Steve Jobs is best known for co-founding Apple, the most valuable company in the world, that’s
created some of the most beloved tech products.
But what you may not realize, is that he’s also responsible for helping to create some
of the most beloved animated movies.
Since he actually co-founded one of the first animation studios called PIXAR.
That may seem a bit strange, since Steve Jobs was more interested in technology than Hollywood.
So in this video, I’m going to explain why Steve Jobs started PIXAR, and how he helped
make it successful.
This is Greg with Apple Explained, and today’s topic will be the last one I cover from the
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Alright now the truth about Steve Jobs starting PIXAR, was that it was kind’ve an accident.
He was forced out of Apple in 1985 and was looking for other opportunities worth his
time and money.
One of those would be Next Computer, a company eventually bought out by Apple.
But the other, was called the Graphics Group.
Which was part of Lucasfilm’s computer division that helped with special effects on movies
like Star Wars.
But once those projects ended, George Lucas had no need for the technology.
So he put the Graphics Group up for sale in 1986, just a year after Job’s left Apple.
He recognized the technology’s potential, but not in the way you might expect.
Job’s didn’t think the Graphics Group would ever create their own movies, there
were only 40 employees after all.
He simply expect them to continue doing what they had been.
Developing hardware to improve computer-generated imagery that could be purchased by other companies.
So Jobs bought the Graphics Group for ten million dollars and spun-off the division
into a full-fledged company named PIXAR.
They’d been developing a super advanced computer with the sole purpose of generating
high-resolution 3D images, called the Pixar Image Computer.
At the time, animation studios like Disney weren’t interested in the technology since
many artists were afraid the machine might replace them.
So the computer was instead marketed for use in medical imaging, geophysics, and meteorology.
But thanks to its $135,000 price tag, sales were few and far between.
There were two more generations of the computer that eventually lowered the cost to $30,000,
but after years of promotion, only about 300 Pixar Image Computers were ever sold.
Jobs found himself in a difficult position.
He was tied up in two companies, Next and PIXAR, both of which were costing him tens
of millions to operate, with no profits in sight.
Now if you’re wondering how he was able to run two companies at the same time, I’ll
be making a day in the life of Steve Jobs video soon, so be sure you’re subscribed
for that.
But Jobs actually admitted that if he’d known how much PIXAR cost to keep running,
he would’ve never bought it to begin with.
But luckily, one of PIXAR’s founders named John Lasseter was coming up with a business
strategy of his own.
He’d worked on several short films that used the 3D animation technology PIXAR had
developed.
Like Luxo Jr, which earned an Academy Award nomination for Best Animated Short.
And Tin Toy, which became the first animated short film to win an Oscar.
Jobs then recognized the potential of PIXAR’s own employees.
They didn’t have to sell their animation technology to established movie studios, they
could simply create the content themselves.
And that’s exactly what they did.
Jobs sold off PIXAR’s hardware division to Viacom Systems for $2,000,000, who happened
to go out of business just a couple years later, and focused on generating income through
short films and commercials.
Although the income from these projects still wasn’t enough to recoup the company’s
operating costs.
That’s when Jobs made the most important deal in PIXAR’s history.
He helped negotiate a twenty-six million dollar contract with Disney to produce PIXAR’s
first three feature-length films.
This was a surprising turn of events, as Disney wasn’t previously interested in utilizing
3D animation for movies.
But many speculated that, through PIXAR, Disney could safely test the concept and observe
the audience response, before implementing such technology into their own films.
PIXAR’s creative team immediately began work on their first movie called Toy Story.
While Jobs hired chief financial officer Lawrence Levy to organize a corporate restructuring
in preparation for a public offering, where people could begin buying shares in the company.
Jobs set the IPO’s date soon after the Thanksgiving release of Toy Story.
Which meant if the movie ended up being successful, so would the company.
But if it was a flop, PIXAR would go down too.
It was a high-risk, high-reward bet, but one that was necessary in order to transform PIXAR
from a hobby that cost Jobs millions, to a viable company that could finally generate
a profit.
Luckily, Toy Story ended up making thirty million dollars in its opening weekend alone,
and eventually 365 million globally.
That meant PIXAR’s IPO would also be successful, since the stock was in high demand.
And it was.
After it’s first day of trading, Pixar closed at $39 per share, amounting to a total valuation
of 1.5 billion.
The company had finally achieved profitability, but that was just the beginning for Jobs.
Pixar was losing out on all of the licensing revenue their movies earned, due to their
previous deal with Disney.
So Jobs renegotiated a new five-movie contract that split the costs and profits equally between
both companies.
Allowing Pixar to generate even more revenue from their blockbuster movies.
After that contract expired in 2002, Jobs again set out to leverage Pixar’s success
to negotiate an even better deal with Disney.
But then CEO Michael Eisner didn’t agree to the new terms.
Prompting Jobs to publicly announce that the two companies would be ending their partnership.
Although in 2005, the situation changed with Disney signing on Bob Iger as their new CEO.
Iger recognized that Disney’s animation division was faltering, being shown up by
movies like Finding Nemo and The Incredibles.
So it appeared that the fastest way to bolster Disney’s animation was to simply acquire
Pixar, the people doing it best.
That’s when Iger met with Jobs, saying, “I have a crazy idea.”
Upon hearing about the proposed acquisition, Jobs replied, “Well, it’s not that crazy.”
The two ended up settling on a 7.4 billion dollar buyout.
And after running the decision by John Lasseter and Ed Catmull, both of whom agreed, Jobs
signed over Pixar to the Walt Disney Company in January 2006.
That meant, while Jobs would no longer serve as the company’s CEO, he did earn himself
a seat on Disney’s board of directors, and a seven percent share in the company.
Which made him Disney’s largest single shareholder.
So during Job’s darkest days, the period after being forced out of Apple, he ended
up doing the impossible.
Starting two companies, Next and Pixar, that would secure him a position in two of the
most valuable companies in the world: Apple and Disney.
It was an unbelievable turn of events, and really gives credence to the Winston Churchill
quote, “if you’re going through hell, keep going.”
Alright guys so that’s how Steve Jobs started Pixar, and don’t forget to subscribe to
find out what a day in the life of Steve Jobs was actually like.