Disney Pixar and the Third Case Study

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Perhaps more than any of the media and entertainment conglomerates with which it competes, Disney has created a prolific, colorful and always expanding universe of characters that draw immediate recognition and appeal. Today, Woody and Buzz Lightyear are as recognizable as Mickey Mouse and Donald Duck.

Weaknesses:

One of the core weaknesses revealed in the decade following Disney's early-90's animation renaissance was the lack of elasticity in its animation department. The company was unprepared for a set of lean years in which its growth had exceeded its ability to earn on its investment. According to Alcacer et al., "Some of the same features that observers credited for Disney Animations' success -- large staff, large budgets, and lots of time -- were also blamed for its demise. Disney Animation had just 275 employees in 1988; about 950 in 1994 for the release of the Lion King; and 2,200 at its peak in 1999.9 Competition for animators in the 1990s also caused salaries, which accounted for 80% of each film's cost, to balloon, with top animators' pay rising from $125,000 in 1994 to $550,000 in 1999. And these pay increases affected employees across the board." (p. 2)

Opportunities:

The acquisition of Pixar has represented the opportunity for Disney to continue to expand its brand universe, integrating characters from newly popular integrated films into its merchandising strategy, its theme parks and its copyrighted images stable.

Threats:

The greatest threat to Disney today is the nature of media sales today. With digital piracy having a significant impact on DVD sales, Disney's animated films are subject to the same declining value if not properly managed. Fortunately for Disney, this threat is pointedly limited by Disney's ability to maintain the visibility of its characters in theme parks and merchandise.

Options and Recommendations:

Disney's various options as it reached this crossroads in the mid-2000s included the possibility of severing ties with Pixar in the interests of creating its own CG studio; the possibility of severing ties with Pixar and establishing a similar partnership with one of its rivals such as DreamWorks; the possibility of renegotiating another temporary agreement with Pixary; and the possibility of purchasing the company outright.

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The recommendation that must be drawn from this account is for Disney to proceed with its acquisition of Disney. Were it 2005 and Disney was on the precipice of this decision, logic would suggest that such a dramatic gesture would be necessary to both revive Disney and solidify its new leadership. According to an article by Burrows & Grover (2006), new CEO Robert Iger has "revamped Disney's management style and has improved some operations. Still, the company's stock is at about the same level it was a decade ago. And Iger has only been CEO a few months, so he's on new footing with Disney's directors. One management expert calls the Jobs move "courageous" but says "Iger just put a gun to his head," predicting that Jobs's influence in the boardroom would be so pervasive that Iger could be gone within a year." (p. 2) Speaking in retrospect, we know this gamble has paid off for Disney and Pixar.

Implementation and Control:

Implementation of the purchase of Pixar has involved a coordinated permeation of the studio's iconic characters with those already important to the Disney brand. This would include the creation of new rides and theme park 'lands' centered on characters from Toy Story, Monster's Inc. And other successful characters.

Still, control of the company is now split between parties as Apple CEO Steve Jobs ascended with the merger to become the largest stockholder in the Disney company. One might suggest that given the considerable and sustained success enjoyed by Jobs' other ventures, that Disney is now in good and innovative hands.

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