Disney, Pixar Give Marriage Second Chance

By Vandana Sinha
January 30, 2006 04:27 PM

Many merging and acquired companies like to tell the story about their corporate union as the fairy tale come true.

Walt Disney Co. and Pixar Animation Studios are no different, as they announced their $7.4 billion marriage last week, conducting joint interviews, issuing mutual praise and all. But time will still tell whether one ends up being the bad apple in the new partnership.

Though, this alliance comes barely a year after the two companies wrote each other off in disgust over a simple movie distribution deal. Former Disney CEO Michael Eisner called Pixar depictions of human characters "pretty pathetic," while Pixar Chairman Steve Jobs "stormed away" from distribution negotiations, threatening to go with another company.

The difference in those two years: a new Disney CEO. The amount of print that history got in stories covering the new alliance: not enough.

"The rocky relationship of Pixar and Disney, or more specifically, of Steve Jobs and former Disney CEO Michael Eisner is important, because it could have derailed any future dealings between the two companies," says Kim Christensen, film industry reporter for the Los Angeles Times , which explained in depth how the company ties frayed before.

"It's a key element now, because it illustrates that things don't happen in a vacuum," he adds. "This deal, in all probability, wouldn't have happened without new Disney CEO Bob Iger's concerted efforts to mend fences with Jobs and bring Pixar back into the fold."

Plus, Christensen's story, written with reporters Claudia Eller and Dawn C. Chmielewski, points out another rare irony that wasn't in many other stories: At the peak of rockiness, Iger, himself, had said that the two companies may have "outgrown each other."

"But shortly after Eisner suddenly announced his plans to leave the company, Iger reconsidered and made a full-court press to woo Jobs back," according to the story.

That kind of history gives your story more context - and your notepad another substantive question to ask Disney executives to help slow down the spin.

Spin, in general, is a danger when it comes to covering mergers and acquisitions. For the most part, CEOs have canned statements, hearty handshakes and pasted smiles. Go beyond those to get the real story for investors, employees and customers. For Christensen, that means talking to analysts, current and former employees, academics and rivals to get the real motivation and drive behind Disney's turnaround.

"The key is to find people who really know what it means and can demonstrate it in a concrete way, rather than relying on talking heads who may be spinning the story or just blowing it out their, uh, ears," he says.

In this case, business coverage has suggested the real story is that Pixar needed the backing of a major studio in case its future films don't repeat their past success, and Disney needed a revival of its decaying animation arm after a series of recent flops.

Turn that skepticism to the finances of the deal as well. Disney said it would pay 2.3 shares for every Pixar share. "The deal may make creative sense, but the company could face a hurdle convincing investors it makes financial sense," wrote Gary Gentile in his Associated Press story.

Study Disney's past acquisitions, and how they've performed over the years. What has been the larger company's formula, and does it work?

And don't stop paying attention down the line. Follow Disney revenues and profits to see whether buying Pixar leaves them launching into space or diving with the sharks.

"The proof will be in the pudding," Christensen says. "It's a public company, so over time, it will be obvious if the partnership is paying off financially."

Many stories rightly focused on the culture clash between business-suited Disney and scooter-riding Pixar. We're talking here about the same Old World Meets New Age relationship that didn't work with Time Warner and America Online not too long ago. What makes the executives so sure this combination will work?

"Already there is fallout within Disney regarding the announcement," reported Laura M. Holson in The New York Times, citing the resignation of Disney's feature animation president. "At Pixar, said a Pixar executive, employees were subdued though many of them had known an acquisition was imminent."

But the best product of skepticism is questions about layoffs, which were hardly covered in most next-day stories on the Disney-Pixar deal.

"To me, this is just basic: What's the human impact," says Christensen, whose story pushed Iger to say this transition "creates some anxiety" for Disney's 700 animation workers.

"It's also easy to just focus on the 'business' aspects of a story like this without getting into the flesh and blood, which is a big mistake," he says. "I'm sure one of the aspects we'll follow most closely is what is the fallout in terms of layoffs."

Now it falls on follow-up stories to tell readers and investors whether the two companies will live happily ever after.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism