Sunday, January 22, 2006
Why did Steve Jobs just buy Disney? I'll give you three guesses.
After all the years of rumors, speculation, and theorization, it looks like Disney is finally about to buy Pixar. As an Apple follower, should you care? That depends on why you think it's happening. I'll go ahead and assume that you already know that Apple CEO Steve Jobs just happens to also be the CEO of Pixar. You probably also know that Pixar's on-again, off-again relationship with Disney (with smaller Pixar holding all the cards) has led to everything from the early "retirement" of former Disney CEO Michael Eisner to Disney's lightning-quick decision to offer up its video content through Apple's iTunes Music Store. And you probably have at least some sense of the fact that Disney couldn't buy Pixar without Steve's blessing. What you may not know is that, with the approval of this deal, Steve becomes Disney's single-largest shareholder.
So if you want to understand how any of this might relate to Apple, you have to start with the question of why Steve chose right now to allow Disney to pull the trigger. Best I can tell, there are three reasonable possibilities:
A) Steve got tired of Pixar
This theory says that Steve Jobs simply got tired of running two companies concurrently, and decided to ditch Pixar (where he was reportedly only spending one day a week anyway) in order to either spend more time focusing on Apple or perhaps simply uncomplicate his professional life. Disney was the logical buyer, and Disney was only willing to make payment in shares of Disney stock, so Steve will simply hang onto them for awhile as an investment, and perhaps begin to sell them off down the road when he's allowed to. If this theory turns out the be the correct one, then the whole thing won't end up meaning much to Apple -- except for the fact that Steve will now be showing up to work five days a week instead of four.
B) Steve wants to be the CEO of Disney
This theory has the numbers behind it, if not the logic. Pixar is unique in that the company is majority-owned (73 percent last I heard) by Steve himself. In a company as large as Pixar, one person holding a share of a company stretching into the upper single-digits would be revelation; one person holding three-fourths of the company is something just doesn't happen. If you're wondering how such a fluke came to pass, it essentially boiled down to Steve already being super-wealthy from his first stint at Apple by the time he ever laid his eyes on Pixar, and not needing anyone else's money to build the company into a powerhouse. But what it means here in the present day is that Steve's 73 percent share in Pixar is going to translate to into a not-nearly-as-large-but-still-ridiclously-large share of Disney.
What this means is that at Disney's next shareholder meeting, Steve can more or less walk in and say "Hi I'm Steve Jobs, I have some success at running large companies, and oh by the way, I'm now your company's largest shareholder. I would like to have the title of _______". And whatever Steve decided to fill in that blank with, is the title he would walk out of that meeting holding. Chairman, CEO, President, Chief Dogwalker, you name it. Steve could take over day to day operations of Disney, and do to the company what he did to Apple upon his 1997 return -- except that Disney isn't in nearly as bad of shape as Apple was back then. Which, depending on his viewpoint, could make the whole thing less of a worthy challenge or more of a rewarding opportunity.
I think we've all more or less assumed that Steve wouldn't be able to function as the CEO of both Apple and Disney. But that assumption conveniently overlooks the fact that Steve has been running two companies concurrently for the past eight years. Sure, running Disney is a little more complicated than running Pixar. But then again, Steve is not exactly your typical CEO, either.
What makes this theory seem unlikely, though, is the timing of it. Steve has spent the past eight years at Apple largely trying to get back to zero in terms of company respectability, breathing room to try bold new things, and limitless potential new markets. And now, after all this time, Apple is succceeding in an almost ridiculous fashion, allowing Steve to bring all the innovation to the world that he wants. Why would he choose now to cut back on his involvement with Apple in order to start almost from square one at Disney? Five years ago, when Apple was still wearing something of a straightjacket, I'd have bought it. But now? Nah, it just doesn't make sense.
C) Steve wants to use Disney to Apple's benefit
Let's look at it from the other side. This theory says that Steve is more interested in Apple now more than ever, sees more potential now than ever, and just seized the opportunity to turn Disney into Apple's puppet. Steve doesn't have to become CEO of Disney just to control things; all he has to do is wave that "Largest Single Shareholder" badge in the faces of the people running Disney from time to time in order to remind them that he (almost literally) owns them. Anytime he wants to, Steve can just head on over to Disney's board room and walk out with anything Apple wants or needs, so long as it's not something that's not in Disney's best interests.
What would Apple want from Disney? Let's start with what Apple already has: half a dozen Disney-owned TV shows available through iTunes. That's about the extent of what Steve could wrangle from Disney in his role as CEO of Pixar. But now? Try iTunes suddenly offering every single TV show on ABC and the Disney Channel; every single sporting event from ESPN; and every single full-length movie in Disney's vault. Let's not forget that Disney's movie empire extends far beyond the cartoon classics, and includes hundreds of movies that have been released by various Disney underlings such as Miramax and others. iTunes suddenly begins offering every movie that Disney has the rights to, and then you've got the domino effect of other movie studios joining in on the iTunes action because they're afraid to be the last one in the door (think of NBC raced into iTunes, chasing after ABC).
What else could Apple use from Disney? How about Disney becoming the first major corporation to move nearly all of its corporate desktop machines to Intel-based Macs? Sure, it's not a given that the company could be persuaded to do such a thing. But would you want to bet against Steve if he walked into Disney's boardroom (with his "Largest Shareholder" badge in tow) and tried to make the case for such a move? And let's not even speculate on what use Apple could have for having control over a handful of rather well-known amusement parks. I can't imagine what Apple could do to milk Disneyland and Disney World in its favor, but I'll bet Steve can. And for those of you wondering if a little company like Apple could actually have such pull on a behemoth like Disney, it turns out that Apple is now a larger company than Disney.
So while any of the above possibilities could be the real reason for why Steve has chosen now to allow Disney to gobble up Pixar (and one of the above is actually quite scary if you're rooting for Apple), my money is on option "C" and I have a funny feeling that, for all intents and purposes, Apple just bought Disney.
After all the years of rumors, speculation, and theorization, it looks like Disney is finally about to buy Pixar. As an Apple follower, should you care? That depends on why you think it's happening. I'll go ahead and assume that you already know that Apple CEO Steve Jobs just happens to also be the CEO of Pixar. You probably also know that Pixar's on-again, off-again relationship with Disney (with smaller Pixar holding all the cards) has led to everything from the early "retirement" of former Disney CEO Michael Eisner to Disney's lightning-quick decision to offer up its video content through Apple's iTunes Music Store. And you probably have at least some sense of the fact that Disney couldn't buy Pixar without Steve's blessing. What you may not know is that, with the approval of this deal, Steve becomes Disney's single-largest shareholder.
So if you want to understand how any of this might relate to Apple, you have to start with the question of why Steve chose right now to allow Disney to pull the trigger. Best I can tell, there are three reasonable possibilities:
A) Steve got tired of Pixar
This theory says that Steve Jobs simply got tired of running two companies concurrently, and decided to ditch Pixar (where he was reportedly only spending one day a week anyway) in order to either spend more time focusing on Apple or perhaps simply uncomplicate his professional life. Disney was the logical buyer, and Disney was only willing to make payment in shares of Disney stock, so Steve will simply hang onto them for awhile as an investment, and perhaps begin to sell them off down the road when he's allowed to. If this theory turns out the be the correct one, then the whole thing won't end up meaning much to Apple -- except for the fact that Steve will now be showing up to work five days a week instead of four.
B) Steve wants to be the CEO of Disney
This theory has the numbers behind it, if not the logic. Pixar is unique in that the company is majority-owned (73 percent last I heard) by Steve himself. In a company as large as Pixar, one person holding a share of a company stretching into the upper single-digits would be revelation; one person holding three-fourths of the company is something just doesn't happen. If you're wondering how such a fluke came to pass, it essentially boiled down to Steve already being super-wealthy from his first stint at Apple by the time he ever laid his eyes on Pixar, and not needing anyone else's money to build the company into a powerhouse. But what it means here in the present day is that Steve's 73 percent share in Pixar is going to translate to into a not-nearly-as-large-but-still-ridiclously-large share of Disney.
What this means is that at Disney's next shareholder meeting, Steve can more or less walk in and say "Hi I'm Steve Jobs, I have some success at running large companies, and oh by the way, I'm now your company's largest shareholder. I would like to have the title of _______". And whatever Steve decided to fill in that blank with, is the title he would walk out of that meeting holding. Chairman, CEO, President, Chief Dogwalker, you name it. Steve could take over day to day operations of Disney, and do to the company what he did to Apple upon his 1997 return -- except that Disney isn't in nearly as bad of shape as Apple was back then. Which, depending on his viewpoint, could make the whole thing less of a worthy challenge or more of a rewarding opportunity.
I think we've all more or less assumed that Steve wouldn't be able to function as the CEO of both Apple and Disney. But that assumption conveniently overlooks the fact that Steve has been running two companies concurrently for the past eight years. Sure, running Disney is a little more complicated than running Pixar. But then again, Steve is not exactly your typical CEO, either.
What makes this theory seem unlikely, though, is the timing of it. Steve has spent the past eight years at Apple largely trying to get back to zero in terms of company respectability, breathing room to try bold new things, and limitless potential new markets. And now, after all this time, Apple is succceeding in an almost ridiculous fashion, allowing Steve to bring all the innovation to the world that he wants. Why would he choose now to cut back on his involvement with Apple in order to start almost from square one at Disney? Five years ago, when Apple was still wearing something of a straightjacket, I'd have bought it. But now? Nah, it just doesn't make sense.
C) Steve wants to use Disney to Apple's benefit
Let's look at it from the other side. This theory says that Steve is more interested in Apple now more than ever, sees more potential now than ever, and just seized the opportunity to turn Disney into Apple's puppet. Steve doesn't have to become CEO of Disney just to control things; all he has to do is wave that "Largest Single Shareholder" badge in the faces of the people running Disney from time to time in order to remind them that he (almost literally) owns them. Anytime he wants to, Steve can just head on over to Disney's board room and walk out with anything Apple wants or needs, so long as it's not something that's not in Disney's best interests.
What would Apple want from Disney? Let's start with what Apple already has: half a dozen Disney-owned TV shows available through iTunes. That's about the extent of what Steve could wrangle from Disney in his role as CEO of Pixar. But now? Try iTunes suddenly offering every single TV show on ABC and the Disney Channel; every single sporting event from ESPN; and every single full-length movie in Disney's vault. Let's not forget that Disney's movie empire extends far beyond the cartoon classics, and includes hundreds of movies that have been released by various Disney underlings such as Miramax and others. iTunes suddenly begins offering every movie that Disney has the rights to, and then you've got the domino effect of other movie studios joining in on the iTunes action because they're afraid to be the last one in the door (think of NBC raced into iTunes, chasing after ABC).
What else could Apple use from Disney? How about Disney becoming the first major corporation to move nearly all of its corporate desktop machines to Intel-based Macs? Sure, it's not a given that the company could be persuaded to do such a thing. But would you want to bet against Steve if he walked into Disney's boardroom (with his "Largest Shareholder" badge in tow) and tried to make the case for such a move? And let's not even speculate on what use Apple could have for having control over a handful of rather well-known amusement parks. I can't imagine what Apple could do to milk Disneyland and Disney World in its favor, but I'll bet Steve can. And for those of you wondering if a little company like Apple could actually have such pull on a behemoth like Disney, it turns out that Apple is now a larger company than Disney.
So while any of the above possibilities could be the real reason for why Steve has chosen now to allow Disney to gobble up Pixar (and one of the above is actually quite scary if you're rooting for Apple), my money is on option "C" and I have a funny feeling that, for all intents and purposes, Apple just bought Disney.
Comments:
I doubt Steve Jobs would ask Disney to switch over to Apple computers. If he owns 73% of Pixar, why wouldn't he have purchased X Servers instead of Intel servers?
# posted by 
: 7:44 AM
: 7:44 AM
Agreed. Steve Jobs is not afraid to use third-party technology when it benefits him or his company to do so. I don't think he is the sort Apple purist many of his customers are.
Overall, this is a very interesting story, and will likely pan out as described by the writer's last scenario.
I can't wait. It's going to be fun watching these new relationships unfold.
Overall, this is a very interesting story, and will likely pan out as described by the writer's last scenario.
I can't wait. It's going to be fun watching these new relationships unfold.
# posted by : 8:36 AM
: 8:36 AM
Currently, only 51% of PIXR owned by Steve. In case you didn't know, Apple fired Steve in a boardroom power play - despite owning 11% of Apple then.... but he did start it!
So, PIXR was mostly 71% owned by Steve so no BOD could do that again.... now Option grants made it just over 1/2.
OK, that equates to 5/100 votes for disney.... "If" Pixar only got it's 7 Billion market value ( Not likely for Steve) 95 other votes in balance..... Would be meaningless to control Disney.... Only the 2% ownership to raise a question at shareholder meetings would help..... or as a cheerleader, for example, getting eisner booted ( PIXR accounted for almost ALL DIS movie income! Since Lion King I)
So, if influential, visionary, advice is the key.... maybe it has already spoken.... 5% is not much.....
We could revive the old DIS + AAPL + PIXR rumor - add in 7 Billion from Apple - merge them - and make Steve run them all....
( but Apple shareholders, DIS shareholders, + PIXR - OK Steve, would all need to meet, vote, approve it.... maybe a year! More?)
So far this is just rumor..... and as shareholders in Disney would need to approve any deal..... Even IF Steve did want to.... It would await votes at all companies....
PIXR has been buying Intel systems for a while.... and tried some G5's ( but no compilers are really PPC optimized - x86 has 95% of optimized code - even on a worse CPU - 90% of speed is optimized code.... PIXR also thanks SUN, SGI, IBM, after all movies for help on render farms.... they need thousands of computers per frame....
I believe Steve said, he wasn't hiring the wrong guy.... but he wouldn't be CEO in 10 years..... So, maybe he'll scale back.... chairman??? Who knows...
It's difficult to take any speculation at all, when you don't even look up how much stock someone owns before speculating value..... and 5% is not controlling company stock....
However, Apple being 3 times bigger than DIS - and selling 8 Million Videos..... is VERY compelling.... no stock, deal, needed.
Last thing, Lasseter, the guy who is the spirit of Disney ( when they made good movies ) Wont work there.... He said, I'll work at Pixar, make a deal if you want in.... Hence 50% of costs, and a split in profits ( Unheard of in Disney history! ) John wont work for Disney..... Then who writes the 100% perfect blockbuster record films then?
If Steve did make a deal... he would want far more than market value ( typical 4 profitable companies ) I don't think Disney can afford paying that.... 1/3 company for animation house??? Shareholders must vote.....???
Steve is in a far better place now. Pixar has all hit films, DIS has not had one in over a decade... Pixar earns tons... DIS does not.... DIS is a disaster... corporation... useless managers... What's left to save?
As for Steve saying, "We want to be the next Disney, not Disney, but like Disney" & Apple the next Sony, not Sony but "Like" Sony...
( This is Valentine daily lecture "You can be IBM or SONY - both successful - one has 45,000 sales people - courts companies YEARS then does billion dollar contract.... OR Make cool stuff and sell to consumers - no board meetings.... like Walkman - just buy..... Not a dream.... a plan for not losing identity - don't make business computers, when only consumers buy Mac's - Lisa for example.... )
Interesting.... but check facts next time!
So, PIXR was mostly 71% owned by Steve so no BOD could do that again.... now Option grants made it just over 1/2.
OK, that equates to 5/100 votes for disney.... "If" Pixar only got it's 7 Billion market value ( Not likely for Steve) 95 other votes in balance..... Would be meaningless to control Disney.... Only the 2% ownership to raise a question at shareholder meetings would help..... or as a cheerleader, for example, getting eisner booted ( PIXR accounted for almost ALL DIS movie income! Since Lion King I)
So, if influential, visionary, advice is the key.... maybe it has already spoken.... 5% is not much.....
We could revive the old DIS + AAPL + PIXR rumor - add in 7 Billion from Apple - merge them - and make Steve run them all....
( but Apple shareholders, DIS shareholders, + PIXR - OK Steve, would all need to meet, vote, approve it.... maybe a year! More?)
So far this is just rumor..... and as shareholders in Disney would need to approve any deal..... Even IF Steve did want to.... It would await votes at all companies....
PIXR has been buying Intel systems for a while.... and tried some G5's ( but no compilers are really PPC optimized - x86 has 95% of optimized code - even on a worse CPU - 90% of speed is optimized code.... PIXR also thanks SUN, SGI, IBM, after all movies for help on render farms.... they need thousands of computers per frame....
I believe Steve said, he wasn't hiring the wrong guy.... but he wouldn't be CEO in 10 years..... So, maybe he'll scale back.... chairman??? Who knows...
It's difficult to take any speculation at all, when you don't even look up how much stock someone owns before speculating value..... and 5% is not controlling company stock....
However, Apple being 3 times bigger than DIS - and selling 8 Million Videos..... is VERY compelling.... no stock, deal, needed.
Last thing, Lasseter, the guy who is the spirit of Disney ( when they made good movies ) Wont work there.... He said, I'll work at Pixar, make a deal if you want in.... Hence 50% of costs, and a split in profits ( Unheard of in Disney history! ) John wont work for Disney..... Then who writes the 100% perfect blockbuster record films then?
If Steve did make a deal... he would want far more than market value ( typical 4 profitable companies ) I don't think Disney can afford paying that.... 1/3 company for animation house??? Shareholders must vote.....???
Steve is in a far better place now. Pixar has all hit films, DIS has not had one in over a decade... Pixar earns tons... DIS does not.... DIS is a disaster... corporation... useless managers... What's left to save?
As for Steve saying, "We want to be the next Disney, not Disney, but like Disney" & Apple the next Sony, not Sony but "Like" Sony...
( This is Valentine daily lecture "You can be IBM or SONY - both successful - one has 45,000 sales people - courts companies YEARS then does billion dollar contract.... OR Make cool stuff and sell to consumers - no board meetings.... like Walkman - just buy..... Not a dream.... a plan for not losing identity - don't make business computers, when only consumers buy Mac's - Lisa for example.... )
Interesting.... but check facts next time!
# posted by : 8:39 AM
: 8:39 AM
Bill, please reserve your comments to technology. You obviously don't know anything about the business side of things, particularly a somewhat important issue called "corporate governance". Most of what you suggest in each of your arguments is unrealistic (and possibly illegal) within the structure ofa a large, publicly held corporation.
# posted by : 8:46 AM
: 8:46 AM
Not to pick nits, but it looks like Steve Jobs has a 50.1% stake in Pixar.
Some interesting points are made in the comments, but there is no reason to be rude Anonymous-11:46.
This is all mere speculation at this point, and speculation sometimes extends beyond the bounds of what seems reasonable or even possible.
Make no mistake, if this deal were to happen, Steve Jobs will use it to his advantage as much as is possible, but his success is an unknown.
Some interesting points are made in the comments, but there is no reason to be rude Anonymous-11:46.
This is all mere speculation at this point, and speculation sometimes extends beyond the bounds of what seems reasonable or even possible.
Make no mistake, if this deal were to happen, Steve Jobs will use it to his advantage as much as is possible, but his success is an unknown.
# posted by : 11:39 AM
: 11:39 AM
I think that Apple fans are vulnerable to looking at this the wrong way, particularly after the infamous (and probably unique) NEXT reverse takeover. It's tempting to emphasize the strategic aspects of this merger, but that might be a mistake.
Pixar has a market cap of 7 billion dollars, which is a lot. That gives it a price-to-earnings ratio of about 40. What this means is that Pixar's investors have made a bet that the company's profits will grow substantially. To reward its investors, Pixar must grow.
But how? They could release, say, three films a year, but they'd only end up making less money per film. Joining up with Disney is useful to Pixar in several simple, business-related reasons. First of all, it rewards the investors with Disney stock, which is more evenly priced with a P/E of 21. More importantly, though, it gives Pixar access to all the immense media resources of the Disney empire. If Pixar artists wanted to try their hands at, say, TV shows, they'd be able to use ABC. Maybe some of their writers are interested in producing some content that would work better in a live-action film, and they'd be able to send those scripts right across the street to Miramax.
In other words, I feel that the driving force behind this transaction may simply be that it's the best way to use and grow the value of Pixar -- which is in essence Steve's job as Pixar CEO. Both sides might also be looking at the benefits of some sort of Apple-Disney alliance, but that thinking is not necessary to explain the decision to merge.
Pixar has a market cap of 7 billion dollars, which is a lot. That gives it a price-to-earnings ratio of about 40. What this means is that Pixar's investors have made a bet that the company's profits will grow substantially. To reward its investors, Pixar must grow.
But how? They could release, say, three films a year, but they'd only end up making less money per film. Joining up with Disney is useful to Pixar in several simple, business-related reasons. First of all, it rewards the investors with Disney stock, which is more evenly priced with a P/E of 21. More importantly, though, it gives Pixar access to all the immense media resources of the Disney empire. If Pixar artists wanted to try their hands at, say, TV shows, they'd be able to use ABC. Maybe some of their writers are interested in producing some content that would work better in a live-action film, and they'd be able to send those scripts right across the street to Miramax.
In other words, I feel that the driving force behind this transaction may simply be that it's the best way to use and grow the value of Pixar -- which is in essence Steve's job as Pixar CEO. Both sides might also be looking at the benefits of some sort of Apple-Disney alliance, but that thinking is not necessary to explain the decision to merge.
# posted by : 12:42 PM
: 12:42 PM
the world of media delivery is changing. there can be no doubt that apple has some serious jig saw bits in their media hub plan that are still to be released.
however media hubs only work with content. such an alliance with disney could potentially provide apple with a constant stream of media product to ensure that their media strategy is implemented smoothly without having to make stupid deals with the likes of sony, AOL Time etc.
In fact, if steve jobs has presented this technology to the CEO of Disney, who llikes it and can see the benefits in it and the extra revenue that could be generated, we now have 2 very powerful men implementing 1 vision. 1 man attacking it from technology and delivery whilst the other produces good content to be delievered.
this would be a very powerful force to be reckoned with which i would imagine would fuel share prices of both companies as well as revenues.
i could only see steve jobs becoming a board member of disney to bridge the communication with apple computers.
however media hubs only work with content. such an alliance with disney could potentially provide apple with a constant stream of media product to ensure that their media strategy is implemented smoothly without having to make stupid deals with the likes of sony, AOL Time etc.
In fact, if steve jobs has presented this technology to the CEO of Disney, who llikes it and can see the benefits in it and the extra revenue that could be generated, we now have 2 very powerful men implementing 1 vision. 1 man attacking it from technology and delivery whilst the other produces good content to be delievered.
this would be a very powerful force to be reckoned with which i would imagine would fuel share prices of both companies as well as revenues.
i could only see steve jobs becoming a board member of disney to bridge the communication with apple computers.
# posted by : 2:30 PM
: 2:30 PM
D: there's a third guess you didn't make. Steve had cancer and wants a legacy. Look at his commencement speech, about looking at death and what that does to you.
He wants a legacy. He's made THE mp3 player, and THE music service. His Macs are THE best computers and people are starting to realize that too. Combining Pixar with Disney or even taking over Disney is another incredible accomplishment.
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He wants a legacy. He's made THE mp3 player, and THE music service. His Macs are THE best computers and people are starting to realize that too. Combining Pixar with Disney or even taking over Disney is another incredible accomplishment.
# posted by : 2:57 PM
: 2:57 PM
