The Negotiations for Collaboration between Pixar-Disney Name: Gi Hyun Kim Student ID: 082SIS48 Intl’ Negotiations :Theory & Practice by Prof. Jasper S. Kim

Contents  Background of three negotiations in 1991, 1994, and 2003  BATNA, Positions of Collaboration btwn Disney & Pixar in deal  Deal set in 1991 reflected each interest=benefit  The Reasons of Clash between them  Missing Points to Successful Relationship

Background of three negotiations  1991 deal to try the first blockbuster animated picture  Successfully done  Bargaining power: Disney > Pixar  1994 deal after successful IPO of Pixar and mega-hit of Toy Story, the first movie by collaboration  Done, but the relationship damaged due to renegotiation suggested by Steve jobs, the former CEO of Pixar  Bargaining power: Disney < Pixar  2003 deal after the smash box-office hit of Finding Nemo  Failed Disney walked out due to unreasonable wish from Steve Jobs  Bargaining power: Disney << Pixar

BATNA, POSITIONS of Collaboration of Disney-Pixar  No deal, no regret for Disney  Tempt John Lasseter who is at Pixar to join Disney again  Breaking new ground for Disney as the first-ever animation production to be outsourced, proceeding with due caution made sense  Disney was the be-all and end-all, and Pixar just a gnat  No BATNA due to Steve’s serious financial burden, he desperately needed the deal  Willing to take deal  Rent Disney’s marketing system, not partner with Disney

Deal set in 1991 reflected each interest=benefit  Disney would fund the production cost, promotion, and the distribution  Disney would keep the income from merchandising royalties-toys, games, T-shirts, fast-food tie-ins, and video sales from the three movies  Controlling the rights to make sequels would belong to Disney Pixar would develop all the creative aspects- characters, character appearances, screenplay, dialogue, casting of actors for the voices, instead, Disney would retain approval power over all creative decisions  Pixar would accept to receive 12.5 percent of the net profits from three movies

Disney’s special benefit=interest reflected on term  John Lasseter in the controlling role as director and head writer should sign off a long-term contract, binding him to stay on board for all three of pictures covered by the agreement

The Development of the situation after Toy Story’s mega hit Bargaining Position changed; Pixar > Disney Steve’s wish to rewrite the contract: Pixar wants 92% of net profits & to own two remaining movies Relationship got worst Commitment damaged after the alteration Relationship got worse Commitment damaged again Disney walked out

The Reasons of Clash Steve Jobs of Pixar and Michael Eisner of Disney ignored these simple rules  Don’t Bargain Over Positions  Preparation – Legitimacy, Commitments  Separate the People from the Problem  Invent Options for Mutual Gain

Don’t Bargain Over Positions Steve of PixarEisner of Disney  In Bargaining power was weak  In 1994, after Toy Story’s success - Bargaining power became stronger than 1991 and made the change of terms even already set  In 2003, after Finding Nemo, including the success of Toy Story 2, Bug’s life, and Monster Inc. - Rent a Disney’s marketing system, not partner with it  In Disney was the be-all and end-all, and Pixar just a gnat  In 1994, - Disney still came first, leveraged its strong bargaining power  In 2003, -Disney did not corporate with Steve’s wish to get 92% of net profits - Do not listen to Steve at all

Preparation - Legitimacy  In Insisted 12.5% of net profits to deliver to Pixar, 12.5% is not legitimate number - All revenues from merchandising royalties, video sales should go to Disney  In did not gather information what number would be the appropriate portion of profits taken  In found that 12.5% of net profits taken was not legitimate, so should be shared fifty-fifty  In 2003, after Finding Nemo, including the success of Toy Story 2, Bug’s life, and Monster Inc. - 92% of net profits was supported by Steve, also was not legitimate Steve of Pixar Eisner of Disney

Preparation - Commitments Steve of Pixar Eisner of Disney  In 1994, after Toy Story’s success -Steve showed his willingness to change the terms of the contract already made  Before release of Finding Nemo - Steve insulted Eisner that he intended to steal Disney from him  In 2003, after Finding Nemo’s success - Showing no respect to continue partnership with insisting huge number of profits  In 2003, before release of Finding Nemo -Attacked Apple’s marketing campaign, “Rip, Mix, Burn” giving consumers permission to “create a theft if they buy his computer”  During the partnership, - Eisner had been spreading that he took possession of Pixar

Separate the People from the Problem They were both master negotiator who could spot weaknesses of counterparty and took advantage of it, however they were vindictive Whenever they were insulted by each other, they treated problem on soft & people on hard

Invent Options for Mutual Gain In 2003, after Finding Nemo’s success Steve of Pixar’s view point Eisner of Disney’s view point  He could have invented options, such as longer term commitment or higher distribution fees instead of insisting 92% of net profits in contract renewal, which would never be considered seriously  Even though Sony Pictures and Warner Bros wanted to contact to Steve, but finally found that it would be hard to make deal happen  Rather than angry, Eisner should have been prepared to listen to him carefully or actively would have to suggest options for mutual gain  Eisner could have notified Steve that the risks of his persistence which would never meet satisfaction from other companies as well

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