Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Pixar Saved Itself from Disney and Then Saved Disney
Transcript
- Lucas: If you look at Pixar today, it's hard to imagine it was ever in trouble. But in 1991, the company was months away from running out of money. It was losing cash on selling computer hardware, and the animation division was basically a side project. Luna: I remember reading that Steve Jobs had already poured something like $50 million of his own money into it by then. He was basically keeping it alive out of sheer stubbornness. Lucas: Exactly. He bought the company from George Lucas in 1986 for $10 million, then poured in another $5 million each quarter to keep the lights on. By the time they finally decided to kill the hardware business in 1990, they had burned through something like $50 million with almost no revenue to show for it. Luna: So what changed? How did they go from close to dead to making 'Toy Story'? Lucas: The pivot was brutal but simple. They laid off half the staff — 70 people — and refocused entirely on selling their rendering software, called RenderMan, and on producing animated commercials. That bought them enough runway to start working on a feature film. And then Disney came calling. Luna: Right, the 1991 deal with Disney. That's when they agreed to produce 'Toy Story' for a $26 million budget. But I recall Pixar didn't get full creative control, did they? Lucas: Not initially. The original contract gave Disney most of the control and most of the profits. But it was a lifeline. Pixar got to develop the technology and the story. And what emerged from that process was something neither side fully anticipated — a way of working that would later completely reshape Disney itself. Luna: Let's talk about that creative process. The 'brain trust' meetings, right? Lucas: Yeah, the brain trust became the core of Pixar's culture. It's a group of directors — John Lasseter, Pete Docter, Andrew Stanton, Brad Bird later — who get together every few months to critique each other's films. Brutally honest feedback, no hierarchy. The rule is: everyone leaves their ego at the door. Luna: And that's what made 'Toy Story' so good. I read that during the brain trust sessions, they completely rewrote the story halfway through production. The original version was much darker — Woody was kind of a jerk. Lucas: Right. The early test screenings were a disaster. Kids didn't like Woody because he was too mean. So they went back and redid the entire second and third acts. That's incredibly expensive — animation is not like live action where you can reshoot. But they did it because the story had to work. Luna: And that willingness to throw away work to get it right became a hallmark. But it's also a huge financial risk. How did Jobs stomach it? Lucas: Jobs was famously hands-off on the creative side. He came to the brain trust meetings but rarely said anything about story. He trusted Lasseter and the team. His focus was on the business side — he renegotiated the Disney deal after 'Toy Story' became a hit, and that second contract gave Pixar much better terms. It was a 50-50 split on profits and joint ownership of the films. Luna: That's a huge shift from the original deal. And that partnership lasted until 2006, when Disney bought Pixar for $7.4 billion. But by then, Disney's own animation division was in a mess. How did the acquisition make sense? Lucas: It only made sense because Bob Iger became CEO of Disney in 2005. His predecessor Michael Eisner had a terrible relationship with Jobs. Iger's first big move was to call Jobs and say, 'Let's fix this.' The deal was structured as a stock swap — Disney bought Pixar for about 2.3 Disney shares per Pixar share. But the real genius was in the cultural terms. Luna: What terms do you mean? Lucas: Iger agreed that Pixar would remain in Emeryville, California, not move to Burbank. John Lasseter became chief creative officer of both Pixar and Disney Animation. And Pixar's brain trust model would be used to revive Disney's own animation studio. That was the key — Iger wasn't just buying technology or a library of films. He was buying a creative engine. Luna: And it worked. Disney Animation's output after 2006 — 'Tangled', 'Frozen', 'Zootopia' — all benefited from that Pixar-style creative discipline. I think 'Tangled' actually went through its own brain trust rewrites. Lucas: Absolutely. 'Tangled' was originally a very different film, but the brain trust pushed for a more modern, character-driven story. The same thing happened with 'Frozen' — they threw out a whole version and rewrote it in about a year. That willingness to kill your darlings is the hardest thing for any creative organization to institutionalize. Luna: It's also expensive. I've seen estimates that a Pixar film costs around $175 million to $200 million. With that kind of budget, you'd think the studio would be risk-averse, but they keep producing original stories. Lucas: That's the paradox. The brain trust actually reduces risk because it catches problems early. A bad test screening after you've locked the film is catastrophic. A bad story board review six months earlier costs a fraction of that. So the process is expensive upfront but saves money in the long run. Luna: And it protects the creative culture. Which brings me to something I've been wondering — how does Pixar keep that culture alive inside a giant like Disney? I mean, Disney has its own corporate bureaucracy. Lucas: It's a constant tension. The key is that Pixar operates as a separate subsidiary, not a division. They have their own HR, their own IT, their own building. And Iger was very deliberate about not sending in Disney executives to 'fix' things. Instead, he sent Pixar people into Disney Animation to teach the process. That's how you transfer culture without diluting it. Luna: That's a smart approach — bring the acquired company's people into the parent, not the other way around. But it's also fragile. After Lasseter left in 2018, there were concerns about whether the culture would survive. Lucas: It's been tested. The pandemic disrupted their release schedule, and they've had a few films that didn't hit the mark commercially. But the brain trust is still functioning. Directors like Pete Docter and Kelsey Mann are carrying the tradition. The question is whether the next generation of leaders can sustain it without the founding voices. Luna: That's a good question. And I think we've seen some shifts — like the decision to release 'Soul' directly to streaming, which was a big departure from Pixar's theatrical model. But that's a different topic. Lucas: It is. And speaking of keeping things going, this is probably a good moment to mention something quick. We do this show because we genuinely enjoy digging into stories like Pixar's. It takes a lot of time to research and produce these episodes, and we don't run ads. A handful of listeners chip in monthly through Buy Me a Coffee dot com slash fexingo, and that's literally what funds making this many of these. Luna: Yeah, it's a small group, but it makes a huge difference. If these conversations have moved your work forward in some small way, that link is there. No pressure, just wanted to mention it. Lucas: So back to Pixar — I think the most underappreciated part of the story is that the same creative process that saved Pixar also saved Disney Animation. And that's a rare case where an acquisition actually strengthened the acquirer's core business rather than just adding a new one. Luna: It really is. Most acquisitions destroy value. But Disney paying $7.4 billion for Pixar arguably created more than that in revived brand equity and a pipeline of hits. Lucas: And it gave Jobs a seat on Disney's board and made him Disney's largest individual shareholder. So there's a symmetry to it — the guy who almost lost his entire investment ended up with a stake worth billions and a hand in reshaping one of the world's most iconic companies. Luna: That's the kind of story that makes you wonder — how many near-death experiences in business end up producing something truly lasting? Pixar's near-death in the early 90s forced them to focus, to innovate, to build a culture of candor. If they had been flush with cash, would they have had the discipline to create the brain trust? Lucas: Probably not. Scarcity breeds creativity, but only if you have the leadership to channel it. Jobs, Lasseter, and Ed Catmull created a system where that scarcity led to breakthroughs instead of panic. That's the real lesson for any CEO: the structure you build around your people matters as much as the product you're making. Luna: Well said. So next time you watch 'Toy Story' with your kids, remember that it almost didn't exist. And the process that created it ended up saving one of the biggest entertainment companies on earth. Lucas: Exactly. That's the kind of legacy that outlasts any single film or CEO. Thanks for listening.