That turned out to be no mere understatement. Toy Story went on to become the biggest film of 1995, clocking in a total domestic box office of just under $192 million by the end of its run. At the time, it was the third-biggest animated feature film ever released, behind only Disney’s Aladdin and The Lion King.
At the end of the day that Pixar went public, if anyone had seen me as I walked out into Pixar’s parking lot to drive home, I’m sure they would have noticed an extra bounce in my step. I felt something between disbelief and jubilation. For most of the past year, I had been utterly wrapped up in what was right in front of me, simply trying to move everything ahead, sometimes little more than an inch or two. Now, in the space of one whirlwind week, Pixar had taken off. We had gone from a sleepy company that the world had all but forgotten to having one of animation’s hottest film releases ever and one of the most successful IPOs of the year. The stock price—which had been the source of so much angst just a few months earlier when we were issuing stock options—was higher than anyone at Pixar expected. It was immensely gratifying to think about how much Pixar’s team of humble, patient, groundbreaking geniuses deserved it.
Years later, I learned more about my own role in Pixar’s IPO. I met up with Todd Carter, who told me how close a call Robertson Stephens’s decision to take Pixar public had been. Their Commitment Committee that made the decision had met not once, not twice, but three times to discuss whether investors would tolerate the built-in risks. They were right on the fence about whether to proceed and had especially worried about Steve’s insistence on too high a valuation, and whether investors would be comfortable with Steve dividing his responsibilities between both Pixar and NeXT.
Todd also explained how important my influence had been in tipping the balance. The committee trusted that my view of the risks aligned with their own, and they believed I would be a grounding influence when it came to valuing Pixar. They also felt I would compensate for Steve’s commitment at NeXT. As flattering as that was, it was me who remained grateful for how Robertson Stephens came through for Pixar, staking its reputation on a crazy bet for Pixar to make it big in Hollywood and doing it before we had even released our first film.
If that Commitment Committee had come down the other way, everything would have been different. We would have been flat out of time for an IPO in 1995, and who knows how hard that would have made it to raise the capital we needed to build Pixar, when we needed it? Any way you looked at it, Pixar’s fate had hung on the slenderest of threads.
As jubilant as I was about the IPO, I also understood that my responsibilities were just beginning. I now had all the pressures of being the CFO of a public company. The coming months would call for an enormous amount of finesse as the Wall Street analysts initiated their reports on Pixar, and the investment community began to scrutinize our ability to execute our business plan. After all, the IPO was just one of the four pillars we had described. We still had to drastically increase Pixar’s output, earn a much bigger share of our films’ profits, and build Pixar’s brand. Pixar was far from reaching a stable orbit. This moment, however, was one to take in and to truly remember. We had navigated the long, torturous, and expensive obstacle course that Hal Vogel had so presciently described in his book, and we had come out of it on top.
But this wasn’t the end of Hal Vogel’s part of the story. Some years later, he made a small editorial change in his book. Just below the paragraph in which he described stock offerings for film companies as “investment nightmares,” he added a new paragraph:
A rare exception, however, was the late 1995 IPO of Pixar, in which 6.9 million shares were sold at $22 per share, raising a total of around $150 million. The Pixar offering was a great success because the company not only introduced new computer-generated technology in the making of Toy Story (released the week of the IPO), but also was backed by a multifilm major studio distribution agreement with Disney and led by a team of management and creative executives with impressive and well-established credentials.7
I am probably the only person in the world to notice this amendment to Hal’s book. But it still makes me smile every time I think about it.
PART III
18
From the Heart
As much as raising $140 million might seem like a big win, it still had to be transformed into actual business success. Like raising money to procure spices from the Banda Islands, all the risks of the voyage were still ahead of us.
To investors, even Toy Story’s success would quickly become yesterday’s news—last year’s spice journey. Sustained performance is the hallmark of business success, and Pixar was still a far cry from it. This depended on the other pillars of our plan: making films more often than every four years, enjoying more of the profits from those films, and turning Pixar into a brand. Before we could tackle those challenges, however, we had to face the biggest challenge of all: how to make great films. Without that, no matter what else we did, Pixar might easily join the long history of one-hit wonders that littered the entertainment highway.
Coming up with a second act after a big hit is a thorny challenge. The problem with success, even a little success, is that it changes you. You are no longer walking along the same precipice that drove you to do great work in the first place. Now you have something to defend: a reputation, money in the bank, a brand, real customer expectations. Success can take the edge away.
To keep the Pixar engine going, we had to produce another hit, and then another, and then more after that. How could we make sure that Pixar kept its creative edge? We couldn’t call a meeting, trot out a whiteboard, and write across the top: MAKE A BLOCKBUSTER. It was like trying to clone Mozart.
Two issues, in particular, were central to the challenge: how often to make films, and who would have the final say over creative choices.
By the end of 1995, Pixar was well into development on its second act, a film called A Bug’s Life. John was directing it, but with his commitments to market Toy Story, he had given Andrew Stanton a big role in making the film, one he hoped would groom Andrew to direct his own films in the future. Work on the story had begun over a year earlier, in 1994, and Disney had approved the film during the past summer.
Once again, the story team was skirting the edge of what was possible technologically: the exoskeletons of bugs were far more complicated than the plastic surfaces of toys; the film was set almost entirely outdoors; the miniaturized world of insects called for a luminous glow created by the sun shining through leaves and trees; and, perhaps hardest of all, the film was centered around an ant colony. A handful of ants was not going to cut it; we needed legions of them. This challenge fell to Bill Reeves, who was leading a team to invent technology to animate ant crowds automatically.
A Bug’s Life was not slated for release until the end of 1998 at the earliest, almost three years after Toy Story. We had to decide when to put future films into production. This called for tackling one of our four pillars: make films more often. The question was—how often?
“It’s a tradeoff,” I said to Steve one evening over the phone. “The more often we release films, the more risk we take with creative quality. The less often, the more risk we take with Pixar’s financial viability.”
“What release rate would reduce the business risk?” Steve asked.
“The numbers show releasing a film a year at a minimum,” I said. “Even two films a year, but I can’t see us getting to that.”
The next time we were at Pixar, we took the issue up with Ed.
“It’s too big of a leap,” Ed said. “The story team isn’t ready for a film a year.”
The story team, often described as Pixar’s brain trust, consisted of John Lasseter, Andrew Stanton, Pete Docter, and Joe Ranft. Lee Unkrich, Toy Story’s editor, also played a key role. They had all been pivotal in the making of Toy Story, and they were slated for big things in the future. The genius of John included not just the ability to make great films but to recognize and to groom o
thers to do the same. Sometimes Steve, Ed, and I referred to the story team as the “John Lasseter School of Animation Direction.”
It was still early days in developing new directors, though. With only one film under Pixar’s belt, we were not certain how long it would take. Moreover, because each film required a host of artistic, technical, and production capabilities, we also didn’t know how much time it would take to hire enough people to scale up. Pixar had around 150 employees while it was making Toy Story, an almost comically small number for all it was doing. This number would need to grow a lot.
“As much as I’d like to see it,” I said, “everyone is balking at the idea of a film a year. But a film every two years makes the numbers all but impossible to work. If we miss on a film, that means we’d have a dry spell of four years. We’d lose too much lift.”
Another option was to release a film every eighteen months. We could still hit the two big release windows, a summer release one year, a winter release the next, although the financial numbers did not work as well as they would if we released a film every year. We would need bigger hits, and any disappointment would hurt more. But we could make a case that a film every eighteen months might work, and this is where we compromised.
When we mapped out what it would take to accomplish a film every eighteen months, it became clear that we would need to expand the size of Pixar by three or four times at least. From that point on, the challenge became where to find the talent to make that happen. The level of artistic, animation, and technical talent within Pixar was rare, almost impossible to duplicate. Multiplying it would be like building two or three World Series baseball championship teams from scratch. We would need a full system of scouts capable of finding and signing the right people.
I hired Rachel Hannah to head up the hiring process. With an infectious enthusiasm, Rachel skillfully put in place the systems that would find the talent we needed from the world’s best animation, technical, and artistic sources. We also had to train the new hires so that they could be effective as quickly as possible. Ed had the vision and took on the task of creating Pixar University, hiring Randy Nelson to head it up. Together, they built an entire school within Pixar for training new and existing Pixar employees. Their vision for Pixar University went beyond merely professional development and training to encompass a full range of fine arts education that would evolve and perpetuate Pixar’s creative depth and talent.
We also hired Sarah McArthur, an executive from Disney, to head up Pixar’s production staff. Sarah had a stellar reputation in the industry, having had key roles in Beauty and the Beast and The Lion King, and served as senior vice president of production at Walt Disney Feature Animation. She was a huge catch for Pixar, something we could never have dreamed about before Toy Story’s success.
When it came to scaling creative quality, however, it was the second challenge that would have more significance for Pixar’s future than any other: Who would have approval over Pixar’s creative choices? Coming into Pixar I had no awareness of the importance of this decision. Now it scared me more than any other. I was simply astounded at how many ways it was possible for a film to go awry creatively.
Each film began with a “pitch” or a “treatment.” This was a simple vision of what the film was about. In the case of A Bug’s Life, it was something like “a film about a group of misfits who save an ant colony from an evil gang of grasshoppers.” The pitch would then outline the basic elements of the story and its main characters. On the strength of that pitch, production funds would be committed to develop the story and push the project further along.
The pitch was just the beginning of a long sequence of creative checkpoints in the making of a film. Someone needed to approve the storyboards, script, character designs, and artwork; the computer models of every character; the actors who would voice the characters; the number of sequences in the film and how those sequences were animated; the musical score and any songs; the film’s title; and even the length of the film.
Moreover, these approvals were repeatedly required in the process. Creative vision does not spring forth fully formed. It evolves, meanders, and all but stumbles its way to fruition. The four thousand storyboard drawings for a film were typically redrawn five or six times each in the process of making a film. Who was going to be responsible for these approvals? We were looking at investing upward of $100 million of investors’ money in filmmaking. We had to watch over it all very responsibly.
Disney had a well-honed system for making creative decisions. The executives there—Jeffrey Katzenberg, until he left, Peter Schneider, and Tom Schumacher—had a hand in every step of the creative process. The directors of Disney’s animated films very clearly answered to the top executives, and very little went forward without executive approval.
It was easy to see why Disney worked this way. Creative mistakes can be very expensive to fix. If there is a significant change to the story or to one of the main characters deep into the production process, the change ripples through every aspect of the film. It doesn’t take much to rack up millions or even tens of millions of dollars in unplanned costs. Most executives are not built to take this kind of risk, so they like to keep a close watch on the creative process. In fact, I was now beginning to understand why so many entertainment companies really didn’t like to take much creative risk at all. Executives often kept creative development on a short leash, preferring safer bets over riskier experiments.
As the stakes grew for Pixar, we felt even more pressure to have some sort of executive oversight to make sure Pixar’s creative processes did not go astray. We had a small band of story artists who had released one film and were now facing production budgets that would soon begin approaching $100 million per film. We worried about how much freedom the creative team should have. Ed, Steve, and I met with John to discuss the matter one Friday when Steve was at Pixar.
“I understand the concern here. I really do,” John said. “But we don’t want to make safe films. We want to keep breaking barriers in story and animation. Our story team is like no other. It has incredible vision and depth. We have to rely on it.”
“What about Disney?” Steve asked. “They’ve made some great films but their executives like Jeffrey Katzenberg provided creative oversight.”
Katzenberg had overseen Disney’s resurgence in animation, presiding over the development of The Little Mermaid, Aladdin, The Lion King, and other films. Now he was off building his own animation studio at DreamWorks. Bringing up Jeffrey Katzenberg to John, however, was a bit like showing a red cape to a charging bull. Katzenberg’s first animated feature at DreamWorks was about ants, just like Pixar’s next film. Pixar felt Katzenberg had developed the idea after hearing about Pixar’s film.
“We’re not making films like Katzenberg,” John retorted quickly. “We have ideas for incredible, original stories. It’s so rare to do original work. That’s what we can do. It’s what we have to do.”
“How do you see the creative decision process moving forward?” I asked.
“Our films must come from the heart,” John explained. “It’s not just about entertainment. It’s about telling stories that audiences connect with emotionally. The way to do this is to make our films personal, to make certain they mean something to our directors.”
John had such passion in his voice, such sincere conviction, that it was almost impossible not to be moved by it. He literally touched over his heart as he spoke.
“We have to trust our story team,” he went on. “They have to believe we trust them.”
“So what you’re saying,” Steve said, “is that we should bet on our creative talent, no matter the risk.”
“Yes,” John replied. “I know that’s asking a lot, but it is what I think we should do.”
What John was asking us to do was unprecedented. He wanted us to put all creative approvals in the hands of Pixar’s story team. It just wasn’t done. Disney had never done it. And those few directors in Hollywood who did ha
ve complete approval over their films had long track records of making iconic films. The truth remained that Pixar had released one film, and most of its future directors would be directing a feature film for the very first time. If we gave them unfettered control over creative decisions, we could end up with production overages that would not just sink us financially, but they’d make us look like the Hollywood novices we were.
After John left the meeting, Steve asked Ed what he thought.
“From Pixar’s shorts to Toy Story, we’ve done it the way John described,” Ed said. “Only now the stakes are higher as we try to make more films and our production budgets go up. But we have to take John’s thoughts seriously. So often studios sacrifice story by playing it safe.”
We walked through our options. The first was to insert ourselves more into the filmmaking process. No one would think it unreasonable for Pixar’s Office of the President to have a say in the films we made. As obvious as this seemed, especially by Hollywood standards, we well understood that we had no experience or qualifications to judge creative choices. Yes, we had our personal taste and opinions just like any other person, but evaluating story had a depth, an art, a physics to it. Moving from our personal views of a film to a professional critique was a gigantic leap. As alluring as it might be to try, we just did not have the confidence that we could guide the stories ourselves.
The second option was more enticing.
“We could hire someone to oversee Pixar’s creative choices,” Steve suggested. “With Toy Story’s success, I’m sure we could lure someone here to help with this side of the business.”
“You could talk to Joe Roth at Disney,” I suggested. “I’m sure he’ll have some ideas.”
Over the next few days, we looked into hiring a creative executive and reviewed a few names that came our way. Nothing really lit our fire, though. In animation, no names came up at all. The top names in animation already worked for Disney or DreamWorks. At best, we would have to settle for a creative executive from live-action film.
To Pixar and Beyond Page 17