Steve's mephistophelian negotiation powers

Rohit Khare (
Wed, 5 Mar 97 17:58:28 -0500

[My god -- this never went out? Sheesh... fie on me. In any case, this was Tuesday
February 25, the day after an NYT biz front on Woody & Buzz]

From: Rohit Khare <khare>
Date: Tue, 25 Feb 97 09:22:07 -0500
To: FoRK
Subject: Steve's mephistophelian negotiation powers
X-Telephone: +1 617 253 5884

1) Never bet against Steve Jobs

2) Always bet with the NYTimes

Yesterday, on the Monday Information Industries front, there was a big splash
on the long-term value of Pixar's digital characters. It noted that the
original 3-picture Disney deal was worth 10-15% of gross profits, so it would
be a long time before it became really profitable on its own -- though it
hinted there was room to renegotiate. The stock, it noted, was as low as it
had ever been, waay down from its IPO-day runup to 39. Steve, though, still
insists he spends 80% of his time at Pixar.

I thought to myself, I believe in Steve, this is cheap. I should look into
picking some up soon. Great long-term bet, as Apple might become soon.

Today, I see Steve has convinced Disney to scrap the agreement for a 50-50
joint venture. The stock is up $6 7/8 to $21. DAMN! DAMN!


February 25, 1997

Disney in 10-Year, Five-Film Deal With Pixar


Walt Disney Co. announced an unusual 10-year partnership Monday with Pixar
Animation Studios to jointly make five films in a deal that reflects the value
Hollywood increasingly places on the lucrative field of animated movies.

Disney and the fledgling studio will equally share the costs, profits and
logo credit on the five films. The studios will essentially be sharing a
brand, as the movies will be called Disney-Pixar productions.

Disney also announced that it would buy 1 million shares of Pixar, and would
acquire warrants that, if exercised, would lift the Disney stake in Pixar to 5
percent. Disney executives said that they had no current plans to buy more
than 5 percent of Pixar.

The profit-sharing arrangement between Disney and Pixar covers not only the
box-office revenue from the five movies, but also the sale of related products
like home videos, toys and computer games. With hit animated films, far more
than in live-action movies, the profits from these spinoff products can
surpass the earnings from the movies themselves.

Pixar, a pioneering computer-animation studio, made the hit film "Toy Story"
with Disney. "Toy Story" was made under a previous three-movie contract
between the two companies, signed in 1991. Under the previous contract, Pixar
would make the movies, while Disney provided advice, funding and distribution.
For its efforts, Pixar received 10 percent to 15 percent of the total profits
from the movies.

With Monday's announcement, the 1991 contract is scrapped and replaced by one
that gives Pixar 50 percent of the profits on future movies. The first,
tentatively called "Bugs," is scheduled to be released during the 1998 holiday

Clearly, the terms of the new contract are far more generous to Pixar than in
the previous one. Pixar's stock price jumped $6.875 Monday, to close at $21 a

After "Toy Story," the leading box-office moneymaker in 1995, Pixar's value
as a partner rose sharply -- not only for Disney but for the other major
studios now rushing into the animation field. Steven Jobs, the co-founder of
Apple Computer Inc., who is chairman of Pixar, had talked to other studios in
recent months.

"But we wanted to stay working with Disney," Jobs said. "Our collaboration
has worked well in so many ways. Disney was the preferred partner."

For Disney, the new deal tightens its link with Pixar and extends the
partnership for a decade, ensuring that rival studios do not gain access to
Pixar's proven skills.

Several studios, including Dreamworks SKG, News Corp.'s Twentieth Century Fox
and Warner Bros., a unit of Time Warner Inc., are all investing heavily to
make animated feature films, hoping to emulate Disney's creative and business
success in the field.