Disney and Pixar
Pixar and Disney have had ongoing disagreements since the production of Toy Story 2. Originally intended as a straight-to-video release (and thus not part of Pixar's five picture deal), the film was upgraded to a theatrical release during production. Pixar demanded that the film then be counted toward the five picture agreement, but Disney refused.
Pixar's first five feature films have collectively grossed more than $2.5 billion, equivalent to the highest per-film average gross in the industry. Though profitable for both, Pixar later complained that the arrangement was not equitable. Pixar was responsible for creation and production, while Disney handled marketing and distribution. Profits and production costs were split 50-50 but Disney exclusively owned all story and sequel rights and also collected a distribution fee. The lack of story and sequel rights were perhaps the most onerous to Pixar and set the stage for a contentious relationship. However, others recognize that Pixar got the best deal given that it lacked credibility as an animation studio, while Disney's own studios were recognized as being at the top of the industry.
The two companies attempted to reach a new agreement in early 2004. The new deal would be only for distribution, as Pixar intended to control production and own the resulting film properties themselves. As part of any distribution agreement with Disney, Pixar demanded control over films already in production under their old agreement, including The Incredibles and Cars. More importantly, Pixar wanted complete financial freedom; they wanted to finance their films on their own and collect 100 percent of the profits, paying Disney only the 10 to 15 percent distribution fee. This was unacceptable to Disney, but Pixar would not concede.
Bad blood between Jobs and Disney Chairman and CEO Michael Eisner made the negotiations more difficult than they otherwise might have been. They broke down completely in mid-2004, with Jobs declaring that Pixar was actively seeking partners other than Disney. However, Pixar did not enter in negotiations with other distributions, since other partners saw Pixar's terms as too demanding. After a lengthy hiatus, negotiations between the two companies resumed following the departure of Eisner from Disney in September of 2005.
In preparation for potential fallout between Pixar and Disney, Jobs announced in late 2004[1] that Pixar would no longer release movies at the Disney-dictated November timeframe, but during the more lucrative early summer months. This would also allow Pixar to release DVDs for their major releases during the Christmas shopping season. An added benefit of delaying Cars was to extend the timeframe remaining on the Pixar-Disney contract to see how things would play out between the two companies.
Pending the Disney acquisition of Pixar, the two companies created a distribution deal for Pixar's intended 2007 release of Ratatouille, ensuring that if the acquisition plan had fallen through for any reason, this one film would still be released through the Disney distribution channels. Unlike the earlier Disney/Pixar deal, Ratatouille would have adhered to Pixar's preferred ownership model, with Disney receiving only a fee for distribution. With the completion of Disney's acquisition of Pixar, this deal is no longer in force.
[edit] Disney's acquisition of Pixar
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Disney buys Pixar
On January 24, 2006, Disney announced that it had agreed to buy Pixar for approximately $7.4 billion in an all-stock deal. Following Pixar shareholder approval, the acquisition was completed May 5, 2006. The transaction catapults Jobs, who was the majority shareholder of Pixar with 50.1%, to Disney's largest individual shareholder with 7% and a new seat on its board of directors. Jobs' new Disney holdings outpace holdings belonging to ex-CEO Eisner, the previous top shareholder who still held 1.7%, and Disney Director Emeritus Roy E. Disney, whose criticisms of Eisner included the soured Pixar relationship and accelerated his ouster, who held almost 1% of the corporation's shares.
As part of the deal, Lasseter, Pixar Executive Vice President and co-founder, became Chief Creative Officer (Reporting to President and CEO Bob Iger and consulting with Disney Director Roy E. Disney) of both Disney and Pixar Animation Studios, as well as the Principal Creative Adviser at Walt Disney Imagineering, which designs and builds the company's theme parks. Catmull retained his position as President of Pixar, while also becoming President of Disney Studios, reporting to Robert Iger and Dick Cook, chairman of Walt Disney Studio Entertainment.
Lasseter and Catmull's oversight of both the Disney and Pixar studios did not mean that the two studios were merging, however. In fact, additional conditions were laid out as part of the deal to ensure that Pixar remains a separate entity, a concern that many analysts had about the Disney deal[2]
Some other points of interest concerning the deal:
* If Pixar had pulled out of the deal, they would have been required to pay Disney a penalty of US$210 million.
* John Lasseter has the authority to approve films for both Disney and Pixar studios, with Disney CEO Robert Iger and Disney Director Roy E. Disney carrying final approving authority.
* The deal required that Pixar's primary directors and creative executives must also join the combined company. This includes Andrew Stanton, Pete Docter, Brad Bird, Bob Peterson, Brenda Chapman, Lee Unkrich, and Gary Rydstrom.
* There will be a steering committee that will oversee animation for both Disney and Pixar studios, with a mission to maintain and spread the Pixar culture. This committee will consist of Catmull, Lasseter, Jobs, Iger, Cook, and Tom Staggs. They will meet at Pixar headquarters at least once every two months.
* Pixar HR policies will remain intact, including the lack of employment contracts.
* Ensures the Pixar name will continue, and that the studio will remain in its current Emeryville, California location with the "Pixar" sign.
* Branding of films made post-merger will be "Disney Pixar" (starting with Cars)
[edit] Criticisms of Pixar
Pixar is generally considered a model company, with excellent employee benefits and a great work environment. However, there is, as of late, one skeleton in the Pixar closet - stock options irregularities. Pixar, along with Apple, is under investigation by the SEC for backdating stock options[3]. According to Eisinger's September 6, 2006 press release, "Apple has owned up to options "irregularities," an ominous word that could presage more significant revelations, and said it may restate earnings. One of the grants under review was made to Mr. Jobs, a grant that was canceled and replaced with restricted stock grants well before Apple's revelation. Pixar's options grants, meanwhile, exhibit a pattern suggestive of backdating: Some of its top executives, but not Mr. Jobs, received grants priced at the stock's annual lows in four years between 1997 and 2003. Options usually give the right to buy stock at the grant date's trading price, so that's either a remarkable coincidence or evidence that the grant dates were picked after the fact." The investigation is underway as of October 30, 2006.
[edit] Executive leadership
Steve Jobs served as Pixar's top executive until May 2006, when the company was bought by Disney. Jobs then took a place on the Disney board of executives (also having more stocks in the company than any other). Today, Catmull serves as president of the combined Disney-Pixar animation studios, and Lasseter serves as the studios' Chief Creative Officer. Catmull reports to Iger as well as Walt Disney Studios chairman Cook. Lasseter, who has greenlight authority on all new films, also reports to Iger as well as consulting with Roy Disney.
. Credit to Jeff over there. 
