THE REALITY DISTORTION FIELD 14 page

They were both masters.” But Katzenberg went into the match with a saber, Jobs with a mere foil.

Pixar was on the verge of bankruptcy and needed a deal with Disney far more than Disney needed

a deal with Pixar. Plus, Disney could afford to finance the whole enterprise, and Pixar couldn’t.

The result was a deal, struck in May 1991, by which Disney would own the picture and its

characters outright, have creative control, and pay Pixar about 12.5% of the ticket revenues. It had

the option (but not the obligation) to do Pixar’s next two films and the right to make (with or

without Pixar) sequels using the characters in the film. Disney could also kill the film at any time

with only a small penalty.

The idea that John Lasseter pitched was called “Toy Story.” It sprang from a belief, which he

and Jobs shared, that products have an essence to them, a purpose for which they were made. If

the object were to have feelings, these would be based on its desire to fulfill its essence. The

purpose of a glass, for example, is to hold water; if it had

feelings, it would be happy when full and sad when empty. The essence of a computer screen is

to interface with a human. The essence of a unicycle is to be ridden in a circus. As for toys, their

purpose is to be played with by kids, and thus their existential fear is of being discarded or

upstaged by newer toys. So a buddy movie pairing an old favorite toy with a shiny new one would

have an essential drama to it, especially when the action revolved around the toys’ being separated

from their kid. The original treatment began, “Everyone has had the traumatic childhood

experience of losing a toy. Our story takes the toy’s point of view as he loses and tries to regain

the single thing most important to him: to be played with by children. This is the reason for the

existence of all toys. It is the emotional foundation of their existence.”

The two main characters went through many iterations before they ended up as Buzz Lightyear

and Woody. Every couple of weeks, Lasseter and his team would put together their latest set of

storyboards or footage to show the folks at Disney. In early screen tests, Pixar showed off its

amazing technology by, for example, producing a scene of Woody rustling around on top of a

dresser while the light rippling in through a Venetian blind cast shadows on his plaid shirt—an

effect that would have been almost impossible to render by hand. Impressing Disney with the plot,

however, was more difficult. At each presentation by Pixar, Katzenberg would tear much of it up,

barking out his detailed comments and notes. And a cadre of clipboard-carrying flunkies was on

hand to make sure every suggestion and whim uttered by Katzenberg received follow-up

treatment.

Katzenberg’s big push was to add more edginess to the two main characters. It may be an

animated movie called Toy Story, he said, but it should not be aimed only at children. “At first

there was no drama, no real story, and no conflict,” Katzenberg recalled. He suggested that

Lasseter watch some classic buddy movies, such as The Defiant Ones and 48 Hours, in which two

characters with different attitudes are thrown together and have to bond. In addition, he kept

pushing for what he called “edge,” and that meant making Woody’s character more jealous, mean,

and belligerent toward Buzz, the new interloper in the toy box. “It’s a toy-eat-toy world,” Woody

says at one point, after pushing Buzz out of a window.

After many rounds of notes from Katzenberg and other Disney execs, Woody had been stripped

of almost all charm. In one scene he throws the other toys off the bed and orders Slinky to come

help. When Slinky hesitates, Woody barks, “Who said your job was to think, spring-wiener?”

Slinky then asks a question that the Pixar team members would soon be asking themselves: “Why

is the cowboy so scary?” As Tom Hanks, who had signed up to be Woody’s voice, exclaimed at

one point, “This guy’s a real jerk!”

Cut!

Lasseter and his Pixar team had the first half of the movie ready to screen by November 1993, so

they brought it down to Burbank to show to Katzenberg and other Disney executives. Peter

Schneider, the head of feature animation, had never been enamored of Katzenberg’s idea of

having outsiders make animation for Disney, and he declared it a mess and ordered that

production be stopped. Katzenberg agreed. “Why is this so terrible?” he asked a colleague, Tom

Schumacher. “Because it’s not their movie anymore,” Schumacher bluntly replied. He later

explained, “They were following Katzenberg’s notes, and the project had been driven completely

off-track.”

Lasseter realized that Schumacher was right. “I sat there and I was pretty much embarrassed

with what was on the screen,” he recalled. “It was a story filled with the most unhappy, mean

characters that I’ve ever seen.” He asked Disney for the chance to retreat back to Pixar and rework

the script. Katzenberg was supportive.

Jobs did not insert himself much into the creative process. Given his proclivity to be in control,

especially on matters of taste and design, this self-restraint was a testament to his respect for

Lasseter and the other artists at Pixar—as well as for the ability of Lasseter and Catmull to keep

him at bay. He did, however, help manage the relationship with Disney, and the Pixar team

appreciated that. When Katzenberg and Schneider halted production on Toy Story, Jobs kept the

work going with his own personal funding. And he took their side against Katzenberg. “He had

Toy Story all messed up,” Jobs later said. “He wanted Woody to be a bad guy, and when he shut

us down we kind of kicked him out and said, ‘This isn’t what we want,’ and did it the way we

always wanted.”

The Pixar team came back with a new script three months later. The character of Woody

morphed from being a tyrannical boss of Andy’s other toys to being their wise leader. His jealousy

after the arrival of Buzz Lightyear was portrayed more sympathetically, and it was set to the

strains of a Randy Newman song, “Strange Things.” The scene in which Woody pushed Buzz out

of the window was rewritten to make Buzz’s fall the result of an accident triggered by a little trick

Woody initiated involving a Luxo lamp. Katzenberg & Co. approved the new approach, and by

February 1994 the film was back in production.

Katzenberg had been impressed with Jobs’s focus on keeping costs under control. “Even in the

early budgeting process, Steve was very eager to do it as efficiently as possible,” he said. But the

$17 million production budget was proving inadequate, especially given the major revision that

was necessary after Katzenberg had pushed them to make Woody too edgy. So Jobs demanded

more in order to complete the film right. “Listen, we made a deal,” Katzenberg told him. “We

gave you business control, and you agreed to do it for the amount we offered.” Jobs was furious.

He would call Katzenberg by phone or fly down to visit him and be, in Katzenberg’s words, “as

wildly relentless as only Steve can be.” Jobs insisted that Disney was liable for the cost overruns

because Katzenberg had so badly mangled the original concept that it required extra work to

restore things. “Wait a minute!” Katzenberg shot back. “We were helping you. You got the benefit

of our creative help, and now you want us to pay you for that.” It was a case of two control freaks

arguing about who was doing the other a favor.

Ed Catmull, more diplomatic than Jobs, was able to reach a compromise new budget. “I had a

much more positive view of Jeffrey than some of the folks working on the film did,” he said. But

the incident did prompt Jobs to start plotting about how to have more leverage with Disney in the

future. He did not like being a mere contractor; he liked being in control. That meant Pixar would

have to bring its own funding to projects in the future, and it would need a new deal with Disney.

As the film progressed, Jobs became ever more excited about

it. He had been talking to various companies, ranging from Hallmark to Microsoft, about

selling Pixar, but watching Woody and Buzz come to life made him realize that he might be on the

verge of transforming the movie industry. As scenes from the movie were finished, he watched

them repeatedly and had friends come by his home to share his new passion. “I can’t tell you the

number of versions of Toy Story I saw before it came out,” said Larry Ellison. “It eventually

became a form of torture. I’d go over there and see the latest 10% improvement. Steve is obsessed

with getting it right—both the story and the technology—and isn’t satisfied with anything less

than perfection.”

Jobs’s sense that his investments in Pixar might actually pay off was reinforced when Disney

invited him to attend a gala press preview of scenes from Pocahontas in January 1995 in a tent in

Manhattan’s Central Park. At the event, Disney CEO Michael Eisner announced that Pocahontas

would have its premiere in front of 100,000 people on eighty-foot-high screens on the Great Lawn

of Central Park. Jobs was a master showman who knew how to stage great premieres, but even he

was astounded by this plan. Buzz Lightyear’s great exhortation—“To infinity and beyond!”—

suddenly seemed worth heeding.

Jobs decided that the release of Toy Story that November would be the occasion to take Pixar

public. Even the usually eager investment bankers were dubious and said it couldn’t happen. Pixar

had spent five years hemorrhaging money. But Jobs was determined. “I was nervous and argued

that we should wait until after our second movie,” Lasseter recalled. “Steve overruled me and said

we needed the cash so we could put up half the money for our films and renegotiate the Disney

deal.”

To Infinity!

There were two premieres of Toy Story in November 1995. Disney organized one at El Capitan, a

grand old theater in Los Angeles, and built a fun house next door featuring the characters. Pixar

was given a handful of passes, but the evening and its celebrity guest list was very much a Disney

production; Jobs did not even attend. Instead, the next night he rented the Regency, a similar

theater in San Francisco, and held his own premiere. Instead of Tom Hanks and Steve Martin, the

guests were Silicon Valley celebrities, such as Larry Ellison and Andy Grove. This was clearly

Jobs’s show; he, not Lasseter, took the stage to introduce the movie.

The dueling premieres highlighted a festering issue: Was Toy Story a Disney or a Pixar movie?

Was Pixar merely an animation contractor helping Disney make movies? Or was Disney merely a

distributor and marketer helping Pixar roll out its movies? The answer was somewhere in

between. The question would be whether the egos involved, mainly those of Michael Eisner and

Steve Jobs, could get to such a partnership.

The stakes were raised when Toy Story opened to blockbuster commercial and critical success.

It recouped its cost the first weekend, with a domestic opening of $30 million, and it went on to

become the top-grossing film of the year, beating Batman Forever and Apollo 13, with $192

million in receipts domestically and a total of $362 million worldwide. According to the review

aggregator Rotten Tomatoes, 100% of the seventy-three critics surveyed gave it a positive review.

Time’s Richard Corliss called it “the year’s most inventive comedy,” David Ansen of Newsweek

pronounced it a “marvel,” and Janet Maslin of the New York Times recommended it both for

children and adults as “a work of incredible cleverness in the best two-tiered Disney tradition.”

The only rub for Jobs was that reviewers such as Maslin wrote of the “Disney tradition,” not the

emergence of Pixar. After reading her review, he decided he had to go on the offensive to raise

Pixar’s profile. When he and Lasseter went on the Charlie Rose show, Jobs emphasized that Toy

Story was a Pixar movie, and he even tried to highlight the historic nature of a new studio being

born. “Since Snow White was released, every major studio has tried to break into the animation

business, and until now Disney was the only studio that had ever made a feature animated film

that was a blockbuster,” he told Rose. “Pixar has now become the second studio to do that.”

Jobs made a point of casting Disney as merely the distributor of a Pixar film. “He kept saying,

‘We at Pixar are the real thing and you

Disney guys are shit,’” recalled Michael Eisner. “But we were the ones who made Toy Story

work. We helped shape the movie, and we pulled together all of our divisions, from our consumer

marketers to the Disney Channel, to make it a hit.” Jobs came to the conclusion that the

fundamental issue—Whose movie was it?—would have to be settled contractually rather than by a

war of words. “After Toy Story’s success,” he said, “I realized that we needed to cut a new deal

with Disney if we were ever to build a studio and not just be a work-for-hire place.” But in order

to sit down with Disney on an equal basis, Pixar had to bring money to the table. That required a

successful IPO.

The public offering occurred exactly one week after Toy Story’s opening. Jobs had gambled that

the movie would be successful, and the risky bet paid off, big-time. As with the Apple IPO, a

celebration was planned at the San Francisco office of the lead underwriter at 7 a.m., when the

shares were to go on sale. The plan had originally been for the first shares to be offered at about

$14, to be sure they would sell. Jobs insisted on pricing them at $22, which would give the

company more money if the offering was a success. It was, beyond even his wildest hopes. It

exceeded Netscape as the biggest IPO of the year. In the first half hour, the stock shot up to $45,

and trading had to be delayed because there were too many buy orders. It then went up even

further, to $49, before settling back to close the day at $39.

Earlier that year Jobs had been hoping to find a buyer for Pixar that would let him merely

recoup the $50 million he had put in. By the end of the day the shares he had retained—80% of

the company—were worth more than twenty times that, an astonishing $1.2 billion. That was

about five times what he’d made when Apple went public in 1980. But Jobs told John Markoff of

the New York Times that the money did not mean much to him. “There’s no yacht in my future,”

he said. “I’ve never done this for the money.”

The successful IPO meant that Pixar would no longer have to be dependent on Disney to

finance its movies. That was just the leverage Jobs wanted. “Because we could now fund half the

cost of our movies, I could demand half the profits,” he recalled. “But more important, I wanted

co-branding. These were to be Pixar as well as Disney movies.”

Jobs flew down to have lunch with Eisner, who was stunned at his audacity. They had a threepicture

deal, and Pixar had made only one. Each side had its own nuclear weapons. After an

acrimonious split with Eisner, Katzenberg had left Disney and become a cofounder, with Steven

Spielberg and David Geffen, of DreamWorks SKG. If Eisner didn’t agree to a new deal with

Pixar, Jobs said, then Pixar would go to another studio, such as Katzenberg’s, once the threepicture

deal was done. In Eisner’s hand was the threat that Disney could, if that happened, make

its own sequels to Toy Story, using Woody and Buzz and all of the characters that Lasseter had

created. “That would have been like molesting our children,” Jobs later recalled. “John started

crying when he considered that possibility.”

So they hammered out a new arrangement. Eisner agreed to let Pixar put up half the money for

future films and in return take half of the profits. “He didn’t think we could have many hits, so he

thought he was saving himself some money,” said Jobs. “Ultimately that was great for us, because

Pixar would have ten blockbusters in a row.” They also agreed on co-branding, though that took a

lot of haggling to define. “I took the position that it’s a Disney movie, but eventually I relented,”

Eisner recalled. “We start negotiating how big the letters in ‘Disney’ are going to be, how big is

‘Pixar’ going to be, just like four-year-olds.” But by the beginning of 1997 they had a deal, for

five films over the course of ten years, and even parted as friends, at least for the time being.

“Eisner was reasonable and fair to me then,” Jobs later said. “But eventually, over the course of a

decade, I came to the conclusion that he was a dark man.”

In a letter to Pixar shareholders, Jobs explained that winning the right to have equal branding

with Disney on all the movies, as well as advertising and toys, was the most important aspect of

the deal. “We want Pixar to grow into a brand that embodies the same level of trust as the Disney

brand,” he wrote. “But in order for Pixar to earn this trust, consumers must know that Pixar is

creating the films.” Jobs was known during his career for creating great products. But just as

significant was his ability to create great companies with valuable brands. And he created two of

the best of his era: Apple and Pixar.

Date: 2015-12-17; view: 597