To Pixar and Beyond

by Lawrence Levy

  In the second week of November, we would begin the IPO road show that would last two weeks.

  Then, on Sunday, November 19, Disney would hold the premiere for Toy Story at the El Capitan Theatre in Hollywood.

  On Wednesday, November 22, Toy Story would be released into movie theaters all over North America.

  On Saturday, November 25, we would have our verdict on Toy Story’s opening.

  Finally, if all that went well, sometime the following week Pixar’s stock would begin trading and we would become a public company.

  Beyond that, there wasn’t much happening.

  16

  El Capitan

  My daughter Sarah was standing by the front door of our house. Now seven years old, she was always the first one ready, especially if we were doing something fun.

  “Come on,” she said. “The car is here. We have to go!”

  I could trust Sarah to keep us on track. She was wearing a pretty black-and-white outfit, a skirt and top, with a white ribbon in her hair. It was Sunday, November 19, and we were heading to the San Jose airport where Hillary, Jason, Sarah, and I would fly to LA. There, a car would take us to the newly renovated El Capitan Theatre where Disney was holding the invitation-only premiere of Toy Story. Even better, next door to the El Capitan, Disney had created the “Toy Story Funhouse,” a building that would be full of games, food, and shows based on Toy Story. Sarah was going to take no chances that we might be late.

  A few days earlier, we had concluded the IPO road show. Steve, Ed, and I had told the Pixar story over and over again. We had described Pixar’s business plan and all of its risks and answered every question the best way we could. Our investment bankers had been with us the entire way, and Mike McCaffrey had indeed joined us at every stop.

  But it was hard to read the investors’ response. They rarely, if ever, jumped up and down with excitement. Investors didn’t want to cause a frenzy that would drive the stock price up before they bought it. Robertson Stephens appeared happy with how we did, but it would be a little while before we knew how that would translate into demand for Pixar stock. The best thing we could do while we waited was to press forward and enjoy Toy Story’s premiere.

  We landed in LA early that afternoon and were picked up at the airport to go to the premiere. As we approached the El Capitan Theatre, evidence of Disney’s marketing campaign for Toy Story was everywhere.

  “Look!” Sarah shrieked. “A Toy Story poster.”

  If we had harbored earlier reservations about Disney’s marketing effort for the film, they had more than made up for it of late.

  “This holiday season the adventure takes off when toys come to life,” began the trailer that had been playing in the movie theaters for weeks.

  “Two heroes, ready for anything, except each other,” it went on. And then, at the end: “Walt Disney Pictures presents the first ever computer-animated motion picture.”

  Disney was hitting all the right chords, and they continued to do so in a massive poster and billboard campaign that filled highway billboards, bus stops, and the sides of buses throughout the country. Everyone at Pixar had shared a nervous excitement these last couple of weeks that all but bubbled over once we started to see the first billboards go up on local highways. THE TOYS ARE BACK IN TOWN, one said in huge, bold, black letters with the Toy Story characters in full color. Other posters emphasized individual characters. Rex the dinosaur had one that said, I’M A NERVOUS REX! Woody’s said, DON’T YANK MY STRING! The bottom of each poster said, COMING TO LIFE NOVEMBER 22. It was becoming hard to miss the growing drumbeat for the film.

  Now we had reached the dropoff point at the El Capitan.

  “We all just get out of the car like we know what we’re doing,” announced Jason, now ten, smiling.

  Jason saw the humor in just about anything we did. We had all been excitedly bantering about walking down the carpet to enter the theater. We would not, strictly speaking, be walking down the red carpet that led to the TV cameras. That was for the stars. Ours was right next to it, though, and it would be as close as we had ever been to the red carpet feeling. We’d still be walking right by the reporters and fans who were lining the street.

  “As far as anyone knows,” Hillary chimed in, “Jason might be a voice in the film. Why don’t we walk behind him like his entourage?”

  Jason liked that. Sarah giggled. The car arrived.

  “This is it!” Jason reminded us. “No one trip.”

  With that caution, we were ushered out of our car and relished every moment of walking down the carpet. Before we knew it we were sitting in our seats, watching as the theater began to fill up.

  “Look, there’s Tom Hanks,” Hillary announced excitedly.

  Indeed, there Hanks was, in the flesh, walking into the theater. His star could not have been brighter at that moment, fresh off the summer’s hit film Apollo 13. We saw many of the “voices” in the film as they came in: Tim Allen, Wally Shawn, John Ratzenberger. Even Michael Eisner, Disney’s CEO, was present, which we took as a special compliment to Pixar given the number of Disney premieres to which he must be invited. And of course we saw John Lasseter, Ed Catmull, and the other key contributors at Pixar, all accompanied by their families, as Disney had made this into a truly family event.

  The only one missing was Steve. He was not a big fan of the El Capitan Funhouse idea, feeling it was money spent on reaching too few individuals, and he had wanted a Silicon Valley premiere to highlight where Toy Story had been made. He had arranged a special screening of the film in San Francisco for the next night.

  Soon the theater filled up, and as the lights went down, a quiet hush filled the room. With great anticipation, we all settled in to watch the world’s first computer-animated feature come to life. And come to life it did!

  It didn’t take long to realize we were watching not just a movie but the making of film history. I had seen much of the film in storyboards, rough animation, and unlit sequences, but seeing the final form, with the songs, the soundtrack, the depth of color, was just stunning. I had never seen final animation of the creepy mutant toys in Sid’s house, and I found myself choking up when Woody and Buzz realized that these ghoulish creatures just wanted to help them. I loved it even more when they helped Woody and Buzz escape from Sid’s house. I cheered inside when I saw the outdoor scenes where Woody and Buzz flew on a rocket ship, seeing not just an amazing movie moment but a technical accomplishment that had seemed impossible just a few months earlier.

  As the film ended, the clapping and cheering in the theater lasted all the way through the closing credits. When the lights went up, the room filled with excited chatter.

  “That was great!” Jason declared. “The end is amazing.”

  “The 3-D look of the film is fantastic,” Hillary said. “It was beautiful to watch.”

  “I’ve seen so many clips of the film,” I said, “but seeing the whole thing was mesmerizing. I was thinking, ‘How did they do it?’ even when I’ve seen how they do it.”

  “Sarah, what’s your favorite part?” Jason asked.

  “I like when Woody tells Etch to draw,” Sarah said, “and when Buzz flies around the room.”

  “But you know my very favorite part?” Hillary added.

  “What’s that?” Jason replied.

  “Seeing Jenna’s name as one of the Toy Story babies in the credits!”

  Of course. Hillary was not soon going to forget that.

  After the film, we were ushered directly into the Funhouse, a three-story spectacle of Toy Story delights for children. There we spent the next two hours exploring the Green Army Men Room and its obstacle course of fake lakes and bridges, the live Western band in Woody’s Roundup, the laser-shooting gallery in Buzz’s Galaxy, and the assortment of junk foods in Pizza Planet Café, including the slushy alien slime, as if there were not enough sugary treats.

  We got stuck, however, in Mr. Potato Head’s Playroom. This was an arts and crafts extravaganza in which, o
nce Sarah started playing with the drawings and Lite-Brite games, all she wanted to do was stay. It was only the sound of clapping and ushers gently encouraging us to leave that made us finally move. All the operators at the Funhouse had lined the hallways to the exit and were clapping as we moved through them, giving Sarah a feeling of being whisked away. We found our way back to our awaiting car and made the journey home, where we arrived totally tired but thrilled. We had been part of a Hollywood moment. I don’t think Jason and Sarah could understand why I had ever doubted joining Pixar.

  With the thrill of Toy Story’s premiere behind us, we were at last heading into the two weeks that would count the most.

  17

  PIXR

  “Can I stop by on my way home?” I asked Steve on the phone as I left Pixar two days after the premiere. It was Tuesday, November 21, the day before Toy Story’s official release.

  This was one conversation I wanted to have in person.

  “Sure, come on by.”

  As I walked through the gate on the side of Steve’s house, I felt a chill down my spine. Goosebumps.

  Steve was in his home office. He sat at his desk, working on his computer.

  “Robertson Stephens called me this afternoon,” I started.

  Steve had been anxiously awaiting the results of our road show.

  “We did it, Steve,” I said, quietly. “We did it,” my voice grew louder. “Investors want in. Our stock offering will be oversubscribed. Robertson Stephens is ready to go. They want to launch Pixar’s public offering at the end of next week.”

  “Any idea what the price will be?” Steve asked.

  “Not precisely. But Robertson Stephens think there’s a good chance the IPO will go over the proposed twelve- to fourteen-dollar price, well over. Interest is very high.”

  “Wow,” Steve said, a smile creeping across his face. “This is fantastic.”

  “It’s amazing,” I said. “Investors loved our story. They understand we’ve got a lot of work ahead of us, that this is a long-term investment. But they believe in Pixar. They believe we can do it. They want in.”

  “Great,” Steve said, taking it all in. “This is really great.”

  The final price for the IPO would not be set until a day or two before the offering. In the meantime, there was that other number we had our eye on: Toy Story’s opening weekend box office.

  On the morning of Saturday, November 25, all I could do was pace. We had arranged a chain of phone calls through which we would know how well Toy Story had performed Friday night. I would receive a phone call from Sarah Staff, who was plugged into Pixar’s source of box office information. We needed to know the precise number, and we needed to know how to interpret it. We had learned that Thanksgiving film releases were a little unusual compared to a normal weekend. In the first place, the film was officially released on Wednesday, the day before Thanksgiving. Friday itself was the huge post-Thanksgiving shopping day, so that had to be factored in also. Disney had promised to help us make sense of the numbers.

  “When will you hear?” Hillary asked.

  “They said by around 10:00 a.m.,” I replied.

  It was now approaching 10:30. It would be only moments before we knew the first magic number, that of Toy Story’s opening weekend box office. I’d take $10 million, I reminded myself, but something north of $15 million would be very sweet indeed.

  “I’m nervous,” Hillary said.

  Twenty minutes later, the phone rang. I rushed to answer it.

  “Yes, yes. I see. I get it. Thank you. Yes, I’d love the details. You have my fax number. Thank you.”

  I hung up the phone, trying to absorb what I had just been told.

  “So?” Hillary couldn’t wait.

  “It’s massive,” I said. “Massive. They didn’t believe it was possible. Disney predicts a weekend box office close to thirty million! Friday night’s box office alone was close to eleven and a half million.”

  Hillary and I high-fived.

  “Wow!” Hillary exclaimed. “It’s way better than any of us even imagined.”

  “Thirty million!” I continued. “Even more, audience polling is off the charts. Disney thinks the film will have a huge run. It will sail past a hundred million, and probably past a hundred and fifty million.”

  Five minutes later the phone rang again. It was Steve.

  “It’s amazing,” Steve started excitedly. “I’ve talked to Disney marketing, I’ve talked to John. I’ve talked to Eisner. This is huge. They’re thinking this could be the biggest film of the year.”

  The biggest film of the year so far had been Batman Forever, with a total domestic box office of $184 million. Second was Apollo 13, with $172 million. It had never really occurred to any of us that we might reach into that territory.

  “Are you serious?” I said. “That means it’ll get close to two hundred million.”

  “It’s possible,” Steve said. “We did it, Lawrence. We totally did it.”

  I felt chills down my spine again as I got off the phone and shared what Steve had said. The biggest film of the year. Pixar. Toy Story. It was hard to compute. We were dumbfounded. Audiences were falling in love with Woody and Buzz. “My goodness,” I thought, “these are going to become cultural icons, like Mickey Mouse and Bambi.” That first number, the opening weekend box office, had totally exceeded our wildest expectations.

  The mood at Pixar on Monday morning was jubilant. More than jubilant. Ecstatic. I don’t think a scrap of work got done as everyone recounted their weekend experiences taking friends and families to see the film. The air was filled with a mixture of humble pride and total disbelief at the size of the box office numbers.

  My team and I had little time to take it all in, though. Robertson Stephens had confirmed they were ready to go. Wednesday was the target day for Pixar’s IPO.

  Later that day, I called Steve.

  “Robertson Stephens thinks they can price it over twenty dollars per share,” I told him. “Far above the twelve- to fourteen-dollar range.”

  That $12 to $14 had been the proposed price before we met investors. Now we were talking about something way beyond that.

  “They’re thinking twenty-two dollars,” I went on. “Their investors want in on this, although if the price is much higher than that, they’re worried some might balk. That values Pixar at eight hundred million dollars, and means we’ll raise over one hundred forty million in cash.”

  “Are you sure that’s as high as they’re willing to go?” Steve asked.

  “I am,” I said. “I’ll arrange a call for you to talk to Mike McCaffrey so you can discuss it with him directly. It’s an incredible price. And there are still worries about the risks in Pixar’s business model.”

  Steve talked to Robertson Stephens’s CEO, Mike McCaffrey, and we had a separate call with Pixar’s board members. They all approved.

  “Congratulations,” Steve said to all of us. “We’ve got ourselves a deal. Let’s make it happen.”

  We had agreement on the opening price.

  Two days later, on Wednesday, November 29, Steve, Ed, and I huddled around a computer in the San Francisco offices of Robertson Stephens. The NASDAQ stock market had opened at 6:30 a.m., about thirty minutes earlier. Robertson Stephens was ready to launch Pixar’s stock, which would trade under the symbol PIXR. With us from Robertson Stephens were Todd Carter, Mike McCaffrey, Brian Bean, and Ken Fitzimmons, who was in charge of actually placing the stock in the hands of investors. It was his task to make sure trading began smoothly. The NASDAQ stock exchange is not a physical place like the New York Stock Exchange. There is no bell to ring, just stock symbols on a computer screen.

  A little after 7:00 a.m., six million shares of Pixar stock were placed with investors at $22 per share. They were immediately tradable by any person who wanted to purchase Pixar’s stock.

  “There it is!” Todd Carter exclaimed. “Pixar’s first trade.”

  We could see our symbol PIXR for the first ti
me. We were live. Pixar was a public company.

  But the trading did not begin at $22. That was the price the first investors paid to Pixar to acquire the stock. It immediately jumped up into the high thirties. Demand was off the charts.

  We all stared at it, partly beaming, partly in disbelief.

  Todd Carter broke the silence. He turned to Steve.

  “Congratulations, Steve,” he said. “You’re a billionaire.”

  At the end of the first day’s trading, Pixar’s stock was at $39. That gave Pixar a market value of close to $1.5 billion and did indeed make Steve a billionaire. I later heard that while I was glued to the computer screen watching Pixar’s trades, Steve had stepped into a nearby office and made a phone call to his friend Larry Ellison, the founder and CEO of Oracle Corporation. All he apparently said was “Larry, I made it.”

  The next day’s headline in the Wall Street Journal’s report on the IPO read:

  STEVE JOBS IS BACK IN THE SADDLE AGAIN,

  BECOMING A BILLIONAIRE IN PIXAR IPO

  The article said:

  There are plenty of analysts who think the market’s valuation of Pixar, at a total of $1.46 billion, is a sign of investors gone mad. Disney will get 80% to 90% of the revenue from “Toy Story,” and has locked Pixar into a three-picture deal through at least 1999 that promises to be a lot more rewarding for Disney than Pixar.5

  Responding to similar skepticism over Pixar’s valuation, the LA Times quoted Steve saying, “It’s not for me to decide what the value is—that’s why we have a market. But we are only the second studio in 60 years to produce a blockbuster animated feature film—and we’re doing it in a new medium of 3-D computer graphics.”6