. Heeseok Lee KAIST Strategy Consulting Group Group members:
1. Growing Up - Disney History & Core - PIXAR History & Core 2. Dating - PIXAR & Disney 3. Before Marriage 4. After Marriage : Change 5. Happily Ever After : Synergy
• Founded in 1923 by Walter Elias Disney, he and his brother Roy created the short film “ Alice’s Wonderland” • Focus on entertainment thru experiences ba sed on creativity and memorable storytellin g • Grown to be a vital competitor in the Broad casting & Entertainment industry • Unique brand • Entertainment giant • Separates business into five segments
Media Networks ESPN
ABC
Internet/Direct Marketing
Parks and Resorts The Walt Disney Studios Consumer Products Toys/ Apparel/Food / Books and Magazines
Disneyland Resort Walt Disney World Resort Tokyo Disney Resort Disneyland Resort Paris Hong Kong Disneyland
Video
• Films • Videos • Network TV • Cable TV • Hotels • Cruise lines
Toy Story
• Merchandise
Animated Film
• Brand licensing • NEW … Retail Stores
Publication
Retail Store
1. To foster an environment of creative innovation i n all aspects of the business 2. Global expansion, meaning to grow the business, p articularly internationally in the growing markets of China and India, while ensuring long-term, sus tainable growth. 3. A strong application of technology Disney must remain on a platform that can meet c hanging consumer demands in a well-priced and well-timed manner
Pixel
ar t
Pixar Inc.
Industry
CGI animation, motion pictures, software
Founded
February 3, 1986
Headquarters
Emeryville, California, U.S.
Products
RenderMan, Marionette, Ringmaster
Key people
Ed Catmull, Steve Jobs
Parent
The Walt Disney Company
Lucasfilm
Pixar Inc. history
the Graphics Group
Ed Catmull met John Lasseter John Lasseter went to LucasFilms c omputer division
Toy Story (1995) · A Bug's Life (1998) · Toy Story 2 (1999) Monsters, Inc. (2001) Finding Nemo (2003) The Incredibles (2004)
Steve Jobs bought the LucasFilm computer business then called Pixar
Cars (2006) Ratatouille (2007) WALL-E (2008) Up (2009) Toy Story 3 (2010) Cars 2 (2011) The Bear and the Bow (2011) · Newt (2012)
Pixar made a $26 million deal with Disney t o produce three computer-animated feature films
People Steve Jobs, Ed Catmull, John Lasseter
Technology Computer animation technology Software : RenderMan, Marionette, Ringmaster
Storytelling Pixar made short films to develop its computer-gene rated technology and storytelling creativity
Culture
Everyone must have the freedom to communicat e with anyone It must be safe for everyone to offer ideas art challenged technology, and then technology i nspired art
CAPS Disney and Pixar collaborated on the development of Computer Animated Production Systems in 1986
Feature film agreement Disney and Pixar signed a deal in 1991 to produce t he first full length 3D CG animated movie
Co-production agreement Pixar would produce for Disney at least 5 films, with production costs, shared equally between the two c ompanies.
Renegotiation for distrib ution-only deal Two companies broke down completely in mid-2004 , with Jobs declaring that Pixar was actively seeking partners other than Disney. Two companies resumed following the departure of Eisner from Disney in September 2005.
CoProduction Agreement Feature Film Agreement
CAPS Colla boration
ReNegotiation Try
CAPS
: Computer Animated Production Systems
Year
1986
Relationship
Collaboration of the development of CAPS
CAPS
Production system used to make 2D cel-based animation movies
Products
The Rescuers Down Under, The Lion King
Feature Film Agreement • In 1991, Disney & Pixar signed a deal to pr oduce the first full length 3D CG animated movie. • Disney : Fund the production cost in return for owning the movie rights and retaining co ntrol over over scheduling • Pixar : Earn a participation fee based on tot al revenue for the movie, hand had to fund t he overage if production costs exceeded a ce rtain pre-agreed budget • Toy Story : Earned $350M, but Pixar only ea rned $56M from 1995 to 1998
Co-Production Agreement • In 1997, Disney & Pixar signed a deal to pr oduce at least 5 original full-length animate d films for next 10 years • Disney : Bought 5% of Pixar paying $15M f or $1M of its shares with warrants to buy ad ditional shares at higher prices • Disney & Pixar : Share the production costs & revenue equally. Disney will fund all mar keting expenditures while Disney will receiv e distribution fee of 12.5% of the earnings. • Disney: Retains the exclusive distribution an d exploitation rights • Disney : $1.5B in operating income & $0.44 i n EPS increased
Re-Negotiation Try
Disney’s SWOT
Brand Power & Multiple Channels
Lack of 3D CG Technology
Experienced
Too much Dependency on Pixar
Well Established & Financials
Too Children Related Images
New Boom of Animation
Pixar’s New Move
Advent of New Media
Other Competitors
Easier to Distribute Contents
Piracy Issues
Pixar’s SWOT
Powerful 3D CG Technology
No Distribution Channel
Proven Capabilities
Focused Business on Animation
Creative & Talented People
Too much dependency on Disney
Big Boom of 3D CG Animation
Advent of New Competitors
New Deal from Other Company
Commoditization of 3D CG Technology
Increased Business Opportunity
High Risk, High Risk
Negotiation Breaks Down!
We are ending talks with Disney! (Jan, 20 04)
Disney board kicks out CEO Michael Eisn er over troubled Disney-Pixar relations Negotiations resumed in Sept. 2005 followi ng departure of Eisner
Full ownership of film Distribution channel Return the rights of Pixar film after five-year distribution
90 percent of a film’s lifetime revenue across all methods of distribution
Pixar animation has strategic im portance to Disney.
Animation revenue
Theme par k sales
Disney’s first full computer version a nimation “Chicken Little (2005)” fared o nly marginally well.
Broadcastin g sales
Acquisition
Warner Brother’s Str
ong Interest in Buying P ixar Strategic Importance
of Pixar to Disney Rickety Relationship
Between Pixar and Disn ey
VS
Alliance
Sequential Synergies Soft Resources (creative
manpower) Clash of Corporate Cul
ture (studio vs. corporate behemoth)
Terms of the Deal (Jan., 2006)
merges wi th
Price tag: US$7.4 billion in all-stock deal Steve Jobs: Disney’s largest individual shareholder with 7 perce
nt stock, new seat on board of directors John Lasseter (Pixar’s co-founder): Chief Creative Officer of P ixar and Walt Disney Animation Studios, Principal Creative Advis er at Wal Disney Imagineering Ed Catmull (Pixar president): President of Pixar and Walt Disn ey Animation Studios
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