How Steve Jobs turned PIXAR into a Billion-dollar empire?
How Steve Jobs changed the course of animation
When you think of Steve Jobs, Pixar Films isn’t one of the many accomplishments that often come to mind or even people know about. Let’s delve a bit deeper into how Jobs acquired Pixar from a niche spinoff company and made it to be one of the most reputed and valuable movie studios on the planet.
Following poor Mac sales and an internal feud with his business partner John Sculley, Jobs was coerced out of Apple in 1985. Being a tech nerd at heart, Jobs went ahead and found NeXT Computers, but had his eyes set on another company. He struck a deal with Star Wars creator George Lucas of LucasFilms for USD 5 million to buy Graphics Group which later became Pixar. He invested an additional USD 5 million into the company.
In its early days, Pixar was mostly a hardware company. Its flagship product was the Pixar Imaging Computer, with a USD 135,000 price tag it catered to the medical and graphics industry. Even though Disney bought a bunch of them, the computer sales were declining. Ultimately, Jobs decided to sell off Pixar's hardware division to Viacom Systems for USD 2 Million. He invested a lot of personal capital into Pixar to keep it afloat. He even contemplated selling Pixar up until 1994 to Hallmark Cards, Microsoft co-founder Paul Allen, and Oracle CEO and co-founder Larry Ellison to name a few contenders.
Meanwhile, Pixar was working on a first of its kind, full-length animated feature film, Toy Story. New York Times film critics review was probably the ray of hope that Jobs had been waiting for. They projected Toy Story to be a huge hit. And once Disney confirmed they would promote and distribute the movie for the 1995 Christmas season, he decided to give Pixar another chance. Toy Story premiered during the 1995 Holiday season. Movie was an instant hit and set the springboard for Pixar’s fame and success. Thanks to the deal with Disney, it made USD 360 million worldwide. Shortly after the release, Pixar went public at USD 22 per share.
Subsequent to Toy Story’s success, Pixar turned into a blockbuster machine, continuing to deliver one hit after another - Bug’s Life, Finding Nemo, Cars, etc. With every chartbuster, box office kept surpassing its own records.
Under the original Pixar-Disney agreement, the 2 companies split revenue earned from the movies. While Pixar handled the production, Disney managed the distribution, marketing, etc. However, Disney's CEO Michael Eisner had difficulty reaching a renewal agreement with Jobs in 2004 and Jobs announced Pixar would go on a hunt for a new partner. He even sent some feelers out to Fox and Warner Bros. In the meantime, Eisner left Disney in 2005 which paved the way for Jobs to resume negotiations. One of Jobs' demands was to switch Pixar films release schedule from winter to summer as it would allow Pixar movies to make more money at the theaters in the summer and later capitalize on DVD releases during the Holidays.
After years of producing successful movies for Disney, Pixar was finally acquired by the media giant for a whopping USD 7.4 billion in an all-stock deal. Steve became the largest Disney shareholder, holding about 7% of the company's shares valued at USD 3.9 billion and a seat on the board.
Why do most people ignore Pixar (in obvious comparison to Apple) when listing Jobs’ great achievements. I think it’s due to a few reasons, stemming from the public's general bewilderment about Jobs’ involvement with the animation studio.
⦁ For starters, Jobs invested in Pixar during his time outside of Apple. This period of Jobs’ life often times proves confusing. Supposedly, it appears like a decade-long stint where he hemorrhaged money on two outwardly failing ventures. Unbeknownst to failure, he turned them around to a billion-dollar empire.
⦁ Unlike at Apple, Jobs did not act as a hands-on micromanager at Pixar. While he played a huge role in negotiating deals for the studio, he took a back seat when it came to creating content. He simply watched a group of brilliant minds (from whom he learned a great deal) achieve greatness.
A visionary with limitless perseverance took a leap and bet into the animation venture. His tenacity and obstinacy to never quit and imaginative negotiation skills helped Jobs morph Pixar into a Billion dollar brand.
If we could find 15 positions that we really had confidence in, we’d be in 15 positions. We’ll never be in 100 positions because we’re never going to know 100 companies that well. I think the merits of a concentrated portfolio are: ‘You live by the sword, you die by the sword.’ If you’re right, you’re going to add value. If you’re going to add value, you’re going to have to look different than the market. That means either being concentrated, or, if you’re not concentrated in a number of issues, you’re concentrated in types of businesses or industries.
― Lou Simpson
Sources:
https://en.wikipedia.org/wiki/Pixar
https://www.businessinsider.com/steve-jobs-pixar-2011-10?IR=T
https://medium.com/mbreads/book-summary-23-to-pixar-and-beyond-c718262e3207
https://www.laughingplace.com/w/articles/2016/12/08/book-review-pixar-beyond-lawrence-levy/