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

Question utilizing the concepts learned throughout the

Question: Utilizing the concepts learned throughout the course, write a Final Paper on one of the following scenarios: • Option One: You are a consultant with 10 years experience in the health care insurance industry. A ...

Discussion your initial discussion thread is due on day 3

Discussion: Your initial discussion thread is due on Day 3 (Thursday) and you have until Day 7 (Monday) to respond to your classmates. Your grade will reflect both the quality of your initial post and the depth of your r ...

Question financial ratios analysis and comparison

Question: Financial Ratios Analysis and Comparison Paper Prior to completing this assignment, review Chapter 10 and 12 in your course text. You are a mid-level manager in a health care organization and you have been aske ...

Grant technologies needs 300000 to pay its supplier grants

Grant Technologies needs $300,000 to pay its supplier. Grant's bank is offering a 210-day simple interest loan with a quoted interest rate of 11 percent and a 20 percent compensating balance requirement. Assuming there a ...

Franks is looking at a new sausage system with an installed

Franks is looking at a new sausage system with an installed cost of $375,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped ...

Market-value ratios garret industries has a priceearnings

(?Market-value ratios?) Garret Industries has a? price/earnings ratio of 19.46X a. If? Garret's earnings per share is ?$1.65?, what is the price per share of? Garret's stock? b. Using the price per share you found in par ...

You are planning to make annual deposits of 4440 into a

You are planning to make annual deposits of $4,440 into a retirement account that pays 9 percent interest compounded monthly. How large will your account balance be in 32 years?  (Do not round intermediate calculations a ...

One year ago you bought a put option on 125000 euros with

One year ago, you bought a put option on 125,000 euros with an expiration date of one year. You paid a premium on the put option of $.05 per unit. The exercise price was $1.36. Assume that one year ago, the spot rate of ...

Common stock versus warrant investment tom baldwin can

Common stock versus warrant investment Tom Baldwin can invest $6,300 in the common stock or the warrants of Lexington Life Insurance. The common stock is currently selling for $30 per share. Its warrants, which provide f ...

Call optionnbspcarol krebs is considering buying 100 shares

Call option  Carol Krebs is considering buying 100 shares of Sooner Products, Inc., at $62 per share. Because she has read that the firm will probably soon receive certain large orders from abroad, she expects the price ...

  • 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

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As