I wasn’t completely surprised by Tim’s answer. I well knew that companies were protective of their business models. I was hoping I might get Disney to make an exception.
“But we need to understand the way our films make money,” I said. “That will also help us going forward as we map out the future films under our agreement.”
“The royalty reports we provide you will show you where the revenues came from,” Tim suggested.
Disney was obligated to provide these reports to Pixar to show how they calculated Pixar’s share of the film revenues.
“That won’t help us now, though,” I went on. “We won’t see those reports until long after Toy Story is released, at least a year from now. And my understanding is those reports won’t contain nearly enough information.”
I knew from my lawyer days that the information in royalty reports could be scant, and they often needed auditing to verify their accuracy.
“Is there anything you can do to give us more detail now?” I asked. “We’ll agree not to share it with others. We just need a start to develop our own projections for how our films will perform.”
“I’m sorry,” Tim said. “We’ve just never given them out. I could give you a sample royalty report from another film if that’s helpful.”
It wasn’t. It wouldn’t be close to what we needed. This wasn’t Tim’s fault either. I thought about escalating the issue higher within Disney. But with the pressures of finishing Toy Story, I didn’t want to start a skirmish over information Disney had no obligation to provide. I was stymied. The numbers mattered. Without them I would not find the foothold I wanted. I wouldn’t even be able to do my job.
As I processed the risks of not finishing Toy Story, and worried about where I was going to get the numbers I needed to understand Pixar’s business, one more challenge began to rear its head, this time having to do with Steve.
“I’d like to start coming up to Pixar more often,” Steve said on the phone one evening. “Maybe once a week, or every two weeks.”
Steve had spent almost no time at Pixar during the nine years he had owned it. He didn’t even have an office there. He had founded NeXT in 1985, right after leaving Apple, and although he took over Pixar in 1986, he had worked full time at NeXT all those years.
Steve didn’t say why he wanted to spend more time at Pixar; he certainly didn’t need a reason to spend more time at the company he owned. I figured he was sensing possibility, and wanted to be closer to it. With a film coming out, there was more action than there had been in a while. The problem was that after I had heard admonition after admonition to keep Steve away from Pixar, it wouldn’t help my cause that shortly after I started, Steve now wanted to increase his presence there. I wasn’t sure how to broach this issue, with Steve or Pixar.
None of this brought me much comfort in terms of what I had been hired to do. If Toy Story missed its deadline, I was certain that Pixar’s chance of success, however minuscule it might be, would all but evaporate. I had no access to the financial information I needed to even create a rudimentary business projection. And the very person whom Pixar feared the most was now making noises about wanting to spend more time there. I felt like I needed something, some opening that I could grab onto, to create a little momentum. I’d been involved with a number of start-ups throughout my career, but this one carried more doubt and uncertainty than I had ever encountered.
Then, one day at the end of the first week of May 1995, a couple of months after I started, something happened that jolted me out of my doldrums in a way that I could never have imagined. I can’t say if it made a difference in any of Pixar’s challenges, but it sure made a difference in me.
“I’m taking the video back to the store,” I casually told Hillary one Sunday afternoon. “I won’t be long, maybe twenty minutes. I’ll pick up another one for tonight.”
Hillary was more than eight months pregnant with our third child. We’d spend the evening at home watching a film while she rested. There was a Blockbuster film rental store about a mile from our house.
I decided it would be fun to skate to Blockbuster. It would take only ten minutes and I’d get some exercise. So I laced up my Rollerblades, inline skates that were all the rage. I often went skating at the local playground with Jason. We liked to play our own version of roller hockey.
It was a pleasant spring day, warm and sunny. I was relaxed and skating down a neighborhood road I’d been on a thousand times before. All of a sudden, without the slightest warning, instead of going straight along the road, I felt myself rearing off to the side, picking up speed. I must have hit a pebble or something. All I knew was that my right leg was off the ground and I was spinning around on my left leg; only it was my body that was turning, not the leg. The amount of torque on my leg at that instant was far more than it could bear. As I headed toward the ground, I heard a nauseatingly loud pop, and then I was lying on the road reeling from the shock of what I knew instantly to be a badly broken bone, just where the skate touched my leg.
My leg was not so much in pain at that moment as feeling horribly weird, and I felt myself shaking. I kept thinking, “How are they going to get my skate off?”
Traffic began to stop and a woman came up to me to ask if I needed help.
“I don’t know how I fell. I’ve broken my leg. I need to let my wife know. We live close by. Thank you.”
“I’ll wait here till someone comes,” she said.
I later learned that someone drove to my house and knocked on the door. Hillary answered to hear the words that no woman who is eight months pregnant wants to hear.
“Your husband’s been in an accident.”
It didn’t take long for Hillary to get to where I was lying in the road. “I’m okay,” I told her. “My leg’s broken. I don’t know how they’re going to get the skate off.”
“I’m sure the paramedics will know how to do it,” Hillary tried to comfort me.
The ambulance arrived and the paramedic took one look at my leg.
“We need to remove your skate,” he said. He was insistent and told me it would be much harder to do it later. Somehow they took it off.
Soon I found myself in the emergency room having x-rays taken of my leg. The diagnosis was a jagged spiral fracture of the tibia, just above my left ankle. The orthopedist on call in the emergency room explained my options: a cast, or surgery to mend the bones. I was thinking a cast wouldn’t be that bad, and it sounded a lot better than the surgery he was describing. But Hillary wanted another opinion. She had connections through her job at Stanford Medical Center, so she called for a recommendation for the best doctors in the area. It was a Sunday, and I couldn’t see anyone that day, but she did find a surgeon we could see the next day. We headed home and I sprawled on the couch with a broken leg and a heavy dose of painkillers until the next day.
“A cast is out of the question,” the surgeon said. “If we cast it, there’s a real risk you’ll have a permanent limp. The break is too jagged, and too close to your ankle. One leg will be longer than the other. Even surgery is a risk, but if it goes well your walk will be normal.”
The surgery he was talking about involved screwing an eight-inch titanium rod into my bones to hold them together. If it went well, I could have the rod removed in a couple of years.
“I can do it tomorrow,” the doctor said. “You won’t be able to drive for three months, the recovery will be painful, and you’ll need physical therapy to rehabilitate that leg. But try not to worry. We’ll take care of it.”
“Try not to worry!” I thought to myself. This was a disaster. We were having a baby in three weeks. I was less than three months into a new job, with a demanding boss and a company looking at me to figure out a strategy for success. How was I going to be able to do it all? I’d fail before I even started. But what options did I have?
The next day I was wheeled into the operating room at Stanford Medical Center in Palo Alto. I came out of it with a titanium rod knitting my
bones together, and a morphine drip for the pain. The following few days were a fog. The pain from screwing the rod into the bone was searing, and the morphine was making me delirious.
The day after surgery, Steve was in my room. He just showed up at the hospital.
“How much pain are you in?” he wanted to know.
“It’s not too bad.” I tried to brave it. “These drugs are helping.”
I felt embarrassed. Here I was just a few weeks into a new job and I was out of commission.
“I’m sorry about this,” I said.
“Don’t be!” Steve exclaimed. “Just get better. If there’s anything you need, anything at all, let me know.”
My room filled with flowers and cards, from family and friends, and also from the Jobs family, and from Ed and the Pixar team. When I got home, Steve brought his family over to visit several times. I’d known him less than six months at this point, and he was acting like an old friend.
The surgery had been a success. The rod had gone in just as the doctor planned, and it was doing its job of holding my bones in place so they could heal.
A week after the surgery, as I emerged from the fog of morphine and was practicing hobbling around on crutches with a big black boot on my left leg, I was ready to get back to Pixar. Only for the first time, something in my attitude had changed. For almost three months I had wandered around Pixar, feeling increasingly dejected about its prospects, questioning if I should even be there. Now I’d been away for ten days and I missed it.
Nothing had happened to change any of my conclusions. I still didn’t have the toehold I needed. But I was feeling something else. Maybe it was the shock of the injury. Maybe it was the care and concern I had experienced from Steve and others at Pixar. Maybe it was my growing appreciation for the magnitude of what Pixar was attempting to do. But there was no question I was experiencing the first glimmer of pride about being on this ship. Pixar was becoming more than a job. What its people had been through, and what they were attempting to do now, was over-the-top extraordinary. It was crazy. I was itching to get back. I wished I had more answers than I did, but if I had a shot at figuring out what to do, I wanted to take it.
The first thing to fix was arranging an office for Steve. Steve was unaware how his frustrations with Pixar over the years, the failure to give employees stock options, not to mention his personal style, had instilled a real fear that he would ruin Pixar’s familial culture. I didn’t want to bring this up with him directly. There was no reason to be inflammatory, or even risk making relations worse, but I needed to address this issue somehow. I called him on the phone one night.
“Steve, I’ll return to Pixar in a couple of days. It’s also a good time to talk about getting you situated at Pixar.”
“That sounds great,” Steve said. “I’m glad to have you back. I only need an office. I plan to come up every week, or every two weeks, probably on Fridays.”
“That’s no problem,” I said, “but we’ll have to make it clear just exactly what your role and purpose is.”
“Why do we have to do that?” Steve asked. I could feel him getting testy.
“As the owner of the company,” I went on, “everyone will want to know why you’re coming up more and what it means. It’s a change for the company—a good change, but a change nevertheless. You’re the CEO, so you hold a lot of power. People might think you want to change things, or start to do things differently.”
“I don’t want to change anything,” Steve protested. “I want to hang around Pixar more. Be part of it. I also want to be closer to discussions around marketing our films. Disney does the marketing, but Pixar should have a strong say in it.”
“I think it would be great to frame it just that way,” I replied. “You’re there not to change how Pixar operates but to be part of it, to be closer to it, and to be involved in the marketing aspects of the films.”
I called Ed Catmull and Pam Kerwin to discuss all of this with them. If they bought into it, others would too. Ed told me that in the past he had talked to Steve about not interfering with Pixar’s story process, and that Steve was okay with that. Pam also understood that we had to make this work.
“We know Steve owns the company and can be here anytime he wants,” Pam said. “We just have to control the situation, get people used to it.”
“I understand,” I said. “He’s on board with how we’re going to position it. That’s all we can ask for.”
Two weeks later I was standing in the front hallway of my home one Friday morning, looking through the window at the road in front of my house. I was waiting for Steve to pull up. He’d be in his silver Mercedes, and he was picking me up to drive to Pixar where he had a new office. I had my crutches and a big boot on my left leg.
It felt more than a little odd waiting for my boss, Steve Jobs, to drive me to work. But that is how it was. For three months, until I could drive again, every time Steve went to Pixar, he drove me there, and he drove me back. On the other days, Sarah Staff, my newly hired right-hand person who had a similar commute to mine, very graciously picked me up.
Finding a way for Steve to spend more time at Pixar wasn’t quite the toehold I had imagined, but at least it was a resolution to one issue we needed to address.
A week after that first ride with Steve, Hillary went into labor and we had our third child. I spent the event standing on one leg in the labor and delivery room. When we left the hospital, we were both pushed out in wheelchairs, Hillary holding our new baby, me holding my crutches.
At the end of the closing credits on Toy Story is a heading called “Production Babies,” below which is a list of all the babies born to Pixar employees during the production of the film. I could not possibly have been prouder to say that my new daughter, Jenna, was among them.
6
What’s an Entertainment Company?
“Steve,” I noted one night in early June 1995, “We don’t have precise data, but I’m looking at this home video market and it’s huge. Disney is making a fortune on it.”
“It’s because people love these family films,” Steve said. “They don’t want to see them just once in the movie theater. They want to see them over and over again. They love those characters. And parents would rather their children watch Aladdin or Beauty and the Beast than a lot of garbage.”
My own home was a great example of this. We owned all the recent Disney animated films, and Jason and Sarah had watched them many times. Aladdin was their favorite. They never seemed to tire of the Genie, masterfully voiced by Robin Williams. It was similar at Steve’s house, where he had a shelf lined with the same films.
“People are paying thirty or forty dollars a film to own them,” I continued. “Some are renting from Blockbuster, but with these animated feature films it looks like there’s a strong preference for actually owning them.”
“Do we know how much Disney makes on them?” Steve asked.
“Not precisely,” I said. “I’m trying to get the exact numbers, hopefully soon. But remember the calculation that said if Pixar had released Beauty and the Beast, we’d make about seventeen million dollars? I think that’s about ten percent of the actual profits. Even if I’m off by a lot, that means their profits on the film are enormous, maybe a hundred fifty million or more. I think much of that is coming from home video.”
Home video was turning animated feature films into big business, bigger than we had imagined. Beauty and the Beast, Aladdin, and The Lion King looked like they were among the most profitable films of all time. They had ushered in a new era of animated entertainment, and they were catapulting Disney’s animation division to new levels of commercial success.
“Investors will love this,” Steve said. “Pixar can be in a multibillion-dollar video market.”
“I agree, but let’s get the data first. Even then I’m not sure we can count on home video alone to take Pixar public.”
Steve winced at this. He didn’t like it when I made any suggestion that Pixar
might not be ready to go public. He was itching to go public as soon as we could. I had one foot on the brake, though. Pixar was frantically trying to finish Toy Story for its launch in six months. I didn’t want potential investors to see how precarious the project was. Worse, we didn’t have a business plan to confidently share with them, and I knew from my talks with Sam Fischer that Pixar’s share of the home video revenues under the agreement with Disney was very small, even if the market for home videos was big.
It was one thing to learn that animated feature films had more financial opportunity than we thought, quite another to bet the entire company on it. In the first place, under the Disney agreement, our share of the profits from our films would remain small for a long time, potentially ten years. Second, there was no modern precedent for taking an independent animation company public. Disney had first sold shares to the public in 1940, and by the time it listed on the New York Stock Exchange in 1957, it had expanded beyond animation. My hope had been to do the same, to balance the risks of animation with more stable businesses like RenderMan software sales.
“You don’t believe any of Pixar’s other technologies can scale?” Steve continued.
“You’re right, I don’t,” I replied.
“That leaves animation,” Steve said.
“Yes,” I replied. “But getting Wall Street interested in a pure animation company that’s never released a film will be close to impossible. It would mean we’d be raising our flag entirely as an entertainment company, a business we know little about.”
Taking a company public meant selling its stock to investors through the public stock exchanges. It served the twin purposes of raising capital to finance a company’s business and enabling anyone, including the company’s founders, to freely sell their stock. In Silicon Valley this was an imprimatur of success like no other. From the time Steve and I had first met, Steve mused about taking Pixar public. It was one of the reasons he had hired me, and the idea was never far from his mind.
To Pixar and Beyond Page 7