Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Pixar and Disney Part Company
The announcement on February 5, 2004, of the end of the wildly successful partnership between Walt Disney Company (Disney) and Pixar Animation Studios (Pixar) rocked the investment and entertainment world. While the partnership continued until the end of 2005, the split-up underscores the nature of the rifts that can develop in business alliances of all types. The dissolution of the partnership ends a relationship in existence since 1995 in which Disney produced and distributed the highly popular films created by Pixar. Under the terms of the original partnership agreement, the two firms co-financed each film and split
the profits evenly. Moreover, Disney received 12.5% of film revenues for distributing the films. Negotiations to renew the partnership after 2005 foundered on Pixar's desire to get a greater share of the partnership's profits. Disney CEO, Michael Eisner, refused to accept a significant reduction in distribution fees and film royalties; while Steve Jobs, Pixar's CEO, criticized Disney's creative capabilities and noted that marketing alone will not make a poorfilm successful.
After 10 months of talks between Disney and Pixar, Disney rejected a deal that would have required it to earn substantially less from future Pixar releases. Disney also would have had to relinquish potentially lucrative copyrights to existing films such as Toy Story and Finding Nemo. Disney shares immediately fell by almost 2% on the news of the announcement, while Pixar's shares skyrocketed almost 4% by the end of the day. Pixar contributed more than 50% of Disney Studio's operating profits, and Disney Studios accounted for about one-fourth of Disney's total operating profits. While Disney now faces Pixar as a competitor, it retains the rights to make video and theatrical sequels and TV shows to the movies covered by the current partnership agreement. However, while Disney does retain the right to make sequels to Pixar films, it does not own the underlying technology and must re-create the millions of lines of computer code for each character.
The key challenge for Disney will be to fill the creative vacuum left by the loss of Pixar preparers and animators. Disney is particularly vulnerable in that it has severely cut back its own feature animation department and has stumbled in recent years with a variety of box office duds (e.g., Treasure Planet). Reflecting concern that Disney would not be able to compete with Pixar, bond-rating service, Fitch Ratings, suggested a possible downgrade of Disney debt. Pixar announced that it was seeking another production studio. Immediately following this announcement, Sony and others approached Pixar with proposals to collaborate in making animated films.

Case Study Discussion problems
1. In your opinion, what were the motivations for forming the Disney-Pixar partnership in 1995? Which partner do you believe had the greatest leverage in these negotiations? describe your answer.
2. What happened since 1995 that might have contributed to the breakup?
(Hint: Consider partner objectives, personalities of Steve Jobs and Michael Eisner, perceived relative contribution, and Disney's in-house capabilities.)

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M928952

Have any Question? 


Related Questions in Basic Finance

A company wants to enter into a commitment to initiate a

A company wants to enter into a commitment to initiate a swap in 90 days. The swap would consist of four payments 90 days apart with the underlying being LIBOR. Use the term structure of LIBOR as given below to solve for ...

Suppose you are about to borrow 15000 for four years to buy

Suppose you are about to borrow $15,000 for four years to buy a new car. Briefly explain which of these situations you would prefer to be in: a. The interest rate on your loan is 10%, and you expect the annual inflation ...

1 when a doublet is added to a uniform stream so that the

1. When a doublet is added to a uniform stream so that the source part of the doublet faces the stream, a cylinder flow results. Plot the streamlines when the doublet is reversed so that the sink faces the stream. 2. A 2 ...

A building owner is evaluating the following four

A building owner is evaluating the following four alternatives for leasing space in an office building for the next five years. Write a two-three page paper and prepare an Excel spreadsheet evaluating each of the four di ...

Your employer provides a 401k retirement plan and matches

Your employer provides a 401(k) retirement plan and matches 100% of your contributions up to 5%. Your annual income is $54,000 and you expect to earn an annualized 8.0% return on your investment. What is the value of you ...

1 when and why would nonprobability sampling methods be

1. When and why would nonprobability sampling methods be used? 2. Under what conditions is sampling bias likely to occur, what are its effects on generalization, and how can it be avoided? 3. Indicate the similarities an ...

Determine the sources of capital for canon inc ticker jcnn

Determine the sources of capital for Canon Inc. (ticker: J:CN@N) in each of the last five years. How much capital was raised through internal sources, and how much was raised through external sources? Compare the sources ...

Bull how is consumer debt different today than in the

• How is consumer debt different today than in the past? • What role do interest rates play in mounting consumer debt? • What are the typical interest rates applied to credit cards, mortgages, and other debt? • Many of t ...

Gangland water guns company is expected to pay a dividend

Gangland Water Guns Company is expected to pay a dividend of $2.10 one year from today. If the firm's growth in dividends is expected to remain at a flat 3 percent forever, then what is the cost of equity capital (in per ...

Why do you suppose countries impose foreign exchange

Why do you suppose countries impose foreign exchange controls? Do you think that, long-term, foreign exchange controls will encourage or discourage inward foreign investment?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen