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A Bug’s Life
When Apple developed the iMac, Jobs drove with Jony Ive to show it to the folks at Pixar.
He felt that the machine had the spunky personality that would appeal to the creators of
Buzz Lightyear and Woody, and he loved the fact that Ive and John Lasseter shared the
talent to connect art with technology in a playful way.
Pixar was a haven where Jobs could escape the intensity in Cupertino. At Apple, the
managers were often excitable and exhausted, Jobs tended to be volatile, and people felt
nervous about where they stood with him. At Pixar, the storytellers and illustrators seemed
more serene and behaved more gently, both with each other and even with Jobs. In other
words, the tone at each place was set at the top, by Jobs at Apple, but by Lasseter at Pixar.
Jobs reveled in the earnest playfulness of moviemaking and got passionate about the
algorithms that enabled such magic as allowing computer-generated raindrops to refract
sunbeams or blades of grass to wave in the wind. But he was able to restrain himself from
trying to control the creative process. It was at Pixar that he learned to let other creative
people flourish and take the lead. Largely it was because he loved Lasseter, a gentle artist
who, like Ive, brought out the best in Jobs.
Jobs’s main role at Pixar was deal making, in which his natural intensity was an asset.
Soon after the release of Toy Story, he clashed with Jeffrey Katzenberg, who had left
Disney in the summer of 1994 and joined with Steven Spielberg and David Geffen to start
DreamWorks SKG. Jobs believed that his Pixar team had told Katzenberg, while he was
still at Disney, about its proposed second movie, A Bug’s Life, and that he had then stolen
the idea of an animated insect movie when he decided to produce Antz at DreamWorks.
“When Jeffrey was still running Disney animation, we pitched him on A Bug’s Life,” Jobs
said. “In sixty years of animation history, nobody had thought of doing an animated movie
about insects, until Lasseter. It was one of his brilliant creative sparks. And Jeffrey left and
went to DreamWorks and all of a sudden had this idea for an animated movie about—Oh!
—insects. And he pretended he’d never heard the pitch. He lied. He lied through his teeth.”
Actually, not. The real story is a bit more interesting. Katzenberg never heard the Bug’s
Life pitch while at Disney. But after he left for DreamWorks, he stayed in touch with
Lasseter, occasionally pinging him with one of his typical “Hey buddy, how you doing just
checking in” quick phone calls. So when Lasseter happened to be at the Technicolor facility
on the Universal lot, where DreamWorks was also located, he called Katzenberg and
dropped by with a couple of colleagues. When Katzenberg asked what they were doing
next, Lasseter told him. “We described to him A Bug’s Life, with an ant as the main
character, and told him the whole story of him organizing the other ants and enlisting a
group of circus performer insects to fight off the grasshoppers,” Lasseter recalled. “I should
have been wary. Jeffrey kept asking questions about when it would be released.”
Lasseter began to get worried when, in early 1996, he heard rumors that DreamWorks
might be making its own computer-animated movie about ants. He called Katzenberg and
asked him point-blank. Katzenberg hemmed, hawed, and asked where Lasseter had heard
that. Lasseter asked again, and Katzenberg admitted it was true. “How could you?” yelled
Lasseter, who very rarely raised his voice.
“We had the idea long ago,” said Katzenberg, who explained that it had been pitched to
him by a development director at DreamWorks.
“I don’t believe you,” Lasseter replied.
Katzenberg conceded that he had sped up Antz as a way to counter his former colleagues
at Disney. DreamWorks’ first major picture was to be Prince of Egypt, which was
scheduled to be released for Thanksgiving 1998, and he was appalled when he heard that
Disney was planning to release Pixar’s A Bug’s Life that same weekend. So he had rushed
Antz into production to force Disney to change the release date of A Bug’s Life.
“Fuck you,” replied Lasseter, who did not normally use such language. He didn’t speak
to Katzenberg for another thirteen years.
Jobs was furious, and he was far more practiced than Lasseter at giving vent to his
emotions. He called Katzenberg and started yelling. Katzenberg made an offer: He would
delay production of Antz if Jobs and Disney would move A Bug’s Life so that it didn’t
compete with Prince of Egypt. “It was a blatant extortion attempt, and I didn’t go for it,”
Jobs recalled. He told Katzenberg there was nothing he could do to make Disney change
the release date.
“Of course you can,” Katzenberg replied. “You can move mountains. You taught me
how!” He said that when Pixar was almost bankrupt, he had come to its rescue by giving it
the deal to do Toy Story. “I was the one guy there for you back then, and now you’re
allowing them to use you to screw me.” He suggested that if Jobs wanted to, he could
simply slow down production on A Bug’s Life without telling Disney. If he did, Katzenberg
said, he would put Antz on hold. “Don’t even go there,” Jobs replied.
Katzenberg had a valid gripe. It was clear that Eisner and Disney were using the Pixar
movie to get back at him for leaving Disney and starting a rival animation studio. “Prince
of Egypt was the first thing we were making, and they scheduled something for our
announced release date just to be hostile,” he said. “My view was like that of the Lion
King, that if you stick your hand in my cage and paw me, watch out.”
No one backed down, and the rival ant movies provoked a press frenzy. Disney tried to
keep Jobs quiet, on the theory that playing up the rivalry would serve to help Antz, but he
was a man not easily muzzled. “The bad guys rarely win,” he told the Los Angeles Times.
In response, DreamWorks’ savvy marketing maven, Terry Press, suggested, “Steve Jobs
should take a pill.”
Antz was released at the beginning of October 1998. It was not a bad movie. Woody
Allen voiced the part of a neurotic ant living in a conformist society who yearns to express
his individualism. “This is the kind of Woody Allen comedy Woody Allen no longer
makes,” Time wrote. It grossed a respectable $91 million domestically and $172 million
worldwide.
A Bug’s Life came out six weeks later, as planned. It had a more epic plot, which reversed
Aesop’s tale of “The Ant and the Grasshopper,” plus a greater technical virtuosity, which
allowed such startling details as the view of grass from a bug’s vantage point. Time was
much more effusive about it. “Its design work is so stellar—a wide-screen Eden of leaves
and labyrinths populated by dozens of ugly, buggy, cuddly cutups—that it makes the
DreamWorks film seem, by comparison, like radio,” wrote Richard Corliss. It did twice as
well as Antz at the box office, grossing $163 million domestically and $363 million
worldwide. (It also beat Prince of Egypt.)
A few years later Katzenberg ran into Jobs and tried to smooth things over. He insisted
that he had never heard the pitch for A Bug’s Life while at Disney; if he had, his settlement
with Disney would have given him a share of the profits, so it’s not something he would lie
about. Jobs laughed, and accepted as much. “I asked you to move your release date, and
you wouldn’t, so you can’t be mad at me for protecting my child,” Katzenberg told him. He
recalled that Jobs “got really calm and Zen-like” and said he understood. But Jobs later said
that he never really forgave Katzenberg:
Our film toasted his at the box office. Did that feel good? No, it still felt awful, because
people started saying how everyone in Hollywood was doing insect movies. He took the
brilliant originality away from John, and that can never be replaced. That’s unconscionable,
so I’ve never trusted him, even after he tried to make amends. He came up to me after he
was successful with Shrek and said, “I’m a changed man, I’m finally at peace with myself,”
and all this crap. And it was like, give me a break, Jeffrey.
For his part, Katzenberg was much more gracious. He considered Jobs one of the “true
geniuses in the world,” and he learned to respect him despite their volatile dealings.
More important than beating Antz was showing that Pixar was not a one-hit wonder. A
Bug’s Life grossed as much as Toy Story had, proving that the first success was not a fluke.
“There’s a classic thing in business, which is the second-product syndrome,” Jobs later
said. It comes from not understanding what made your first product so successful. “I lived
through that at Apple. My feeling was, if we got through our second film, we’d make it.”
Steve’s Own Movie
Toy Story 2, which came out in November 1999, was even bigger, with a $485 million
gross worldwide. Given that Pixar’s success was now assured, it was time to start building
a showcase headquarters. Jobs and the Pixar facilities team found an abandoned Del Monte
fruit cannery in Emeryville, an industrial neighborhood between Berkeley and Oakland,
just across the Bay Bridge from San Francisco. They tore it down, and Jobs commissioned
Peter Bohlin, the architect of the Apple stores, to design a new building for the sixteen-acre
plot.
Jobs obsessed over every aspect of the new building, from the overall concept to the
tiniest detail regarding materials and construction. “Steve had this firm belief that the right
kind of building can do great things for a culture,” said Pixar’s president Ed Catmull. Jobs
controlled the creation of the building as if he were a director sweating each scene of a
film. “The Pixar building was Steve’s own movie,” Lasseter said.
Lasseter had originally wanted a traditional Hollywood studio, with separate buildings
for various projects and bungalows for development teams. But the Disney folks said they
didn’t like their new campus because the teams felt isolated, and Jobs agreed. In fact he
decided they should go to the other extreme: one huge building around a central atrium
designed to encourage random encounters.
Despite being a denizen of the digital world, or maybe because he knew all too well its
isolating potential, Jobs was a strong believer in face-to-face meetings. “There’s a
temptation in our networked age to think that ideas can be developed by email and iChat,”
he said. “That’s crazy. Creativity comes from spontaneous meetings, from random
discussions. You run into someone, you ask what they’re doing, you say ‘Wow,’ and soon
you’re cooking up all sorts of ideas.”
So he had the Pixar building designed to promote encounters and unplanned
collaborations. “If a building doesn’t encourage that, you’ll lose a lot of innovation and the
magic that’s sparked by serendipity,” he said. “So we designed the building to make people
get out of their offices and mingle in the central atrium with people they might not
otherwise see.” The front doors and main stairs and corridors all led to the atrium, the café
and the mailboxes were there, the conference rooms had windows that looked out onto it,
and the six-hundred-seat theater and two smaller screening rooms all spilled into it.
“Steve’s theory worked from day one,” Lasseter recalled. “I kept running into people I
hadn’t seen for months. I’ve never seen a building that promoted collaboration and
creativity as well as this one.”
Jobs even went so far as to decree that there be only two huge bathrooms in the building,
one for each gender, connected to the atrium. “He felt that very, very strongly,” recalled
Pam Kerwin, Pixar’s general manager. “Some of us felt that was going too far. One
pregnant woman said she shouldn’t be forced to walk for ten minutes just to go to the
bathroom, and that led to a big fight.” It was one of the few times that Lasseter disagreed
with Jobs. They reached a compromise: there would be two sets of bathrooms on either
side of the atrium on both of the two floors.
Because the building’s steel beams were going to be visible, Jobs pored over samples
from manufacturers across the country to see which had the best color and texture. He
chose a mill in Arkansas, told it to blast the steel to a pure color, and made sure the truckers
used caution not to nick any of it. He also insisted that all the beams be bolted together, not
welded. “We sandblasted the steel and clear-coated it, so you can actually see what it’s
like,” he recalled. “When the steelworkers were putting up the beams, they would bring
their families on the weekend to show them.”
The wackiest piece of serendipity was “The Love Lounge.” One of the animators found a
small door on the back wall when he moved into his office. It opened to a low corridor that
you could crawl through to a room clad in sheet metal that provided access to the airconditioning
valves. He and his colleagues commandeered the secret room, festooned it
with Christmas lights and lava lamps, and furnished it with benches upholstered in animal
prints, tasseled pillows, a fold-up cocktail table, liquor bottles, bar equipment, and napkins
that read “The Love Lounge.” A video camera installed in the corridor allowed occupants
to monitor who might be approaching.
Lasseter and Jobs brought important visitors there and had them sign the wall. The
signatures include Michael Eisner, Roy Disney, Tim Allen, and Randy Newman. Jobs loved
it, but since he wasn’t a drinker he sometimes referred to it as the Meditation Room. It
reminded him, he said, of the one that he and Daniel Kottke had at Reed, but without the
acid.
The Divorce
In testimony before a Senate committee in February 2002, Michael Eisner blasted the ads
that Jobs had created for Apple’s iTunes. “There are computer companies that have fullpage
ads and billboards that say: Rip, mix, burn,” he declared. “In other words, they can
create a theft and distribute it to all their friends if they buy this particular computer.”
This was not a smart comment. It misunderstood the meaning of “rip” and assumed it
involved ripping someone off, rather than importing files from a CD to a computer. More
significantly, it truly pissed off Jobs, as Eisner should have known. That too was not smart.
Pixar had recently released the fourth movie in its Disney deal, Monsters, Inc., which
turned out to be the most successful of them all, with $525 million in worldwide gross.
Disney’s Pixar deal was again coming up for renewal, and Eisner had not made it easier by
publicly poking a stick at his partner’s eye. Jobs was so incredulous he called a Disney
executive to vent: “Do you know what Michael just did to me?”
Eisner and Jobs came from different backgrounds and opposite coasts, but they were
similar in being strong-willed and without much inclination to find compromises. They
both had a passion for making good products, which often meant micromanaging details
and not sugarcoating their criticisms. Watching Eisner take repeated rides on the Wildlife
Express train through Disney World’s Animal Kingdom and coming up with smart ways to
improve the customer experience was like watching Jobs play with the interface of an iPod
and find ways it could be simplified. Watching them manage people was a less edifying
experience.
Both were better at pushing people than being pushed, which led to an unpleasant
atmosphere when they started trying to do it to each other. In a disagreement, they tended
to assert that the other party was lying. In addition, neither Eisner nor Jobs seemed to
believe that he could learn anything from the other; nor would it have occurred to either
even to fake a bit of deference by pretending to have anything to learn. Jobs put the onus on
Eisner:
The worst thing, to my mind, was that Pixar had successfully reinvented Disney’s
business, turning out great films one after the other while Disney turned out flop after flop.
You would think the CEO of Disney would be curious how Pixar was doing that. But
during the twenty-year relationship, he visited Pixar for a total of about two and a half
hours, only to give little congratulatory speeches. He was never curious. I was amazed.
Curiosity is very important.
That was overly harsh. Eisner had been up to Pixar a bit more than that, including visits
when Jobs wasn’t with him. But it was true that he showed little curiosity about the artistry
or technology at the studio. Jobs likewise didn’t spend much time trying to learn from
Disney’s management.
The open sniping between Jobs and Eisner began in the summer of 2002. Jobs had
always admired the creative spirit of the great Walt Disney, especially because he had
nurtured a company to last for generations. He viewed Walt’s nephew Roy as an
embodiment of this historic legacy and spirit. Roy was still on the Disney board, despite his
own growing estrangement from Eisner, and Jobs let him know that he would not renew the
Pixar-Disney deal as long as Eisner was still the CEO.
Roy Disney and Stanley Gold, his close associate on the Disney board, began warning
other directors about the Pixar problem. That prompted Eisner to send the board an
intemperate email in late August 2002. He was confident that Pixar would eventually renew
its deal, he said, partly because Disney had rights to the Pixar movies and characters that
had been made thus far. Plus, he said, Disney would be in a better negotiating position in a
year, after Pixar finished Finding Nemo. “Yesterday we saw for the second time the new
Pixar movie, Finding Nemo, that comes out next May,” he wrote. “This will be a reality
check for those guys. It’s okay, but nowhere near as good as their previous films. Of course
they think it is great.” There were two major problems with this email: It leaked to the Los
Angeles Times, provoking Jobs to go ballistic, and Eisner’s assessment of the movie was
wrong, very wrong.
Finding Nemo became Pixar’s (and Disney’s) biggest hit thus far. It easily beat out The
Lion King to become, for the time being, the most successful animated movie in history. It
grossed $340 million domestically and $868 million worldwide. Until 2010 it was also the
most popular DVD of all time, with forty million copies sold, and spawned some of the
most popular rides at Disney theme parks. In addition, it was a richly textured, subtle, and
deeply beautiful artistic achievement that won the Oscar for best animated feature. “I liked
the film because it was about taking risks and learning to let those you love take risks,”
Jobs said. Its success added $183 million to Pixar’s cash reserves, giving it a hefty war
chest of $521 million for the final showdown with Disney.
Shortly after Finding Nemo was finished, Jobs made Eisner an offer that was so onesided
it was clearly meant to be rejected. Instead of a fifty-fifty split on revenues, as in the
existing deal, Jobs proposed a new arrangement in which Pixar would own outright the
films it made and the characters in them, and it would merely pay Disney a 7.5% fee to
distribute the movies. Plus, the last two films under the existing deal—The Incredibles and
Cars were the ones in the works—would shift to the new distribution deal.
Eisner, however, held one powerful trump card. Even if Pixar didn’t renew, Disney had
the right to make sequels of Toy Story and the other movies that Pixar had made, and it
owned all the characters, from Woody to Nemo, just as it owned Mickey Mouse and
Donald Duck. Eisner was already planning—or threatening—to have Disney’s own
animation studio do a Toy Story 3, which Pixar had declined to do. “When you see what
that company did putting out Cinderella II, you shudder at what would have happened,”
Jobs said.
Eisner was able to force Roy Disney off the board in November 2003, but that didn’t end
the turmoil. Disney released a scathing open letter. “The company has lost its focus, its
creative energy, and its heritage,” he wrote. His litany of Eisner’s alleged failings included
not building a constructive relationship with Pixar. By this point Jobs had decided that he
no longer wanted to work with Eisner. So in January 2004 he publicly announced that he
was cutting off negotiations with Disney.
Jobs was usually disciplined in not making public the strong opinions that he shared with
friends around his Palo Alto kitchen table. But this time he did not hold back. In a
conference call with reporters, he said that while Pixar was producing hits, Disney
animation was making “embarrassing duds.” He scoffed at Eisner’s notion that Disney
made any creative contribution to the Pixar films: “The truth is there has been little creative
collaboration with Disney for years. You can compare the creative quality of our films with
the creative quality of Disney’s last three films and judge each company’s creative ability
yourselves.” In addition to building a better creative team, Jobs had pulled off the
remarkable feat of building a brand that was now as big a draw for moviegoers as Disney’s.
“We think the Pixar brand is now the most powerful and trusted brand in animation.” When
Jobs called to give him a heads-up, Roy Disney replied, “When the wicked witch is dead,
we’ll be together again.”
John Lasseter was aghast at the prospect of breaking up with Disney. “I was worried
about my children, what they would do with the characters we’d created,” he recalled. “It
was like a dagger to my heart.” When he told his top staff in the Pixar conference room, he
started crying, and he did so again when he addressed the eight hundred or so Pixar
employees gathered in the studio’s atrium. “It’s like you have these dear children and you
have to give them up to be adopted by convicted child molesters.” Jobs came to the atrium
stage next and tried to calm things down. He explained why it might be necessary to break
with Disney, and he assured them that Pixar as an institution had to keep looking forward to
be successful. “He has the absolute ability to make you believe,” said Oren Jacob, a
longtime technologist at the studio. “Suddenly, we all had the confidence that, whatever
happened, Pixar would flourish.”
Bob Iger, Disney’s chief operating officer, had to step in and do damage control. He was
as sensible and solid as those around him were volatile. His background was in television;
he had been president of the ABC Network, which was acquired in 1996 by Disney. His
reputation was as a corporate suit, and he excelled at deft management, but he also had a
sharp eye for talent, a good-humored ability to understand people, and a quiet flair that he
was secure enough to keep muted. Unlike Eisner and Jobs, he had a disciplined calm,
which helped him deal with large egos. “Steve did some grandstanding by announcing that
he was ending talks with us,” Iger later recalled. “We went into crisis mode, and I
developed some talking points to settle things down.”
Eisner had presided over ten great years at Disney, when Frank Wells served as his
president. Wells freed Eisner from many management duties so he could make his
suggestions, usually valuable and often brilliant, on ways to improve each movie project,
theme park ride, television pilot, and countless other products. But after Wells was killed in
a helicopter crash in 1994, Eisner never found the right manager. Katzenberg had
demanded Wells’s job, which is why Eisner ousted him. Michael Ovitz became president in
1995; it was not a pretty sight, and he was gone in less than two years. Jobs later offered his
assessment:
For his first ten years as CEO, Eisner did a really good job. For the last ten years, he
really did a bad job. And the change came when Frank Wells died. Eisner is a really good
creative guy. He gives really good notes. So when Frank was running operations, Eisner
could be like a bumblebee going from project to project trying to make them better. But
when Eisner had to run things, he was a terrible manager. Nobody liked working for him.
They felt they had no authority. He had this strategic planning group that was like the
Gestapo, in that you couldn’t spend any money, not even a dime, without them approving
it. Even though I broke with him, I had to respect his achievements in the first ten years.
And there was a part of him I actually liked. He’s a fun guy to be around at times—smart,
witty. But he had a dark side to him. His ego got the better of him. Eisner was reasonable
and fair to me at first, but eventually, over the course of dealing with him for a decade, I
came to see a dark side to him.
Eisner’s biggest problem in 2004 was that he did not fully fathom how messed up his
animation division was. Its two most recent movies, Treasure Planet and Brother Bear, did
no honor to the Disney legacy, or to its balance sheets. Hit animation movies were the
lifeblood of the company; they spawned theme park rides, toys, and television shows. Toy
Story had led to a movie sequel, a Disney on Ice show, a Toy Story Musical performed on
Disney cruise ships, a direct-to-video film featuring Buzz Lightyear, a computer storybook,
two video games, a dozen action toys that sold twenty-five million units, a clothing line,
and nine different attractions at Disney theme parks. This was not the case for Treasure
Planet.
“Michael didn’t understand that Disney’s problems in animation were as acute as they
were,” Iger later explained. “That manifested itself in the way he dealt with Pixar. He never
felt he needed Pixar as much as he really did.” In addition, Eisner loved to negotiate and
hated to compromise, which was not always the best combination when dealing with Jobs,
who was the same way. “Every negotiation needs to be resolved by compromises,” Iger
said. “Neither one of them is a master of compromise.”
The impasse was ended on a Saturday night in March 2005, when Iger got a phone call
from former senator George Mitchell and other Disney board members. They told him that,
starting in a few months, he would replace Eisner as Disney’s CEO. When Iger got up the
next morning, he called his daughters and then Steve Jobs and John Lasseter. He said, very
simply and clearly, that he valued Pixar and wanted to make a deal. Jobs was thrilled. He
liked Iger and even marveled at a small connection they had: his former girlfriend Jennifer
Egan and Iger’s wife, Willow Bay, had been roommates at Penn.
That summer, before Iger officially took over, he and Jobs got to have a trial run at
making a deal. Apple was coming out with an iPod that would play video as well as music.
It needed television shows to sell, and Jobs did not want to be too public in negotiating for
them because, as usual, he wanted the product to be secret until he unveiled it onstage. Iger,
who had multiple iPods and used them throughout the day, from his 5 a.m. workouts to late
at night, had already been envisioning what it could do for television shows. So he
immediately offered ABC’s most popular shows, Desperate Housewives and Lost. “We
negotiated that deal in a week, and it was complicated,” Iger said. “It was important
because Steve got to see how I worked, and because it showed everyone that Disney could
in fact work with Steve.”
For the announcement of the video iPod, Jobs rented a theater in San Jose, and he invited
Iger to be his surprise guest onstage. “I had never been to one of his announcements, so I
had no idea what a big deal it was,” Iger recalled. “It was a real breakthrough for our
relationship. He saw I was pro-technology and willing to take risks.” Jobs did his usual
virtuoso performance, running through all the features of the new iPod, how it was “one of
the best things we’ve ever done,” and how the iTunes Store would now be selling music
videos and short films. Then, as was his habit, he ended with “And yes, there is one more
thing:” The iPod would be selling TV shows. There was huge applause. He mentioned that
the two most popular shows were on ABC. “And who owns ABC? Disney! I know these
guys,” he exulted.
When Iger then came onstage, he looked as relaxed and as comfortable as Jobs. “One of
the things that Steve and I are incredibly excited about is the intersection between great
content and great technology,” he said. “It’s great to be here to announce an extension of
our relation with Apple,” he added. Then, after the proper pause, he said, “Not with Pixar,
but with Apple.”
But it was clear from their warm embrace that a new Pixar-Disney deal was once again
possible. “It signaled my way of operating, which was ‘Make love not war,’” Iger recalled.
“We had been at war with Roy Disney, Comcast, Apple, and Pixar. I wanted to fix all that,
Pixar most of all.”
Iger had just come back from opening the new Disneyland in Hong Kong, with Eisner at
his side in his last big act as CEO. The ceremonies included the usual Disney parade down
Main Street. Iger realized that the only characters in the parade that had been created in the
past decade were Pixar’s. “A lightbulb went off,” he recalled. “I’m standing next to
Michael, but I kept it completely to myself, because it was such an indictment of his
stewardship of animation during that period. After ten years of The Lion King, Beauty and
the Beast, and Aladdin, there were then ten years of nothing.”
Iger went back to Burbank and had some financial analysis done. He discovered that
they had actually lost money on animation in the past decade and had produced little that
helped ancillary products. At his first meeting as the new CEO, he presented the analysis to
the board, whose members expressed some anger that they had never been told this. “As
animation goes, so goes our company,” he told the board. “A hit animated film is a big
wave, and the ripples go down to every part of our business—from characters in a parade,
to music, to parks, to video games, TV, Internet, consumer products. If I don’t have wave
makers, the company is not going to succeed.” He presented them with some choices. They
could stick with the current animation management, which he didn’t think would work.
They could get rid of management and find someone else, but he said he didn’t know who
that would be. Or they could buy Pixar. “The problem is, I don’t know if it’s for sale, and if
it is, it’s going to be a huge amount of money,” he said. The board authorized him to
explore a deal.
Iger went about it in an unusual way. When he first talked to Jobs, he admitted the
revelation that had occurred to him in Hong Kong and how it convinced him that Disney
badly needed Pixar. “That’s why I just loved Bob Iger,” recalled Jobs. “He just blurted it
out. Now that’s the dumbest thing you can do as you enter a negotiation, at least according
to the traditional rule book. He just put his cards out on the table and said, ‘We’re screwed.’
I immediately liked the guy, because that’s how I worked too. Let’s just immediately put all
the cards on the table and see where they fall.” (In fact that was not usually Jobs’s mode of
operation. He often began negotiations by proclaiming that the other company’s products or
services sucked.)
Jobs and Iger took a lot of walks—around the Apple campus, in Palo Alto, at the Allen
and Co. retreat in Sun Valley. At first they came up with a plan for a new distribution deal:
Pixar would get back all the rights to the movies and characters it had already produced in
return for Disney’s getting an equity stake in Pixar, and it would pay Disney a simple fee to
distribute its future movies. But Iger worried that such a deal would simply set Pixar up as
a competitor to Disney, which would be bad even if Disney had an equity stake in it. So he
began to hint that maybe they should actually do something bigger. “I want you to know
that I am really thinking out of the box on this,” he said. Jobs seemed to encourage the
advances. “It wasn’t too long before it was clear to both of us that this discussion might
lead to an acquisition discussion,” Jobs recalled.
But first Jobs needed the blessing of John Lasseter and Ed Catmull, so he asked them to
come over to his house. He got right to the point. “We need to get to know Bob Iger,” he
told them. “We may want to throw in with him and to help him remake Disney. He’s a great
guy.” They were skeptical at first. “He could tell we were pretty shocked,” Lasseter
recalled.
“If you guys don’t want to do it, that’s fine, but I want you to get to know Iger before
you decide,” Jobs continued. “I was feeling the same as you, but I’ve really grown to like
the guy.” He explained how easy it had been to make the deal to put ABC shows on the
iPod, and added, “It’s night and day different from Eisner’s Disney. He’s straightforward,
and there’s no drama with him.” Lasseter remembers that he and Catmull just sat there with
their mouths slightly open.
Iger went to work. He flew from Los Angeles to Lasseter’s house for dinner, and stayed
up well past midnight talking. He also took Catmull out to dinner, and then he visited Pixar
Studios, alone, with no entourage and without Jobs. “I went out and met all the directors
one on one, and they each pitched me their movie,” he said. Lasseter was proud of how
much his team impressed Iger, which of course made him warm up to Iger. “I never had
more pride in Pixar than that day,” he said. “All the teams and pitches were amazing, and
Bob was blown away.”
Indeed after seeing what was coming up over the next few years—Cars, Ratatouille,
WALL-E—Iger told his chief financial officer at Disney, “Oh my God, they’ve got great
stuff. We’ve got to get this deal done. It’s the future of the company.” He admitted that he
had no faith in the movies that Disney animation had in the works.
The deal they proposed was that Disney would purchase Pixar for $7.4 billion in stock.
Jobs would thus become Disney’s largest shareholder, with approximately 7% of the
company’s stock compared to 1.7% owned by Eisner and 1% by Roy Disney. Disney
Animation would be put under Pixar, with Lasseter and Catmull running the combined unit.
Pixar would retain its independent identity, its studio and headquarters would remain in
Emeryville, and it would even keep its own email addresses.
Iger asked Jobs to bring Lasseter and Catmull to a secret meeting of the Disney board in
Century City, Los Angeles, on a Sunday morning. The goal was to make them feel
comfortable with what would be a radical and expensive deal. As they prepared to take the
elevator from the parking garage, Lasseter said to Jobs, “If I start getting too excited or go
on too long, just touch my leg.” Jobs ended up having to do it once, but otherwise Lasseter
made the perfect sales pitch. “I talked about how we make films, what our philosophies are,
the honesty we have with each other, and how we nurture the creative talent,” he recalled.
The board asked a lot of questions, and Jobs let Lasseter answer most. But Jobs did talk
about how exciting it was to connect art with technology. “That’s what our culture is all
about, just like at Apple,” he said.
Before the Disney board got a chance to approve the merger, however, Michael Eisner
arose from the departed to try to derail it. He called Iger and said it was far too expensive.
“You can fix animation yourself,” Eisner told him. “How?” asked Iger. “I know you can,”
said Eisner. Iger got a bit annoyed. “Michael, how come you say I can fix it, when you
couldn’t fix it yourself?” he asked.
Eisner said he wanted to come to a board meeting, even though he was no longer a
member or an officer, and speak against the acquisition. Iger resisted, but Eisner called
Warren Buffett, a big shareholder, and George Mitchell, who was the lead director. The
former senator convinced Iger to let Eisner have his say. “I told the board that they didn’t
need to buy Pixar because they already owned 85% of the movies Pixar had already made,”
Eisner recounted. He was referring to the fact that for the movies already made, Disney was
getting that percentage of the gross, plus it had the rights to make all the sequels and
exploit the characters. “I made a presentation that said, here’s the 15% of Pixar that Disney
does not already own. So that’s what you’re getting. The rest is a bet on future Pixar films.”
Eisner admitted that Pixar had been enjoying a good run, but he said it could not continue.
“I showed the history of producers and directors who had X number of hits in a row and
then failed. It happened to Spielberg, Walt Disney, all of them.” To make the deal worth it,
he calculated, each new Pixar movie would have to gross $1.3 billion. “It drove Steve crazy
that I knew that,” Eisner later said.
After he left the room, Iger refuted his argument point by point. “Let me tell you what
was wrong with that presentation,” he began. When the board had finished hearing them
both, it approved the deal Iger proposed.
Iger flew up to Emeryville to meet Jobs and jointly announce the deal to the Pixar
workers. But before they did, Jobs sat down alone with Lasseter and Catmull. “If either of
you have doubts,” he said, “I will just tell them no thanks and blow off this deal.” He
wasn’t totally sincere. It would have been almost impossible to do so at that point. But it
was a welcome gesture. “I’m good,” said Lasseter. “Let’s do it.” Catmull agreed. They all
hugged, and Jobs wept.
Everyone then gathered in the atrium. “Disney is buying Pixar,” Jobs announced. There
were a few tears, but as he explained the deal, the staffers began to realize that in some
ways it was a reverse acquisition. Catmull would be the head of Disney animation, Lasseter
its chief creative officer. By the end they were cheering. Iger had been standing on the side,
and Jobs invited him to center stage. As he talked about the special culture of Pixar and
how badly Disney needed to nurture it and learn from it, the crowd broke into applause.
“My goal has always been not only to make great products, but to build great companies,”
Jobs later said. “Walt Disney did that. And the way we did the merger, we kept Pixar as a
great company and helped Disney remain one as well.”