Sunday, January 25, 2015

This Day in Pixar History: Toy Story Revenue and Profits

If you've followed my blog for a while, you probably know I have an ongoing series of posts looking at Pixar's earnings from when they were a standalone public company. I started with their first quarter after their IPO (January - March, 1996), and am now up to the last quarter of 1998 (which I hope to post in a few weeks). Pixar's earnings during this period of time was primarily driven by Toy Story - its theatrical release in November, 1995, the home video release in late 1996 and related merchandise sales.

By the end of 1998, Disney and Pixar had received the majority of revenue that would be generated by Toy Story. Sure, there would be continuing revenue from merchandise sales and television syndication fees. But this would be minimal, especially compared to the imminent release of A Bug's Life. So I thought it would be fun to take a look at the revenue and profit Pixar made from Toy Story's original theatrical debut, home video release and merchandise.

Below is a table of revenue, gross profit and gross profit margins Pixar had for the years 1996 through the first quarter of 1999:

Quarter Film Revenue
Film Gross Profit
Film Gross
Profit Margin
1st Quarter, 1996 $76 $67 88.2%
2nd Quarter, 1996 $5,000 $4,586 91.7%
3rd Quarter, 1996 $11,146 $10,224 91.7%
4th Quarter, 1996 $2,625 $2,419 92.2%
1st Quarter, 1997 $6,301 $5,743 91.1%
2nd Quarter, 1997 $11,596 $10,827 93.4%
3rd Quarter, 1997 $3,509 $3,424 97.6%
4th Quarter, 1997 $5,508 $5,436 98.7%
1st Quarter, 1998 $4,036 $4,036 100%
2nd Quarter, 1998 $2,912 $2,912 100%
3rd Quarter, 1998 $1,260 $1,260 100%
4th Quarter, 1998 $1,551 $1,551 100%
1st Quarter, 1999 $559 $559 100%
Total $56,079 $53,044 94.6%

There are a few significant points I'd like to point out regarding this table:
  • Gross profit margin - Wow! The reason it is so high is because of how the Feature Film Agreement was written. Disney reimbursed all production costs that Pixar incurred except for any budget overages. These payments were not treated as revenue but as cost reimbursements, which lowered cost of revenue to almost nothing.
  • Notice how the profit margin started increasing in mid 1997 until it reached 100%. This was due to how much better Toy Story performed than expected, causing all production costs to be fully reimbursed sooner than Disney had expected. Once all the costs had been reimbursed, all revenue received by Pixar was pure profit.
  • While Pixar had huge profit margins, the actual amount they made from Toy Story isn't very much. To put it into perspective, let's look at the revenues through 1996 which came from the theatrical release of the film. Toy Story made over $361 million worldwide but Pixar's revenues were not even $19 million, equating to only 5%. This was a big reason for Steve Jobs pushing for the Co-Production Agreement, which became effective with A Bug's Life and would give Pixar 50% of all revenue.
Looking ahead to A Bug's Life, the new agreement would mean Pixar receiving half of all film and merchandise revenue, and in exchange would be responsible for half of all film production costs. Without spoiling future earnings report posts, it's easy to expect that while revenues will be significantly higher, we won't see profit margins of 90%! But I think it's safe to say the new Co-Production Agreement works out well for Pixar. Just as a tease, if we look at only a single quarter, the 3rd quarter of 1999, Pixar reported $77 million in film revenue and $55.8 million in profits. Those numbers for that single quarter are higher than the total that Pixar made from Toy Story!

Tuesday, January 13, 2015

Pixar News Articles for January 13, 2015

I'm thinking of starting a new series of posts to highlight cool and interesting Pixar-related news articles, interviews and other events. There's so much going on with Pixar, I'm hoping these posts will capture a good portion of the interviews and technology events that are occurring. If this works out I hope to have a post every week or two.

To start with, Fortune has had a couple of excellent posts recently. As part of their recent cover story on The Walt Disney Company, they interviewed Disney and Pixar president Ed Catmull, which covered Pixar's spin-out from Lucasfilm, their merger with Disney and the use of technology in animated films. They also did an in-depth piece on Disney CEO Bob Iger and his role as CTO, which not only covered Pixar but Marvel, Star Wars and technological changes in their theme parks.

Pixarian Colin Levy tweeted a link to an article on short films that launched the careers of famous directors. The article included John Lasseter for the short film Luxo, Jr., which was released in 1986, the year Pixar spun out of Lucasfilm and became a standalone company. The article itself linked to an interview Entertainment Weekly did with Lasseter which went into more detail of the making of Luxo, Jr. and other early short films like Red's Dream and The Adventures of André and Wally B.

Did you see the pre-production artwork for the Toy Story 3 film that never got made? Former Disney artist Jim Martin has released a number of pieces of concept art from when he was at Circle 7 working on the sequel. This was back before Disney bought Pixar and there was a lot of animosity between the 2 CEOs. Fortunately Bob Iger became CEO, purchased Pixar, and put Lasseter and Catmull in charge of animation of both companies. The new leaders immediately put a halt to the sequel and closed down the division.

There have been a couple of recent videos demonstrating the story process at Pixar. First, CGMeetUp posted a video of Monsters University Head of Story Kelsey Mann showing how to pitch a movie scene. The post contains a number of links to other behind-the-scenes clips from Monsters University.

Second, Story Supervisor Matthew Luhn posted an old video of Andrew Stanton and the late Joe Ranft demonstrating the pitch process, with Ranft pitching an entire scene from Toy Story. Note how Joe is pitching the "old fashion" way, standing up at a board with story cards pinned to it, while Mann does his pitch digitally using a computer.

Although Luhn has only been on Twitter for a short time, he has quickly become one of my favorite people to follow. Many of his tweets contain great behind-the-scenes videos and helpful tips. I highly recommend following him!

There are a couple of cool auctions going on at the moment. The first, which I wrote about this weekend, is the Art to Heart fundraiser to raise money for helping those impacted in the Philippines by Typhoon Haiyan. Many of the original art pieces were created by past and current Pixarians such as Ronnie del Carmen, Ricky Nierva, Matt Jones, Dice Tsutsumi, Robert Kondo, Chris Sasaki, John Hoffman and others. This is beautiful artwork and it's going for a great cause.

The second isn't Pixar related but is still wonderful. Cartoon Brew recently posted about an auction that the stop-motion studio Laika is holding on February 12. It doesn't sound like this is an online auction but will include puppets and props from all 3 of their films - Coraline, ParaNorman and The Boxtrolls. A portion of the proceeds will go to The Art of Elysium organization.

And for something fun to end on, David Lally tweeted some simulation bloopers from the making of Brave!

If you come across any Pixar-related interviews or news articles, please send them my way and I'll include them in a future post.

Friday, January 9, 2015

Art to Heart Philippine Typhoon Benefit Auctions

Art to Heart is giving you an opportunity to buy some awesome artwork and movie memorabilia, while at the same time helping those affected by Typhoon Haiyan which devastated the Philippines in November of 2013. The artwork and memorabilia, much of it Pixar-related, is being auctioned off with the proceeds going to International Disaster Volunteers to help rebuild the areas damaged by the typhoon.

There are a couple of auctions you can take part of. The first is an online-only auction that ends Sunday, January 11 at 8pm PST. This auction contains 20 items, many signed by Pixarians. Some of the items up for bid include The Art of A Bug's Life, signed by co-director Andrew Stanton, The Art of Pixar, signed by John Lasseter and Ed Catmull, and a limited edition Brave Merida & Elinor Bear Pin, of which only 650 were made and were sold exclusively by the Pixar Studio Store.

A second online auction featuring original artwork will begin immediately after the first auction ends Sunday and will run until January 15th. This artwork will then go to a live auction at 111 Minna Gallery in San Francisco on January 16th. The highest bid on each piece during the online auction will become the opening bid for the live auction. They will ship the artwork to the winner if not present for the live auction for $10. Artists such as Dice Tsutsumi, Jason Deamer, Matt Jones and Ricky Nierva have donated artwork.

Typhoon Nina
by Ronnie del Carmen

Which piece catches my eye the most? I'd have to say Typhoon Nina by Ronnie del Carmen. I am a huge fan of Nina and have a couple of books Ronnie has authored and illustrated. I could sit for hours and admire Ronnie's illustrations; there's a depth to Nina's expressions that I find mesmerizing.

So head over to the Art to Heart website and take a look at both auctions and the items up for bid. If you live near San Francisco, the artwork is available for viewing at 111 Minna. And if you're able, make a bid on one of these one-of-a-kind items, and help make a positive impact.

Saturday, January 3, 2015

My Top Pixar-Related Web Events of 2014

It's the start of a new year, and I thought it would be fun to look back at 2014 and highlight some great Pixar content I found from both well-known and some, maybe not so well-known, websites. I should say right up front the title is a bit misleading. I don't want to imply this list is a "Best Of" list. Rather, these were events, sites and podcasts that caught my attention and I hope ones that, if you're looking for some new Pixar content, might pique your interest. Plus, you'll notice many aren't Pixar-specific but are great sources for animation, technology, pop culture and overall geeky goodness.

Artist: Jeffrey Devey

The Pixar Times is one of the oldest Pixar news site and has been covering Pixar news for many years. The site also has a section for Pixar-related artwork called PixArt, which is full of many beautiful pieces of art and is curated by Jerrod Maruyama. It's well worth your time to stroll over there and spend time looking at it. I especially like the November Feature II piece featuring Mr. Incredible and Jack-Jack.

There was no Pixar film in 2014, but there were still a couple of big Pixar events. The first was the release of Ed Catmull's book Creativity, Inc. I love this book and recommend it to anyone interested in Pixar, business management or how to work in and sustain a creative culture. Catmull did a number of interviews promoting the book, and you can find many great reviews of the book. The Pixar Post launched their book club with Creativity, Inc., and The Incomparable podcast, hosted by Jason Snell, did an episode reviewing the book. I enjoyed listening to Jason and his guests, all who are obviously Pixar fans, discuss the book and highlight a number of the same important points I enjoyed from the book - the egoless environment, the fact that Catmull was so open in discussing their failures and how they're constantly working to create an environment to not avoid failures but make it safe to fail and then figure out how to move forward. If you're into pop culture, I highly recommend checking out The Incomparable (I greatly enjoy their Doctor Who flashcasts).

The second big Pixar event to me was Pixar in Concert. Yes, I realize Pixar in Concert didn't start in 2014 but it's when I was finally able to see it! Music is such a critical component of Pixar films and almost all of their scores have left big impressions on me. So to hear this music live was really an emotional and fun event. If you're familiar with Dan the Pixar Fan, you know that he has a passion for Pixar merchandise. He has daily posts on his wide-ranging collection of Pixar memorabilia (how he does a post every single day is a mystery to me!). But earlier this year he wrote about his and his wife Brita's experience at Pixar in Concert in Salt Lake City. Go check out his post on the concert and then check out some of his merchandise posts.

Pixar's next film Inside Out will not be released until June 19, but it's already been generating huge excitement. In early December, director Pete Docter took over the PixarInsideOut Twitter handle to answer fans' questions regarding the upcoming film. I've posted before how much I enjoy hearing artists discuss the making of a film or their other projects, and this is the second time Docter has done this, his first being a Reddit AMA he did a couple years ago.

Did I just mention that I love listening to artists talk about the making of films? Yes? Well then, The Pixar Post gave me close to a year of behind-the-scenes goodies with their Pixar Pipeline Project. Throughout the year, T.J. and Julie interviewed 8 different Pixar artists, one in each of the main departments a film goes through during development and production. Listening to the artists, you really get a sense of the passion and excitement they each share for their work, and after each episode I'm always amazed at the detail each department puts forth. These episodes are a great way to learn about making animated films, the artists themselves and what it takes to get into the industry. The last episode should be coming out early this month.

In addition to the Pipeline Project, there were some other excellent interviews with Pixarians throughout the year. The first was episode 12 of the Toon Talks Podcast, where Sandra interviewed Pixar animator Bret Parker. You may recognize Bret as the amazing voice of Kari McKeen from The Incredibles. I love Bret's enthusiasm, and she gives some great tips for beginning animators - the value of acting in animation, knowing your character, showing your work often and just as important, showing it to the right people.
Christian Roman

The second interview was the Something Something Experience Podcast interviewing storyboard artist Christian Roman.This was an in-depth interview and went into a lot of Christian's pre-Pixar history such as Mission Hill and The Simpsons. They also briefly discussed Inside Out, the importance of improvisation and hand-drawn art. They even took a detour to discuss Burning Man!

I really liked the consistent message from both Bret and Christian on the importance of acting and improvisation, and how they use these techniques to "plus" scenes. Also, a cool coincidence: shortly after Christian's podcast came out, Pixar Story Supervisor Matthew Luhn posted a tweet titled Storyboarding the Simpsons Way - notes from Brad Bird that Christian had documented and illustrated from their time working on The Simpsons. It's full of great tips and examples for creating compelling storyboards!

© Len Peralta

Finally, Len Peralta interviewed Dr. Michael B. Johnson as part of his Geek A Week series. Peralta's project started as an effort to interview 52 geeks in 52 weeks and draw them as trading cards, and fortunately has continued beyond that first year. The interview goes into Johnson's history at Pixar, a fun discussion on Dungeons & Dragons and the secret thing he geeks out about. I sadly was not aware of this project until Johnson's interview, but have listened to a number of other episodes since and have many others queued up!

So that's my list for 2014! I wrote a similar post a couple years ago and it was fun to go back and revisit it as I wrote this one. Anyways, I hope this post gives you some new sources for Pixar and other cool content. What about you? I'd love to get some recommendations for podcasts or sites. If you have any, leave them in the comments below, and have an awesome 2015!!

Sunday, December 14, 2014

Pixarian Birth and Start Dates, December, 2014 Edition

Wow, it's been almost a year since I last posted a birth and start dates article! Where did the time go? Well, let's jump right in with some Pixar employees who started with the company in the month of December:
  • Mark Andrews (2000) -
    Before Mark came to Pixar, he had been a storyboard artist for a number of animated films, including The Iron Giant, for which he won an Annie Award. Andrews also worked on animated television shows such as The New Adventures of Jonny Quest and Star Wars: The Clone Wars (which he won an Emmy award). Mark has also worked on live action films including Spider-Man, and was second-unit director and co-writer on Andrew Stanton's John Carter. Andrews came to Pixar with Brad Bird and others in 2000, first working as story supervisor on The Incredibles. He also serve as a storyboard artist on Cars, then again as story supervisor on Ratatouille. His latest effort was as co-writer and co-director of Brave. According to an interview the A113Animation blog did with Brave Story Supervisor Brian Larsen, Andrews is working with Larsen in the early stages of development of an idea for a new film.
  • Jay Ward (1998) - Jay started in the art department as a production assistant on Monsters, Inc. Then in 2001, he began working on Cars.
    With his deep knowledge of cars, he quickly became a key contributor on the film's development, acting as consultant to co-directors John Lasseter and Joe Ranft, plus as the character team manager. Ward's passion for automobiles has led to him being named the Guardian of the Cars franchise, and he has worked on Cars 2 plus other Cars-related efforts. Ward also organizes the annual Motorama car show at Pixar. Prior to coming to Pixar, Ward received a Bachelor of Fine Arts in Illustration from the California College of the Arts.
And now for some birth dates:
  • Jordy Ranft (December 24, 1991) - Jordy is the son of late Pixar story artist Joe Ranft. He is an actor and poet, and voiced Tad in Finding Nemo, and one of the ants in A Bug's Life. Jordy has a sister, Sophia, who has also done voice work for Pixar, voicing one of the monster children in Monsters, Inc. 
  • Scott Morse (December 4th) - Morse studied character animation at CalArts in the early 1990s, then went to work at Chuck Jones' Film Productions. At Pixar, Scott has been a story artist on Ratatouille, Cars 2 and Brave. He has also been active with a number of the Cars Toons episodes, with writing credit on episodes such as Time Travel Mater, Unidentified Flying Mater and Monster Truck Mater. He is now serving as director for the next episode, To Protect and Serve. Morse is also a well-known author of a number of graphic novels and other books, including the Magic Pickle series and the rare The Ancient Book of Myth and War, which he did with other Pixarians like Lou Romano, Nate Wragg and Don Shank.
  • Andrew Stanton (December 3, 1965) -
    Many of you may know that when Pixar started creating animated television commercials in the late 1980s, the first animator John Lasseter hired was Stanton. Since then, Stanton has written and directed a number of Pixar films, having writing credits on Pixar's first 5 films, co-directing A Bug's Life and having directed Finding Nemo and WALL•E. Stanton has also done a number of character voices including Zurg in Toy Story 2 and Crush in Finding Nemo. Stanton is busy directing Finding Dory, coming out June 17, 2016. 
  • Ronnie del Carmen (December 31, 1959) - Ronnie was born in the Philippines and received a fine arts degree from the University of Santo Tomas. He worked at both Warner Brothers and Dreamworks before coming to Pixar in 2000. His first Pixar effort was story supervisor for Finding Nemo.
    He also did storyboard work on Ratatouille and was story supervisor on Up. del Carmen directed the wonderfully cute short film Dug's Special Mission, and is now co-director of next year's Inside Out. Ronnie has also published a number of books such as My Name is Dug, Three Trees Make a Forest (along with Tadahiro Uesugi and fellow Pixarian Enrico Casarosa), plus And There You Are, featuring beautiful drawings of Nina (from del Carmen's Paper Biscuit series) plus a look into his story and character creation process. I love both this book and Three Trees Make a Forest, and find myself often going back and flipping through the pages admiring his illustrations.
  • Eugene Levy (December 17, 1946) - Levy is a well-known Canadian actor and comedian, having been in films such as Night at the Museum: Battle of the Smithsonian, Cheaper by the Dozen 2 and both Father of the Bride films. He has also done voice acting in Curious George and Over the Hedge. His first Pixar effort will be for Charlie, Dory's father in Finding Dory
Sadly, December has also held some Pixar-related losses. Japeth Pieper, an artist on Cars, Ratatouille and WALL•E, passed away on December 7, 2010. Pixar dedicated Cars 2 to him. And exactly 1 year ago today on December 14th, 2013, the amazing Peter O'Toole, the voice of Anton Ego in Ratatouille, passed away.

Sunday, December 7, 2014

This Day in Pixar History: Pixar Earnings Report, 3rd Quarter 1998

Welcome back to another look at Pixar's earnings reports from when the studio was a standalone company. Today I am looking back at their 3rd quarter 1998 results.

As had been the case for a few quarters, revenues for Pixar had been dropping as Toy Story revenue was drying up, and their next film, A Bug's Life, wouldn't be released until later in 1998. Total revenues for the quarter were $2.5 million, down over 50% from $5.3 million in the 3rd quarter of 1997. This was due to a 63% drop in film revenue, from over $3.5 million to $1.3 million, but that's not the full story. As part of the Feature Film Agreement between Disney and Pixar, once Disney recovered all their marketing and production costs, Pixar was eligible to receive a higher percentage of the revenue. Disney ended up recovering all their costs earlier than expected, so in the 3rd quarter of 1997, Disney paid Pixar an additional $1.8 million to catch up for the higher percentage. Removing this one-time item, film revenue only dropped $400,000. There was also no animation service or patent licensing revenue in 1998, compared to almost $1 million in 1997. There was an uptick in software revenue, growing from $900,000 to $1.2 million, which I think can be mostly attributed to their purchase of PEI which had occurred in June of 1998.

Not surprisingly, gross profits for the quarter also dropped to $2.2 million from $4.7 million in the 3rd quarter of 1997. There was a large increase in software cost of revenues due to the PEI acquisition. As discussed in the quarterly report, Pixar was amortizing a large portion ($2.7 million) of the purchase price for PEI over the next 3 years. Basically, Pixar would match amortized expenses against any related revenue so there would be no gross profit until the $2.7 million had been accounted for.

Even though software cost of revenues increased dramatically, gross margins stayed the same at 88% year-over-year. This was due to the high cost of animation services that was recorded in 1997 - $534,000 in costs against $896,000 in revenue for a gross margin of only 40%. While 40% gross margins would be good in many businesses, that was less than half of what Pixar was generating with their film and software businesses, and I'm sure had a large influence on the company deciding to exit that business segment.

Expenses for the quarter were $3 million, up from only $658,000 in 1997. But I should point out that 1997 had an extraordinary event which I discussed in my post of that quarterly report: due to Disney and Pixar signing the new Co-Production Agreement in early 1997, Disney was responsible for paying half of all the costs Pixar incurred in developing films. At the time of signing the agreement, both A Bug's Life and Toy Story 2 had been in production since 1996, so Disney was responsible for paying half of those expenses, resulting in a $2.2 million reimbursement.

In the end, net income for the quarter was $867,000 (net profit margin of 35%)  or $0.02/share versus $3.6 million (68%) or $0.08/share in 1997, but given the 2 extraordinary revenue and expense reimbursements that occurred in 1997, it's not an apples-to-apples comparison.

Pixar also continued to burn through cash, although fortunately they still had a large amount of cash from their IPO. Cash and short-term investments were $153.2 million at the end of the 3rd quarter of 1998, down from $176.0 million at the beginning of the year. Much of the cash burn was due to development and production costs for A Bug's Life, Toy Story 2 and Film Four (the title for Monsters, Inc. before it was green-lit), which totaled almost $24 million for the first 3 quarters of 1998. Another $8.8 million had been spent for new computers and other equipment.

Pixar's stock had a wild ride during the quarter. Whereas the first half of the year was good for shareholders, with the stock tripling from around $20 to the mid-$60s by July, the stock dropped over 50% to below $28 by the end of August. It recovered somewhat and ended the quarter around $40. While I was a long-term buy-and-hold Pixar investor (making my first purchase in early 1997 and holding on through the merger with Disney), the stock's volatility made it possible to do some "stock trading". Pixar's stock seemed to often follow the "buy on rumor, sell on fact" axiom. In early July, 1998, with the price over $60, there was a lot of optimism about the company with A Bug's Life soon to be released and Toy Story 2 being upgraded to a full theatrical sequel. But it seemed premature for the stock price to be increasing so rapidly since it would be close to a year before any income from A Bug's Life would be recognized. I sold about half my holdings in early July, and would buy back all that and more in the spring of 1999 at a 30% discount.

Saturday, November 29, 2014

This Day in Pixar History: A Day in the Life of La Luna Director Enrico Casarosa

If you're like me,  not only do you like seeing films on the big screen, you like the behind-the-scene looks at the making of the films. I love listening to director commentaries and watching bonus features on the DVD or Blu-ray. I've mentioned this before, but a critical event in my love of Pixar came with the Monsters, Inc. DVD. I've spent hours in the "For Humans" section of the bonus DVD. This was my first in-depth look at the new Emeryville studio and I sat in awe watching the Production Tour and other features that focused on the people and building. Watching all the different aspects of making the film - story, animation, sound, the artwork, just blew me away. And then there were the fun features - the Fun Factory Tour, riding around the studio on scooters, the chimp, the first annual International Air Show, the Easter Eggs! I already knew this was a special company, but these bonus features started me down the road of learning more about Pixar's culture and how they managed to have fun, work hard and continued to put out amazing films.

Enrico, middle, at the 8th annual
Cartoon Art Museum Benefit
Fortunately, now with the Internet there are a number of ways to learn about how films are made and the artists that make them.  From podcasts like The Pixar Post and their Pixar Pipeline Project, to artists live-tweeting throughout their work day or answering questions via Twitter or Reddit. And on this day back in 2011, Pixar's Enrico Casarosa took us on a visual tour of one of his days while directing the beautiful short film La Luna. From the moment he arrived at the studios via bicycle, through meetings and reviews, Casarosa gives a great, personal look at what occurred during development of the film. I really enjoyed seeing the antics and effort that went into making the film, and would love to see more of these day-in-the-life features.