By tying up the company so completely in exchange for funding up to three films, it was as if Disney owned Pixar without ever buying it. And all this turned out to be just the standard way that Hollywood deals with new talent. Sam told me it was no different in music or other parts of the entertainment industry.
One evening at home, after the children had gone to sleep, I shared my frustration with Hillary.
“I’m not sure how to say this,” I said. “I don’t think I knew what I was getting myself into. I think I blew this one.”
“What do you mean?”
“I’ve turned over every stone at Pixar. There’s nowhere to take it. Disney has closed every door. The best we can hope for is a tiny profit, and that’s only if our films are among the most popular animated films ever made.”
“Pixar has to be as successful as Disney is at animation?” Hillary asked.
“More successful! Disney keeps the lion’s share of the profits on its own films. That means the hits can make up for the flops. But Pixar has such a small share of the profits that it wouldn’t even have this luxury. They all have to be hits. I don’t know what Steve was thinking when Pixar signed that contract.”
“So what are you thinking about doing?” Hillary asked.
I didn’t know.
“If I had known what I know now,” I said, “I can’t imagine I would have taken this job. Taking this company public seems like a crazy notion. No investor I know would come near this. Fifty million in losses, no profits, no growth, Disney holding all the cards. I’m not sure Pixar even needs a CFO.”
“I think you have to understand where Steve’s at with all this,” said Hillary.
But as frustrated as I felt, I waited. I needed to be in a better frame of mind for a discussion I didn’t expect would be easy. If I called out Steve on entering what I thought was an insane agreement with Disney, I expected he would dig in and defend it. It must have seemed like a good idea to him at the time.
One Saturday afternoon about a week later, I headed over to Steve’s house. We took a seat on the back porch, and I went through what I had learned.
“Steve,” I concluded, “this contract ties our hands for the better part of a decade. We can’t talk to other studios. We can’t make much money. And it doesn’t even make sense to make sequels.”
“Do we even want to make sequels?” Steve asked.
“We might. Disney’s having a lot of success with direct-to-video sequels. We might want to make those.”
“Can’t we get through the contract faster if we speed up how long it takes us to make our films?” Steve asked.
“I’ve discussed this with Ed,” I said. “He’s very skeptical about making films quicker. He’s open to looking at it, but he’s doubtful.”
“Well”—Steve shrugged—“if Toy Story and the other two films are hits, we’ll make some money. Then we’ll be free to do whatever we want.”
That was certainly a true statement, but it wasn’t the answer I was looking for. Of course we’d be free after the three films, but that was still years away. I wanted to ask Steve why he let Pixar enter such a one-sided contract, why he didn’t tell me it was so constraining, and why he seemed so nonchalant about it.
But I didn’t. As we sat there talking, I realized Steve had no interest in looking back. He didn’t defend the contract. He didn’t justify it. He listened carefully to everything I had to say about it, taking it all in. That was pretty much it.
Instead of pressing Steve, I was left to draw my own conclusions. I pieced together a scenario that made sense of what had happened, at least to me. I never verified it with Steve; it was simply my own way of understanding things.
I reasoned that around 1991, Steve was ready to let go of Pixar. He had never set out to build an animation company. In 1986, when he took control of Pixar, Steve dreamed of building a technology company, a graphics powerhouse that would stun the world with machines that could do computer imagery like no other. Storytelling was an afterthought, a way to demonstrate the technology. The hopes of that graphics company had rested in part on the Pixar Image Computer, which had failed. By 1991, that division of Pixar had been shut down completely.
At that moment, I concluded, Steve was ready to give up on Pixar. He must have wanted out. The burden was simply too great, and the dream dashed. He was in a very tough spot, however. It was five years since his departure from Apple, and he had not had a hit since. If he couldn’t chalk Pixar up as a win, he badly wanted to avoid another highly public loss. That was the instant when the Disney opportunity came along. To Steve, the deal with Disney was a way to stop the financial bleeding. Steve’s guard was down, and in that negotiation with Disney he had been bested by Jeffrey Katzenberg, chairman of Walt Disney Studios, who handled the deal on behalf of Disney. Steve had signed up for terms the implications of which he either didn’t fully understand, or to which he had simply yielded in order to get the deal done.
None of this changed our current situation, however. We had no long-range hope in RenderMan software. No hope in animated commercials. No hope in short films. No hope in animated feature films. One of the world’s richest and most powerful companies controlled our future and our fortunes. And on top of everything else, a terribly strained relationship between Pixar and its owner, Steve. That was the hand we were dealt.
Early in my career I had learned the wisdom of not griping over the hand I was dealt. I had a mentor who taught me lessons about business and life that served me for many years. He looked at business the way a grand master might look at a chessboard.
“There’s nothing you can do about where the pieces are,” he’d say. “It’s only your next move that matters.”
I had worked at training myself in this way of thinking. It was a lot more productive than getting emotional about things that were out of my control. Business can be harsh, but the stakes are rarely a matter of life and death. It was not going to help me to fret over the reasons why Pixar may or may not have entered a one-sided contract a few years earlier. I simply had to remain focused on the task at hand: find a way for Pixar to flourish.
I also found one silver lining to keep me going. Somewhere out of the fog of those first two months, one more important conclusion struck me. Hillary and I discussed it as we were sitting in the living room after dinner one night.
“You know,” I said, “in all my conversations with Steve these past two months, I’ve never found him defensive. I’ve critiqued and dismantled every aspect of Pixar’s business and he had every reason to justify and defend it. But he didn’t. Not once. It’s as if he’s taking this journey with me, learning it at the same time I am.”
“He hasn’t given you a reason to distrust him,” Hillary said. “You two are in this together. You have to work it out together.”
That’s how it felt. Whatever mess we were in, we were in it together. What mattered was our next move.
5
My Big Break
By the end of April 1995, I felt my honeymoon period at Pixar should be coming to an end. I had walked and talked around its hallways and offices for long enough. I wanted to move forward, to find a toehold somewhere. But I was having a hard time doing so. It felt like I was meandering around the base of the mountain instead of actually climbing it.
It didn’t help that there was a growing fear within the company that its first film, now officially named Toy Story, would not be finished on time. People worried about whether we were too far behind in the animation, lighting, rendering, and other myriad details required to finish the film. For as much as I wanted to move forward, I had to finish my homework. I needed to understand the risks surrounding the completion of Toy Story, and I had far more to learn about how films make money.
Toy Story’s release date was set for November 22, 1995. That triggered a whole set of must-hit dates for the delivery of the film: completion of the songs and music, development of the marketing campaign, and many other details involved in preparing
the film for release. Pixar was marching into a place no company had ever been. This was the first computer-animated feature film ever attempted, and, as I was beginning to realize, the challenges were staggering.
One of those challenges involved the need to create every single detail that the audience sees, literally everything. For example, in live-action filmmaking you don’t have to think about where the sky will come from. Shoot any outdoor scene with a camera, and the sky will be there. Background buildings and trees will be there. The leaves on the trees will be there. The wind rustling the leaves on the trees will be there. Live-action filmmakers don’t have to think about the leaves on the background trees. But in animation, there is no sky, no trees, no leaves, and certainly no gentle breeze rustling those leaves. There is just a blank screen on a computer. If you want anything on that screen, you have to give the computer instructions to draw it.
There are challenges even more daunting than these. We take for granted elements in our reality like light and shadow. We never think to ourselves, “How did that shadow get there?” or “How come that part of the fence is sunlit and that part isn’t?” But if lighting and shadow are off, even a tiny bit, in a photo or portrait, we notice it immediately. It looks weird to us. In computer animation there is no light, no shadow. It all has to be created.
Even this pales in comparison to something as seemingly innocuous as skin. A live-action filmmaker never has to worry about skin. Touch it up with a little makeup perhaps, but it will be there. Yet skin is one of the most complex things to create artistically. It is full of details—color, hair, blemishes, folds, and texture—and it is very difficult to capture the way light interacts with skin. These are nuances we never think about, but they are glaringly obvious when they are missing. Ed told me that without these careful details, skin would look like “painted rubber.”
Pixar had set up entire departments dedicated to these challenges. There was a lighting department, a team whose sole function was to get the computer to generate lighting and shadows correctly. There were technical directors who were dedicated to projects like leaves and sky and skin.
Bill Reeves was the company’s top technical leader and the supervising technical director on Toy Story. Many of the trickiest challenges landed on his desk. Bill had been with the team all the way back to its days at Lucasfilm. He had red hair, thin-rimmed glasses, and a quiet demeanor. I sat in his office one day to see how he felt about finishing the film. His office was plain, a big computer screen on his desk, and not terribly well lit.
“I don’t know if we can do it,” he told me flat out. “The number of details we have to complete is enormous. But we’re going for it. We’ve had tough challenges before.” Bill conveyed a sense of calm confidence. He was worried, but not panicking.
“How would you assess the risk?” I asked.
“That’s hard to say,” he said. “There’s risk. Our best people are working night and day. Animation is a few weeks behind. Lighting too. And we’re trying to finish the humans, Andy and his mom. The skin, clothes, and facial features are challenging. But we’re on it.”
I began to fathom how these technical challenges imposed enormous constraints on the film. I learned that there was a reason the film was specifically about toys, and not about animals or people. Toys are made of plastic. They have uniform surfaces. No variation. No skin. No clothing that needs to wrinkle with every movement. Toys have geometries that are much easier to create with computers. For similar reasons, the opening scenes of the film take place inside Andy’s bedroom. The bedroom is a square box. Its features—bed, dresser, fan, window, door—are more geometric than outdoor features. Easier to draw. Much easier to light.
Audiences would be in the last ten minutes of Toy Story before they saw the scenes that were far more technically challenging. There was a big outdoor chase scene at the end of the film in which Woody and Buzz are in a toy car trying to catch a moving truck. Imagine if that scene took place in streets with leafless trees, or carless roads. It turned out that part of the genius of Toy Story was not just the brilliance of the story and characters; it was crafting them amid almost impossible constraints. This built up more and more pressure on finishing the film. The hardest elements were being saved for last. Was it possible to get them done at all?
Some of the challenges were so technical that I would never have thought to even ask about them. For example, Pixar had a tiny department run by David deFrancisco, a brilliant graphics and film pioneer whose office consisted of two small, windowless rooms. One of those rooms looked like a high school lab, the other a photography darkroom. This was Pixar’s photoscience department. I had never heard the term photoscience, but people at Pixar were worried about it.
To understand what all the fuss was about, I went to visit David. He was about ten years older than me, soft-spoken and understated, with a beard, glasses, and a professorial manner. David explained that the task of the department was to solve the problem of transferring computer images to film.
Pixar did computer animation. There were no cameras. No film. Just images on computer screens. But the only way to watch a film in a movie theater was to play it on a film projector. Pixar’s computer images had to find their way onto celluloid if they were to be seen by the public. That was David’s job. In order to accomplish it, he invented a machine to transfer computer images to film. This was the mystery machine I had seen during my first interview. It sat in the middle of a darkroom and looked like a huge slab of metal on which sat a giant microscope-like device. Into that machine came every single computer image of a Pixar project, where it was painstakingly recorded onto film.
David and I sat in this small, darkened room, with this huge machine in the middle. “So,” I asked, like the slowest student in class who was finally beginning to catch on, “this one machine has to record over a hundred thousand frames of Toy Story onto film?”
“Exactly,” David replied.
“And it all has to happen in the right sequence, and with the right color and tone so it looks consistent?”
“Right again.”
“And this is the only one?” I asked. “If this breaks down or a part fails, there’s no backup?”
“Yes, that’s right. This is the only one in the world. We have almost enough spare parts to make a backup, but we haven’t really focused on that. It would take a while to assemble.”
“What happens if this one breaks during production?”
“It can’t,” David blurted, then paused to correct himself. “Obviously, it could. But that would be a disaster. There would be no film that would be delivered and shown in the theaters. It’s not an option.”
The more I learned, the more the magnitude of what Pixar was attempting to do dawned on me. Making Toy Story was not just finishing another film. It was more like climbing Everest or landing on the moon for the first time. Computers had never been pushed to this level of artistry before. Pixar had more than one hundred of the most powerful computer workstations available just to draw the final images that would appear in the film. Each frame of the film took anything from forty-five minutes to thirty hours to draw, and there were around 114,000 of them. Pixar was embarked on a lonely, courageous quest through terrain into which neither it nor anyone else had ever ventured. The summit was just beginning to poke out from behind the distant clouds, and no one was certain how thin the air would get. This was hardly a fertile environment in which to raise money to finance Pixar.
The more I understood the challenges with finishing Toy Story, the more I wondered where my toehold for moving Pixar forward might come.
“I’m starting to wonder if Pixar will get Toy Story finished,” I mentioned one night at dinner, thinking aloud.
“Why is it so hard?” Jason, my nine-year-old, wanted to know.
“Getting the story right has taken a long time,” I explained. “Toy Story was almost shut down because Disney didn’t like it. It’s also very hard to finish all the animation, colors, an
d details of each frame in the film.”
“Why didn’t Disney like it?” Jason asked.
“They thought Woody was too mean,” I said. “So Pixar made a lot of changes. They turned the film into an adventure story. Those changes really delayed the film, though.”
“Who’s your favorite character?” Sarah, my seven-year-old, asked.
“Buzz Lightyear is really funny,” I said. “So is Rex, the dinosaur.”
“I like Slinky,” declared Sarah, who had seen the first part of the film.
A cute slinky dog. Of course. Judging from my children’s interest in the film, if Pixar did get this finished, kids everywhere were going to fall in love with it.
In the meantime, while the company bent under the pressures of finishing Toy Story, I had to understand the financial implications of Toy Story’s release. I had done some back-of-the-envelope calculations based on the Disney contract, but they were only educated guesses. To even think about the viability of animated feature films as a business strategy, I needed to understand precisely how those films would generate revenues. The questions were simple enough: How do films make money and who gets it? Put another way, if I buy a movie ticket and popcorn, who gets the dollars? The movie theater? The film studio distributing the movie? The people who made the movie? As a chief financial officer, it was almost embarrassing not to know these basics.
To learn more about this, I called Tim Engel, who was in charge of finance at Walt Disney Animation Studios. He was part of the management team that had created Disney’s recent successes, including Beauty and the Beast, Aladdin, and The Lion King. I had been introduced to Tim recently and he seemed very open and helpful.
“I’m trying to understand the financial details of how these films work,” I explained to Tim. “Would you have someone at Disney who might be able to help me with that?”
“I’d love to help you,” he replied. “But our financial models for films are proprietary. We don’t share them.”
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