CHAPTER THIRTY-THREE

PIXAR’S FRIENDS

. . . and Foes

A Bug’s Life

When Apple developed the iMac, Jobs drove with Jony Ive to show it to the folks at Pixar. He felt

that the machine had the spunky personality that would appeal to the creators of Buzz Lightyear

and Woody, and he loved the fact that Ive and John Lasseter shared the talent to connect art with

technology in a playful way.

Pixar was a haven where Jobs could escape the intensity in Cupertino. At Apple, the managers

were often excitable and exhausted, Jobs tended to be volatile, and people felt nervous about

where they stood with him. At Pixar, the storytellers and illustrators seemed more serene and

behaved more gently, both with each other and even with Jobs. In other words, the tone at each

place was set at the top, by Jobs at Apple, but by Lasseter at Pixar.

Jobs reveled in the earnest playfulness of moviemaking and got passionate about the algorithms

that enabled such magic as allowing computer-generated raindrops to refract sunbeams or blades

of grass to wave in the wind. But he was able to restrain himself from trying to control the creative

process. It was at Pixar that he learned to let other creative people flourish and take the lead.

Largely it was because he loved Lasseter, a gentle artist who, like Ive, brought out the best in Jobs.

Jobs’s main role at Pixar was deal making, in which his natural intensity was an asset. Soon

after the release of Toy Story, he clashed with Jeffrey Katzenberg, who had left Disney in the

summer of 1994 and joined with Steven Spielberg and David Geffen to start DreamWorks SKG.

Jobs believed that his Pixar team had told Katzenberg, while he was still at Disney, about its

proposed second movie, A Bug’s Life, and that he had then stolen the idea of an animated insect

movie when he decided to produce Antz at DreamWorks. “When Jeffrey was still running Disney

animation, we pitched him on A Bug’s Life,” Jobs said. “In sixty years of animation history,

nobody had thought of doing an animated movie about insects, until Lasseter. It was one of his

brilliant creative sparks. And Jeffrey left and went to DreamWorks and all of a sudden had this

idea for an animated movie about—Oh!—insects. And he pretended he’d never heard the pitch.

He lied. He lied through his teeth.”

Actually, not. The real story is a bit more interesting. Katzenberg never heard the Bug’s Life

pitch while at Disney. But after he left for DreamWorks, he stayed in touch with Lasseter,

occasionally pinging him with one of his typical “Hey buddy, how you doing just checking in”

quick phone calls. So when Lasseter happened to be at the Technicolor facility on the Universal

lot, where DreamWorks was also located, he called Katzenberg and dropped by with a couple of

colleagues. When Katzenberg asked what they were doing next, Lasseter told him. “We described

to him A Bug’s Life, with an ant as the main character, and told him the whole story of him

organizing the other ants and enlisting a group of circus performer insects to fight off the

grasshoppers,” Lasseter recalled. “I should have been wary. Jeffrey kept asking questions about

when it would be released.”

Lasseter began to get worried when, in early 1996, he heard rumors that DreamWorks might be

making its own computer-animated movie about ants. He called Katzenberg and asked him pointblank.

Katzenberg hemmed, hawed, and asked where Lasseter had heard that. Lasseter asked

again, and Katzenberg admitted it was true. “How could you?” yelled Lasseter, who very rarely

raised his voice.

“We had the idea long ago,” said Katzenberg, who explained that it had been pitched to him by

a development director at DreamWorks.

“I don’t believe you,” Lasseter replied.

Katzenberg conceded that he had sped up Antz as a way to counter his former colleagues at

Disney. DreamWorks’ first major picture was to be Prince of Egypt, which was scheduled to be

released for Thanksgiving 1998, and he was appalled when he heard that Disney was planning to

release Pixar’s A Bug’s Life that same weekend. So he had rushed Antz into production to force

Disney to change the release date of A Bug’s Life.

“Fuck you,” replied Lasseter, who did not normally use such language. He didn’t speak to

Katzenberg for another thirteen years.

Jobs was furious, and he was far more practiced than Lasseter at giving vent to his emotions.

He called Katzenberg and started yelling. Katzenberg made an offer: He would delay production

of Antz if Jobs and Disney would move A Bug’s Life so that it didn’t compete with Prince of

Egypt. “It was a blatant extortion attempt, and I didn’t go for it,” Jobs recalled. He told

Katzenberg there was nothing he could do to make Disney change the release date.

“Of course you can,” Katzenberg replied. “You can move mountains. You taught me how!” He

said that when Pixar was almost bankrupt, he had come to its rescue by giving it the deal to do Toy

Story. “I was the one guy there for you back then, and now you’re allowing them to use you to

screw me.” He suggested that if Jobs wanted to, he could simply slow down production on A Bug’

s Life without telling Disney. If he did, Katzenberg said, he would put Antz on hold. “Don’t even

go there,” Jobs replied.

Katzenberg had a valid gripe. It was clear that Eisner and Disney were using the Pixar movie to

get back at him for leaving Disney and starting a rival animation studio. “Prince of Egypt was the

first thing we were making, and they scheduled something for our announced release date just to

be hostile,” he said. “My view was like that of the Lion King, that if you stick your hand in my

cage and paw me, watch out.”

No one backed down, and the rival ant movies provoked a press frenzy. Disney tried to keep

Jobs quiet, on the theory that playing up the rivalry would serve to help Antz, but he was a man not

easily muzzled. “The bad guys rarely win,” he told the Los Angeles Times. In response,

DreamWorks’ savvy marketing maven, Terry Press, suggested, “Steve Jobs should take a pill.”

Antz was released at the beginning of October 1998. It was not a bad movie. Woody Allen

voiced the part of a neurotic ant living in a conformist society who yearns to express his

individualism. “This is the kind of Woody Allen comedy Woody Allen no longer makes,” Time

wrote. It grossed a respectable $91 million domestically and $172 million worldwide.

A Bug’s Life came out six weeks later, as planned. It had a more epic plot, which reversed

Aesop’s tale of “The Ant and the Grasshopper,” plus a greater technical virtuosity, which allowed

such startling details as the view of grass from a bug’s vantage point. Time was much more

effusive about it. “Its design work is so stellar—a wide-screen Eden of leaves and labyrinths

populated by dozens of ugly, buggy, cuddly cutups—that it makes the DreamWorks film seem, by

comparison, like radio,” wrote Richard Corliss. It did twice as well as Antz at the box office,

grossing $163 million domestically and $363 million worldwide. (It also beat Prince of Egypt.)

A few years later Katzenberg ran into Jobs and tried to smooth things over. He insisted that he

had never heard the pitch for A Bug’s Life while at Disney; if he had, his settlement with Disney

would have given him a share of the profits, so it’s not something he would lie about. Jobs

laughed, and accepted as much. “I asked you to move your release date, and you wouldn’t, so you

can’t be mad at me for protecting my child,” Katzenberg told him. He recalled that Jobs “got

really calm and Zen-like” and said he understood. But Jobs later said that he never really forgave

Katzenberg:

Our film toasted his at the box office. Did that feel good? No, it still felt awful, because people started

saying how everyone in Hollywood was doing insect movies. He took the brilliant originality away

from John, and that can never be replaced. That’s unconscionable, so I’ve never trusted him, even after

he tried to make amends. He came up to me after he was successful with Shrek and said, “I’m a changed

man, I’m finally at peace with myself,” and all this crap. And it was like, give me a break, Jeffrey.

For his part, Katzenberg was much more gracious. He considered Jobs one of the “true geniuses

in the world,” and he learned to respect him despite their volatile dealings.

More important than beating Antz was showing that Pixar was not a one-hit wonder. A Bug’s

Life grossed as much as Toy Story had, proving that the first success was not a fluke. “There’s a

classic thing in business, which is the second-product syndrome,” Jobs later said. It comes from

not understanding what made your first product so successful. “I lived through that at Apple. My

feeling was, if we got through our second film, we’d make it.”

Steve’s Own Movie

Toy Story 2, which came out in November 1999, was even bigger, with a $485 million gross

worldwide. Given that Pixar’s success was now assured, it was time to start building a showcase

headquarters. Jobs and the Pixar facilities team found an abandoned Del Monte fruit cannery in

Emeryville, an industrial neighborhood between Berkeley and Oakland, just across the Bay Bridge

from San Francisco. They tore it down, and Jobs commissioned Peter Bohlin, the architect of the

Apple stores, to design a new building for the sixteen-acre plot.

Jobs obsessed over every aspect of the new building, from the overall concept to the tiniest

detail regarding materials and construction. “Steve had this firm belief that the right kind of

building can do great things for a culture,” said Pixar’s president Ed Catmull. Jobs controlled the

creation of the building as if he were a director sweating each scene of a film. “The Pixar building

was Steve’s own movie,” Lasseter said.

Lasseter had originally wanted a traditional Hollywood studio, with separate buildings for

various projects and bungalows for development teams. But the Disney folks said they didn’t like

their new campus because the teams felt isolated, and Jobs agreed. In fact he decided they should

go to the other extreme: one huge building around a central atrium designed to encourage random

encounters.

Despite being a denizen of the digital world, or maybe because he knew all too well its isolating

potential, Jobs was a strong believer in face-to-face meetings. “There’s a temptation in our

networked age to think that ideas can be developed by email and iChat,” he said. “That’s crazy.

Creativity comes from spontaneous meetings, from random discussions. You run into someone,

you ask what they’re doing, you say ‘Wow,’ and soon you’re cooking up all sorts of ideas.”

So he had the Pixar building designed to promote encounters and unplanned collaborations. “If

a building doesn’t encourage that, you’ll lose a lot of innovation and the magic that’s sparked by

serendipity,” he said. “So we designed the building to make people get out of their offices and

mingle in the central atrium with people they might not otherwise see.” The front doors and main

stairs and corridors all led to the atrium, the café and the mailboxes were there, the conference

rooms had windows that looked out onto it, and the six-hundred-seat theater and two smaller

screening rooms all spilled into it. “Steve’s theory worked from day one,” Lasseter recalled. “I

kept running into people I hadn’t seen for months. I’ve never seen a building that promoted

collaboration and creativity as well as this one.”

Jobs even went so far as to decree that there be only two huge bathrooms in the building, one

for each gender, connected to the atrium. “He felt that very, very strongly,” recalled Pam Kerwin,

Pixar’s general manager. “Some of us felt that was going too far. One pregnant woman said she

shouldn’t be forced to walk for ten minutes just to go to the bathroom, and that led to a big fight.”

It was one of the few times that Lasseter disagreed with Jobs. They reached a compromise: there

would be two sets of bathrooms on either side of the atrium on both of the two floors.

Because the building’s steel beams were going to be visible, Jobs pored over samples from

manufacturers across the country to see which had the best color and texture. He chose a mill in

Arkansas, told it to blast the steel to a pure color, and made sure the truckers used caution not to

nick any of it. He also insisted that all the beams be bolted together, not welded. “We sandblasted

the steel and clear-coated it, so you can actually see what it’s like,” he recalled. “When the

steelworkers were putting up the beams, they would bring their families on the weekend to show

them.”

The wackiest piece of serendipity was “The Love Lounge.” One of the animators found a small

door on the back wall when he moved into his office. It opened to a low corridor that you could

crawl through to a room clad in sheet metal that provided access to the air-conditioning valves. He

and his colleagues commandeered the secret room, festooned it with Christmas lights and lava

lamps, and furnished it with benches upholstered in animal prints, tasseled pillows, a fold-up

cocktail table, liquor bottles, bar equipment, and napkins that read “The Love Lounge.” A video

camera installed in the corridor allowed occupants to monitor who might be approaching.

Lasseter and Jobs brought important visitors there and had them sign the wall. The signatures

include Michael Eisner, Roy Disney, Tim Allen, and Randy Newman. Jobs loved it, but since he

wasn’t a drinker he sometimes referred to it as the Meditation Room. It reminded him, he said, of

the one that he and Daniel Kottke had at Reed, but without the acid.

The Divorce

In testimony before a Senate committee in February 2002, Michael Eisner blasted the ads that Jobs

had created for Apple’s iTunes. “There are computer companies that have full-page ads and

billboards that say: Rip, mix, burn,” he declared. “In other words, they can create a theft and

distribute it to all their friends if they buy this particular computer.”

This was not a smart comment. It misunderstood the meaning of “rip” and assumed it involved

ripping someone off, rather than importing files from a CD to a computer. More significantly, it

truly pissed off Jobs, as Eisner should have known. That too was not smart. Pixar had recently

released the fourth movie in its Disney deal, Monsters, Inc., which turned out to be the most

successful of them all, with $525 million in worldwide gross. Disney’s Pixar deal was again

coming up for renewal, and Eisner had not made it easier by publicly poking a stick at his partner’

s eye. Jobs was so incredulous he called a Disney executive to vent: “Do you know what Michael

just did to me?”

Eisner and Jobs came from different backgrounds and opposite coasts, but they were similar in

being strong-willed and without much inclination to find compromises. They both had a passion

for making good products, which often meant micromanaging details and not sugarcoating their

criticisms. Watching Eisner take repeated rides on the Wildlife Express train through Disney

World’s Animal Kingdom and coming up with smart ways to improve the customer experience

was like watching Jobs play with the interface of an iPod and find ways it could be simplified.

Watching them manage people was a less edifying experience.

Both were better at pushing people than being pushed, which led to an unpleasant atmosphere

when they started trying to do it to each other. In a disagreement, they tended to assert that the

other party was lying. In addition, neither Eisner nor Jobs seemed to believe that he could learn

anything from the other; nor would it have occurred to either even to fake a bit of deference by

pretending to have anything to learn. Jobs put the onus on Eisner:

The worst thing, to my mind, was that Pixar had successfully reinvented Disney’s business, turning out

great films one after the other while Disney turned out flop after flop. You would think the CEO of

Disney would be curious how Pixar was doing that. But during the twenty-year relationship, he visited

Pixar for a total of about two and a half hours, only to give little congratulatory speeches. He was never

curious. I was amazed. Curiosity is very important.

That was overly harsh. Eisner had been up to Pixar a bit more than that, including visits when Jobs

wasn’t with him. But it was true that he showed little curiosity about the artistry or technology at

the studio. Jobs likewise didn’t spend much time trying to learn from Disney’s management.

The open sniping between Jobs and Eisner began in the summer of 2002. Jobs had always

admired the creative spirit of the great Walt Disney, especially because he had nurtured a

company to last for generations. He viewed Walt’s nephew Roy as an embodiment of this historic

legacy and spirit. Roy was still on the Disney board, despite his own growing estrangement from

Eisner, and Jobs let him know that he would not renew the Pixar-Disney deal as long as Eisner

was still the CEO.

Roy Disney and Stanley Gold, his close associate on the Disney board, began warning other

directors about the Pixar problem. That prompted Eisner to send the board an intemperate email in

late August 2002. He was confident that Pixar would eventually renew its deal, he said, partly

because Disney had rights to the Pixar movies and characters that had been made thus far. Plus, he

said, Disney would be in a better negotiating position in a year, after Pixar finished Finding Nemo.

“Yesterday we saw for the second time the new Pixar movie, Finding Nemo, that comes out next

May,” he wrote. “This will be a reality check for those guys. It’s okay, but nowhere near as good

as their previous films. Of course they think it is great.” There were two major problems with this

email: It leaked to the Los Angeles Times, provoking Jobs to go ballistic, and Eisner’s assessment

of the movie was wrong, very wrong.

Finding Nemo became Pixar’s (and Disney’s) biggest hit thus far. It easily beat out The Lion

King to become, for the time being, the most successful animated movie in history. It grossed

$340 million domestically and $868 million worldwide. Until 2010 it was also the most popular

DVD of all time, with forty million copies sold, and spawned some of the most popular rides at

Disney theme parks. In addition, it was a richly textured, subtle, and deeply beautiful artistic

achievement that won the Oscar for best animated feature. “I liked the film because it was about

taking risks and learning to let those you love take risks,” Jobs said. Its success added $183

million to Pixar’s cash reserves, giving it a hefty war chest of $521 million for the final showdown

with Disney.

Shortly after Finding Nemo was finished, Jobs made Eisner an offer that was so one-sided it

was clearly meant to be rejected. Instead of a fifty-fifty split on revenues, as in the existing deal,

Jobs proposed a new arrangement in which Pixar would own outright the films it made and the

characters in them, and it would merely pay Disney a 7.5% fee to distribute the movies. Plus, the

last two films under the existing deal—The Incredibles and Cars were the ones in the works—

would shift to the new distribution deal.

Eisner, however, held one powerful trump card. Even if Pixar didn’t renew, Disney had the

right to make sequels of Toy Story and the other movies that Pixar had made, and it owned all the

characters, from Woody to Nemo, just as it owned Mickey Mouse and Donald Duck. Eisner was

already planning—or threatening—to have Disney’s own animation studio do a Toy Story 3,

which Pixar had declined to do. “When you see what that company did putting out Cinderella II,

you shudder at what would have happened,” Jobs said.

Eisner was able to force Roy Disney off the board in November 2003, but that didn’t end the

turmoil. Disney released a scathing open letter. “The company has lost its focus, its creative

energy, and its heritage,” he wrote. His litany of Eisner’s alleged failings included not building a

constructive relationship with Pixar. By this point Jobs had decided that he no longer wanted to

work with Eisner. So in January 2004 he publicly announced that he was cutting off negotiations

with Disney.

Jobs was usually disciplined in not making public the strong opinions that he shared with

friends around his Palo Alto kitchen table. But this time he did not hold back. In a conference call

with reporters, he said that while Pixar was producing hits, Disney animation was making

“embarrassing duds.” He scoffed at Eisner’s notion that Disney made any creative contribution to

the Pixar films: “The truth is there has been little creative collaboration with Disney for years.

You can compare the creative quality of our films with the creative quality of Disney’s last three

films and judge each company’s creative ability yourselves.” In addition to building a better

creative team, Jobs had pulled off the remarkable feat of building a brand that was now as big a

draw for moviegoers as Disney’s. “We think the Pixar brand is now the most powerful and trusted

brand in animation.” When Jobs called to give him a heads-up, Roy Disney replied, “When the

wicked witch is dead, we’ll be together again.”

John Lasseter was aghast at the prospect of breaking up with Disney. “I was worried about my

children, what they would do with the characters we’d created,” he recalled. “It was like a dagger

to my heart.” When he told his top staff in the Pixar conference room, he started crying, and he did

so again when he addressed the eight hundred or so Pixar employees gathered in the studio’s

atrium. “It’s like you have these dear children and you have to give them up to be adopted by

convicted child molesters.” Jobs came to the atrium stage next and tried to calm things down. He

explained why it might be necessary to break with Disney, and he assured them that Pixar as an

institution had to keep looking forward to be successful. “He has the absolute ability to make you

believe,” said Oren Jacob, a longtime technologist at the studio. “Suddenly, we all had the

confidence that, whatever happened, Pixar would flourish.”

Bob Iger, Disney’s chief operating officer, had to step in and do damage control. He was as

sensible and solid as those around him were volatile. His background was in television; he had

been president of the ABC Network, which was acquired in 1996 by Disney. His reputation was as

a corporate suit, and he excelled at deft management, but he also had a sharp eye for talent, a good

-humored ability to understand people, and a quiet flair that he was secure enough to keep muted.

Unlike Eisner and Jobs, he had a disciplined calm, which helped him deal with large egos. “Steve

did some grandstanding by announcing that he was ending talks with us,” Iger later recalled. “We

went into crisis mode, and I developed some talking points to settle things down.”

Eisner had presided over ten great years at Disney, when Frank Wells served as his president.

Wells freed Eisner from many management duties so he could make his suggestions, usually

valuable and often brilliant, on ways to improve each movie project, theme park ride, television

pilot, and countless other products. But after Wells was killed in a helicopter crash in 1994, Eisner

never found the right manager. Katzenberg had demanded Wells’s job, which is why Eisner

ousted him. Michael Ovitz became president in 1995; it was not a pretty sight, and he was gone in

less than two years. Jobs later offered his assessment:

For his first ten years as CEO, Eisner did a really good job. For the last ten years, he really did a bad

job. And the change came when Frank Wells died. Eisner is a really good creative guy. He gives really

good notes. So when Frank was running operations, Eisner could be like a bumblebee going from

project to project trying to make them better. But when Eisner had to run things, he was a terrible

manager. Nobody liked working for him. They felt they had no authority. He had this strategic planning

group that was like the Gestapo, in that you couldn’t spend any money, not even a dime, without them

approving it. Even though I broke with him, I had to respect his achievements in the first ten years. And

there was a part of him I actually liked. He’s a fun guy to be around at times—smart, witty. But he had a

dark side to him. His ego got the better of him. Eisner was reasonable and fair to me at first, but

eventually, over the course of dealing with him for a decade, I came to see a dark side to him.

Eisner’s biggest problem in 2004 was that he did not fully fathom how messed up his animation

division was. Its two most recent movies, Treasure Planet and Brother Bear, did no honor to the

Disney legacy, or to its balance sheets. Hit animation movies were the lifeblood of the company;

they spawned theme park rides, toys, and television shows. Toy Story had led to a movie sequel, a

Disney on Ice show, a Toy Story Musical performed on Disney cruise ships, a direct-to-video film

featuring Buzz Lightyear, a computer storybook, two video games, a dozen action toys that sold

twenty-five million units, a clothing line, and nine different attractions at Disney theme parks.

This was not the case for Treasure Planet.

“Michael didn’t understand that Disney’s problems in animation were as acute as they were,”

Iger later explained. “That manifested itself in the way he dealt with Pixar. He never felt he

needed Pixar as much as he really did.” In addition, Eisner loved to negotiate and hated to

compromise, which was not always the best combination when dealing with Jobs, who was the

same way. “Every negotiation needs to be resolved by compromises,” Iger said. “Neither one of

them is a master of compromise.”

The impasse was ended on a Saturday night in March 2005, when Iger got a phone call from

former senator George Mitchell and other Disney board members. They told him that, starting in a

few months, he would replace Eisner as Disney’s CEO. When Iger got up the next morning, he

called his daughters and then Steve Jobs and John Lasseter. He said, very simply and clearly, that

he valued Pixar and wanted to make a deal. Jobs was thrilled. He liked Iger and even marveled at

a small connection they had: his former girlfriend Jennifer Egan and Iger’s wife, Willow Bay, had

been roommates at Penn.

That summer, before Iger officially took over, he and Jobs got to have a trial run at making a

deal. Apple was coming out with an iPod that would play video as well as music. It needed

television shows to sell, and Jobs did not want to be too public in negotiating for them because, as

usual, he wanted the product to be secret until he unveiled it onstage. Iger, who had multiple iPods

and used them throughout the day, from his 5 a.m. workouts to late at night, had already been

envisioning what it could do for television shows. So he immediately offered ABC’s most popular

shows, Desperate Housewives and Lost. “We negotiated that deal in a week, and it was

complicated,” Iger said. “It was important because Steve got to see how I worked, and because it

showed everyone that Disney could in fact work with Steve.”

For the announcement of the video iPod, Jobs rented a theater in San Jose, and he invited Iger

to be his surprise guest onstage. “I had never been to one of his announcements, so I had no idea

what a big deal it was,” Iger recalled. “It was a real breakthrough for our relationship. He saw I

was pro-technology and willing to take risks.” Jobs did his usual virtuoso performance, running

through all the features of the new iPod, how it was “one of the best things we’ve ever done,” and

how the iTunes Store would now be selling music videos and short films. Then, as was his habit,

he ended with “And yes, there is one more thing:” The iPod would be selling TV shows. There

was huge applause. He mentioned that the two most popular shows were on ABC. “And who

owns ABC? Disney! I know these guys,” he exulted.

When Iger then came onstage, he looked as relaxed and as comfortable as Jobs. “One of the

things that Steve and I are incredibly excited about is the intersection between great content and

great technology,” he said. “It’s great to be here to announce an extension of our relation with

Apple,” he added. Then, after the proper pause, he said, “Not with Pixar, but with Apple.”

But it was clear from their warm embrace that a new Pixar-Disney deal was once again

possible. “It signaled my way of operating, which was ‘Make love not war,’” Iger recalled. “We

had been at war with Roy Disney, Comcast, Apple, and Pixar. I wanted to fix all that, Pixar most

of all.”

Iger had just come back from opening the new Disneyland in Hong Kong, with Eisner at his

side in his last big act as CEO. The ceremonies included the usual Disney parade down Main

Street. Iger realized that the only characters in the parade that had been created in the past decade

were Pixar’s. “A lightbulb went off,” he recalled. “I’m standing next to Michael, but I kept it

completely to myself, because it was such an indictment of his stewardship of animation during

that period. After ten years of The Lion King, Beauty and the Beast, and Aladdin, there were then

ten years of nothing.”

Iger went back to Burbank and had some financial analysis done. He discovered that they had

actually lost money on animation in the past decade and had produced little that helped ancillary

products. At his first meeting as the new CEO, he presented the analysis to the board, whose

members expressed some anger that they had never been told this. “As animation goes, so goes

our company,” he told the board. “A hit animated film is a big wave, and the ripples go down to

every part of our business—from characters in a parade, to music, to parks, to video games, TV,

Internet, consumer products. If I don’t have wave makers, the company is not going to succeed.”

He presented them with some choices. They could stick with the current animation management,

which he didn’t think would work. They could get rid of management and find someone else, but

he said he didn’t know who that would be. Or they could buy Pixar. “The problem is, I don’t know

if it’s for sale, and if it is, it’s going to be a huge amount of money,” he said. The board authorized

him to explore a deal.

Iger went about it in an unusual way. When he first talked to Jobs, he admitted the revelation

that had occurred to him in Hong Kong and how it convinced him that Disney badly needed Pixar.

“That’s why I just loved Bob Iger,” recalled Jobs. “He just blurted it out. Now that’s the dumbest

thing you can do as you enter a negotiation, at least according to the traditional rule book. He just

put his cards out on the table and said, ‘We’re screwed.’ I immediately liked the guy, because that’

s how I worked too. Let’s just immediately put all the cards on the table and see where they fall.”

(In fact that was not usually Jobs’s mode of operation. He often began negotiations by proclaiming

that the other company’s products or services sucked.)

Jobs and Iger took a lot of walks—around the Apple campus, in Palo Alto, at the Allen and Co.

retreat in Sun Valley. At first they came up with a plan for a new distribution deal: Pixar would

get back all the rights to the movies and characters it had already produced in return for Disney’s

getting an equity stake in Pixar, and it would pay Disney a simple fee to distribute its future

movies. But Iger worried that such a deal would simply set Pixar up as a competitor to Disney,

which would be bad even if Disney had an equity stake in it. So he began to hint that maybe they

should actually do something bigger. “I want you to know that I am really thinking out of the box

on this,” he said. Jobs seemed to encourage the advances. “It wasn’t too long before it was clear to

both of us that this discussion might lead to an acquisition discussion,” Jobs recalled.

But first Jobs needed the blessing of John Lasseter and Ed Catmull, so he asked them to come

over to his house. He got right to the point. “We need to get to know Bob Iger,” he told them. “We

may want to throw in with him and to help him remake Disney. He’s a great guy.” They were

skeptical at first. “He could tell we were pretty shocked,” Lasseter recalled.

“If you guys don’t want to do it, that’s fine, but I want you to get to know Iger before you

decide,” Jobs continued. “I was feeling the same as you, but I’ve really grown to like the guy.” He

explained how easy it had been to make the deal to put ABC shows on the iPod, and added, “It’s

night and day different from Eisner’s Disney. He’s straightforward, and there’s no drama with

him.” Lasseter remembers that he and Catmull just sat there with their mouths slightly open.

Iger went to work. He flew from Los Angeles to Lasseter’s house for dinner, and stayed up well

past midnight talking. He also took Catmull out to dinner, and then he visited Pixar Studios, alone,

with no entourage and without Jobs. “I went out and met all the directors one on one, and they

each pitched me their movie,” he said. Lasseter was proud of how much his team impressed Iger,

which of course made him warm up to Iger. “I never had more pride in Pixar than that day,” he

said. “All the teams and pitches were amazing, and Bob was blown away.”

Indeed after seeing what was coming up over the next few years—Cars, Ratatouille, WALLE—

Iger told his chief financial officer at Disney, “Oh my God, they’ve got great stuff. We’ve got

to get this deal done. It’s the future of the company.” He admitted that he had no faith in the

movies that Disney animation had in the works.

The deal they proposed was that Disney would purchase Pixar for $7.4 billion in stock. Jobs

would thus become Disney’s largest shareholder, with approximately 7% of the company’s stock

compared to 1.7% owned by Eisner and 1% by Roy Disney. Disney Animation would be put

under Pixar, with Lasseter and Catmull running the combined unit. Pixar would retain its

independent identity, its studio and headquarters would remain in Emeryville, and it would even

keep its own email addresses.

Iger asked Jobs to bring Lasseter and Catmull to a secret meeting of the Disney board in

Century City, Los Angeles, on a Sunday morning. The goal was to make them feel comfortable

with what would be a radical and expensive deal. As they prepared to take the elevator from the

parking garage, Lasseter said to Jobs, “If I start getting too excited or go on too long, just touch

my leg.” Jobs ended up having to do it once, but otherwise Lasseter made the perfect sales pitch.

“I talked about how we make films, what our philosophies are, the honesty we have with each

other, and how we nurture the creative talent,” he recalled. The board asked a lot of questions, and

Jobs let Lasseter answer most. But Jobs did talk about how exciting it was to connect art with

technology. “That’s what our culture is all about, just like at Apple,” he said.

Before the Disney board got a chance to approve the merger, however, Michael Eisner arose

from the departed to try to derail it. He called Iger and said it was far too expensive. “You can fix

animation yourself,” Eisner told him. “How?” asked Iger. “I know you can,” said Eisner. Iger got

a bit annoyed. “Michael, how come you say I can fix it, when you couldn’t fix it yourself?” he

asked.

Eisner said he wanted to come to a board meeting, even though he was no longer a member or

an officer, and speak against the acquisition. Iger resisted, but Eisner called Warren Buffett, a big

shareholder, and George Mitchell, who was the lead director. The former senator convinced Iger

to let Eisner have his say. “I told the board that they didn’t need to buy Pixar because they already

owned 85% of the movies Pixar had already made,” Eisner recounted. He was referring to the fact

that for the movies already made, Disney was getting that percentage of the gross, plus it had the

rights to make all the sequels and exploit the characters. “I made a presentation that said, here’s

the 15% of Pixar that Disney does not already own. So that’s what you’re getting. The rest is a bet

on future Pixar films.” Eisner admitted that Pixar had been enjoying a good run, but he said it

could not continue. “I showed the history of producers and directors who had X number of hits in

a row and then failed. It happened to Spielberg, Walt Disney, all of them.” To make the deal worth

it, he calculated, each new Pixar movie would have to gross $1.3 billion. “It drove Steve crazy that

I knew that,” Eisner later said.

After he left the room, Iger refuted his argument point by point. “Let me tell you what was

wrong with that presentation,” he began. When the board had finished hearing them both, it

approved the deal Iger proposed.

Iger flew up to Emeryville to meet Jobs and jointly announce the deal to the Pixar workers. But

before they did, Jobs sat down alone with Lasseter and Catmull. “If either of you have doubts,” he

said, “I will just tell them no thanks and blow off this deal.” He wasn’t totally sincere. It would

have been almost impossible to do so at that point. But it was a welcome gesture. “I’m good,” said

Lasseter. “Let’s do it.” Catmull agreed. They all hugged, and Jobs wept.

Everyone then gathered in the atrium. “Disney is buying Pixar,” Jobs announced. There were a

few tears, but as he explained the deal, the staffers began to realize that in some ways it was a

reverse acquisition. Catmull would be the head of Disney animation, Lasseter its chief creative

officer. By the end they were cheering. Iger had been standing on the side, and Jobs invited him to

center stage. As he talked about the special culture of Pixar and how badly Disney needed to

nurture it and learn from it, the crowd broke into applause.

“My goal has always been not only to make great products, but to build great companies,” Jobs

later said. “Walt Disney did that. And the way we did the merger, we kept Pixar as a great

company and helped Disney remain one as well.”

Date: 2015-12-17; view: 776