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Pixar Animation Studios is an award-winning American computer animation studio based in Emeryville, California (USA). It is a division of The Walt Disney Company.

Though best known for its production of computer-animated feature films, Pixar also develops and markets high-end 3D computer graphics technology. Most notably, Pixar is the developer of the industry-standard rendering software RenderMan, which is used to generate high-quality, photorealistic images.

On January 24, 2006, The Walt Disney Company agreed to buy Pixar for $7.4 billion through an all-stock transaction. The acquisition was completed on May 5, 2006 (swapping one Pixar share for 2.3 shares of Disney), making Pixar a wholly-owned subsidiary of Disney.

Contents

History

Early history

Pixar was founded as the Graphics Group, one third of the Computer Division of Lucasfilm that was launched in 1979 with the hiring of Edwin Catmull from the New York Institute of Technology (NYIT). After years of remarkable research success, and key milestones in films such as [[Star Trek II: The Wrath of Khan]] and Young Sherlock Holmes, the group was purchased in 1986 by current Apple Computer, Inc. CEO Steve Jobs after he left the company he founded with Steve Wozniak and Ronald Wayne. He paid US$5 million to George Lucas and put US$5 million as capital into the company. The sale reflected George Lucas' desire to stop the cash flow losses associated with his 7 year research projects associated with new entertainment technology tools, as well as his company's new focus on creating entertainment products rather than tools. A contributing factor was cash flow difficulties following Lucas' 1983 divorce concurrent with the sudden drop off in revenues from Star Wars licenses following the release of [[Star Wars Episode VI: Return of the Jedi|Return of the Jedi]]. Lucas also felt that a lot of the work being done by Pixar was redundant, with Industrial Light and Magic doing similar work.

The newly independent company was headed by Dr. Edwin Catmull, President and CEO, and Dr. Alvy Ray Smith, Executive Vice President and Director. Jobs served as Chairman of the Board.

Initially, Pixar was a high-end hardware company whose core product was the Pixar Image Computer, a system which was primarily sold to government agencies and the medical community. One of the leading buyers of Pixar Image Computers was Disney studios, which was using the device as part of their secretive CAPS project, using the machine and custom software to migrate the laborious Ink and Paint part of the 2D animation process to a more automated and thus efficient method. The Image Computer never sold well. In a bid to drive sales of the system, Pixar employee John Lasseter — who had long been creating short demonstration animations, such as Luxo Jr., to show off the device's capabilities — premiered his creations at SIGGRAPH, the computer graphics industry's largest convention, to great fanfare.

Business in transition

As poor sales of Pixar's computers threatened to put the company out of business, Lasseter's animation department began producing computer-animated commercials for outside companies. Early successes included campaigns for Tropicana, Listerine, and LifeSavers. During this period, Pixar continued its relationship with Walt Disney Feature Animation, a studio whose corporate parent would ultimately become its most important partner. Pixar was a key technical participant in the development of Disney's CAPS, a computer-assisted animation post-production software system. In 1991, after substantial layoffs in the company's computer department, Pixar made a $26,000,000 deal with Disney to produce computer-animated feature films, the first of which was Toy Story. Pixar was re-incorporated on December 9, 1995.

Disney and Pixar

Pixar and Disney have had ongoing disagreements since the production of Toy Story 2. Originally intended as a straight-to-video release (and thus not part of Pixar's five picture deal), the film was upgraded to a theatrical release during production. Pixar demanded that the film then be counted toward the five picture agreement, but Disney refused.

The arrangement was very profitable for both companies. Pixar's first five feature films have collectively grossed more than $2.5 billion, equivalent to the highest per-film average gross in the industry. Though profitable for both, the arrangement was not equitable [[Citing sources citation needed]]. Pixar performed the creative heavy lifting, while Disney handled marketing and distribution. Disney exclusively owned all story and sequel rights. The lack of story and sequel rights were perhaps the most onerous to Pixar and set the stage for a contentious relationship.

The two companies attempted to reach a new agreement in early 2004. The new deal would be only for distribution, as Pixar intended to control production and own the resulting film properties themselves. As part of any distribution agreement with Disney, Pixar demanded control over films already in production under their old agreement, including The Incredibles and Cars. More importantly, Pixar wanted complete financial freedom; they wanted to finance their films on their own and collect 100 percent of the profits, paying Disney only the 10 to 15 percent distribution fee. This was unacceptable to Disney, but Pixar would not concede.

Bad blood between Pixar head Jobs and Disney Chairman and CEO Michael Eisner made the negotiations more difficult than they otherwise might have been. They broke down completely in mid-2004, with Jobs declaring that Pixar was actively seeking partners other than Disney. After a lengthy hiatus, negotiations between the two companies resumed following the departure of Eisner from Disney in September of 2005.

In preparation for potential fallout between Pixar and Disney, Jobs announced in late 2004 [Business Week article with Pixar release date change info] that Pixar would no longer release movies at the Disney-dictated November timeframe, but during the more lucrative early summer months. This would also allow Pixar to release DVDs for their major releases during the Christmas buying season. An added benefit of delaying Cars was to extend the timeframe remaining on the Pixar-Disney contract to see how things would play out between the two companies.

Pending the Disney acquisition of Pixar, the two companies extended their distribution deal for Pixar's 2007 release of Ratatouille ensuring that if the Disney acquisition had fallen through for any reason, this one film will still be released through the Disney distribution channels. Unlike the earlier Pixar/Disney deal used for the earlier films, this one had the following caveats:

With the completion of Disney's acquisition of Pixar, this deal is no longer in force.

Disney's acquisition of Pixar

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On January 24, 2006, Disney announced that it had agreed to buy Pixar for approximately $7.4 billion in an all-stock deal. Following Pixar shareholder approval, the acquisition was completed May 5, 2006. The transaction catapults Steve Jobs, who was the majority shareholder of Pixar with 50.1%, to Disney's largest individual shareholder with 7% and a new seat on its board of directors. Jobs' new Disney holdings outpace holdings belonging to ex-CEO Eisner, the previous top shareholder who still held 1.7%, and Disney Director Emeritus Roy E. Disney, whose criticisms of Eisner included the soured Pixar relationship and accelerated his ouster, who held almost 1% of the corporation's shares.

As part of the deal, John Lasseter, Pixar Executive Vice President and founder, becomes Chief Creative Officer of the Disney and Pixar animation studios as well as the Principal Creative Adviser at Walt Disney Imagineering, which designs and builds the company's theme parks. Current Pixar President Ed Catmull becomes President of the Disney and Pixar animation studios, reporting to Robert Iger and Dick Cook, chairman of Walt Disney Studio Entertainment.

Lasseter and Catmull's oversight of both the Disney and Pixar studios does not mean that the two studios are merging, however. In fact, additional conditions were laid out as part of the deal to ensure that Pixar remains a separate entity, a concern that many analysts had about the Disney deal [SEC filing containing Disney-Pixar merger details]:

Executive leadership

Steve Jobs continued to serve as Pixar's top executive until May 2006, when the company merged with Disney. Today, Ed Catmull serves as president of the combined Disney-Pixar animation studios, and John Lasseter serves as the studios' Chief Creative Officer. Catmull reports to Walt Disney Company President & CEO Bob Iger as well as Walt Disney Studios chairman Dick Cook. Lasseter, who has greenlight authority, reports solely to Iger.

Feature films

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