WALT DISNEY

AND PIXAR INC.

Presented by:

AISHWARYA KUMAR PGP/016/63

ANUJ KUMAR LOOMBA PGP/016/69
KAVYASHREE MALLESH PGP/016/086
MEENAKSHI SUBRAMANIAN PGP/016/90
T DURGALAKSHMI PGP/016/115

Case Questions
1. Which is greater: the value of Pixar and Disney in an exclusive
relationship or the sum of the value that would create if operated
independently of one another or were allowed to form relationships with
other companies? why?
2. Assuming Pixar and Disney are more valuable in a relationship, Can
that value be realized through a new contract. or is common ownership
required (must Disney acquire Pixar)
3. If Disney does acquire Pixar, How should Bob Iger and his team
organize and manage the combined entity. What challenges you foresee
and how would you meet them.

Ally or Acquire!?
Factor

Remark

Strategy
Equity alliances

Types of Synergies

Sequential

Pixar is responsible for production

while Disney controls marketing and
distribution

Nature of resources
(soft/hard resources)

High

Few hard assets; proprietary

Equity alliances
technologies sold to other firms. Pixar
brought together artistic and
technological talent in a unique manner.

Extent of redundant
resources

Low/Mediu
m

Disney has a small CG unit- not much

efficiency gains from elimination of
redundant resources

Equity alliance/ Non

equity alliance

Degree of Market
Uncertainty

Medium

Pixar has a good track record (shortonly 5 films) but there is no guarantee
that the same formula will work in the
future

Acquisitions

Level of competition

High

Several players are interested in

partnering with Pixar (Sony/ Fox/ WB)

Acquisitions

Cultural Differences at Pixar and

Disney
Pixar
Freedom to communicate with everyone
was the aim
Fusion of artistic and technical skills
Innovation was given importance- in
touch with academia and recruitment of
Phds
Focus on quality did not hesitate to
rework in the case of project not up to
standards
Free rein to the director who was in
charge of the movie
No cyclical hire and fire- reassignment of
employees resulted in high loyalty.
Fewer employees resulting in an
entrepreneurial environment

Disney
Open and collaborative environmentGong show thrice a year to find the
best ideas
Katzenberg monitored all aspects of
film making
Large employee strength- led to a
bureaucratic set up
Rewarded based on the quality of
ideas/work difficult for employees to
be lured away by competitors

Alternatives for Organization

post acquisition
Pixar remains an independent unit like Miramax
Helps to retain Pixars entrepreneurial culture
Prevent key employees from leaving less imposition by
acquiring company

Pixar integrated with CG unit of Disney

Disneys CG unit was way behind in technology- difficult to
integrate
Unique culture of Pixar diluted

Suggestions to Disney
Challenges

Way Ahead

Bureaucratic apparatus in Disney might be an

obstacle for creativity after the acquisition of
Pixar
Different strategic visions

Stock dilution and potential creative talent

exodus

Keep Pixar as a separate entity having

corporate culture intact with a flat organization
structure.
After acquisition, the two companies should
share a common strategic vision in order to
reduce uncertainties and enhance productivity.
This improves employee morale when goals
and objectives are clearly stated
Retain Lasseter as the head of new division
Preserve HR policies, including employment at
will to retain talent
Movies to be released under the banner of
Pixar to capture its brand value

Contract AnalysisTechnical Coordination

Mechanism
Coordination Clauses

Feature Film Agreement

Grammar

Strategic Coordination

Routines: Clearly defined Objectives

A1

Organization Coordination

Routines: Clearly defined roles of the 2 parties ex-ante

B1

Operational Coordination

Centralized: Disney decided the date of movie release

C2

Coordination Clauses

Co-production Agreement

Grammar

Strategic Coordination

Routines: Clearly defined Objectives

A1

Organization Coordination

Routine: Clearly defined roles of the 2 parties with no decision left expost

B1

Operational Coordination

Centralized: Power still skewed towards Disney with Pixar having no

decision making role

C2

Coordination Clauses

Re-negotiated Agreement

Grammar

Strategic Coordination

Routines: Clearly defined Objectives

A1

Organization Coordination

Routine: Clearly defined roles of the 2 parties with no decision left expost (Except increasing revenue percentage with success of the movie)

B1

Operational Coordination

Routine: Payment of just 8% distribution fees; other rights expected to be

with Pixar. Clear distribution of power expected

C1

Contract AnalysisEnforcement Mechanism

Enforcement Clauses

Feature Film Agreement

Grammar

Credible Commitments

Unilateral: Non-performance and termination was

lopsided towards Disney

D2

Supervision

Non-specialized Supervisor

E2

Enforcement Clauses

Co-production Agreement

Grammar

Credible Commitments

Bilateral : Both were equally liable and shared the risk

D3

Supervision

Non-specialized Supervisor

E2

Enforcement Clauses

Re-negotiated Agreement

Grammar

Credible Commitments

Bilateral : Both were equally liable and shared the risk

D3

Supervision

Non-specialized Supervisor

E2

Contract AnalysisRemuneration and Risk sharing

Feature Film Agreement

Grammar

Remuneration

On a collective basis: fixed rule for revenue sharing

F2

Duration

Short term

G2

Co-production Agreement

Grammar

Remuneration

On a collective basis: fixed rule for revenue sharing

F2

Duration

Short term

G2

Re-negotiated Agreement

Grammar

Remuneration

On a flat rate basis: fixed percentage for distribution

cost

F3

Duration

Short term

G2