Disney Buys Pixar for $7.4 Billion

The House of Mouse has decided that its partner in animation, Pixar, is worth $7.4 billion. Yesterday, the board of Disney heard “yes” in reply to its all-stock offer for Pixar from the latter’s board. Not a bad return for Steve Jobs, who bought Pixar from Lucasfilm back in 1986 for $10 million. And Disney secures the services of a partner whose products often eclipsed its own.

In a sense, the end of the 20th was the second golden age of animation. From Disney, the world enjoyed “The Little Mermaid,” “Beauty and the Beast,” “Aladdin,” and “The Lion King,” (a cartoon so beautiful and a story so ageless its been turned into a stage play). Pixar brought Woody and Buzz Lightyear to kids with “A Toy Story,” Nemo got his own film “Finding Nemo,” and Flik saved the day in “A Bug’s Life.” A confluence of breeding baby-boomers and computer technology brought a demand and supply together in a most astonishing way.

On the business side, Pixar had a distribution bottleneck that Disney was only too happy to solve for a price. After “A Toy Story,” the two companies signed a 10-year, 5-film deal. This arrangement served both pretty well, but when Pixar’s “Cars” comes out later this year, the game would be over. Disney was faced with a partnership in dissolution, and Pixar was no longer a piddling little computer company but a solid film studio.

One of the main stumbling blocks to a resolution to the problem was removed when Michael Eisner left Disney. Regardless of one’s opinion of him, there was no arguing that he and Mr. Jobs didn’t get along and really didn’t want to work together. Robert Iger, the new Disney top man, is a different kettle of fish, and Mr. Jobs was rather readily persuaded to take the deal and become the biggest shareholder at Disney.

The real excitement here is not what the bottom line for both companies would have been versus what it will be. Instead, having Steve Jobs on the board with a huge chunk of stock, Disney has just placed itself on the forefront of the computerization of the movie business. Digital files rather than film is just the thin end of the wedge. If he can be bothered to quit tinkering with the iPod for a bit, Mr. Jobs could well remake the cinema industry just as he has the audio game.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent.
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