Book Summary 22 — To Pixar and Beyond
You can find all my book summaries — here.
…is a really well written book by Lawrence Levy Pixar’s CFO around the time of its IPO. The story flows and gives an insight into Pixar’s and therefore the animation movie history, as well as into the process of raising an IPO.
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“Great graphics will keep us entertained for a couple of minutes, it is story that holds us in the seats”
The book starts with Lawrence receiving a call from Steve Jobs to become Pixar’s CFO and to lead it towards an IPO. Jobs at the time was trying to make a come back after being kicked off the Apple board. He initially bought Pixar to make it a hardware company, but realised that that’s not what it was — it was an animation movie / entertainment company.
Lawrence comes on board as CFO, but struggles to understand the business and industry, as the entertainment industry is fully controlled by Hollywood and nobody wants to share their business plans. Pixar and Disney have a deal (which was signed before he joined as CFO) — Disney pays for production, marketing and distribution costs for the first 3 movies, but also receives 90% of its revenues.
Lawrence and Steve come up with a 4 step plan to make the company a success.
1. Successful launch of first movie — Toy Story
2. IPO to get cash
3. Renegotiation of the Disney contract
4. Pixar as a brand
Toy Story comes out after 5+ years in production — it’s super hard to make animations back then as you need to think of every single detail and animate it and then put it back on film for the cinemas. It is a massive hit and becomes the 3rd top grossing animation of all time.
IPO preparations don’t go smoothly — Goldman Sachs and Morgan Stanley don’t want to do it, so Lawrence finds other 3 smaller investment banks. As part of the process Steve also finds a couple of Directors for the Board (who he trusts — remember: Apple kicked him out). The IPO is a massive success, with Steve owning all of the shares (apart from a small employee share pool — Jobs was super stingy with giving away shares).
With the new cash they enter Disney’s renegotiations, which are really difficult as Disney doesn’t need to renegotiate. In the current contract Disney has a sweet deal of 90% revenues from the first 3 films including all their sequels. Considering that it takes 3–5 years to product one movie, Pixar is locked in for 10+ years. Pixar offers to pay for half of the production costs, but wants 50/50 on revenue, as well as their brand to be shown on the movies (Toy Story was branded as “Disney’s Toy Story”). At first the negotiations break down because of the branding issue, but after almost a year they agree to the above terms, because Disney does not want to miss out on the animation industry.
All 4 pillars of their change achieved, Pixar continues with other blockbusters such as Cars, Bug’s Life, Finding Nemo, etc.
The shares skyrocket and Pixar is bought by Disney for almost $7 billion — making Steve Jobs a billionaire. Around that time he is also asked to join Apple’s board again.
