Disney Pixar case study

1155008442 Farica 1155008384 Agnes

1155008485 Tony 1155008361 Briseis

Agenda

Case reviewCompany introduction

The acquisition

Case studyAdvantage

Disadvantage

DiscussionAbout the future

Case review

Walt Disney Animation Studios

• Founded in 1923, America• 1930s Mickey Mouse & Donald Duck

51 animated 2D films in total. Not strong in 3D animation.

Snow White and the Seven Dwarves Cinderella Alice in Wonderland

Peter Pan The Lion King Mulan Winnie the Pooh

• Previously ‘Lucas Film’ computer animation workshop

• Offered 3D technique in Star Wars (1977)

Pixar Animation Studios

1986 Steve Jobs acquired Lucas Film & renamed it Pixar Animation Studios

Cooperation(1991-2004)

• 1991 Disney and Pixar signed cooperative agreement for 5 movies

• 2004 Broke up

Jobs wanted 100% revenue, not the split cost (50-50)

Jobs became the largest shareholder in Disney

The acquisition (2006)

Walt Disney Co. acquire

Pixar

Jobs being the CEO of Pixar

$7.4 billion

AdvantagesOptimistic Perspective

How they benefit from each other

Optimistic PerspectiveHow they benefit from each other

Disney: Consolidate its dominant position in animation industry •The new digital era•The requirement of creativity•The rivalry among organizations in the animation industry

Source: FactSet: Walt Disney daily share price

Pixar ： Improve the capacity of profitability and then create more value.

•Strengthening the capability to release animated cartoons•Independent administration•Gain sufficient funds

Optimistic PerspectiveHow they benefit from each other

Steve Jobs ： Gain a much more influence in the multimedia field

His roughly 50% ownership of Pixar is worth over $3.5 billion, which would be more than enough to turn him into Disney's largest individual shareholder should he accept a stock swap.

Optimistic PerspectiveHow they benefit from each other

Apple ： The one who can release and share media content based on broad band network technique win in the competition.

• Bring out the new product---”Family recreation center”•Apple Media content can raising   competitiveness of their products like iMac and iPod.• Disney Disseminating its entertainment programs through Apple’s new media terminals and receiving technical support from Apple.

VS.

Optimistic PerspectiveHow they benefit from each other

Recent Development

• Share price: 38% $35.85• Market Value: $64,000,000,000 (Nov. 30th 2011)• Average returns to investment: 7.6%• Dividend: 1.1%• Robert A.Iger was intended to become the director of Apple.

Source: FactSet: Walt Disney’s monthly share price (2006-2011)

Optimistic PerspectiveHow they benefit from each other

Disadvantagespessimistic perspectiveWhat’s the risk?

Financial burden

• Estimated value of Pixar 6.5 billion – 7.4 billion

• End of fiscal year of 2005 ， Disney had net income of 2.5billion USD

Pixar stock deal worth

14%

86%

cashstock in exchange

1billionUSD cash

Stock worth -6.4 billion USD

Financial burden

Financial burden

• Changed original ownership structure of the company.

• The Stock-for-Stock often provoke risk 

Disney’s Culture Big company, big bureaucracy 150,000 employee in 2008 Hierarchical structure: distant upper management Micromanagement ->low morale, “brain drain” of

creative talent

Profitability, not quality, rules the day Executives are the ones making creative decisions -Generic Disney formula for animated films -straight- to –video “cheapquels “ -makes films on a tight schedule

Pixar: Free-spirited creativity

Emeryville location( the “anti-Hollywood”)Individually–decorated workspaces; huts

instead of cubiclesHawaiian shirts and scooters Policy against employment contracts

Pixar: Egalitarian Collaboration

Environment invites congregation Pixar university Themes of teamwork Bonus structure

Pixar: Perfectionism

• Pixar short films • no cheapquels (錄影帶首映，低成本低品質 )

• Pick 1 idea, good or bad and stick it until it works

The three basic principles

• Everyone must have the freedom to communicate with anyone

• It must be safe for everyone to offer ideas • Stay close to innovations happening in the

academic community

Risk of culture

• Disney soldier Pixar artist

Apple and Jobs

• May lost rational and independent business choice.

Right or Tight?

Discussion

Discussion

Q1:

For Disney, are there any other alternatives like strategic alliance better than acquiring Pixar?

• Internal Development

human&technology asset, 3D technology, development cost&fierce competition

• Strategic Alliance(not Pixar)

with other studios, build new relationship,

distribution channel factors

• Strategic Alliance(with Pixar) CAPS, feature film agreement,

co-production agreement

• M&A

revitalize animation department,

eliminate competition,

access to technology &human capital

Discussion

Discussion

Q2:

Before the death of Jobs, Disney, as entertainment industry, has brought Jobs enormous wealth.

Then, in your opinion, what about purchasing Disney for Apple in the future?

• It is a good choice for Apple. Apple has the ability and money to buy Disney.

Disney can bring Apple many media channels.

• It is not applicable: two different positions

no spare time to afford for Apple

It is an OPEN question!

Thank you!