Disney swallows Pixar at last – good news for iPod owners?

Posted by Chris Green on Wednesday January 25 @ 3:13 pm

Pixar Web Site 

Last night’s confirmation that Disney has made an agreed bid for animation studio Pixar was no surprise. Disney needs Pixar – Pixar does not need Disney – hence the hefty premium ($7.4bn) being paid for the company. Many analysts have already expressed surprise at how high a sum Pixar is being bought for, with many expecting a deal around the $5-5.5bn mark.

By taking control of Pixar, Disney not only takes full control of all the media rights relating to the previous computer-animated movies that Pixar has made for Disney, but also lucerative merchandising and spin-off rights and full rights to produces sequels based on those past franchises such as Toy Story and Monsters Inc (prior to the takeover, Pixar retained an option to co-produce any future sequels based on past work, even if they had not renewed their distribution deal).

But this deal is not about Pixar rights alone. For its money, Disney is buying creative talent and intellectrual property locked up in the minds of Pixar’s loyal and successful team, people Disney didn’t have a hope in hell of poaching away from Pixar without buying the whole thing. These people are the new Walt Disney, and will bring the same creative flair and sense of child-like wonder and imagination to animation that has been missing from Disney since the old man himself pased away.

So Disney finally gets what it needs to survive and to underpin the Disney side of the empire. But what does Pixar, or more to the point, Steve Jobs get from the deal?

The maverick Jobs, who originally spent just $10m to buy the original assets that Pixar was founded on, will make his entire investment back 30+ times over. It also means that he has more-or-less made back all the money his missed out on by cashing in his original Apple stock after he was fired during his first tenure at the company he co-founded.

Jobs is motivated by money, but not by money alone – his remains motivated by successful creativity, and this is where the deal will really pay off for him, and by close association, for Apple Computer.

There are several things to consider once this takeover is complete:

  1. Steve Jobs will directly own just over 7% of Disney
  2. Disney owns numerous media assets including the ABC television network, the ESPN sports television channels (and with it the broadcast rights to numerous popular sporting events), Miramax Films, Buena Vista International, Touchstone Television, a record label, not to mention everything Disney from theme parks to a back catalogue of movies, cartoons and TV that is among the largest in the world.
  3. Disney was the first company to provide paid-for broadcast video content via iTunes in the form of new episodes of Desperate Housewives and Lost (no doubt done as a gesture to help build bridges with Jobs)
  4. Apple needs more of this kind of content to maintain the momentum of iPod sales and iTunes transactions.

It does not take a rocket scientist to work out the obvious synergies to be had.

Steve is not stupid, and will no doubt use his significant holding in Disney and subsequent board seat to encourage the company to work more closely with his first love Apple, and to ensure that more new and archive Disney content is released to the work through iTunes at a time and in a way that will underpin demand for new iPods and generally encourage users to remain locked into the Apple/iPod experience.

In the current climate, you can have the greatest hardware going, or the worst, but ultimately it is the content that will make or break you!

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