|
The Walt Disney/Pixar case
explores the benefits and perils of potential acquisition while looking at
two of the most famous media companies in the world. The central decision
of the case is whether Disney should acquire Pixar, a move that could be
quite lucrative but also very expensive.
The case begins with a
description of the current (as of 2005) relationship between Disney and
Pixar. Pixar was, in essence, a software company that used mathematical
models to create 3D computer-generated animated films. Pixar had partnered
with Disney, which was financing the production of Pixar films in exchange
for the rights to the movies. In the late 1990s and early 2000s,
Pixar produced some of the most
successful animated films in history, including Toy Story and Finding
Nemo.
The deal the two companies had
inked was set to expire in 2007 after the release of Cars.
Operating under CEO Steve Jobs,
Pixar was seeking to renegotiate the deal for the future, using Disney as
merely a distribution partner and shouldering the financing burdens itself.
This new structure would be more lucrative for Pixar but would cut Disney
out of the large profits that Pixar films generated. Disney understandably
wanted to maintain or expand the partnership, not shrink it, in order to
bring in more Pixar film profits.
In addition to Disney’s desire
for higher profits, the company had faced a long string of increasingly
unsuccessful movies. After the release of the Lion King in
1994, most of Disney’s animated film releases had been box office
disappointments. Pixar’s films had become an important growth driver for
Disney’s animated film business.
The acquisition was not without
its risks. While Pixar did have a long string of successful films under its
belt, it was facing competition. DreamWorks, with itsShrek franchise
(among others), was giving Pixar a run. Pixar was also expensive; in 2005,
it was trading with a
Price/Earnings ratio of 46, compared to DreamWorks’ 30 and Disney’s 17.
Further, Pixar had a unique corporate culture that was in many ways
incompatible with Disney’s.
If the two companies were to
merge, Disney would have to be careful when integrating Pixar into the
business without stymying Pixar’s creative energy, lest they inadvertently
drive the talented Pixar employees to other studios.
In the update to the case, it is
revealed that Disney did in fact acquire Pixar for $7.4 billion in stock.
The deal made Steve Jobs the largest single Disney shareholder and resulted
in many future successful Pixar films. Disney and Pixar have maintained
separate animation studios and have released films as distinct studios but
have collaborated on stories and distribution.
|
No comments:
Post a Comment