Disney-Pixar vs Dreamworks | Regime Change | 3

Hey, business wars fans, have you heard? Audible subscribers can listen to new episodes of business wars early and ad-free. Right now, join Audible in the Audible app, or by subscribing on Apple Podcasts. He's the 72-year-old nephew of Walt Disney, and the last family member still involved with corporation. Roy is sitting in the dining room of Steve Jobs' English-style country home, because he and Jobs share a mutual problem. Disney's CEO, Michael Eisner. Roy sips his wine as the Apple CEO and picks our chairman, Vince. Michael attacked me. He attacked Apple. He told Congress that I run a business built on copyright theft. A total lie. How can I work with someone like that? I can't trust him. Roy nods. He shouldn't trust him. He put a spy in Disney animation to keep tabs on me. It's because I stand up to him. You see, my role, and actually, my duty is to protect Walt's legacy to ensure Disney doesn't lose its magic. Michael only cares about short-term profits. He's nickel in diming the amusement parks. I'm not sure that even animation is safe anymore. Jobs smiles. His hunch that Roy could be a potential ally was right. Agreed. Disney used to be the master of animation now it makes embarrassing duds. Roy pears into his wine glass. There's a look of sorrow on his face. Michael wasn't always like this. When I staged the boardroom coup at 84 and made him CEO, it was wonderful. It was like the scene in the Wizard of Oz where the munchkins dance and sing, ding dong the witch's dead. Well, now Michael's the witch. Jobs senses its time to show his hand. Next year, Pixar will start talks with Disney about renewing their partnership. Jobs wants to reduce Disney's role to being nothing more than Pixar's distributor. He's had enough of Pixar being bossed around by Disney. He wants Pixar to be a truly independent studio, free to decide its own destiny, just like Dreamworks. But he knows Eisner will never accept that. So he wants Roy's help. Jobs stares into Roy's eyes. Roy, Pixar and Disney working together was probably the most successful partnership in movie history, and it was great while it lasted. But when the current deal ends, Pixar will leave Disney. I will never make a deal with Disney while Michael's there. Roy's eyes widen. He knows that losing Pixar would devastate Disney. Disney ruled animation in the 20th century, but Pixar is the only thing saving it from irrelevance in the 21st. And for Roy, animation isn't just another business division. It's the soul of Disney. He can't let this happen. So, after his dinner with Jobs, Roy starts using his influence as a Disney board member to pressure Eisner to make a deal with Pixar at any cost. Just as Jobs hoped he would. Jobs has just used Roy to put Eisner in check. But it's not checkmate yet. And Eisner still believes he can win this game. Hi, I'm Lindsey Graham, the host of the podcast American Scandal. Our latest series tells the story of college counselor Rick Singer who thought he'd found a way to rig the admissions process for his wealthy clients until an unrelated FBI investigation inadvertently exposed the largest college admission scandal in American history. Listen to American scandal on Audible or wherever you get your podcasts. James Arthuray was a charismatic self-help guru who promised his followers a path to wealth and enlightenment by becoming the best versions of themselves. But not all who followed him finished their journey. For the best bingeable series, listen to the Audible True Crime podcast wherever you get your podcasts. From Wondry, I'm David Brown and this is Business Wars. On the last episode, Toy Story kicked start of the age of computer animated movies. Dreamworks and Pixar had a bug brawl at the box office. And Shrek made Dreamworks, champagne wishes, and caviar dreams come true. Now, after four blockbusters in a row, the Disney Pixar Alliance is fraying. Not the Disney's worried. It still believes traditional animation has a bright future. But it's about to get a reality check. This is Episode 3, Regime Change. November 2002, Mammoth Mountain's ski resort, California. Ron Clements crouches on his skis and carbs through the snow. The 48-year-old director feels he's earned this vacation. He spent the last four to half years taking Disney's movie Treasure Planet from Concept to Box Office. He first pitched his hand-drawn sci-fi reimagining of Treasure Island in 1985. Now, it's finally playing on thousands of screens nationwide. He slides to a halt at the brow of the next slope and admires the mountain view. But his cell phone interrupts the moment. He yanks off a glove with his teeth and scrambles to find his phone. Hello, Ron, it's Thomas Schumacher. Schumacher is the president of Disney Animation, and Clements has been expecting this call. You get the box office numbers? Yeah, but first I want to say that Treasure Planet is a fantastic movie. Oh, how bad is it? Are we talking at Lannis Bad here? Last year's Atlantis, the lost Empire, marked a new low for Disney Animation. Its lukewarm reception underlined just how far the studios fallen since the Lion King. Worst. Worst than Atlantis? Twelve and a half million in five days. Clements feels winded. Disney spent $170 million on Treasure Planet. His movie's going to lose the company tens of millions. After Treasure Planet's failure, Disney's CEO Michael Eisner calls time on traditional animation at Disney and overhauls the studio. Half of its 2,000 animators lose their jobs. The rest are sent to computer graphics boot camps to be prepped for the leap from pen and ink to monitor and mouse. The production pipeline gets reconfigured too. From 2005 onwards, Disney Animation will only make computer animated features. But these changes are about more than just the waning interest in hand drawn animation. They're also about Pixar. Eisner wants Disney to be ready to compete with Pixar. Should the talks to renew their partnership fail. But he hopes it'll never come to that. He's sure that Pixar's run of hits can't last and when the studio finally trips up, Disney will gain the upper hand. And based on what he's seen, Eisner believes Pixar's next picture will be that miss. On May 30th, we're looking for Neymar. The search is on. It's May 2003 and after two years away, Pixar's fifth movie is inbound. Under endless dangers. Nice. One fish will go where no fish has gone before. Up inside my mouth if you want to live. Walt Disney Pictures presents a Pixar animation studio's film. I'm coming Neymar! Finding Neymar, ready to go. For Eisner and Pixar chairman Steve Jobs, a lot hangs on finding Neymar. Its box office performance will set the tone for the fraught negotiations that lay ahead. And it opens with a splash. Finding Neymar shifts 71 million dollars of movie tickets in its first weekend. It's the best-ever debut of an animated movie in the U.S. and Canada. And the interest doesn't weigh. Week after week, Finding Neymar packs the theaters. Eisner watches as his negotiation strategy. Watches away like a castle-made of sand. But he's not the only one hurt by Pixar's latest smash. July 7, 2003 DreamWorks Animation, Glendale, California. In the conference room, the studio's executives are gathered for their usual Monday morning meeting and feeling low. DreamWorks latest hand-animated movie was released last week. It's called Sinbad, the legend of the Seven Seas. DreamWorks hoped it would prove their still life in traditional animation. Instead, it grossed less than $7 million in its opening weekend. At same weekend, Finding Nemo made another $11 million. Pixar's fishy tale is about to replace the Lion King as the highest grossing animated movie of all time. Sinbad is about to become DreamWorks' fourth hand-drawn misfire in a row. DreamWorks co-founder Jeffrey Katzenberg enters the conference room. Usually he buzzes with energy. Today, he moves like his batteries are running low. He stands before his team with a solemn look on his face. Sinbad's a failure, and each of us must own up to our own role in that failure. We made a weak movie, and marketing failed to sell it. Everyone here has a cross to bear. The exact stare at the floor. This isn't the uplifting pep talk they hoped for. But we've got to listen to what the audience is telling us. Sinbad will be our last 2D animation. It's been eight years since Toy Story. The generation now entering their teens grew up with computer animation. They don't want traditional animation. This isn't news to the team. It's Katzenberg's love of hand-drawn animation that's held DreamWorks back from going all in on digital. But now, faced with a public's brutal rejection of Sinbad, he's a convert. Our R&D years are over. We found our identity in Shrek. DreamWorks is irreverence, a verse of PG, not G, and, yeah, computer animated. Those are the movies we're making from here on out. It's taken 9 years, but DreamWorks now knows what sets it apart. While Disney trades in fairy tales and Pixar tells warm-hearted stories for the whole family, DreamWorks is the sarcastic uncle of the animation pack. It doesn't take itself too seriously, and it's happy to revel in crude jokes if it gets a laugh. But that journey of discovery has been pricey. Sinbad's failure inflicts a $125 million blow to DreamWorks finances and sparks a cash flow crisis that threatens to tank the whole studio. DreamWorks again turns to its billionaire benefactor, Microsoft co-founder Paul Allen. But Allen's out of patience. He's invested $700 million in DreamWorks, and now he wants returns. But with a rest of DreamWorks floundering, the only way to unlock the huge sums Allen is owed is to spin off the animation arm. And as DreamWorks prepares to cleave in two, there's unrest in the Magic Kingdom. November 2003, the Pierre Hotel Manhattan. Disney President Bob Eiger enters Michael Eisner's apartment. Eisner said the window looking out of a recentral park. "Michael, what's happening? Your assistant said it's an emergency." Eisner hands Eiger a letter. Someone slipped this under my door. It's from Roy Disney. Eiger unfolds the letter and starts reading. Roy's resigning from Disney's board and he's not going quietly. His resignation letter accuses Eisner of multiple failures, including destroying relations with Pixar. Eiger reaches the final page and reads aloud Roy's parting shot. This my sincere belief that you should be leaving not me. Accordingly, I once again call for your resignation and retirement. "Wow, man, he's starting a campaign to get you fired." Eisner nods, "Yes, he's angry I invoke the mandatory retirement rule to remove him from the board." "So what are you going to do?" "I'm not resigning if that's what you're asking." His clueless, we only kept him around for publicity. He tried to stop us from creating the Disney Princess line. That's a billion dollar business he'd have thrown away, but better off without him. He ousted your predecessor in this saved Disney campaign he's threatening could be trouble. Disney was smaller in '84. He had more sway then. He might cause some PR headaches at the annual shareholders meeting in March, you know, I can't see investors rallying behind him. But Roy's campaign is about to get a helping hand. January 2004, Pixar headquarters, Emoryville, California. In Pixar's conference room, Disney Studios chairman Dick Cook takes his seat. He's here for another round of talks with Steve Jobs. Jobs won't even meet with Eisner now, so it's fallen to Cook to negotiate a deal. But the talks are going nowhere. Time after time, Jobs makes demands and Eisner rejects them. Jobs hands Cook some papers. Cook looks up at Jobs. "What's this?" A revised terms. Cook's jaw drops as he reads Jobs latest demands. "You want us to give you the right to all your previous movies, just for the privilege of distributing your movies in the future?" "Correct." Steve, Michael will never do that, and he'd be right not to. "Come on, you need to give a little. Michael's formed a new animation studio to make sequels to Pixar's movies should these talks fail." "If we don't find a way forward, that studio will be making Toy Story 3. You get that, don't you?" Jobs scales. Pixar's creatives have invested years of their lives bringing these characters to life. Jobs has seen Pixar creative chief John Lasseter cry at the thought of leaving Woody Buzz and the rest of the gang at the hands of Eisner. But Jobs is willing to pay that price. If Michael doesn't like our offer fine, we'll work with Warner, Sony, or Fox instead. Cook returns to Disney HQ and relays Jobs' new demands. Warner shoots them down. So Jobs announces that the talks are over. The news rattles Disney shareholders. Together, Pixar's first five movies earned $3 billion dollars and accounted for a huge chunk of Disney's profits since 1995. Disney's stock price dives. Support for Roy Disney's Save Disney campaign swells. And with Disney's stock now cheap, cable TV giant Comcast pounces with a $64 billion hostile takeover bid. Eisner's now a CEO under siege. After 20 years in charge of Disney, Eisner is about to face a reckoning. And if he falls, Disney will get one last chance to lure Pixar back into the Magic Kingdom. In 1969, when police tried to shut down a gay bar in New York City's Greenwich Village, they expected little resistance. Instead, patrons rose up in a series of demonstrations that would ignite a movement. Hi, I'm Lindsay Graham, the host of the podcast American History Tellers. We take you to the events, times, and people that shaped America and Americans. Our values, our struggles, and our dreams. In our latest series, the police raid on the Stonewall Inn marked a turning point in the fight for LGBTQ rights. But activists had already been hard at work pushing for gay rights for decades, and their battle is still being fought today. Follow American History Tellers wherever you get your podcasts. Audible subscribers can binge all episodes of American History Tellers early and ad-free right now. Join Audible in the Audible app or by subscribing on Apple Podcasts. Imagine you're reading Pride and Prejudice, except you're not reading it. Harris Dickinson and Marissa Obella are reading it to you on Audible. Her Barb sting you. His coldness sends a shiver up your spine. Your heart aches, your ears burn. You yearn for Elizabeth and Mr. Darcy to profess their undying love for one another. You can't bear it any longer. Well, maybe a chapter longer. Performance is so good, you'll give love a second chance. Audible. That's the stories that speak to you. March 2004, the Pennsylvania Convention Center, Philadelphia. At the side of the stage, Disney's CEO and Chairman Michael Eisner grits his teeth. Roy Disney's onstage, trashing his leadership and the 3,000 stockholders gathered for the corporation's annual meeting, are cheering. Roy jabs at the air with a finger as he lays into Eisner. The current leadership seems to think the creativity and originality are things you can't afford. To them, it's all about branding. I say branding is for cows. But branding is what you do when there's nothing original about your products. As the crowd cheers, Eisner turns to Disney President Bob Eiger. We said he could have 15 minutes while he's still on stage. You want to cut him off? Of course not, he'd love that. And assistant approaches. Mr. Eisner, I have the stockholder vote results for you. The assistant hands over the figures and backs away. Eisner stares at the results in silence. Eiger moves closer. What's the result? 43% withheld support from my reelection. Eiger says nothing. It's a devastating verdict. Eisner hoped his success at repelling Comcast's advances would quell descent. But nearly half of Disney stockholders still lack confidence in him. On stage, Roy Disney wraps up. After today, the board will no longer be able to pretend they have a great management team. After today, things will be different. That evening, Disney's board strips Eisner of his role as chairman. He remains CEO, but he's the walking dead. Once the board chooses his successor, he's out. The news prompts Steve Jobs to halt Pixar's talks with rival studios. He wants to see how things play out at Disney before partnering with another studio. But it's a risky move. There's no guarantee that the next Disney leader will be more amiable to Pixar's demands. And that's dangerous for Pixar's first self-financed movie, Ratatouille. It's coming out in 2007, and many doubt the commercial potential of a movie about a rat in a restaurant kitchen. And the longer Pixar waits for change at Disney, the less time it'll have to assemble a marketing and merchandising push to boost Ratatouille's chances at the box office. But while Pixar pauses, DreamWorks ups the pace. October 2004, Manhattan. Jeffrey Katzenberg stands before a room full of representatives from major investment funds. He's here to hawk the chance to buy into DreamWorks Animations IPO. The studio's stock market debut is only a week away. Once it happens, DreamWorks Animation will split off from the rest of DreamWorks with Katzenberg at the helm. Katzenberg briefs the fund managers. Our strategy is very clear, very focused. We make computer animated features and TV shows for the whole family. I like to say that we make movies for adults and the inner adult in every child. A fund manager interrupts. So you make movies, parents can tolerate, so they're more likely to take their kids to see it. Our movies offered shared experiences for families. Now let's say you take your child to see our new movie, Sharktail. You're sitting next to your child and you're both laughing. Your child's laughing because of the physical comedy, but you're laughing at the subtext or the innuendo. It's a shared moment. We very deliberately seek to create these moments. Another fund manager raises a hand. Pixar makes similar movies. Why should I put my clients money in DreamWorks instead of Pixar? Katzenberg smiles. He's been on the road selling this IPO to investors for days and he's already heard every question. You could invest in both. Back to your point, DreamWorks releases two movies a year, Pixar just won. That reduces our risk and increases our upside potential. So this year we've had two big hits, Sharktail and Shrek 2. Which has replaced finding Nemo's the highest grossing animated movie of all time. They didn't Sharktail get terrible reviews. They tell you Sharktail has been America's number one movie for the past three weekends. So both I and the movie going public disagree with the critics on that one. What about after the IPO, what's the outlook? This fall we release Shrek 2 on DVD. We expect to sell 55 million copies. The fund managers smile. On October 28th, 2004, DreamWorks Animation joins the New York Stock Exchange. The stock opens at $28 and soars 40% that day. By the closing bell, DreamWorks Animation is worth $3 billion and Katzenberg's a billionaire. But his big promises about Shrek 2 on DVD soon come back to haunt him. Ahead of Christmas 2004, DreamWorks swamp stores with Shrek 2 DVDs. Let's retailers stock DVDs with the option to send back any copies that don't sell, few object. Shrek 2 sells fast by the new year more than 30 million copies are sold. But that's not enough to empty the shelves. So in January 2005, retailers gather all the unsold Shrek 2 DVDs and ship them back to DreamWorks. In May, DreamWorks downgrades its financial forecasts to account for the millions of unsold DVDs. Wall Street is appalled. It can't stomach how far off DreamWorks sales projections were and why it took five months to fess up to the miscalculations. DreamWorks stock price tumbles and investor confidence is dented. But Katzenberg is in phase. He reckons DreamWorks next movie will re-energize the company's fortunes. In the zoo, there are dreamers. I wish I could go to the wild. And there are schemers. They were going to blow this dump this summer. Oh, I feel good. They had kitty. Lady. Ben Stiller and Chris Rock are setting a course for uncharted territory. We're going to face extreme parrots. From the creators of Shrek. What are you guys doing? You didn't see anything. Metagascar. It's going to be ice cold sushi for breakfast. Lady PG. On May 27th, 2005, DreamWorks new movie Metagascar hits cinemas. It's tale of pampered zoo animals returning to the wild draws big crowds. In nine days, it grosses $100 million. A head of release, Katzenberg hiked the movie hard. He told investors it would be the moment that DreamWorks became as reliable a hit machine as Pixar. And that big talk convinced analysts that Metagascar would gross more than $200 million in the U.S. But when it becomes clear that Metagascar won't meet that sky high expectation. Investors freak. DreamWorks stock crashes to $28. The same price as its IPO. Investors file lawsuits accusing the company of misleading statements where the studio's financial credibility shredded, Katzenberg brings in a former Bank of America executive as president to handle business operations. The move restores trust, but DreamWorks Wall Street Honeymoon is over. And while Katzenberg adjusts to the reality of leading a public company, Disney's under new management. October 2005, the Disney boardroom, Burbank, California. Its Bob Iger's first day is Disney's CEO. After a six month handover, Michael Eisner's left the building and given Iger the keys to the kingdom. And Iger's, starting bold. He brings up a PowerPoint slide detailing Disney animation's performance. The board members sitting around the table lean in for a closer look. Not pretty. In the past decade, Disney spent a billion dollars making animated movies and lost $400 million. Iger begins his pitch. Disney animations amass. It really hit me last month at the opening of Hong Kong Disneyland. I was at the parade watching the floats go by and I noticed that nearly all the characters from the previous ten years were created by Pixar, not Disney. Truth is, Disney animation doesn't make good movies or memorable characters. The board looked shocked at Iger's take down of the animation studio. Eisner painted the merosier picture of a studio having a rough patch. Iger continues. Meanwhile, Pixar made hit after hit using technology unfamiliar to our animators. Our own surveys show that people now love Pixar more than Disney. It's not even a close call. The board members shocked, turns to fury. Bob, you're the president of the past five years. Isn't this your fault, too? Buying ABC in 1995 made Disney a much more complicated business to manage. And the animation studio didn't get the attention it should have. So we can't fix yesterday, but we can change the future. The way I see it, as animation goes, so goes the whole corporation. The animation creates fuels our other businesses, TV, consumer products, theme parks. So yes, we have to fix this. But how? We have three options. One, we trust the current management to fix it, and I doubt it can. Two, we find new talent to run the studio. But I spent six months looking for that talent, and I found no one. Alright, what's the last option? We buy Pixar. The meeting descends into chaos. Iger tries to restore order. Listen, listen, I don't know if they're for sale. That's up to Steve Jobs and I doubt he'd sell. And even if he would, it'd be expensive. Six billion dollars minimum. But look, if we can, we should buy them and have Pixar fix Disney animation. You with me? The board members can't believe their ears. Iger's been CEO less than 24 hours and he wants to make a multi-billion dollar acquisition. But they don't want to slap down the new CEO on his first day. So they give Iger permission to contact Jobs and see if there's a deal to be done. A deal that could get Pixar back and save Disney animation. Hey, it's Mike Corey, the host of Against the Odds, from Audible Originals. In each episode, we share thrilling true stories of survival, putting you in the shoes of the people who live to tell the tale. And sometimes we get to hear from survivors themselves in their own words. On our next episode, Sujo John will tell his story of September 11, 2001. That day he clocked into his job at the World Trade Center's North Tower. Sujo's wife Mary, pregnant with their first child, worked just next door in the South Tower. Suddenly, an explosion rocked the building, collapsing cubicles and walls. But as Sujo and his office mates race to escape the smoldering building, they heard another massive explosion. And Sujo realized his wife and unborn child were also in grave danger. Follow Against the Odds wherever you get your podcasts. Audible subscribers can binge all episodes of Against the Odds early and ad-free right now. You stepped out for your morning jog. Except it's not your usual morning jog. You started listening to an epic sci-fi book Unaudible. 30 chapters later, you've accidentally run a half marathon. You lost track of how far you've run, somewhere just past the city limits. You can't stop. You have to find out what happens next. Then it's over. The universe seems bigger. You feel different. You feel like you have no idea where you are. Audible. Stories that speak to you. October 2005, Apple headquarters, Cupertino, California. In the boardroom, Apple CEO and Pixar Chairman Steve Jobs draws a vertical line down the middle of the long whiteboard that covers one wall. He writes the word "prose" on one side of the line and cons on the other. Then turns to face the only other person in the room. Disney's CEO, Bob Eiger. "Okay, you start Bob, any pros?" Eiger doesn't want to go first. He's still surprised Jobs is entertaining the idea of "Disney buying Pixar." No, after you. Okay, well I have some cons. Jobs rolls up the sleeves of his black turtleneck sweater and starts writing. Disney's culture will destroy Pixar. There's too much ill will between our companies. Wall Street will hate it. Let's see, fixing Disney animation will take too long. Pixar will reject being owned by Disney like a body rejects a transplanted organ. Okay, did I miss anything, Bob? That's quite a list, Steve. I don't think I need to add to it. But for a pro, how about Pixar will save Disney and will all live happily ever after? What do you think? What do you mean Pixar will save Disney, Bob? Turning animation around will totally change Disney's fortunes. Jobs turns and scrolls the first pro onto the board. Two hours later, Jobs and Eiger sit back and stare at the pros and cons list. The pros side looks empty. The cons side is nearly full. Eiger looks defeated. Well, he was an ice idea, but it won't work. Jobs turns to Eiger. A few solid pros are more powerful than a dozen cons. What's our next step? In the weeks it follow, Jobs persuades Pixar's CEO Ed Catmull and creative chief John Lasseter to back the sale. He convinces them that Pixar will be more secure within a large corporation than as an independent studio that sells finances its movies. He also underlines how Disney doesn't want to change Pixar, but rather have Pixar change its animation studio. But while Pixar is now on board, Eiger still needs to get Disney's board to back the $7.4 billion buy-up and as decision-day looms, Michael Eisner resurfaces. He's heard about Eiger's plan and he's made it his mission to persuade Disney's board to reject it. January 2006 Disney boardroom Burbank, California. Eisner smiles at the board members. It's been only four months since he left Disney, but it feels good to be back. He knows the board has only given him an audience to ensure he doesn't go public with his objections to the Pixar acquisition, but he's certain he can win them over to his point of view. Today I want to save Disney from making a terrible mistake. Buying Pixar would be a disaster. We already own their IP, so what exactly are we paying $7.4 billion for? Two board members nod in agreement. Eisner continues his attack. Pixar is overvalued. It's never released a movie without Disney's marketing support. The markets have failed to factor our contribution into Pixar's success as part of its stock price. Pixar is one failure away from being just another animation studio. Eisner looks at Eiger who's sitting at the far end of the boardroom table. We don't need Pixar to fix Disney animation. Bob can fix it. Eiger's Scals. Michael, you couldn't fix it. Why do you think I can? Because you've made it a priority. This acquisition will also make Steve Jobs Disney's largest individual stockholder. Steve is difficult. He's domineering. He'll cause trouble. He'll demand control. Reject this deal. Eiger fumes as Eisner stalks out of the boardroom. He's no longer in charge, but he's still trying to control Disney's destiny. Disney Chairman George Mitchell looks at Eiger. "Bob, you want to respond before we vote?" Eiger rises to his feet. His heart's racing. This vote is no longer just about Disney and Pixar's future. It's also about his own. He's staked his credibility on this buyout. If the board says no, his position as CEO will be untenable. What Michael told you is wrong, wrong, wrong. Michael can't work with Steve, but I can. Steve is one of the greatest business minds of our time. Why wouldn't we want his input? The price is fair. We're not just buying Pixar. We're buying the means to fix Disney animation. Eiger looks at the board members. Today you will decide Disney's future. I've said it before, as Disney animation goes, so goes this company. That was true in 1937 with Snow White. It was true in 1994 with the Lion King, and it's true now when animation soars, Disney soars. We must do this. Eiger sits. He can't tell if he's done enough. Mitchell breaks the silence. Thank you, Bob. All right, it's time to vote. January 24, 2006. Pixar Headquarters, Emeryville, California. 106 PM. Tom Porter checks the email that just landed in this inbox. It's from Pixar's CEO, Ed Catmull. All employees to assemble in the atrium at 1.15 PM. Porter and those next to him, exchange looks. This must be it. For weeks, there's been widespread speculation about Pixar's future. Wild rumors of a Disney buyout, claims of a distribution deal with a rival studio and more. Porter leaves his desk and joins the hundreds of employees streaming towards the huge central atrium of Pixar's headquarters. Porter's been with Pixar since it was founded. He was part of the original Lucasfilm. team that began building the tech that went on to transform animation. He grabs a spot on the stairwell balcony overlooking the atrium. Below, he sees employees gathering around a small stage draped in black cloth. A hush falls over the crowd. Steve Jobs emerges from a side room dressed in his usual black turtleneck and jeans ensemble. Pixar's CEO catmole follows, along with Pixar's creative chief John Lasseter, who's wearing a Hawaiian shirt. They step on to the stage. Jobs speaks into his handheld microphone. At this moment, a press release is going out announcing that Disney will acquire Pixar. The 800 employees in the atrium gas. Porter hears someone burst into tears. They heard the rumors that they never believe him. They were all fired up about Pixar becoming an independent studio. Now, Disney's swallowing them. Catmole takes the mic. We reached a point where we couldn't continue as we were. We had to go left or right. Join Disney or be independent. Our instinct was independence. On the surface, it's more appealing. But below the surface, it's not so clear cut. To be independent, we would need to create marketing and consumer products divisions fast. And that would endanger our creative culture. Lasseter speaks next. Also, our stock price is based on the expectation. They will keep performing at our current level. At some point, investors will demand growth. And that will mean doing things like making more than one movie a year, expanding into TV. We'd have to make creative compromises. So we concluded that the heart of Pixar is more likely to survive inside Disney than outside it. As an independent studio, a single flop could take us down. The employees look shell shocked. Still, some seem to be warming to the idea, but others look devastated. Jobs speaks again. This deal protects Pixar's culture and creativity. I would never have done it otherwise. With this deal, Pixar will stay a great company and help Disney remain one too. Now, I have someone I'd like to introduce to you. Bob Eiger, the CEO of Disney. Eiger emerges from the sidelines and heads on to the stage. The employees applaud, but they're all wondering what the future really holds for them and for Pixar. On the next episode, DreamWorks enters the third dimension. Pixar carries out brain surgery on Disney animation. And a new studio challenges the animation duopoly with help from a supervillain. From wondering, this is episode three of DreamWorks vs Disney Pixar for business wars. A quick note about recreations you've been hearing. In most cases, we can't know exactly what was said, though scenes are dramatizations. But they're based on historical research. If you'd like to read more about Disney's buyout of Pixar, we recommend the ride of a lifetime by Robert Eiger and Steve Jobs by Walter Isaacson. I'm your host David Brown, Tristan Donovan of Yellow Ant Media wrote this story. Karen Lo is our senior producer and editor, edited and produced by Emily Frost, sound designed by Kyle Randall. Our producer is Dave Shelling. Our executive producers are Jenny Lauer Beckman and Marshal Louis, created by Ernan Lopez for Wundery. What if I/I could recreate the voice of somebody you loved who'd done it? What if it destroyed your reputation with words you never said? And what if you fell in love with something that was never human? I'm Mark Funnell and in my brand new audible original podcast, I'm traveling the globe to investigate the very personal ways. A.I. is already changing our relationships, our memories and our sense of what is real. Unreal, listen now on Audible.