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The Disney Pixar Merger Essay

2895 words - 12 pages

Table of Contents

Disney – Pixar Merger 3
Introduction 3
Aggressive cost cutting 3
Co-production agreement 4
The Financials 5
The Investment decision 5
How had this merger worked in the long run 7
Advantages 8
Disadvantages 8
Bibliography 10
Appendix 11
Exhibit 1 11
Exhibit 2 12
Exhibit 2a 13
Exhibit 3 14
Exhibit 4 & 4a 15
Exhibit 8 16
Exhibit 9 17
Exhibit 11 18


Disney – Pixar Merger
Introduction

The Walt Disney Company was established by the brothers Walt and Roy Disney on October 16th 1923 and is one of biggest entertainment and media’s company’s throughout the world. It is the largest of a number of television networks such as the American Broadcasting company together with 7 theme parks. Also in the 1930’s, Disney started to make films with their first ever animation; being Snow White and the Seven Dwarfs. Other few of their primary films include Bambi, Dumbo and Pinocchio which were all targeted as kid’s fairytales. Furthermore, prior to 2006 Walt Disney had created some of the best cartoons in the industry that had generated a lot of revenue for the company such as Lion King, Beauty and the Beast and the Little Mermaid.
After the Lion King in 1994, Disney-produced animated films fell below expectations (Exhibit 1). Disney was employing 275 employees in 1988 and later increased this to 950 in 1994 due to the release of The Lion King. It later expanded to 2,200 in 1999.
Competition for animators in the 1990s also caused salaries, which accounted for 80% of each film’s cost, to expand, with animators’ pay rising from $125,000 in 1994 to $550,000 in 1999. Such increases in pays affected the whole sector.

Aggressive cost cutting

The first movie made under a new cost cutting environment was Lilo & Stitch. The feature-animation chief in 2002 was Thomas Schumacher. The production cost about $80 million to make, versus $150 million for the 1999 Tarzan.
Disney came to rely on revenue and characters produced by its partner, Pixar. Between 1998 and 2004, Pixar CG movies contributed a total of more than $3.5 billion to Disney Studio revenues, and more than $1.2 billion to Disney’s operating income (Exhibits 2 and 2a). Pixar’s contribution represented 10% of revenue and over 60% of total operating income over the period.
The dynamics of theatrical and financial success changed completely, and new revenue streams were generated by other sectors (see Exhibit 3). By 2005, a structural change in profits occurred with the largest revenue sources was home video and not the theatrical box office.
As for Pixar, the company was established in 1979, originally as a graphics group to form part of the computer division of Lucas Film Limited by John Lasseter and George Lucas. In 1986, Steve Jobs - who had left Apple Computer the year before—bought the Lucas Film computer business for $10 million. Later Steve Jobs established it as an independent company co-founded with Dr. Edwin E. Catmull and renamed the company to Pixar.
Although it would be...

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