Disney and Pixar Merger

Disney and Pixar Merger

This Case Study discusses the case of successful acquisition of Pixar by Disney. It is concerning Corporate Level Strategy.

In 2006, The Walt Disney Company bought Pixar at a value of $7.4 billion, which was one of the biggest transactions made in the animation industry.

The Walt Disney Company was founded in 1923 by Walt and Roy Disney and is known as one of the largest media and entertainment corporations in the world. Pixar Animation Studios, on the other hand, began its journey in 1979 as Graphics Group, a part of the Computer Division of Lucasfilm.

It was acquired by Steve Jobs, the co-founder of Apple Computer, in 1986. Pixar is known as one of the most prominent leaders in the animation industry for its film studio based in Emeryville, California. The studio has earned 16 Academy Awards, 7 Golden Globes, and 11 Grammy Awards, along with many other awards and acknowledgments.

Disney had already been working with Pixar since 1991. It used to look after the distribution of Pixar’s animated films. However, in 2004, due to the differences with Disney’s then-CEO Michael Eisner, Pixar announced that it would partner with another distribution company. But things changed as Robert Iger took over from Eisner in 2005 and revitalized talks with Pixar.

The talk ended up in the successful acquisition of Pixar by Disney which made Steve Jobs, the ex-CEO of Apple Computer Inc., the major shareholder in Disney with an equity stake of around 7%. Not only this, but Jobs had also become a member of Disney’s Board of Directors.

As per Disney’s press release, 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.

Analysts said that the deal was more important to Disney than to Pixar. The deal gave Disney ownership of the world’s most renowned computer animation studio and its talent. The merger offered the necessary technology edge and direction to Disney. At that time, Disney was facing trouble as its animation films were failing one after another.

The deal provided Disney with a chance to get the necessary push for creativity. On several benefits that Disney would derive, nelson Gayton, Professor at Wharton School of Business said, I believe that the acquisition of Pixar was of utmost strategic importance to Disney, not only because of where Disney’s previous distribution relationship with Pixar seemed headed but also because of Pixar’s potential value to Disney’s ‘family entertainment’ brand and assets, like theme parks and television, that feed off this brand.

Overall, it was a highly successful deal for both companies as the duo together resulted in some of the highest-grossing films of all time. ‘Cars’ in 2006, ‘Ratatouille’ in 2007, ‘Wall-E’ in 2008, ‘Up’ in 2009, ‘Toy Story 3’ in 2010, ‘Cars 2’ in 2011, ‘Brave’ in 2012, ‘Monsters University’ in 2013, ‘The good Dinosaur’ in 2015, ‘Finding Dory’ in 2016 and ‘Cars 3’ in 2017 are the examples of films produced under the Disney-Pixar collaboration.

The basic reason behind the success of the merger was that it turned out to be a win-win deal for both parties. On one hand, the deal helped Disney to get access to the animating expertise of Pixar and produce more hit creations. On the other hand, Pixar got the advantage of using the vast network of Disney for capturing the untapped market. Disney, after all, is the world’s largest entertainment company. It owns television networks; film studios; theme parks and consumer products businesses; and all of these could help Pixar in gaining maximum profit.

Pixar, to preserve its culture, created a list of things that would not be changed as a result of the merger. For example, Pixar employees do not sign employment contracts. At Pixar, it is believed that We have never had to go back and look at it. Everything they’ve said they would do they have lived up to. Iger ensured that Pixar employees get mixed into the new environment.

Disney and Pixar, even after the merger, continued to work from their separate headquarters at Burbank and Emeryville respectively. Iger not only allowed the Pixar name to remain but also never changed employees’ email addresses. In other words, Disney allowed Pixar to maintain its own identity within the enlarged group. However, in turn, Iger involved Pixar employees in tasks that could increase efficiency of Disney.

Before the merger, Pixar used to release only one film a year. Not only this, but it also used to stay away from the idea of sequels as it believed that sequels destroy the creative process. However, after the merger, the work process at Pixar started changing and within a couple of years, Pixar’s executives started sanctioning the release of sequels and more than one film each year.