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

1 define amortization list the five types discussed2 why do

1. Define amortization. List the five types discussed. 2. Why do the monthly payments in the beginning months of a CPM loan contain a higher proportion of interest than principal repayment?

Does the estimated maximum preload threaten your bolts you

Does the estimated maximum preload threaten your bolts? You guess, since this is a conventional or typical joint, that the joint to bolt stiffness ratio is 5:1. You believe that the tensile loads applied to this joint in ...

1 why is notional principal often exchanged in a currency

1. Why is notional principal often exchanged in a currency swap but not in an interest rate or equity swap? Why would the parties to a currency swap choose not to exchange the notional principal? 2 .Explain how the follo ...

Each question will need be answered with 150 words1 explain

Each question will need be answered with 150 words. 1. Explain how we should go about computing the WACC for a project which uses both retained earnings and a new equity issue? 2. Explain why we multiply the component co ...

An article in the wall street journal noted that of the

An article in the Wall Street Journal noted that of the thousands of mutual funds investing in stocks or stocks and bonds, only 31 had managed to earn a higher rate of return than the S&P 500 in every year from 1999 thro ...

1 discuss how the interrupted time series design with a

1. Discuss how the interrupted time series design with a reversal and the interrupted time series design with multiple replications improve on the simple interrupted time series design. 2. Distinguish between a longitudi ...

1 distinguish between a eurobond a foreign bond and a

1. Distinguish between a Eurobond, a foreign bond, and a Yankee bond. Which of these three represents the greatest volume of security issuance? 2. What do you think are the most important costs and benefits of becoming a ...

Describe the liquidity premium what are its uses in

Describe the liquidity premium. What are its uses in determining the term structure of interest rate?

1 consider the right-hand side of the blackscholes-merton

1. Consider the right-hand side of the BlackScholes-Merton formula as consisting of the sum of two terms. Explain what each of those terms represents. 2 .Explain each of the following concepts as they relate to call opti ...

The black bird company plans an expansion to be financed by

The black bird company plans an expansion to be financed by selling $190 million in new debut and $121 million in new common stock. The before-tax required rate of return on debut is 6.21% and the required rate of return ...

  • 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