You are on page 1of 2

Critically examine the events that happened during the partnership between Disney and Pixar.

In May 1991, Disney entered into agreement with Pixar for developing and producing three computer animated feature films. Disney agreed to market and distributes these movies. Pixar was to receive compensation based on the revenue obtained from distributing these films and related products. Disney was to get 87% of the distribution proceeds. This partnership enhanced marketing capabilities of Pixar. The first film under the partnership was Toy Story which was released in November 1995 which was a huge success and generated over US$ 360 million in worldwide revenues. After the release of Toy Story, Disney extended its partnership with Pixar to a co-production agreement in 1997, under which Pixar agreed to produce five original computer-animated feature films, in a span of ten years. Pixar would be responsible for production of the movies while Disney would be responsible for marketing, promotion, publicity, advertising and distribution of the films. A distribution fee of 12% was to be paid to Disney as agreed by both the companies. Pixar could not enter into another distribution agreement with a third party till the expiry of the contract. This agreement favored Disney more than Pixar. By the early 2000s, Disney ran into several problems. The company’s Internet initiatives failed to take off. The poor performance of Go.com had an adverse effect on Disney. Problems intensified with Dotcom crash in 2000. Disney’s hand-drawn animation movies started failing at the box-office and some of them lost large sums between 2000 and 2003 while Pixar accounted for about 45% of the US$ 1 billion operating income of Disney Movie Studio between same period. In 2001, Disney reported a net loss of US$ 158 million. The average share price fell to US$ 14 in 2002 as against US$ 40 in 2000. Disney’s major shareholders Roy Jr. and Gold stepped down from Disney’s board. In the late 1990s there is a tussle between the partners with the release of sequel to Toy Story which was in the five film co-agreement. Pixar was not happy sharing the profits and paying the distribution fee. Disney had failed to keep up with the digital revolution in the entertainment segment by not producing computer animation films quickly. Ultimately, in January 2004, Pixar announced that it was calling off the partnership deal with Disney. Disney announced the closure of its animation studio in Orlando, Florida. The company also announced that its future films would be computer-animated. Jobs, CEO of Apple Computer Inc would resume talks with Disney if Eisner stepped down as CEO of Disney. Eisner wrote to the Disney board stating that he would retire on September 30, 2006, after his contract expired, and would step down as CEO on September 30, 2005. Pixar announced that the release of Cars, the last in agreement, would be postponed to June 2006. Pixar was bound to Disney and could not make a film for other studios until the completion of Cars. Pixar was likely to lose another US$ 1 billion, if the agreement was not

. If the release was delayed a new CEO would take charge at Disney.revised as Disney held the rights to make the sequels of the movies made under the agreement. with whom Pixar could re-negotiate the deal.