Wednesday, April 13, 2016

This Day in Pixar History: Pixar's 1998 Annual Report




As I am fond of doing, let's step back about 17 years to early 1999, when Pixar released their 1998 annual report. 1998 was an exciting year for Pixar. Early in the year it won an Academy Award for its short film Geri's Game, and in November they had released their second feature length film, A Bug's Life. The film was an immediate success, opening at #1 in late November with over $33 million and going on to be the 4th highest grossing film of 1998 with over $363 million worldwide. But looking at the annual report you might not believe it - revenues declined almost 59% to $14.3 million from $34.7 million in 1997, and net income dropped over 64% from $22.2 million to $7.8 million. This was because Pixar hadn't received any revenue yet from A Bug's Life, and according to the Co-Production Agreement with Disney, Disney was allowed to recover all marketing and distribution costs before any remaining revenue was shared equally between the two. Pixar didn't expect to start receiving money from A Bug's Life until the second half of 1999.

Annual reports are full of lots of interesting details. Here are a just a few in Pixar's 1998 report:
  •  As of January 2, 1999 Pixar had a total of 427 employees.
  •  As of March 19, 1999, Steve Jobs owned 30,000,001 shares, or 65.8% of all outstanding shares of Pixar. John Lasseter, the Executive Vice President of Creative Development owned a little over 1 million shares (2.3% of shares outstanding) and Chief Technical Officer Ed Catmull almost 613,000 shares, or 1.3%.
  • Pixar was busy working on its new Emeryville headquarters. The company had spent $21.2 million through 1998 on the new studio and expected to spend another $38 million in 1999 and $19 million in 2000.
The annual report also gave a nice summary of Pixar's filmmaking process, stating the process was very iterative and required continued re-working of each film. The report stated the process was divided in 4 stages: Creative Development, Pre-Production, Production and Post-Production. It also discussed their digital backlot, which they equated to a traditional movie studio backlot. For Pixar, it encompassed a database of their digital models that Pixar stated could be used multiple times in future films and other animated products. They also went into their core technology components, consisting of:
  • Marionette - The in-house developed system used for modeling, animating and lighting. Also known as Menv, Marionette was replaced by Presto, which was first used on Brave.
  • Ringmaster - A complex, distributed system used for scheduling and tracking their animation projects. A key piece of functionality in Ringmaster was its ability to coordinate and schedule the processors in Pixar's render farm.
  • RenderMan - The company's award-winning rendering system. Not only does Pixar continue using RenderMan, Pixar licenses it to other studios and third parties, and it has become the de facto industry standard for rendering. RenderMan licensing generated revenues of approximately $3.8 million in 1998.
If you've never read an annual report, companies always include a section on the risks involved with their business. Pixar was no exception, and the report detailed how difficult it was to be successful in creating animated films:
It is rare for animated feature films to achieve extraordinary box office success. We believe, based on available information, that there is a reasonable basis to conclude that of the more than 40 animated feature films introduced since 1990, only two films generated domestic box office revenues greater than A Bug's Life and Toy Story, and both of those films were produced and distributed solely by Disney.
I actually found 3 Disney films that had been released in the 1990s and had done better than A Bug's Life and Toy Story - Aladdin ($217 million), Beauty and the Beast ($219 million) and The Lion King ($423 million).

While also demonstrating the risks involved, this next quote shows just how powerful the Disney and Pixar films were in regards to their competition:
During at least the last five years, we believe The Rugrats Movie is the only fully-animated feature film (other than Toy Story and A Bug's Life) produced or developed by a studio other than Disney that has achieved more than $100 million in domestic box office revenues.
The Prince of Egypt also was released in 1998 and went over the $100 million threshold, making a little over $101 million. The report pointed out though that the animated world was changing and competition was intensifying:
While the release of A Bug's Life was extremely successful, achieving domestic box office revenues over $160 million as of March 28, 1999, Antz, The Rugrats Movie and Prince of Egypt achieved domestic box office revenues of over $91 million, $100 million and $99 million, respectively. These three films were released during or near the 1998 holiday season and directly competed with A Bug's Life. Each of these films was more successful than any preceding animated feature film not released by Disney or Disney and Pixar.
Another section of risks covered availability of key personnel and the possible impact to the schedule of upcoming films:
In addition, John Lasseter, who, while directing A Bug's Life, was providing creative oversight for Toy Story 2 in his role as Executive Vice President, Creative, has now transitioned to the role of Director of Toy Story 2. Using the personnel of future films to meet the immediate deadlines of films nearing release, as we have for both A Bug's Life and Toy Story 2, may have the long term impact of pushing out the targeted release dates of future films, increasing film budgets, and adversely impacting our ability to generate creative concepts for subsequent films on a timely basis. [. . . ] Although we cannot provide any assurances that Toy Story 2 or Film Four will be released on schedule, the targeted release timing of mid 2001 for Film Four is particularly uncertain.
Film Four referred to Monsters, Inc., whose name had not yet been officially announced, and it in fact did end up getting delayed until November 2, 2001.

In all, Pixar spent 14 of their 71 page report discussing all sorts of risk factors in investing in the company. And this is for a company I consider fairly straight-forward to understand and analyze! I love a company with a simple-to-understand balance sheet that actually has a significant amount of cash, not one with millions of dollars of goodwill or intangibles. A company with a straight-forward cash flow statement where cash from operations exceeds net income. Granted, there were risks in investing in Pixar, but to me, the largest of those risks was easy to understand - Pixar revenue was driven by film releases, and since they weren't releasing films on a consistent basis it led to very lumpy earnings. I could look at the income statement and immediately understand why revenues in 1998 dropped 59% from 1997 - the majority of film, video and merchandise revenue from Toy Story has been collected, and revenues for A Bug's Life hadn't started flowing in. So while this "lumpy" behavior might scare off analysts and people looking for consistency, to me it made sense. With their sizable stockpile of cash, there was little risk of going bankrupt. It was just as unlikely that people would all of a sudden stop wanting to see family friendly films. To me, the only question was, would their future films continue to be successful? From what I had experienced, read and heard, that question was easy to answer. I had confidence Pixar would continue to generate excellent films, I just had to be patient. And in the periods between films, if the stock price began rising too much, like it did in the summer prior to the release of A Bug's Life, I could take some profit. Or, if the price dropped like Pixar would never create another film again, like it did immediately before the release of A Bug's Life, I could buy more shares. Pixar was not a company for investors looking for consistency but one for the patient investor. It was one of my most enjoyable investments, and actually still is as I continue to own the Disney stock I received when Pixar was bought out by them.

One of the best parts of being a Pixar investor in the early years was the cool merchandise the company sent with the annual report. As I mentioned in my post for the 1997 annual report, I received a VHS copy of the short Geri's Game. For 1998, I received 2 posters, one celebrating the release of A Bug's Life with Flik floating on a dandelion (shown at the top of this article), and the second teasing their next film, Toy Story 2 (shown below). These posters were large and beautiful, I think 16" x 40". Even after only 2 films, I had become accustom to the extras Pixar put in their works, such as the bloopers at the end of A Bug's Life. So as I analyzed the poster trying to figure out the roles of the new characters (remember, back in the late 90s, in-depth coverage and fan sites weren't as common as they are now!), I noticed tiny Flik waving from the grill of RC!


Sunday, March 6, 2016

Alex Mandel's First Solo Album "As Long as We Breathe"




I wanted to give a quick shout-out to Alex Mandel and his first solo album titled As Long as We Breathe. In case you're not familiar with Mandel, he wrote the music and lyrics for Touch the Sky and Into the Open Air for the film Brave. He also did the music for a couple of short films such as Your Friend the Rat and Mr. Incredible and Pals.

Alex has been with a couple of bands such as The Echo Falls, but this is his first solo effort. Mandel utilized Kickstarter to help fund the album, and I had been eagerly waiting for it to be completed and delivered. My excitement only grew when the CD arrived last week and I saw the gorgeous cover! I've been playing it quite a bit this past week and recommend it to anyone looking for a nice mix of music that spans a number of genres.

If you're a fan of Brave's Celtic music, then I think you'll enjoy the opening number, Way to Go, an upbeat and inspirational tune. Speaking of Brave, Mandel joined up with Julie Fowlis (the voice on both Touch the Sky and Into the Open Air) for The Road - the combination of Alex's guitar with his and Julie's voice is beautiful. Both Helping Hand and Happy sport an electronic/rock edge while In My Arms is a slower, more reflective song. I also got a Paul Simon vibe on both City and the Bay and Domino.

I not only enjoyed the music on this 15 song album but many of the songs lyrics caught me by surprised and left me thinking about finding our purpose in the world, love, despair and spirituality.

All in all, a wonderful album! I strongly encourage you to go to iTunes, Google Play or Spotify and check out As Long as We Breathe for yourself!

Friday, December 18, 2015

Pixar News Articles for December 18, 2015



It's been a while since I did a news post but between the releases of Inside Out and The Good Dinosaur, the 20th anniversary of Toy Story and the start of the 2015 award season (which both Inside Out and The Good Dinosaur have been wonderfully participating in),  there's been a lot of great interviews and articles. Below is a small sampling of these articles.

The first is an interview with Director of Photography Danielle Feinberg. I first fell in love with Danielle's work about the time I started this blog, right before the release of Brave (which she did the lighting on). In this interview, Feinberg discusses how light can be used to convey emotion and help bring Pixar's stories to life.


Next up is the Pencil Kings podcast interview artist Noah Klocek. Klocek just finished working as Art Director on The Good Dinosaur, and also recently released his first children's book Cloud Country. Klocek talks about his path to Pixar, the importance of collaboration and Cloud Country.



The touching short film Sanjay's Super Team was released alongside the theatrical release of The Good Dinosaur. The director of the short, Sanjay Patel, gave a very personal and in-depth look at the making of the short film, including his relationship with his father.


Finally, there is a good interview with Pixar president Jim Morris. I really enjoy hearing from folks on the production side of Pixar. Morris talks about his history, starting with Industrial Light & Magic and his moving up the ranks at Pixar to his current position as president. Morris also discusses production of The Good Dinosaur, other Pixar films and non-Pixar films like John Carter, which he produced.

Sunday, November 22, 2015

Toy Story Theatrical Release, Pixar's IPO and the Brilliance of Steve Jobs



In honor of the 20th anniversary of the theatrical release of Toy Story (which occurred exactly 20 years ago today), I want to do some historical looks at Pixar and its employees back around the time of Toy Story's release. This post is one I've wanted to write for quite a while.

I don't think there's any argument that Steve Jobs was a marketing genius. I think on his return to Apple in 1996, he had a well thought out strategy for the company and its products and services. To me it's clear he knew exactly where he wanted the company to be in the future and he laid it out perfectly.

But his genius went beyond marketing, which he demonstrated at Pixar. Perhaps his most brilliant and boldest move was taking the company public only a week after the release of their first feature film, Toy Story. To understand, companies usually don't try to access the public markets until they are on firm ground and have a history demonstrating that their business plan is working. Without this confidence, investors will not give the company a high valuation and likely shy away from investing.

Pixar's situation in late 1995 couldn't be farther from solid ground. This was a company that had already lost approximately $50 million. They were going to release their first ever film, never having made anything longer than commercials and some short films. In addition, they were using this new technology called computer generated animation. Everything screamed "Stay Away!"

But Jobs had reasons for his timing, much of which was explained in Ed Catmull's excellent book, Creativity, Inc. To take a step back, Jobs wanted to turn Pixar into a world-class studio. To do this would require a lot of money, more than the 10%-15% of profits they were receiving under the current Feature Film Agreement with Disney. He knew they would need a new agreement with Disney that evenly shared profits between the 2 partners. But he also knew that Disney wasn't going to just hand Pixar such generous terms - Jobs needed the financial footing necessary so that they could leave Disney and go it alone if the 2 companies couldn't come to agreement.

Jobs knew he had the best artists and computer animation engineers assembled at Pixar. He'd also seen how strong of a story John Lasseter and the creative team had constructed.  Then, in the spring of 1995, Jobs saw the power of Disney marketing with the release of Pocahontas. With that knowledge, all the pieces were in place to give him confidence that Toy Story would be a success.

He knew if Toy Story was as big of a success as he expected, Michael Eisner would immediately want to extend their agreement rather than risk Pixar going independent and becoming a formidable competitor. With the film's success he knew an IPO would also be a success, giving him the financial footing he could utilize in his negotiations with Eisner. In his mind, Jobs knew Eisner would have no choice but to agree to his terms.

The Pixar management team in 1995: Lawrence Levy, CFO; Ed Catmull, CTO; Steve Jobs, CEO;
John Lasseter, VP of Creative; Sarah McArthur, VP of Production

By the fall of 1995 the board was set and the game played out exactly as Jobs envisioned. Toy Story was the #1 film its opening weekend and for the year, going on to make almost $362 million worldwide and garnering a 100% score on Rotten Tomatoes. A week after its release, Pixar went public in a very successful IPO, raising almost $140 million for the company and valuing Pixar at close to $1.5 billion. Within weeks, Eisner called to renegotiate their agreement, which led to Disney and Pixar signing the Co-Production Agreement, a 10 year, 5 film agreement entitling Pixar to 50% of all theatrical and merchandise revenue.


I marvel at how Steve Jobs was able to so clearly see the future and predict how Michael Eisner would respond. This demonstrates a deep insight not only in business logic but also human behavior, something I don't think Jobs gets enough credit for. Because of his vision, he was able to put Pixar on the path of stability and accomplish his goal of creating a world-class animation studio.

Sunday, November 8, 2015

Toy Story: The Art and Making of the Animated Film







Living in Minnesota, our family has a tendency to want to get away to someplace warm. That usually consists of going to either Disney World or Sanibel Island. My wife and I made our first trip to Sanibel about 20 years ago and since then we've returned a number of times. I can remember on our first trip bringing the book Disney's Art of Animation by Bob Thomas. I was mesmerized by this book and loved learning about the process of making animated films. I especially enjoyed the second part of the book that focused on Beauty and the Beast. It's how I began learning about the current generation of Disney artists like Chris Sanders, Kirk Wise, Gary Trousdale, Glen Keane, Brenda Chapman, James Baxter, and Lisa Keene. That first trip started a tradition of bringing an Art of book whenever we go to Sanibel. I find it very relaxing to sit on the patio or lanai, listening to the waves and reading some sort of Art of or Making of animation book.



We just returned from Sanibel where we were celebrating my wife's birthday. On this trip I brought Toy Story: The Art and Making of the Animated Film by John Lasseter and Steve Daly. It felt right to bring this book as this month is the 20th anniversary of the release of Toy Story.


Toy Story: The Art and Making of the Animated Film is a gorgeous book and is so fun to look at, starting with the lenticular cover. If you're familiar with other Pixar Art of books, this one is somewhat different. True, it is full of pre-production artwork. There is plenty of beautiful color script and lighting art from artists like Ralph Eggleston and Tia Kratter, plus character concept and story art by Bud Luckey, Jeff Pidgeon, Andrew Stanton and Joe Ranft. But the book also has gorgeous fully rendered images from the film to complement the artwork. It's cool to see the storyboards side-by-side with their rendered versions.



Also, where there is usually limited text in the Art of books, this one provides great, in-depth discussions of Pixar's film-making process. There are detailed descriptions of character development and the voice actors, with extra time spent on the main characters including Woody, Buzz, Sid, Rex, Slinky, Mr. Potato Head, Hamm and Bo Peep. In addition, there are separate sections for story, modeling, layout, sets, animation, lighting, rendering, music and sound effects. I also enjoyed that the book talks about some of the tools used, such as the animation software. There are also a number of great stories, such as Black Friday, the story session that led to the green aliens and "the claw", and the evolution of the Pizza Planet restaurant.

All in all, this is a great book and addition to the rest of the Art of collection. I highly recommend picking up a copy!



Tuesday, October 13, 2015

17th Annual Animation Show of Shows

It's not too often we get to see animated short films on the big screen. But producer and curator Ron Diamond is bringing his Animation Show of Shows cross country throughout October and November. This looks to be a great opportunity to see shorts using many different animation styles from a number of countries. Diamond has a knack for picking out great shorts; many shorts from previous shows have gone on to be nominated for the Academy Award Best Animated Short Film, with a number of them winning the award.

The list of films include:
  • Ascension - Colin Laubry, Thomas Bourdis, Martin de Coudenhove, Caroline Domergue, Florian Laubry, France
  • The Ballad of Holland Island House - Lynn Tomlinson, USA
  • Behind the Trees - Amanda Palmer & Avi Ofer, USA
  • Love in the Time of March Madness - Melissa Johnson, and Robertino Zambrano, USA
  • Messages Dans L’Air - Isabel Favez, France/Switzerland
  • Snowfall - Conor Whelan, Ireland
  • The Story of Percival Pilts - Janette Goodey & John Lewis, Australia, NZ
  • Stripy - Babak Nekooei & Behnoud Nekooei, Iran
  • Tant de Forets - Geoffrey Godet & Burcu Sankur, France
  • We Can't Live Without Cosmos - Konstantin Bronzit, Russia
  • World of Tomorrow - Don Hertzfeldt, USA
 Here is the trailer for the show:



The tour will visit approximately 2 dozen theaters during its run, with Ron Diamond attending a number of them. Additional screenings may be added so keep an eye on their website or Facebook page! If you're lucky enough to attend, I'd love to hear what you thought of the films!

Sunday, October 11, 2015

The Good Dinosaur Giveaway! UPDATED With Winner!

The excitement for The Good Dinosaur is really starting to build! A couple weeks ago was the bloggers press event, and last week Pixar released a new trailer for the film. We're only a little more than a month away from its theatrical release!


I was very fortunate to go to the Pixar studio last month. It had nothing to do with The Good Dinosaur press event; rather it was due to the amazing thoughtfulness of my friends Santi and Laura, and the generosity of Pixar Supervising Animator Victor Navone and his wonderful wife Candy. I had a great time, and was able to meet some Pixar legends like Ralph Eggleston and Bob Peterson.

While there, we of course had to stop at the Pixar Studio Store. At that time they didn't have much Good Dino merchandise, but they did have some cool t-shirts and I picked up a few. So with the film just a few weeks away, I thought it would be fun to give one away in a Good Dino giveaway!

This is a women's medium Arlo tee. It a soft tee with the film's protagonist on the front. The word "Pixar" is on the left sleeve, and on the back is the film's title. I just love the minimal, clean design. What a great way to show your Pixar spirit at The Good Dinosaur theatrical release!

So how do you win this Pixar Studio Store shirt? Hopefully it's not too tough, just fill out the form below and hit submit! There are a couple of rules. To enter, you must be at least 18 years of age and live in the 48 contiguous United States. If you are under 18, you can have a parent enter. Only one entry per person - multiple submissions will be ignored. No purchase necessary to enter. The giveaway starts NOW and will end Saturday, October 17, 2015 at 11:59pm Central Time. One random winner will be chosen and contacted via the email address used to enter the contest. Once the winner claims their prize, I will announce it here in this post and on Twitter. Good luck!



UPDATE (October 18, 2015)
Congratulations to Jenny Y. on winning the contest!

As part of the contest I asked, "Which upcoming Pixar film are you most excited for". Perhaps not surprising, The Good Dinosaur was the overwhelming favorite, taking in over 55%. Next was very close with The Incredibles 2 coming in at 18% and Finding Dory at 16%. Coco only received 9% of the votes, which surprised me.