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INDEX

ð Pre-Acquisition Structure and Acquisition at a

glance

ð Company·s history, Strength, and Position

(Disney and Pixar)

ð Acquisition strategy and intended benefits

ð The Road Ahead


? E- ACQUISITION ST UCTU E

¢ Disney ?ixar were in a partnership agreement since 1991


    „  
„ 
 
 
 
 
   
   
   
   
  
 

 

¢ After the success of toy story, Disney- ?ixar had a co- production
agreement in 1997
ÿ Production costs were co-financed by ÿ ive original computer animated films
Pixar, mutual control over sequels to be co produced and distributed by
Disney, mutual control over sequels
ÿ wnership of 50%, co-branding, profit
sharing for picture, merchandise and ÿ wnership of 50%, distribution rights,
ancillary products co-branding, profit sharing for picture,
merchandise and ancillary products,
ÿ Pixar had the right to enter into other
dist agreements after contract ÿ ull recovery of distribution costs and
completion receive 12% distribution fees
Acquisition at a glance

 
£   
Co-ounded
By ; Steve Jobs in 1986

ounded by : Walt Disney in 1927 Know How : creative &technological


resources for computer
Know How: Unparalled generated
Portfolio in world animation films
class amily
Entertainment
Characters, Theme
Parks and other
franchisees
?OST ACQUISITION ST UCTU E
¢ Disney acquired ?ixar for approximately $7.4 billion
in an all-stock deal.

¢ The acquisition was completed May 5, 2006

¢ Steve Jobs, who was the majority shareholder of


?ixar with 50.1% became Disney's largest individual
shareholder with 7%

¢ Conditions were laid out as part of the deal to


ensure that ?ixar remained a separate entity,
?ixar name was to continue

¢ Branding of films made post-merger would be


"Disney-?ixar"
ACQUISITION ² WHY?
The four main reasons for making an acquisition
include:

¢ To acquire complementary products, in order to


broaden the line

¢ To acquire new markets or distribution channels

¢ To acquire additional mass, and benefit from


economies of scale

¢ To acquire technology, to complement or replace the


currently used one
OVE VIEW OF ANIMATION INDUST Y

¢ Industry estimates the size of global animation industry at $50


billion

¢ The global animation industry largely lies in Europe, the U.S.,


Japan and South Korea.

¢ The U.S. is the leader of the global animation industry.

¢ Upcoming markets are India and China, due to low labour rates
animation content is outsourced here

¢ Aiming at a larger target audience

¢ Till date the lords of the animation field are said to be Disney,
Sony, and IMAX only
SWOT ANALYSIS OF ANIMATION INDUST Y
£  
6 
ÿExcessive Research and Development
ÿ Availability of latest technology
lower costs ÿ High Investment

ÿ lobalization has given rise to a ÿ High Risk actor


Larger audience
ÿ Limited Range of Target Audience
roup


  | 

ÿ 
 

    ÿ Competition: lobal, National and
   
      Local


  

ÿ Highly Demanding in terms of Sales,
ÿ        Creativity and Innovation

ÿ     


   ÿ Employee Retention
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DISNEY ²
A HIST RY IN THE MAKIN
¢ ounded in 1923 with Alice¶s Wonderland.
¢ Rise of swald The Lucky Rabbit and Break-Up with
Mintz in 1927.
¢ Mortimer a.k.a. Mickey, birth of world famous Disney
Character which featured in first 2 unsuccessful films,
Planet Crazy and allopin· aucho.
¢ Steamboat Willie (November 18, 1928) with the
characters speaking for the first time - irst Step in
Mickey·s Popularity.
¢ Soon Donald Duck, Pluto, oofy arrived.
DISNEY·S STEPS T WARDS SUCCESS -AT
A LANCE

¢ In December 1937, Snow White( full Length animated


feature film) - ormula of Instant Success which resulted in
Walt being the successful Hollywood producer.

¢ After this, Employee demanding higher wages, World war


II and Political Uncertainties were the major concerns
resulted in deep debt.

¢ After raising US$ 3.5 million ,Animation (Cinderella), True


Life Adventures (Seal Island), Live Action (Treasure
Island)were the three categories in which Walt Disney
decided to march on.
RISE  THE DISNEYLAND
¢ In early 1940, Disneyland Started with the motive of
entertaining children and their parents.

¢ unds raised against Life Insurance and Employees


and Selling Vacation home.

¢ Contract with ABC worth US$ 500,000 in cash and


US$ 4.5 million in Loan.

¢ In July 1955, 1 million People visited the theme park


which underlined its huge success.

¢ Soon after, Disney lost its popularity after the death


of mighty Walt Disney in 1966.
DISNEY-REAININ THE P PULARITY
¢ Released The Lion King (June 1994) which won 2
academy awards and pocahontas.

¢ Acquiring ABC in 1995 and launched its Internet


division, Disney nline.

¢ Disney.go.com and Radio Disney were next in the


list.

¢ Acquiring ox amily Worldwide (W).

¢ Total Revenues Rose up to US$ 32 Billion with a


Net Income of US$ 2.5 Billion
AILURE  DISNEY

¢ After Tarzan(1999) , a spate of unsuccessful films like

Treasure Planet(Nov 2002) and Brother Bear(2003).

¢ Internet initiatives failed to take off

¢ Competition with Viacom·s MTVi and E·s NBCi,

go.com began losing money around US$ 1 Billion

which affected Disney·s other sites ABC and ESPN.

¢ In 2000 dotcom crashed and in 2001 disney. go.com.


M RE AND M RE L SS
¢ In 2001, A net loss of US$ 158 million and avg. share price of US$ 14
in 2002 as against US$40 in 2000.

ð Disney·s Animation ilm failures


|     "6#   
    $ 
antasia Jan,2000 58 45
Dinosaur May 2000 137 18
The Emperor·s new groove Dec 2000 89 36
Recess: School·s ut eb 2001 36 1
Atlantis: The Lost Empire June 2001 84 71
Treasure Planet Nov 2002 38 142
Piglet·s Big Movie Mar 2003 23 13
Brother Bear ct 2003 85 35

¢ Source: www.homepage.mac.com
P SITI N AT THE TIME  ACQUISITI N-
IRST T PARTNER THEN T C NQUER

¢ May 1991, agreement with Pixar to develop and


produce 3 animation films.

¢ Toy Story (Nov 1995) was a huge success and


generated US$ 360 million in worldwide revenue.

¢ In 1997, Co-production agreement stated that Pixar


will be responsible for production of the movies
whereas Disney would be responsible for marketing,
Promotion, Publicity and Advertising.
DISNEY-PIXAR M VIE RELEASES
„ |     "6     £  # 
   $  %  $ 
 !

A Bug·s Life 1998 163 363

Monster Inc. 2001 256 525

inding Nemo 2003 340 865

The Incredibles 2005 260 631

Cars 2006 - -

According to Analysts, It was a steal deal for


Disney, A perfect Strategic Acquisition.
Õ Õ
6|  &
¢   Animation Studios started with
John Lasseter & eorge Lucas
¢ Pixar was initially a computer graphics
division which was of film maker eorge
Lucas known as Lucas film limited.
¢ In 2 ', Steve Jobs purchased the
computer graphics division of Lucas ilm
Ltd. for $10 million and established it as
an independent company named   co-
founded with Dr. Edwin E. Catmull(
 |
(
¢ Initially, Pixar was a high-end computer
hardware company whose core product was the
Pixar Image Computer.
¢ ne of the buyers of Pixar Image Computers was
Disney Studios, which was using the device as
part of their secretive CAPS project.
¢ The Image Computer never sold well. In a bid to
drive sales of the system, Pixar employee John
Lasseter who had long been creating short
demonstration animations, such as Luxo Jr. to
show off the device's capabilities premiered his
creations at SIRAPH, the computer graphics
industry's largest convention, to great fanfare.
 |

¢ Pixar·s first production was Luxo Jr., a short film


in 1986 followed by Red·s Dream, Tin Toy and
Knick Knack.
¢ In 2 ), Pixar developed and started selling
visual effects developing software called
RenderMan.
¢ In 2 ), Pixar created advertisements for
Volkswagen and Pillsbury.
6| $| 6  &
¢ Pixar has produced eleven feature films,
beginning with Toy Story in 1995, all of which
have met with critical and commercial success.
¢ ive of the seven have won the award: p  
,
   ,  , , and
.  is also the first Pixar film to be
nominated for the Academy Award for Best
Picture. p  ,
   ,
 ,  and   manage to make
the top 50 list of highest-grossing films of all
time, with p   making the top 20 at
#20,  at #36,   at #44,

   at #46 and   at #48.
ACT RS LEADIN T WARDS
ACQUISITI N
ð Losses arising due to online ventures
ð Problems with management of Disney led
Pixar to step down and also led to conflicts
ð Problems due to Toy Story 2 after its
theatrical release.
ð Problem related to the sequel of Toy
Story 3.
ð Personal grievances between Jobs and
Eisner
|  "6|
CHANES ATER THE RELATI NSHIP
¢ In march 2005, the Disney Board elected Iger as
Company·s CE .

¢ Iger asked for Disney·s content to be distributed


over the internet through iTunes.

¢ In ct 2005 Iger and Jobs signed a deal to sell TV


shows through iTunes.

¢ Started with Desperate Housewives and lost.


L KIN BACK

¢ Jobs Started Renegotiating on the Disney-Pixar


agreement.

¢ n Jan 24,2006 Disney announced the


acquisition of Pixar.

¢ Catmull was named president of the new unit.

¢ Disney issued 2.3 shares for a single pixar share.


| | 
DISNEY WHY?
¢ The acquisition gave Disney ownership of the
world·s most famous computer animation studio
and its talent.

¢ The timing was also perfect for Disney as its own


animation films were failing.

¢ The deal brought the technology co. Apple closer


to Disney.
PIXAR ANLE
¢ or Pixar it was a good move to face competitors
like DreamWorks & 20th century fox.

¢ The deal gave Apple iTunes more video content to


offer.

¢ As of Jan 2006, Disney sold 1.5 million videos of


TV serials.
THE R AD AHEAD
P ST MERER SYNERIES

i ti
PI R

Distributi Tech l gy
DISNEY ( pple)
NEW EXECUTIVE LEADERSHIP
¢ Steve Jobs continues to serve as Pixar's top
executive. Single largest share holder and
member of board.
¢ Ed Catmull serves as president of the combined
Disney-Pixar animation studios
¢ John Lasseter serves as the studios' Chief
Creative fficer.
¢ Catmull reports to Walt Disney Company
President & CE Bob Iger as well as Walt
Disney Studios chairman Dick Cook
¢ Lasseter, who has greenlight authority, reports
solely to Iger.
P ST MERER  CUS
¢ Disney to release film as ´Disney - Pixarµ
¢ Creating the Conditions for a Successful Merger

¢ Creating transformational leadership

¢ Developing a shared vision and goals

¢ Team and organizational learning

¢ Creating Synergies for uture Success

¢ Making the alliance sustainable


CHALLENES AHEAD

¢Power Tussle between Steve


Jobs and Iger
¢Possible cultural Differences
¢Integrity of the Deal
¢Pixar has the upper hand
¢Pixar·s talent Retention by
Disney
WHAT LIES AHEAD«..
¢ With technology at their fingertips
¢ The merged entity can implement a distribution
blitz
¢ f High quality animation films with eye-
catching effects

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THANK Y U

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