Disney's Acquisition of Pixar

            
 
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Case Details:

Case Code : BSTR203
Case Length : 13 Pages
Pages Period : 1995-2005
Organization : Walt Disney Company, Pixar
Pub Date : 2006
Teaching Note :Not Available
Countries : US
Industry : Media and Entertainment

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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The Rationale

Analysts said this deal was more important to Disney than to Pixar. For Disney, the acquisition gave it ownership of the world's most famous computer animation studio and its talent, with whom it had teamed up to create block busters since the 1990s.

The timing was also perfect as its own animation films had failed one after another. Its first full computer animation film Chicken Little (released in November 2005) fared only marginally well. The deal would bring the technology company Apple (through Steve Jobs) closer to Disney, and Iger could further increase the digital content that was being offered through Apple. Analysts said that having Jobs on the Disney board would certainly give the company the necessary technology edge and direction. Further, with Lasseter, the creative genius behind Pixar's block busters, in charge of the new division, Disney would get the necessary push in creativity which it seemed to lack in recent times.

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The Road Ahead

On the several benefits 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."

While there were several possible synergies that could arise from the acquisition, there were also some potential trouble spots for Disney. The rise of Jobs to the Disney board as the single largest shareholder could become a major worry for Iger as Jobs was slightly unpredictable. The merger, in place of the partnership with Pixar, might make Iger second to the powerful and experienced Jobs. An industry analyst termed the move bold but predicted that Iger might leave Disney in a year, saying, "Iger just put a gun to his head." Analysts felt Iger had to be careful as he was still trying to create his own identity after being under the shadow of Eisner, who had been at the helm for more than twenty years...

Exhibits

Exhibit I: Steamboat Willie
Exhibit II: Disney's Recent Financials
Exhibit III: Awards Won by Pixar Films
Exhibit IV: Pixar's Recent Financials
Exhibit V: Details of Co-Production Agreement Between Disney and Pixar


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