The highly successful animation studio has fallen out big-time with its partner Disney. But would the House of Mouse dare to go it alone and bring back Buzz Lightyear in Toy Story 3 without the creative genius of Emeryville? Mark Lasswell reports.
Before Pixar Animation Studios set up shop in Emeryville, California, the industrial town on San Francisco Bay had only one other claim to distinction: in 1922, Emeryville's dog-racing track unveiled the world's first mechanical rabbit. For the past decade, Pixar - as adept at 3D fakery as any toy bunny - has been the mechanical rabbit of the animation business.
At regular intervals a bell goes off, the company jumps into the marketplace with its latest animated feature and effortlessly speeds ahead of a ravening pack of competitors intent on biting its head off.
Pixar wins handily, the clock is re-set and a fresh bunch of Hollywood mutts assembles at the starting line, believing that this time they're finally going to catch the rabbit.
Meanwhile, a punter named Steve Jobs practically lives at the betting window, cashing in armloads of winning tickets. It was the Apple founder who spent £5.5 million in 1986 to buy an interesting little computer graphics research division at George Lucas's Lucasfilm Ltd, and Jobs presided over its emergence in the 1990s, beginning with Toy Story and followed by an uninterrupted series of massively successful feature films, establishing the gold standard for computer-generated movie animation. By 2004, the market value of Jobs' firm - he owns 55% of the stock - was £2 billion.
A significant new phase in Pixar's history was marked this year as the company gave a widely publicised shove to Disney after negotiations for a new distribution arrangement with the House of Mouse broke down in January.
The rift was as significant for its symbolism as its financial fallout. When Disney and Pixar teamed up in 1991, the alliance was a coup for the Jobs crew: they'd never made a feature film before, and here was the world-straddling master of family entertainment agreeing to bring out Pixar's fledgling efforts - at a time when Disney's resurgent animation division had Aladdin and The Lion King in the pipeline.
Thirteen years later, Disney animation is in flop-riddled disarray, and former upstart Pixar, empowered by a five-for-five run of blockbusters, is calling the shots. It's the sort of tale of the old giving way, inevitably, to the new with which Hollywood animators might be familiar. Call it the Circle of Business Life. Having shared the cost of production and profits with Disney for the past decade, Pixar is now likely to strike a new deal elsewhere that entails paying a flat fee for distribution, with the company shouldering production costs but also pocketing most of the profits.
With the increased financial risk, Pixar might be expected to slide into the sort of over-cautious, accountant-driven and bureaucratised mediocrity that besets many Hollywood studios. Yet it has shown a remarkable ability to remain focused on what it does best - turning out inventive and entertaining movies such as Toy Story, Monsters, Inc. and Finding Nemo, while avoiding the pitfalls that come with success and expansion (in Pixar's case, from 44 employees in 1986 to 700 today).
The first sign that Pixar isn't your average multi-billion-dollar entertainment company comes when you ring the main phone number. Rather than the sort of benumbed corporatespeak that most businesses in the US present to the public, the voice of Pixar sounds like the winkingly too-enthusiastic guy that Americans hear when they call to order movie tickets in advance.
'Thank you for calling Pixar Animation Studios in fashionable Emeryville, California,' burbles the message. 'If your VCR at home is still blinking 12 o'clock, press zero at any time during this message and an operator will assist you.'
The phone greeting is a small but telling touch, reflecting Pixar's fanatical attention to detail and a bracing refusal to take itself too seriously. 'Part of their great success is that they clearly have an awful lot of fun making what they do,' says David Sproxton, co-founder of Bristol-based Aardman Animations, creator of Wallace and Grommet and whose Chicken Run in 2000 was among the few major, non-Pixar animation efforts in recent years to show much creative spark.
Sproxton explains that making animated features is so expensive and time-consuming - an investment of £50 million and nearly two years' time wouldn't be shocking - that the process almost invites trouble. An over-worried studio often ends up torturing its animation projects with committee thinking, where, in an effort to 'tick a few boxes' in the storyline, 'there's something ironed out of it that makes it really sing', says Sproxton.
Even in the absence of studio meddling, the creative types can 'get lost in the fog' as they fiddle with the script and animation for months on end.
He credits Pixar executive vice-president John Lasseter, the company's longtime creative leader, as the studio's insurance against falling prey to either danger. Lasseter, who directed Toy Story, Toy Story 2 and A Bug's Life and who was executive producer for Monsters, Inc. and Finding Nemo, 'clearly puts his imprint, his humour and imagination into those Pixar movies and the audience can latch onto it', says Sproxton. 'And if you've got a Lasseter-type character at the helm, it helps you to keep the thing pointing in the right direction.'
Lasseter joined the group that would become Pixar in 1984. Back then, 'Pixar' was just the name that the computer graphics R&D guys at Lucasfilm called an image-compositing device they'd developed. The picture-maker was originally called the Pixer, but was amended to the cooler-sounding Pixar - so cool that it was adopted as the company name when Jobs flashed his cash and turned it into a stand-alone enterprise.
Bringing Lasseter aboard was an early reflection of what Ed Catmull, now Pixar's president, says was a philosophy he and his Lucasfilm cohorts had adopted early: 'Hire people who are better than we are.'
Given Catmull's own pedigree, that was a tall order. He had started dreaming about computer animation in the early 1970s as a graduate student at the University of Utah, where classmates included John Warnock and Jim Clark, the future founders of, respectively, Adobe Systems and Netscape. Two decades later, Pixar's initial public stock offering in 1995 raised $140 million, beating Clark's Netscape for IPO-of-the-year honours.
In the era of Pong (one of the first video games), it took a vivid imagination to see where computer graphics might go, but Catmull found a believer in Star Wars director George Lucas, who hired him in 1979 to brainstorm a convergence between computers and filmmaking. Catmull assembled a team to develop hardware and software applications. They weren't charged with actually producing creative work, but the techies were dying to see what their stuff could do. That's where Lasseter came in.
Though plenty of people seized on the Disney-Pixar contretemps earlier this year as evidence of CEO Michael Eisner's hamfisted management, perhaps the most boneheaded episode in Disney's long history with Pixar came when Disney let Lasseter, an ambitious, frustrated animator on its payroll, slip away. Catmull says Lasseter immediately embraced the recruit-better-people-than-we-are philosophy: 'The first person John hired was Andrew Stanton, who has written all our screenplays and directed Finding Nemo. The second person was Pete Docter, who's an extraordinary animator and also directed Monsters, Inc.'
But in the mid-80s, the band of computer-animation true believers at the fledgling Pixar had to show that the idea worked. They began making short films - and promptly started winning awards. Lasseter's Luxo Jr was nominated for an Academy Award in 1986 for best animated short film, and in 1988 his Tin Toy won an Oscar. That got Disney's attention: they tried to steal the former Disney employee back by offering him a director's job. 'This was back when they were in their heyday, and John said he'd rather stay with this struggling company,' recalls Catmull. 'To me, that is amazing.'
Animated short films can be entertaining, but they don't make money.
There's plenty of profit to be found, though, in the even shorter films known as television commercials, as Pixar discovered in 1989 when Lasseter and co began producing eye-catching TV ads that firms like Pillsbury, Volkswagen and Listerine adored.
Disney, sensing where all this was heading and having given up on Lasseter, decided in 1991 that if you can't beat 'em, sign 'em to a distribution deal. Pixar had intended to move from short films and TV commercials to producing half-hour television specials before graduating to animated feature films. But with Disney's distribution and marketing muscle behind it, the company went straight into producing the first full-length movie made completely with computer animation.
Toy Story, released on Thanksgiving weekend in America in 1995, became the highest-grossing release of the year, bringing in £200 million worldwide.
The movie looked like nothing seen in theatres before, but it was also a note-perfect comedy that parents gladly took their kids to see more than once.
'We started out by saying that the story is the most important thing,' says Catmull. 'Then I realised after a while, listening to people at other studios, that everybody says the story is the most important thing - even if they produce garbage. Saying it doesn't mean anything. It's what you do that matters. But even that's a little glib, because it's like: what do you do?'
In Pixar's case, what the studio does is relentlessly dissect its productions to ensure that the stories, the jokes, the voice talent and the animations, down to the tiniest gestures, mesh into a compelling whole.
'There are subtle things about character and movement that really matter,' says Catmull. 'It's what great animators understand and mediocre ones don't.'
That sort of distinction lay at the heart of what Catmull regards as Pixar's moment of truth, following the success of Toy Story. The plan was to capitalise on the movie's popularity by producing a straight-to-video sequel, Toy Story 2, that would be quick and cheap to make and hugely profitable. 'It meant we had to have two different mindsets in the studio,' says Catmull. 'One was, go for the bucks and exploit the value of what we'd done; and the other one was, go for the quality and trust in the quality.' The studio decided that the split-personality approach wouldn't work, he says, because 'the wrong side ultimately prevails'.
So Toy Story 2 would be a theatrical release in 1999, getting the full Pixar treatment. Catmull calls that decision 'a defining moment for the studio'. The movie pulled in £265 million worldwide, becoming the first animated sequel to beat the original at the box office. 'If you do the quality right, the characters come alive, and you're making something that's going to last for generations,' he adds. 'And there's incredible value in that. The value of Toy Story 3 is greatly enhanced.'
Oops. Toy Story 3. Sore point with Pixar.
Disney has the rights to sequels of films made when the two companies were working together, and it was Disney's refusal to renegotiate the sequel rights, as well as substantially reduce its share of future profits, that reportedly helped spoil negotiations for a new distribution deal.
Disney has announced its intention to forge ahead with its own production of Toy Story 3. It might be a straight-to-video affair.
That will drive Pixar up the wall, right? 'No comment,' comments Catmull.
Indeed, Pixar still has to get along with Disney (amid rumours that Jobs might be prepared to cut a new deal with the Mouse, provided Eisner walks the plank). Two more movies will come out under the Disney-Pixar umbrella: The Incredibles, directed by The Iron Giant's Brad Bird, arrives this autumn with the story of a family of superheroes living in suburbia; and the Lasseter-directed Cars is scheduled for 2005.
Reports earlier this year suggested that Pixar might have continued working with Disney if Jobs hadn't found Eisner so personally difficult. But one school of thought believes that the break-up was a win-win development.
'I actually think it was good for both companies,' says financial analyst Harold Vogel, whose Entertainment Industry Economics was published here in its sixth edition this spring by Cambridge University Press. 'For Jobs, it's almost impossible not to get a better deal. And despite what you see in the press, there was no way Eisner could give back rights Disney already had on successful pictures. It would have been a big problem for the company. It looked at the probabilities and decided it was better off with what it's got right now.'
Disney also would be better off with almost anything other than the reputation it now has in the animation business. The days of resurrected glory seen in Aladdin and Lion King are long gone ('They've literally lost the plot,' says Sproxton), and this spring the studio brought its tradition of hand-drawn animation to an ignominious end with the $100 million flop Home on the Range.
Oh, well. At least Disney has its cut of The Incredibles to look forward to this year. Disney showed analysts, including Vogel, a four-minute clip of the movie in Orlando in February. 'It looks like another big winner,' pronounces Vogel. Run, rabbit, run.
JOINT FORTUNE: worldwide box office receipts for Pixar/Disney movies
$1995 Toy Story 358.8m
1998 A Bug's Life 358.0m
1999 Toy Story 2 485.7m
2001 Monsters, Inc. 524.2m
2003 Finding Nemo 853.2m
WITH A LITTLE HELP FROM RENDERMAN
And you thought Pixar had been involved in only five feature films so far. Don't forget the Lord of the Rings trilogy, Master and Commander, Spider Man, the Harry Potter movies and dozens of other eye-catching feature films in recent years. The studio's software for melding computer-generated graphics data into a convincing screen image, called RenderMan, is a favourite in all the big Hollywood special-effects shops.
Ed Catmull's fellow computer whizzes Loren Carpenter and Rob Cook received an Academy Award in 2001 for the technical advances they made in developing what Pixar calls RenderMan's 'powerful shading language and anti-aliased motion blur' - the techie stuff you need so that Frodo doesn't look like he's engaged in a titanic battle with a hologram of a monster being projected onto a bedsheet. 'Our primary focus is on content creation,' said Pixar in its annual report last year. 'And, as a result, we have not increased the time and resources necessary to generate significantly higher RenderMan licence revenues.' Still, with RenderMan averaging more than £4 million in sales annually between 2000 and 2002, it's a nice little sideline.