Monday, August 13, 2007

Was Buying Pixar a Titanic Decision? Probably.

The reason it's Titanic (meaning fine, meaning okay) is simple. You can't put a price tag on the capture of lightning in a bottle...

You also can't calculate the damage that would have been done to the Walt Disney Company if Pixar had been allowed to waltz off to some other conglomerate and cut a deal there. But Robert Iger and some of Disney's green eyeshade boys made mathmatical equations, and Mr. Iger obviously wasn't willing to go near the answer to that particular question. He made a decision made under duress, but he made (I think) the right one.

Now, did Steve Jobs drive a hard bargain after that decision? Sure. He was in the driver's seat, knew it, and therefore drove.

He's not a billionaire for nothing.

So let's look at Pixar's box office -- the reason that the hard-bargaining and decision to buy -- occured in the first place: Pixar has never had a box office loser.

I mean, they're 8-0.

You can make a to-do over the fact that the company's performance trendline is down, but only fools believe that 800 million to billion dollar worldwide grosses are the norm.

Ratatoutille might be a "disappointment" for someone convinced that John Lasseter and the Pixar brain trust have a magical set of keys to $300 million domestic ticket sales every time one of their features goes into wide release, but there are too many variables for any sane person to get that kind of religion. Take one example from commenter Joe Shelby:

Rat was hit hard not just by a difficult marketing job given its "is not Disney / is now Disney" history. It was also hit extremely hard, as I posted on JHM, by the largest summer blockbuster competition in history (every weekend a new release) driven entirely by sequels to well established franchises.

Yet even with all the heavy hitters north and south of it, Ratatouille now closes in on $200 million domestically, and is doing fine overseas:

The launch of Disney-Pixar toon "Ratatouille" in Gaul over the Aug. 3 frame scored the Mouse House its second-best opening ever in that country, after Pixar's "Finding Nemo."

"Ratatouille" ... made $11.4 million from 721 runs, beating out holdover "The Simpsons Movie."

Disney-Pixar toon also led in its Spain launch, cooking up $3.5 million. Pic is expected to have good staying power...

Staying power, it's a wonderful thing. Remember Titanic? That costume epic that collected all those Academy Awards, and $1.8 billion at the box office? When writer-director James Cameron went over budget before its socko release, Fox executives were a trifle concerned, because Fox was holding the bag for the lion's share of the budget (even though Viacom was in for a big piece of the action.)

But this was only one of the problems. The picture's complicated post-production wasn't completed in time for the original big summer launch date, so the decision (considered risky at the time) was made to roll it out at Christmas instead of the following summer.

Commentators wrung their hands, saying Fox was making a bad choice not releasing it when the kids were out of school. "Bad move...Disaster in the making...Fox's donnybrook..." etc., etc.

But how disastrous could the results have really been? James Cameron, after all, was batting 1.000. Terminator, Terminator2, The Abyss, True Lies. All hits.

And the "risky, foolish" decision turned out to be the right one. Titanic opened with a good but not great $25 million. Then, week after week, the $25 million gross never went down. Staying power.

That corporate decision, made under duress, turned out to be genius. Because the big ship sailed calm box office seas, far away from all the summertime icebergs and ended up a winner. (And wasn't that fortuitous?) And Fox today is still in business with James Cameron, despite the huge budgets and cost overruns for which Mr. C. is famous.

All of this seemed kind of obvious after the fact. It certainly didn't before. Perfect vision occurs only when you're looking over your shoulder, not when you're squinting at the landscape out ahead.

But let's return to Disney's purchase of Pixar. Was it a bad choice? Is it a disaster in the making? Maybe, if the Pixar Brain Trust goes down in the corporate plane. Otherwise, it's a completely rational and okay decision. Just like backing James Cameron was a rational and okay decision a decade ago.

This is Hollywood, after all. Going in, you know you're making decisions about trapping lightning in bottles. And playing the odds.


Joe Shelby said...

Uh, "Joe" Shelby, not John (who happens to be my father's name ;-) ), but thanks for the support.

Anonymous said...

Clearly the right decision. I shudder to think what would have happen had Pixar cut a deal with the competition.

Iger made the only wise choice. Had he not, I'd be using my Disney stock for wallpaper.

Anonymous said... Brad Bird part of the "Pixar brain trust"? After all, he's responsible for most of their recent successes...(of the last 3 films, 2 of those were his), and if he's now moved on, won't that leave a huge gap in the talent pool? Just wondering...

Anonymous said...

Actually I think Andrew Stanton is the one who is at the top when it comes to writer/director. I feel everyone of them are just as good but, Andrew Stanton just seems to be slightly 1 up.

Sure Finding Nemo is way ahead in the box office, of the other Pixar movies, but I just mean the film itself is just....Wow!

My favorite is actually "A Bug's Life" cuz I like 3 Amigos (I noticed Randy Newman is involved with both) and David Foley. (I'm Canadian!)

Anonymous said...

"My favorite is actually "A Bug's Life" cuz I like 3 Amigos (I noticed Randy Newman is involved with both)"


Steve Hulett said...

Uh, "Joe" Shelby, not John (who happens to be my father's name ;-) ), but thanks for the support.

Oops. Must have mislaid my glasses.

A thousand pardons.

Steve Hulett said... Brad Bird part of the "Pixar brain trust"?


Anonymous said...

Why would anyone, least of all "Joe Shelby" read jim hill, much less comment on his drivel?

Steve Hulett said...

Why would anyone, least of all "Joe Shelby" read jim hill, much less comment on his drivel?

Hill's stuff is often so wrong-headed that the temptation to puncture it with logic becomes irresistable.

Joe Shelby said...

Well, there are two things on his site: glimpses into the behind the scenes of the movies and parks, particularly things that never actually got made or finished, and economic and business predictions for the future, usually based on the "rumor mill".

The former do make the site worth visiting, or at least keeping an entry in your RSS reader. His history of things like Western River Expedition and the like have been fascinating. Reading his archives and seeing his early "previews" of movies in development (now since released) one can get a glimpse of how he thinks and is able to look objectively at his prediction rate...

...which runs only about 25-35% accurate.

Then again, that's about as good as any other forecaster in the entertainment economics business. Some studios will kill for someone that accurate...which is rather depressing in the bigger picture of things.

But like this Pixar thing, his main problem is when he wants to go on a rant, he tries to isolate variables that shouldn't and in reality can't be isolated. He tries to pin things down on one person's decision or misfortune, where many things play into why such-n-such did great or poorly.

As for Pixar, again, looking at ALL variables and ALL income sources, I see Disney getting some very big bargains out of the deal. Most importantly, they get royalty-free usage of the characters for the parks, which is a BIG deal. Second, they get ALL of the merchandise revenue, no longer having to share a cut of that. Cars's revenue alone was rather impressive. All Disney/Pixar needs is one more "Nemo" and the deal will have paid for itself easily.

Anonymous said...

What is so huh? about me liking 3 Amigos or Randy Newman being involved with both movies? The 3 Amigos (he co-wrote) is the same storyline as A Bug's Life (he composed).

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