The company of Pixar Animation is one of the most successful enterprises that specializes in transforming the business of movie making to a new frontier. The CEO of Pixar Animation, Steve Jobs formulated a unique concept that was on the basis of creativity and advance technology thru the prisms of movie-making. The journey that Mr. Jobs took was to grant the creative team of Edwin E. Catmull and crew to transfer ideas into 3-D reality. The benefit of this union was the most impressive collaboration of creative, talent, and networks that produced several high grossing movies. Over time, the Pixar Animation Company came across issues related to their contract with Disney that posed problems internally and externally to meet Pixar’s set goals.
The alignment with Mr. Job and Mr.Catmull formed an exceptional reliance that provided for a working management team at Pixar that focuses on the core concept for effective decision making (Borja de Mozota, 2003). In return, the management team that Mr. Job and Mr. Catmull was able to strike an interesting contract agreement with Disney Studios back in the early 1990s, in which, at the time seemed to beneficial to place Pixar movies on the map both nationally and internationally. With profound success with Toy Story and subsequent movies to follow, the Pixar product reached heights never seen before in the industry. However, there was a major problem to reveal itself the several years later in 2004 when a discussion for the contract to be renegotiated with Disney went in the wrong direction.
Mr. Jobs felt that the initial contract did not offer the major benefits of a creative enterprise generating over $340 million dollars on its first movie release and has grown over the years to be a force in the animation movie market. The contract adjustment was a major problem with Disney that the management team at Pixar was determined to rectify. In addition, the internal issue with Pixar was the production and development divisions to sustain the growth and vitality of the creative substance of the company for the future business.
The Pixar Animation Company contract with Disney poses several issues that stemmed initially from the concept of Disney receiving more of a deal than Pixar. Case in point, the initial contract provided Disney half of all profits of the high generating movies created by Pixar. The profits were on films ticket sales, video sales, and merchandising sales that limited the growth of the Pixar Animation Company, in expanding their creative interests. In the beginning, the concept was acceptable to gain Pixar a foot in the market and brand identity, however, a need for a redirection for a review of current status of management focus for effective strategy.
The surge of Pixar Animation creativity and style for bringing drawing sketches to a whole new frontier captivated to record sales across the world. Although, the relationship with Disney provided the means for implementation of those ideas to reality, the Pixar Animation Company needed a room for making strategic decision making within the constraints of the contract. In addition, Pixar was not able to focus on the structure of their internal departments, rather, the concerns for expansion limited their reach. Therefore, an adjustment of the initial contract – that is conducive to realizing the imperative contribution of Pixar Animation for rebranding Disney of bringing a new concept to the market (Beroggi, 1998).
The main concern with Mr. Jobs as the CEO at Pixar Animation was the fact that a new strategy on an agreement could pose an impact to Disney due to effective management team at Pixar accruing a talented pool of staff in strategic roles. Furthermore, the vantage point on the market of distribution was a huge benefit with Disney, however, the cost of this part of arrangement posed a restricted room to grow internally at Pixar by keeping up with its previous management strategic initiatives to obtain and sustain talent pool of artists (Klign, 2007). The continue efforts by Pixar to live up to the initial contract with Disney was on par and provided a new way view a computer generated story-telling concept. With limited management strategic control of Pixar, the restrictions created an effect that also allowed for other competition to enter the market and take away some potential revenues that previously propel Pixar creations to profound heights. See Figure A:
Box Office Grossing Millions
Toy Story 2
Toy Story 2
A Bug’s Life
Beauty ; The Beast
The additional awareness of problems at Pixar Animation Company was also growing sentiment of the length of time of production, development, and distribution. The available cash at of the company at the time of the initial discussion on the contract with Disney was at several million dollars that presented a means to break-away from Disney if no deals were made accordingly. The issues with the production and development departments are with the focus for releasing more movies than previously but – that prospect demands more cash flow if done without Disney assistance. Therefore, the vantage point is urgency for a newer relationship that would benefit Pixar – to address the management decision making to secure more productive internal divisions (Sanwal, Critterden, 2007).
The need for a more structure production and development unit of Pixar also presented a difficult concept to undertake if standing alone and no longer apart of Disney due to the complexity of the channels for the deliverables. The Pixar Animation management tool strategy on the selection the best staff to work on certain projects for production and development so far manages the issue to a degree; however, the need to grow and expand on previous movie titles creates pressure for more earnings than granted in initial contract. The process of the distribution market poses a difficult task that will be a challenge compared to Disney due to limited networks for execution. Therefore, the need for a more flexible means within the contract to broaden their organizational matrix – that will propel Pixar Animation bottom line to the forefront and will advance control within the company.
Identification of Problems/Issues Needed To Be Addressed
The main issue of concern is the contract between Disney and Pixar Animation Company that has major restrictions in the animation company ability to expand financially and internally. The contract with Disney poses a stubborn management approach for a redirection to provide a more willingness for flexibility due to the successful enterprise. The Pixar Animation Company was the really first known computer generating entity on the movie scene with highly producing films, that Disney saw the potential but not the need to readjust Pixar in a favorable way.
The proposal of Mr. Jobs were to have Disney to accept a deal that provided Pixar to have half of profits, more control over films, the right finance and to marketing as well as a distribution fee to Disney of 7 – 10%. The Disney perspective didn’t wanted to seal the deal due to the limited amount of revenue returned. The Pixar management team felt that – that approach was unacceptable for moving forward towards their goal to exceeding in financially and creating in the world of animation movie making.
The Pixar management team needs to deal with the issue of being in control of making more profits. In turn, the Pixar management team will be able to sustain the trials and tribulation of changes in the trends of the entertainment world. Such as, the concerns of the possibility on future non-producing movies not generating high ticket sales that affects their already low % of return on profit sharing (Savory, Butterfield, 1998). The Pixar management team needed to project a win-win situation that actually demonstrates to Disney that Pixar was the leader in its field and a better proactive approach to stimulating the energies for having management creative control and financial returns due to continue marketable movie titles.
The management team of Pixar approach could be presented by offering a higher percentage of revenue ticket sales that ranges from above the offered standard. In which, the protocol would make Pixar Animation more on the receiving side and Disney as a subsidiary side (Haritz-Menne, 2004). The argument would be that unique concepts and technology advancement sets Pixar apart for delivery of exceptional animation outcomes. In addition, the bottom line of revenue in figure A proves that each past and recent movie title increased in revenue by at least 5-10% that will result in potential future higher returns if an adjusted contract was approved by Disney.
The focus on profit sharing proposal would then provide a new opportunity for Pixar to grow in other areas of focuses that otherwise limit the management role (Vaughn, 2007). The profit sharing and more rights to merchandising would add to the newer contract by allowing a creative hand in the final deliverables. In part, the adjusted contract with Disney could encourage a justice theory on part of Pixar Animation Company that balances out the input of ideas and performance, in which, the power source is motivation on part of Pixar to continue creating awesome movies. The effort on part of Pixar would produce quality of work that Disney has previously enjoyed with the lion share of positives going back to Disney. Therefore, a redirection of the contract to being more flexible is in order so that a continued relationship is desired. (See figure B)
Quantity of work
Quality of work
Level of customer service
Feeling of accomplishment
Pleasure of doing interesting work
The other issue to address is the need for more control on the marketing and financing of the movies from Pixar that could provide room for creativity. The noted success of Pixar was the profoundly success of the movies that was record breaking. Pixar has a unique management concept of nurturing creative talent from all levels of the company. In order to perform this method, the ability to have the freedom to infuse such creative means of the marketing aspect that would continue the stream of positive revenues (Best, (2006). The recommended approach could be reach by a dedicated management team that had both companies’ representatives on the panel. The slight difference of the initial contract is an alignment to Pixar desire to have more decision making in focusing on creative marketing – that has been proven in figure A of high gross making exceptional movies.
The financing control would go in line with the initial workable plan that provides the Pixar Management staff to direct their preferences in a particular way. The ability to allow the financing being in control of Pixar places the area of diversification into their portfolio that infuses the bottom line would benefit the concept for needed market growth (Sanwal, Crittenden, 2007). The contract with Disney did not provide a means for growth for Pixar when consistent profitable movies became a reality, therefore, the proposal should be highlighted to the intervention of a clause for variety of financing opportunities. The benefit would create a more profound landscape of choices in financing options that are specific to the needs of Pixar.
Discussion and Justification of Analysis to Resolve Identified Problems/Issues
The justification for the redirection of the contract with Disney caters to the notion that Pixar is a pioneer animation company with proven success in the animation market than any other entity. The Pixar talent pool presented the best in the business of creating unique and different concepts for evolving the technology characteristics. Furthermore, the need for a more flexibly contract on ticket sales, rather than, the Disney being on top for receiving a higher return on record breaking movies. The main clarification of a readjustment of the contract is due to reflect the turning point of continue increase of revenue over time (Ingram, Laforge, 2006). The movies provided Disney huge returns as well as additional brand visualability. The Disney profited more than on revenue but as well as the main leader in the animation business with the assistance of Pixar.
The structure of a business contract must initially provide interests from the investor that still empowers the dependant entity. The contract should allow for a means of negotiation at a future time to ensure that what was previously agreed upon is still warranted today (Procter, 2007). However, the Disney Company was not interested in wiliness to redirect the initial contract to have Pixar reap some of the rewards for such awesome talent. In doing so, Mr. Jobs at Pixar researched other options and decided to connect with the Hollywood Studios that presented a more rewarding business aspect. A relationship with Hollywood Studios created a new opportunity that addressed the concerns of flexibility to the actual needs of Pixar.
The concerns of control that Pixar so desperately wanted and deserved due to the power to sell movie tickets – that was beneficial for both parties that provided empowerment. Therefore, Pixar had to seek other means of options if Disney did not consider the initial readjustment of the contract to continued limited growth. The Pixar Animation Company demonstrated the functional and divisional power matrix – that outlines the flow of the organizational behavior, in order to generate an exceptional product. (See figure C).
Ability to control uncertain contingencies
Ability to control and generate resources
Functional of Divisional Power
The prevention of acceptance to reflect the advantage position of Pixar Animation in proven high producing movies, the Disney Corporation demonstrated the refusal to acknowledge the trend of the positive returns. That refusal created a very limited division for operational control on pertinent interests relaying to creativity (Mullins, 2006). The need to allow such additional control in regard to the merchandising arena that empowers the talent at Pixar to benefit on its efforts. The ability to gain access to the decision making in creating high-quality research and development is the basis of irreplaceability for functional divisional power. In doing so, the coalition between Disney and Pixar could merge to the fundamentals importance’s of each role; Disney a more subsidiary role compared to Pixar as the central source of distributing outcomes.
Evaluation of Courses of Action or Strategic Alternatives
The action strategy is warranted to make a deal with a different entity that answers the certain needs of Pixar (Vaughn, 2007). Those needs were more profit sharing due to the enormous growth of movies producing record breaking ticket sales. In the beginning, the Pixar Animation needed Disney as a stepping stone to reach the audience to view a new concept to computer generating images. After the success of profound levels of achievement, the management team at Pixar demonstrated a growth surge both internally and externally that needed to be address. Therefore, the need for a revamp of the initial contract should be readjusted to benefit Pixar as a depart division.
Since Disney wanted to keep the status-queue, the decision for Pixar to network with Hollywood for the benefit of a functional management strategy is more beneficial. The ability to demonstrate a proactive functional management provides Pixar the freedom to address the areas of production, development and complex channels of distributing that in all areas address the profit sharing issue. The redirection strategy thru another medium poses a greater opportunity for added resources, in order to make decisions internally regarding staff, processes, and future strategies (Werhane, 1999). In doing so, the Pixar management team has the means to create the most recent technology deliverables as in the past with Disney and reap the necessary rewards accordingly.
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Bottom of Form
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