Brand Transformation Case Studies: Disney/Pixar
The Disney/Pixar merger is deemed as one of the most successful mergers of media corporations, with an overall positive impact on both brands.
- On May 5, 2006, in a deal worth $7.4 billion, Pixar became a subsidiary of Disney in what is considered as one of the most successful mergers of all times.
- Prior to the merger, Disney and Pixar already had a deal where Disney was responsible for distributing Pixar’s works, since 1997 in a 10-year, 5-picture deal in which they shared the costs and profits of movies produced by Pixar.
- After a long negotiation, Disney offered 2.3 of its shares for each Pixar share and agreed to keep the company culture intact.
- Some people expressed early concerns about the merger playing out like most mergers, saying that Disney would trample Pixar’s spirit or that Pixar animators would not accept the deal and would rebuke their new owner, creating internal warfare.
- However, Iger brought his experience dealing with mergers to the table and is considered the driving force behind the successful merger. He was willing to accept the culture of Pixar as one of its strengths and accepted that some things would not change.
- For Jobs to agree with the merger, Iger had to agree to keep Pixar’s culture and employees. Disney agreed to a set of ground rules for safeguarding Pixar’s looser culture, instead of Disney's formal environment. For example, Pixar employees weren’t required to sign employment contracts with Disney, were free to choose the titles on their business cards, could decorate their cubicles and offices as they wished, and could continue their annual paper airplane contest. Employees were also not fired or relocated.
- Pixar employees also got to keep their benefits and identity; for instance, telephone operators at Pixar are not required to end calls with the iconic “Have a magical day” and employees get to keep the same email address.
- To ensure that the transition would go smoothly, Disney kept the Pixar’s high-level management and used their help to guide the changes and mix the company’s visions as one. Not only was Steve Jobs a board member at Disney, but Iger put Pixar chief creative officer, John Lasseter, and president Ed Catmull in charge of Walt Disney Animation Studios.
- The Disney Steering Committee, consisting of Steve Jobs, Lasseter, Iger, Dick Cook (Disney CEO), Tom Staggs (Disney CFO), and Catmull was established, aiming to ensure that an organizational environment and culture was created to encourage growth and the development of creative thinking and problem-solving.
- The Committee also made sure that Pixar company culture remained the same after the merger, and was responsible for creating a sense of trust, communication, and respect that was vital for the success of the merge. This dynamic helped the company to work as a team, despite some rough patches.
- The price tag of the merger raised some eyebrows at the time, and it was more than most people were expecting, but the merger was originally greeted with enthusiasm by Wall Street, even though some were questioning if the acquisition would dilute Disney’s earnings.
- There were also some concerns regarding Steve Jobs and a possible conflict of interests between Apple and Disney.
- When the deal was announced, Merrill Lynch analyst Jessica Reif Cohen maintained a buy rating and $31 price tag on The Walt Disney Co. stating that the Disney-Pixar merger was a perfect combination.
- January 24, Disney’s shares were up 47 cents, closing at $25.99 while Pixar was down 70 cents at $57.57 with a market capitalization of $6.9 billion. January 25 showed a different story, with Disney shares closing at $25.44 and Pixar’s shares rising at $58.02.
- By March 2006, Disney stocks were up 20% for the year, outpacing every other media rival, which some analysts attributed to the Jobs and Apple halo effect.
- The numbers continued to grow for Disney. In 2007, the stock price closed at $35.43, followed by $34.70 in 2008. Net income went from $2,533 millions in 2006 to $24,687 million in 2007 and $4,427 millions in 2008. (S9)
- Some say that Disney is killing Pixar’s magic; for instance, Pixar is known for showing sweet and quirky shorts at the beginning of its movies, something fans came to love. When Coco was released, the short was a 21-minute Frozen spin-off called Olaf’s Frozen Adventure, created by Disney and not Pixar.
- Some fans criticized the move, saying it was evidence that corporate Disney was meddling in Pixar’s creative decisions. However, director Adrian Molina explained that they chose Olaf’s Frozen Adventure because it deals with similar themes than Coco and Pixar didn’t have another short ready.
- Others point out the Pixar sequels as evidence that corporate Disney and pursuing money and merchandising sales killed Pixar’s original intent and focus, arguing that the merger saved Disney Animations while destroying Pixar.
- Moneywise, since the acquisition, Pixar movies saw a jump of a $20 million from their average box office numbers before Disney. When adding worldwide sales, that number goes up to $100 million from what it used to make before Disney.
- Overall, both studies continue to attract consumers, with Disney launching successful animations like Wreck-it-Ralph, Frozen, Zootopia, and Moana, while Pixar launched hits like WALL-E, Inside Out, Finding Dory, Toy Story 3 and UP.
- Disney and Pixar kept different brands, logo, colors, identities, and different studios after the merger. Each studio makes its own productions. The making of Bolt illustrate that premise; when the film faced challenges, and the Disney team insisted that they would not make the deadline, Lasseter and Catmull refused to use Pixar resources, opting to resolve the issue with creative solutions.
- That is not to say that there were no changes, with Disney pressuring Pixar to release more movies per year, more sequels and straight to DVD movies, which the studio used to frown upon. By the same token, Pixar turned around Disney’s animation department and revitalized it.
The Disney-Pixar merger is an unusual case among mergers for the highly preserved culture and identity of the acquired company. From the start of the negotiations, measures were taken not profoundly disturb employees. Therefore, employees’ dynamics didn’t change much after the merger. Our research shows that, for the most part, the main changes can be found in the creative process and what productions are being released. The nature of the product, animation movies, also present a different customer dynamics than consumer goods or services, which is why when detailing such dynamic, we chose to include some critics and concerns but also included the overall reception of the final product, aka, the box office numbers.