Disney And Pixar
The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire
Economics of Strategy and Organization
Are Disney and Pixar better together?
Positive Aspects
The co-production agreement between Disney and Pixar has led Disney to rely on revenue and characters produced by its partner.
Pixar CG movies contributed more than $3.5 billion to Disney Studio revenues and around $1.2 billion to Disney’s operating income which represented 10% of revenue and 60% of total operating income of Disney over the period.
Pixar’s unmatched technology which helped animators to make films faster than its competitors and at a fraction of their cost and Disney’s distribution network helped in generating a succession of box office hits. Both Disney’s and Pixar’s work culture was such that it motivated creativity among employees which in turn enabled them to make quality movies. Negative Aspects
Disney agreed to fully fund the production cost of animated movies but also in return wanted the ownership rights which later was renegotiated by Pixar demanding for more favourable economic terms and ownership rights. Also there was a misbalance in the contribution of revenues generated from the movies. In total Disney would receive at least 60% of each movie’s profits whereas Pixar would only get 40% of the total profits that the movie generated.
What are the alternatives to acquire Pixar? Is ownership really necessary? Or could another long-term contract do the trick?
The alternatives to acquire Pixar are-
Rather than a merger Disney and Pixar can form an equity alliance between them where they can share each other’s resources and capabilities to create best possible synergistic effect.
Another option is to enter contract with Pixar that Disney will use Pixar’s talent to make films and pay Pixar a fixed percentage of revenue or profit from the film and retain with itself the distribution rights of the film.
Next option is to enter into another long term contract with
Economics of Strategy and Organization
Are Disney and Pixar better together?
Positive Aspects
The co-production agreement between Disney and Pixar has led Disney to rely on revenue and characters produced by its partner.
Pixar CG movies contributed more than $3.5 billion to Disney Studio revenues and around $1.2 billion to Disney’s operating income which represented 10% of revenue and 60% of total operating income of Disney over the period.
Pixar’s unmatched technology which helped animators to make films faster than its competitors and at a fraction of their cost and Disney’s distribution network helped in generating a succession of box office hits. Both Disney’s and Pixar’s work culture was such that it motivated creativity among employees which in turn enabled them to make quality movies. Negative Aspects
Disney agreed to fully fund the production cost of animated movies but also in return wanted the ownership rights which later was renegotiated by Pixar demanding for more favourable economic terms and ownership rights. Also there was a misbalance in the contribution of revenues generated from the movies. In total Disney would receive at least 60% of each movie’s profits whereas Pixar would only get 40% of the total profits that the movie generated.
What are the alternatives to acquire Pixar? Is ownership really necessary? Or could another long-term contract do the trick?
The alternatives to acquire Pixar are-
Rather than a merger Disney and Pixar can form an equity alliance between them where they can share each other’s resources and capabilities to create best possible synergistic effect.
Another option is to enter contract with Pixar that Disney will use Pixar’s talent to make films and pay Pixar a fixed percentage of revenue or profit from the film and retain with itself the distribution rights of the film.
Next option is to enter into another long term contract with