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TVInews - 107 Disney buys Pixar for a solid $7.4 billion. Steve Jobs CEO of Pixar and Apple Computers to become Disney board member, John Lasseter will head Disney Animation, Robert A. Iger said in a joint statement with Roy Disney
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1. Feature Story / BURBANK - 4th week of 2006: Walt Disney Co. Chief Executive Robert A. Iger said in a joint statement with Steve Jobs, the CEO of both Pixar and Apple Computers, that Disney is buying longtime partner Pixar Animation Studios for $7.4 billion in stock in a deal that could restore Disney's clout in animation while vaulting Pixar and Apple CEO Steve Jobs into a powerful role at the media conglomerate.
As for John Lasseter, the Executive Vice President of Pixar, he will become chief creative officer of the animation studios and principal creative adviser at Walt Disney Imagineering, which designs and builds the company's theme parks. Lasseter began his career as a Disney animator and is the creative force behind Pixar's films. He will report directly to Iger.
Disney's purchase of the maker of the blockbuster films "Toy Story" and "Finding Nemo" would make Jobs Disney's largest shareholder. Jobs, who owns more than half of Pixar's shares and also heads Apple Computer, will become a Disney director.
"With this transaction, we welcome and embrace Pixar's unique culture, which for two decades, has fostered some of the most innovative and successful films in history," Disney Chief Executive Robert A. Iger said in a statement.
Disney has co-financed and distributed Pixar's animated films for the past 12 years, splitting the profits. That deal expires in June after Pixar delivers "Cars," and it had once appeared the companies would not renew it amid friction between Jobs and former Disney CEO Michael Eisner.
But the talks revived under Iger, who became Disney CEO last October. Disney, the theme park owner that also owns the ABC and ESPN TV networks, and Pixar had discussed a new relationship for months.
Part 02 /As is common in Hollywood, the ability to give a film the go-ahead comes with a caveat: Disney Chief Executive Bob Iger still would have final approval over anything set in motion by Lasseter, who would be chief creative officer at Pixar and Disney Animation, as well as at Walt Disney Imagineering
In announcing the deal this week, Iger and Pixar Chief Executive Steve Jobs said Lasseter and Pixar President Ed Catmull would take the reins of Disney Animation from its leader, David Stainton. Catmull would report to Iger and Disney Studios Chairman Dick Cook, and Lasseter would report solely to Iger.
The filing with the Securities and Exchange Commission said the acquisition would be jeopardized if Iger, Lasseter or Catmull quit or died. The same would hold true if the majority of Pixar's seven directors and creative executives, including "Finding Nemo" director Andrew Stanton, "Monsters, Inc." director Pete Docter and "The Incredibles" director Brad Bird, left the combined company.
For the time being, at least, it appears that Disney has locked up Lasseter's services for only five years. In an interview transcript filed with the SEC, Iger said Disney would pick up the animation guru's current 10-year contract, which expires in 2011.
It is unclear whether Lasseter, the only Pixar senior executive with an employment contract, might be able to negotiate a longer and more lucrative pact if the sale goes through as expected.
The director of the "Toy Story" hits, "A Bug's Life" and Disney-Pixar's upcoming summer release "Cars" already is rewarded handsomely, with a $2.5-million salary and 5% annual increases. He also enjoys a rich package of stock options and bonuses based on the domestic performance of his movies. When he inked his 10-year deal in March 2001, he received a $5-million signing bonus.
Lasseter and Catmull, who would remain at Pixar's headquarters in Emeryville, Calif., were in Burbank on Wednesday to meet with Disney's animation troops. While there, Lasseter said a version of "Toy Story 3" that Disney set in motion last year without Pixar's input would be scrapped, according to a person familiar with the matter. More than 100 Disney employees have been working on the project for months.
According to the filing, if the deal goes through, Lasseter would sit on a new committee that would oversee feature animation at Disney and Pixar. The committee, which would include Jobs, Catmull, Iger, Cook and Disney Chief Financial Officer Tom Staggs, would approve all film budgets, oversee Pixar compensation packages and help maintain the company's creative "culture." The group is expected to meet at least once a month in Emeryville.
Under Disney's ownership, the SEC documents indicate, the traditionally free-spirited Pixar would retain its compensation philosophies and practices, including its refusal to grant employment contracts (other than Lasseter's). Pixar also would continue to give employee stock options, bonus plans, medical benefits and other policies for at least five years.
Disney said the deal would lower earnings over the next two years, but that the deal would add to earnings by 2008.
"It's something Disney had to do," said Harold Vogel, a media analyst with Vogel Capital Management in New York. "It's good for both companies."
The deal received the blessing of Roy E. Disney, nephew of company founder Walt Disney and a former board member who once also oversaw animation at the company.
3. Editor's Note / Roy Disney and former board member Stanley Gold led a shareholder revolt against the company in part over what they saw as a deterioration of the relationship between Pixar and Disney under the reign of Eisner.
"Animation has always been the heart and soul of the Walt Disney Company and it is wonderful to see Bob Iger and the company embrace that heritage by bringing the outstanding animation talent of the Pixar team back into the fold," Roy Disney said in a statement.
With Pixar, Disney gains a company that has produced a long-running string of animated blockbusters. Iger wants to strengthen Disney's animated features, the hallmark of the company since its founding and a steady source of characters for Disney's theme parks and other units.
Pixar has served as Disney's de facto animation unit for a decade. Two Pixar movies, "Finding Nemo" and "The Incredibles," have won Academy Awards for best animated feature film.
Pixar films also have been a financial windfall for Disney, which receives 60 percent of the profits.
By contrast, Disney's own animation unit has struggled, producing some modest successes, such as 2002's "Lilo & Stitch," and many flops, including "Treasure Planet" and "Home on the Range."
Its first fully computer-animated effort, "Chicken Little," grossed more than $100 million domestically since its release last year and will likely be profitable. But that figure falls well short of the more than $200 million domestic gross of 2004's "The Incredibles."
Pixar also benefits from the deal by cashing in at the top of its game, before it produces the inevitable box office disappointment, Vogel said.
"Eventually, we know that after six huge hits, there would be a film that would come along that would be less good than what they had," Vogel said.
With Jobs, Disney also tightens its link with Apple Computer, the innovative technology company behind music and video iPods.
Jobs could help Iger push his plans to marry films, TV shows, video games and other content to computers, iPods, handheld game consoles and even cell phones.
Disney and Pixar had been discussing an extension of their distribution deal since early 2003. Last year, analysts said striking that agreement was Iger's top priority.
The talks stalled in 2004 after Pixar demanded that it own 100 percent of all future films and pay Disney a straight distribution fee, similar to the deal "Star Wars" creator George Lucas had with Twentieth Century Fox. Pixar also wanted ownership of all the films already produced as well as two that were remaining under the existing agreement at the time.


4. Related Stories /

As previously speculated, Disney's purchase of Pixar - to be completed this summer - will be an all-stock one worth about $7.4 billion. Though no layoffs have been announced, the purchase of Pixar is expected to have a major impact on the employees of Disney's existent animation division. Right now, however, only the top level is changing: Steve Jobs is joining Disney's board (and, as previously mentioned, will be one of the company's biggest shareholder), and Pixar's heads are sliding into the leadership positions of the newly-created Pixar and Disney animation studios.
The deal has been approved by the boards of both companies and needs only the vote of Pixar's shareholders to go through. And, Since Steve Jobs personally owns just over 50% of Pixar stock, it's safe to say that the Disney/Pact is a done deal.'
If it bails out on the deal, Pixar would be required to pay Disney a penalty of $210 million.
In the regulatory filing, Pixar sought to safeguard its independence as it joins the world's second-largest media conglomerate. The studio would continue to be called "Pixar" and the branding of its previous films and products "will not be altered." However, future films produced by Pixar would be branded Disney Pixar.
Perhaps most symbolically, the agreement guarantees Pixar a concession that costs nothing but means much to the people who work there.
Referring to the huge black-lettered logo that greets visitors as they approach the entrance to the studio's Bay Area compound, the agreement stipulates, "The Pixar sign at the gate shall not be altered."
The two companies will remain separate, with Pixar keeping its brand name and headquarters in Emeryville, near San Francisco. Maintaining Pixar's unique creative character was a priority in the talks, executives said.
"Most of the time that Bob and I have spent talking about this hasn't been about economics, it's been about preserving the Pixar culture because we all know that that's the thing that is going to determine the success here in the long run," Jobs said on a conference call with analysts.
Under the deal, Burbank-based Disney said it will issue 2.3 shares for each share of Pixar stock. At Tuesday's closing price of $25.99 for Disney, Pixar shareholders would get stock worth $59.78, a 4 percent premium over Pixar's closing price of $57.57. The deal was announced after the markets closed for the day. Pixar gained 2.5 percent to $59 in after-hours trading, while Disney fell 14 cents.

More Articles • Converging News 052006 / TeleCom BuyOuts, Spinoffs and Asset Seizure Boom

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