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Friday, January 20, 2006

Disney's Pixar purchase: Done by next week?

The Orlando Sentinel says that Disney directors will meet on Monday to formally consider buying Pixar; the Wall Street Journal seems to think the board will convene this weekend to start mulling.

Two (non-financial) questions and observations about the deal, should it happen:

    - How incredible will the pressure be on Pixar to continue churning out an uninterrupted string of hits? The company has made six movies so far, all successful. But once it has combined with Disney's feature animation unit, can Pixar's geniuses (Ed Catmull and John Lasseter, primarily) increase the number of movies they're producing while maintaining a firm grasp on quality? In some ways, I see this situation as a trendy, successful corner boutique suddenly being handed the job of running Macy's.

    - How will future Disney animation releases be branded, given that they'll all likely be computer-generated? Will everything be Pixar? It's unthinkable that Disney would cease using the Disney brand on animated films - or is it? Which is more powerful today, in consumers' minds?

The Orlando Sentinel writes:

    By acquiring Pixar, Disney would immediately resume its perch at the top of an industry it pioneered with Snow White and the Seven Dwarfs in 1937 and dominated in the 1990s with such hits as Lion King and Beauty and the Beast.

    Disney faltered in recent years with such duds as Treasure Planet and Atlantis: The Lost Empire. Its latest release, Chicken Little, has been a success, but its box-office performance paled in comparison to Monsters Inc., Finding Nemo and other Pixar hits.

    For Jobs, selling Pixar could allow him to focus more on running Apple Computer Inc., which is enjoying huge popularity of its iPod products. It also would make him even more of a media power player.

In the Journal, Merissa Marr focuses on some of the challenges of the combination:

    ...[M]aintaining the culture that has made Pixar so successful would be a major challenge. Based in the San Francisco Bay area some distance from Hollywood, Pixar has produced six straight hits by combining strong stories and memorable characters with cutting-edge technology. Under a team of Silicon Valley and animation experts, Pixar invented its own software and nurtured a corporate culture where creativity flourished.

    The studio has worked at a leisurely pace, however, releasing one picture every 18 months. As part of Disney, that pace would most likely have to speed up. Rival DreamWorks Animation produces two films a year, a much more ambitious production slate. "The question here is whether Pixar's production process of high-quality, profitable films is scalable. This is uncertain," says Sanford Bernstein's Mr. Nathanson.

    Next up for Pixar is "Cars," the last of the movies that Disney will distribute under their current deal. Pixar hasn't officially announced its next movie but has been working on a project originally titled "Ratatouille," about a rat living in a Parisian restaurant.

The New York Times has a piece, too, by Laura Holson and John Markoff, that speculates on the possibility of layoffs. (Disney animators, I presume.) They write:

    The new animation division would be overseen by John Lasseter, Pixar's chief creative officer and a former Disney animator, who would work with animators at Pixar's headquarters in Emeryville, Calif., and at Disney in Burbank.

    It is not yet clear if there would be layoffs, although they would be likely. While Pixar under Mr. Lasseter has thrived, Disney's animation division has floundered, burdened by its past and its inability to adapt to an environment where pens and paper are being replaced by computers.

    Analysts say a Disney-Pixar combination would be successful only if Pixar took the reins of animation at Disney, because the cultures are vastly different. "John Lasseter's role in any new incarnation of Pixar will be crucial," wrote Katherine Styponias of Prudential Equity.

    Mr. Lasseter's involvement at Disney may end up contributing more to the merger's success than Mr. Jobs's, since it is likely that Mr. Jobs sees more of a future in Silicon Valley than in Hollywood. Mr. Jobs, said friends and associates, deeply believes the counterculture worldview that he articulated in Apple's "Think Different" advertising campaign.

And BusinessWeek asks, `Will Steve Jobs Be Disney's Big Cheese?


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