by Robert Iger;
Over the course of the next month, Tom and Steve went over the possible financial structure in great detail and arrived at a price: $7.4 billion. (It was an all-stock deal—2.3 Disney shares for each Pixar share, and netted out to $6.4 billion because Pixar had $1 billion in cash.) Even if Steve stopped just short of being greedy, it was still a huge price, and it was going to be a tough sell to our board and to investors.
We also negotiated what we called a “social compact”—a two-page list of culturally significant issues and items that we promised to preserve. They wanted to feel that they were still Pixar, and everything related to protecting that feeling mattered. Their email addresses would remain Pixar addresses; the signs on their buildings would still say Pixar. They could keep their rituals for welcoming new employees and their tradition of monthly beer blasts. A much more sensitive negotiation took place over the branding on films, merchandise, and theme-park attractions. Our research showed that Pixar had eclipsed Disney as a brand—a fact that they were well aware of—but I felt that over time the strongest branding for the Pixar films, especially since John and Ed would now be running Disney Animation, would be Disney-Pixar. Ultimately, that’s what we settled on. Pixar’s famous “Luxo Junior” animation would still open each of their films, but it would be preceded by the Disney castle animation.
* * *
—
THE CHALLENGE BEFORE me now was convincing our board. I realized my best shot was for them to meet and hear from Steve and John and Ed directly. No one could sell this better than the three of them. So, on a weekend in January 2006, we all convened in a Goldman Sachs conference room in L.A. Several members of the board were still opposed to a deal, but the moment Steve, John, and Ed started talking, everyone in the room was transfixed. They had no notes, no decks, no visual aids. They just talked—about Pixar’s philosophy and how they worked, about what we were already dreaming of doing together, and about who they were as people.
John spoke with passion about his lifelong love of Disney and his desire to return Disney Animation to its former glory. Ed gave a cerebral, fascinating dissertation about where technology was heading and what might be possible for both Disney and Pixar. As for Steve, it’s hard to imagine a better salesman for something this ambitious. He talked about the need for big companies to take big risks. He talked about where Disney had been and what it needed to do to radically change course. He talked about me and the bond that we’d formed already—with the iTunes deal, but also in the ongoing discussions about preserving Pixar’s culture—and his desire to work together to make this crazy idea a success. For the first time, watching him speak, I felt optimistic that it might happen.
The board was scheduled to meet for a final vote on January 24, but word of a possible deal soon leaked out. Suddenly I was receiving calls from people urging me not to do it. Among them was Michael Eisner. “Bob, you can’t do this,” he said. “It’s the stupidest thing in the world.” It was the same list of concerns. It was too expensive, too risky. Bringing Steve into the company would be a disaster. “You can fix Animation,” Michael said. “You don’t need them to do it. They’re one failure away from being an average performer.” He even called Warren Buffett, thinking that if Warren thought it was a dumb investment, he would be able to sway the people he knew on the Disney board. Warren didn’t weigh in, so Michael called Tom Murphy, to see if he would say something, and then he reached out to George Mitchell and asked if he could address the board directly himself.
George called me and told me about the request. “George,” I said, “you’re not going to let him do it, are you? At this point?” Michael had been out of the company for four months. His connection with Disney had ended on his last day at work. I knew it was difficult for Michael, but I was offended by his meddling. It was something he would never have tolerated when he was CEO.
“It’s cheap,” George said. “Just let it happen. We show him respect, we hear him out, then you make your case.” This was quintessential George. After years in the Senate, including a stint as majority leader, and after helping to broker peace in Northern Ireland, he was the consummate statesman. He genuinely felt Michael deserved the respect, but he also knew Michael could be a rogue element here, influencing the board from outside, and it was better to let him come in and talk, giving me the chance to immediately issue a rebuttal in the same room. It’s the only thing George ever did as chairman that rankled me, but there was nothing I could do but trust in his instincts.
On the day the board was set to vote, Michael came in and made his case. It was the same one he’d made with me—the price tag was too high, Steve was difficult and imperious and would demand control, Animation was not beyond repair. He looked at me and said, “Bob can fix Animation.” I said, “Michael, you couldn’t fix it, and now you’re telling me that I can?”
Before the meeting, George came into my office and said, “Look, I think you’re going to get this. But it’s not a done deal. You have to go in there and pitch your heart out. You have to do the equivalent of pounding your fists on the table. Show your passion. Demand their support.”
“I thought I’d already done all that,” I said.
“You have to do it one more time.”
I entered the boardroom on a mission. I even took a moment before I walked into the room to look again at Theodore Roosevelt’s “The Man in the Arena” speech, which has long been an inspiration: “It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood.” My face wasn’t quite marred by dust and sweat and blood, and the Disney boardroom wasn’t the harshest of arenas. But I had to go in there and fight for something I knew was a risk. If they said yes, and it worked, I’d be a hero for changing the fortunes of the company. If they said yes, and it didn’t work, I wouldn’t be long in the job.
I spoke with as much fire as I could muster. “The future of the company is right here, right now,” I said. “It’s in your hands.” I repeated something I’d said back in October, in my first board meeting as CEO. “As Disney Animation goes, so goes the company. It was true in 1937 with Snow White and the Seven Dwarfs and in 1994 with The Lion King, and it’s no less true right now. When Animation soars, Disney soars. We have to do this. Our path to the future starts right here, tonight.”
When I was done, George began the voting process, calling on each member in alphabetical order to vote aloud and offering them a chance to speak if they wanted to. The room went very quiet. I recall making eye contact with Tom Staggs and Alan Braverman. They were confident we would get the vote, but now I wasn’t sure. After all the board had been through over the past few years, it seemed likely that risk aversion could rule the day. The first four members voted yes, and the fifth also voted yes but added that he was doing so only out of support for me. Of the remaining five, two voted against, bringing the final tally to nine for and two against. The deal was approved.
There was a brief discussion about whether another vote should be taken to make it unanimous, but George quickly shut that down, arguing that the process had to be transparent. Someone worried about the public perception of a less-than-unanimous vote, but I said that I didn’t care. All anyone had to know was that the Disney board approved it. The vote did not have to be made public, and if anyone asked whether it was unanimous, we should respond with the truth. (Years later, Michael admitted to me that he was wrong about Pixar, which was gracious of him.)
* * *
—
ON THE DAY of the announcement, Alan Braverman, Tom Staggs, Zenia Mucha, and I traveled to Pixar’s headquarters in Emeryville. Steve, John, and Ed were there, and the plan was to release the announcement right after the stock market closed at 1 P.M. PST, then hold a press conference and a town hall meeting with Pixar’s employees.
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Just after noon, Steve found me and pulled me aside. “Let’s take a walk,” he said. I knew Steve liked to go on long walks, frequently with friends or colleagues, but I was surprised at the timing and suspicious about his request. I turned to Tom to ask what he thought Steve wanted, and we guessed either he want to back out or he wanted something more.
I looked at my watch as Steve and I left the building. It was now 12:15. We walked for a while and then sat on a bench in the middle of Pixar’s beautiful, manicured grounds. Steve put his arm behind me, which was a nice, unexpected gesture. He then said, “I’m going to tell you something that only Laurene”—his wife—“and my doctors know.” He asked me for complete confidentiality, and then he told me that his cancer had returned. He’d been diagnosed with a rare form of pancreatic cancer a few years earlier, and after an operation he had declared that he was completely cured. But now it was back.
“Steve, why are you telling me this?” I asked. “And why are you telling me now?”
“I am about to become your biggest shareholder and a member of your board,” he said. “And I think I owe you the right, given this knowledge, to back out of the deal.”
I checked my watch again. It was 12:30, only thirty minutes before we were to announce the deal. I wasn’t sure how to respond, and I was struggling to process what I’d just been told, which included asking myself whether what I now knew would trigger any disclosure obligations. Did I need to tell our board? Could I ask our general counsel? He wanted complete confidentiality, so it would be impossible to do anything except accept his offer and back away from a deal I wanted badly, and we needed badly. Finally I said, “Steve, in less than thirty minutes we are set to announce a seven-plus billion dollar deal. What would I tell our board, that I got cold feet?” He told me to blame him. I then asked, “Is there more that I need to know about this? Help me make this decision.”
He told me the cancer was now in his liver and he talked about the odds of beating it. He was going to do whatever it took to be at his son Reed’s high school graduation, he said. When he told me that was four years away, I felt devastated. It was impossible to be having these two conversations—about Steve facing his impending death and about the deal we were supposed to be closing in minutes—at the same time.
I decided to reject his offer to cancel the deal. Even if I took him up on it, I wouldn’t have been able to explain why to our board, which not only had approved it, but had endured months of my pleas to do so. It was now ten minutes before our release was to go out. I had no idea if I was doing the right thing, but I’d quickly calculated that Steve was not material to the deal itself, although he certainly was material to me. Steve and I walked in silence back to the atrium. Later that day I spoke with Alan Braverman, whom I trusted like a brother, and told him what Steve had told me. He endorsed the decision I’d made, which came as a great relief. That night I took Willow into my confidence, too. Willow had known Steve for years, since long before I knew him, and instead of toasting what had been a momentous day in my early days as CEO, we cried together over the news. No matter what he told me, no matter how resolved he would be in his fight with cancer, we dreaded what was ahead for him.
The Pixar deal was announced at 1:05 PST. After Steve and I addressed the press, we both stood on a platform in the cavernous Pixar atrium, John and Ed at our side, in front of almost a thousand Pixar employees. Before I spoke, someone gave me a Luxo lamp as a present to commemorate the moment. Extemporaneously, I thanked the group and told them I was going to use it to illuminate our castle. It has ever since.
CHAPTER 10
MARVEL AND MASSIVE RISKS THAT MAKE PERFECT SENSE
THE PIXAR ACQUISITION served our urgent need to revitalize Disney Animation, but it was also the first step in our larger growth strategy: to increase the amount of high-quality branded content we created; to advance technologically, both in our ability to create more compelling products and to deliver those products to consumers; and to grow globally.
Tom Staggs, Kevin Mayer, and I had a list of “acquisition targets” that we believed could help us fulfill those priorities, and we decided to focus first on intellectual property. Who possessed great IP that could have applications across the full range of our businesses? Two companies came immediately to mind: Marvel Entertainment and Lucasfilm. We had no idea if either might be for sale, but for a variety of reasons (among them that I believed it would be very hard to convince George Lucas to sell the company he’d built himself and relinquish control of the Star Wars legacy), we put Marvel at the top of our list. I wasn’t steeped in Marvel lore, but you didn’t have to be a lifelong reader of the comics to know it was a trove of compelling characters and stories that would plug easily into our movie, television, theme-park, and consumer-products businesses. There were other companies on our list, but none were as valuable as Marvel and Star Wars.
The approach wasn’t without complications. For one, Marvel was already contractually bound to other studios. They had a distribution agreement with Paramount for multiple upcoming films. They’d sold the Spider-Man rights to Columbia Pictures (which eventually became Sony). The Incredible Hulk was controlled by Universal. X-Men and The Fantastic Four belonged to Fox. So even if we could acquire everything that wasn’t tied up by other studios, it wasn’t as pure an IP acquisition as we would ideally have liked. We wouldn’t have all the characters under one umbrella, which would potentially cause some brand confusion and some licensing complications down the road.
The larger obstacle, though, was that the person who ran Marvel, Ike Perlmutter, was a mystery to us. Ike was a legendarily tough, reclusive character, former Israeli military, who never appeared in public or allowed pictures of himself to be taken. He had made a fortune by buying up the debt of distressed companies and then using it to take control of them. And he had a reputation for being penurious to the extreme. (There are stories of Ike pulling paper clips out of trash cans.) Beyond that, we knew very little about him. We had no idea how he’d respond to our overtures, or if he’d respond at all when we reached out to him.
Ike’s connection to Marvel Comics went back to the mid-’80s, when Marvel’s then owner, Ron Perelman, acquired part of ToyBiz, a company that Ike owned along with a partner named Avi Arad. Throughout the comic-collecting boom of the late ’80s and early ’90s, Marvel was hugely profitable. Then the boom ended, and losses started piling up. There were financial restructurings and a bankruptcy filing, and finally a long power struggle between Perelman; the investor Carl Icahn, who’d become Marvel’s chairman; and Ike and Avi Arad. In 1997, Ike and Arad wrested control of the company away from both Perelman and Icahn. The next year, they fully merged ToyBiz and Marvel to form Marvel Enterprises, which eventually became Marvel Entertainment.
By 2008, when we began looking into them in earnest, Marvel was a publicly traded company, with Ike as its CEO and controlling shareholder. We spent about six months trying to get a meeting with him and got nowhere. You’d think it wouldn’t be that difficult for the CEO of one company to arrange a meeting with another, but Ike didn’t do anything that he didn’t want to do, and because he was so secretive, there were no direct channels to him.
If he was going to give us the time of day, it would be because someone he trusted vouched for us. We did have one connection. A former Disney executive named David Maisel had joined Marvel to help them get into the movie business. David and I always got along, and he checked in from time to time to see if there was anything we could do together. He’d pushed me several times to consider becoming the distributor of the films Marvel was embarking on, but I wasn’t interested in just being a distributor. I told David I wanted to meet with Ike, and asked if he had any advice. He said he would try to arrange something, and that he thought it was a great idea, but he made no promises and urged patience.
Meanwhile, Kevin Mayer couldn’t stop fantasizing about what Disney could do if we add
ed Marvel. Kevin is as intense and laser-focused as anyone I’ve ever worked with, and when he sets his sights on something of value, it’s very hard for him to accept my advice to “be patient,” and so he harangued me on a near-daily basis to find some way to get to Ike, and I told him we needed to wait and see what David could do.
Months went by. Intermittently, David would reach out with the same message—nothing yet, keep waiting. And then, finally, he called one day in June 2009 and said Ike was willing to meet. David never explained why things had changed, but I suspect he told Ike we had some interest in possibly acquiring Marvel, and that intrigued him.
A few days after we got the word from David, I went to meet Ike at the Marvel offices in midtown Manhattan. As with John and Ed at Pixar, I wanted him to feel that I was there out of respect, so I went to New York expressly to meet with him and showed up by myself, not with a team of Disney executives. Marvel’s offices confirmed Ike’s reputation. They were spartan. His own office was tiny and unadorned: a small desk, some chairs, small tables and lamps. No expensive furniture or sweeping view, very little on the walls. You’d never know that it belonged to the CEO of an entertainment company.
Ike was noticeably wary of me, but he wasn’t cold or uninviting. He had a wiry frame and a powerful handshake. When I sat down he offered me a glass of water and a banana. “From Costco,” he said. “My wife and I shop there on weekends.” I didn’t know how much David had told him about me or what I wanted to talk about, but you can’t meet someone and then right after the niceties say you want to buy his company. So while I suspected Ike knew there was likely only one reason I was in his office, we first chatted about where we each came from and our respective businesses. He asked specifically about the Pixar purchase, and I told him about integrating them into Disney in a way that allowed them to maintain their unique culture. It was at that point that I explained why I was there and raised the notion of doing something similar with Marvel.