What if one of Disney's most important acquisitions didn't happen?

Pixar joined Disney exactly 15 years ago

On January 24th, 2006 — 15 years ago — recently appointed CEO Bob Iger announced Disney was acquiring the biggest force in modern animation from then Apple CEO Steve Jobs — Pixar

Like any good business story, it was fraught with drama. Jobs didn’t care for previous Disney CEO Michael Eisner. So much so that Jobs refused to work with Disney. The companies ended their decade-long relationship in 2004, not long after Finding Nemo was released into theaters. Eisner told Disney’s board at the time that Disney didn’t need Pixar. He had seen a rough cut of Finding Nemo, according to the Los Angeles Times, and didn’t think it was anything to write home about. 

Finding Nemo would go on to make nearly $1 billion worldwide when adjusted for inflation, the Academy Award for Best Animated Feature, and is still regarded as one of Pixar’s most successful movies. That same year, Disney released its own animated film, Brother Bear, which only grossed $250.4 million worldwide and is considered one of Disney Animation’s lesser films. 

“When I became CEO, we had been through about a decade of disappointing performance in the animation business,” former CEO Bob Iger wrote about Disney’s Animation business in his book, Ride of a Lifetime. “Except for the relationship we had with Pixar. And if you were to look at the Disney animated films from that decade — which I’ll call the post-Lion King decade — a very few made any money. And in a number of cases, not only did they lose money but they did significant damage to the Disney brand.”

When Iger took over as CEO in 2005, he realized three things:

  1. The 1990’s era of Walt Disney Animation that transformed the film industry was long gone

  2. Some of Disney’s most notable characters that kids ran up to and adults laughed beside at the parks were Pixar originals, not Disney, and most importantly

  3. It became increasingly clear that if Disney wanted to completely own domination, Iger needed to purchase Pixar away from Steve Jobs

So, he did. Disney’s acquisition of Pixar led to 15 years of continued success, making Disney America’s most prominent animation studio and leading the box office around the world. Pixar films released post-slate have grossed just over $3.3 billion since Disney acquired the studio, and have gone on to make billions in merchandise, generated millions of park visits around the world, and even more additional revenue for the House of Mouse. It also kickstarted Iger’s legacy, built on the idea that owning powerful, recognized IP universes could create unprecedented profit for Disney. 

But what if it didn’t happen? What if Iger couldn’t fix things with Jobs? What if, just as the entertainment industry was ushering in the direct-to-consumer era, Jobs saw potential for Pixar to become an even bigger asset to his other company, Apple, and help sell even more i-devices? What if Pixar became the backbone to Apple TV+, a streaming service designed around the family room with kids in mind? What would this do to Disney’s business — not just its Studio division, but Parks, Consumer Products, and everything else?

Well, let’s try and figure it out. 

Disney’s second dark age and new competition 

At the height of Disney’s animation conquests in the 1990s, often referred to as Disney’s Second Renaissance, the studio was releasing certified hit after certified hit. Between 1989 and 1999, Disney saw the release of: The Little Mermaid (1989), The Rescuers Down Under (1990), Beauty and the Beast (1991), Aladdin (1992), The Lion King (1994), Pocahontas (1995), The Hunchback of Notre Dame (1996), Hercules (1997), Mulan (1998), and Tarzan (1999). 

Not only did the films usher in billions of dollars for Disney, but they took home Academy Awards and secured some of Hollywood’s biggest talent for voice acting roles. Superstar musicians like Phil Collins and Elton John wrote stunning scores that elevated the film’s production. A few of those films became Broadway sensations in their own right. For a while, it felt like no one could touch Disney, save for Pixar — a studio that Disney enjoyed a partnership with through a feature film distribution and co-production agreement. 

Turmoil was just around the corner. The ‘90s came to an end, and as battles were looming internally amongst Disney’s most powerful executives and board members, the company’s animation block hit a slump. This period is referred to as the second Dark Age, and lasted between 2000 and 2009. Not every film was a miss: Lilo and Stitch and The Emperor’s New Groove found their audiences and were praised by critics, but other films, like Fantasia 2000 (1999), Disney’s first CGI-feature Dinosaur (2000), Treasure Planet (2002), Brother Bear (2003), Home on the Range (2004), Chicken Little (2005) and Meet the Robinsons (2007) didn’t have as much luck. 

More importantly, none of these films were producing characters that  kids wanted to spend more time with off-screen. Disney’s business works best when its various divisions ultimately support and help prosper one another. It’s why consumer products executives talk to the studios division now about how to get ahead of the next big Star Wars toy. As one former Disney executive told me, “A robust merchandise program tied to a feature film takes 28 months to develop, which is Disney’s ideal timeline.” The executive added that people “can do it faster but every month less than 28 you have to start cutting corners until you truly do run out of time.” 

If part of the goal with Disney movies is to also sell t-shirts, plushies, and get families into parks and on cruises to take photos, not having a constant new litany of household characters is a problem. People know Simba, Nala, Zazu, Scar, Timone, and Pumbaa — how many people in 2007 were lining up to snap a photo with a CGI dinosaur, Chicken Little or characters from Treasure Planet? When the company opened its Hong Kong resort in 2005, the problem was obvious. 

"It really hit me hard that we had had 10 years of real failure," Iger said at a conference in 2006. "Keeping animation strong is incredibly vital."

While Disney was struggling with its own lack of success, two other studios were excelling in their animation efforts: Pixar and DreamWorks Animation, the latter of which was started by a former Disney Animations executive who oversaw much of Disney’s second renaissance in the ‘90s before effectively being ousted, Jeffrey Katzenberg. In the early ‘00s, DreamWorks Animation had Shrek, a movie that grossed $480 million worldwide, becoming an instant sensation. 

Iger realized that if Disney didn’t figure out a plan, and fast, the longevity of the company’s prospects and franchises would struggle. Disney’s relationship with Pixar was on the outs, thanks to disagreements between Jobs and Eisner, which led to Pixar deciding not to renegotiate its production and distribution contract with Disney in 2004. 

At the time, Pixar accounted for nearly 50 percent of Disney’s studios division operating income, according to the Los Angeles Times. In 2003, Disney’s Studios division made up 20% of the company’s annual fiscal year, and the company specifically called out Finding Nemo for being the most successful animated film of all time in its annual fiscal report. The year ended with Disney’s Studios division, helped by massive breakouts such as Pirates of the Caribbean: Curse of the Black Pearl and Finding Nemo, bringing in $7.36 billion, up from $6.69 billion the year before. 

More importantly, Disney had franchise stars it could incorporate into parks and its consumer products division with Jack Sparrow and Nemo; it didn’t in its animated division. Not having Pixar was simply unacceptable and, alongside internal politics and concerns,  Eisner’s was out and Iger’s was in. With a new level of control and power, the longtime executive saw potential: buy Pixar. As Iger says in his book, he realized Disney Animation needed a major overhaul.

“I thought the fastest way to accomplish that, albeit at the riskiest and the most expensive, was to buy Pixar,” he wrote.

Iger brought up the idea to Jobs, who he was trying to fix Disney’s relationship with, writing down the pros and cons of the deal. The pros for Iger and Disney were obvious: they needed Pixar, who remained virtually unchallenged at the time in the animation space and, most importantly, had a catalogue of IP that no other studio could replicate. The cons were as follows, according to Iger’s book:

  • “Disney’s culture will destroy Pixar!” 


  • “Your board will never let you do it.”

Clearly, the board did approve the deal — but what if Jobs couldn’t get over the first two? Iger described his session with Jobs at Apple’s campus as a culture that anyone in a creative business, in any business, would aspire to.” What if Jobs thought Pixar would make more sense and thrive even more under Apple’s banner?

Alternate reality: Apple acquires Pixar

In an alternate reality, after turning down Disney’s offer to purchase the company, Jobs convinces Apple’s board to purchase Pixar two years later in 2007. 

The move leaves many in the industry perplexed. Apple was seemingly reinventing personal technology with every new keynote, starting with the iPod and iTunes in the early ‘00s, right through to the iPhone, Mac Mini, and Mac Pro. Why would the company want to get into the entertainment industry? Apple made more sense as a distributor. In 2006, an updated version of iTunes allowed customers to purchase and download movies on top of songs. That makes sense. It didn’t make sense for Apple to suddenly try and take on other established studios in their own space — what did it bring to Apple? 

The answer lies in a 2005 Inc. interview and, two years later, the most crucial development in the entertainment space: Netflix launches a streaming service. Although the streamer didn’t launch until 2007, co-CEO Reed Hastings told Inc in 2005 that “movies over the internet are coming, and at some point it will become big business.” Netflix in 2007 is nowhere near what Netflix is in 2021 — there are more than 200 million streaming around the world today — and there is no original content, but Silicon Valley and Hollywood take notice. 

In 2007, Netflix officially unveiled its streaming service. Just a year later, another company with similar ambitions launches: Hulu, while companies like Apple and Amazon were betting on people wanting to purchase and own their favorite songs and films without having to pay a monthly subscription fee. In 2003, Jobs specifically called out subscription models in the music industry, saying at a keynote, “These services treat you like a criminal,” adding “they are subscription based and we think subscriptions are the wrong path.” At another event later in the year, Jobs added that it was different for video. Specifically, Jobs thought that people may watch their favorite movie “ten times in your life,” but listen to a favorite song thousands of times. 

Even ignoring the fact that Jobs often changed his opinion on what Apple would and wouldn’t do depending on shifts in the industry — remember, he once proclaimed Apple would never make a seven-inch tablet — dedicated online streaming services were popping up everywhere. Netflix, Vevo, YouTube, Hulu, Vudu, and Twitch all appear within the next four years. As smartphones become pocket-sized computers, and the iPhone continues to sell out, Apple becomes a third-party streaming home to a growing number of popular apps. 

In our reimagined alternate universe, Pixar has effectively been left alone until now. The company is brought into Apple’s fold, but films are still released theatrically. The only difference is that at certain times of the year, Apple supplies a $50 gift card for a night out at theaters to watch the newest Pixar film with the purchase of a new Apple product, like the latest iPhone. Things change around 2012-2013. Even without Jobs guiding the company, having lost his battle to cancer in 2011, Apple decides to launch a dedicated, paid streaming service for its Pixar unit — Pixar+.

Pixar is still a film business first and foremost. Movies are still being released theatrically. Apple, then worth about $450 billion, has more than enough cash to continue spending north of $100 million on marketing campaigns around the world. But the streaming era is here. Seeing Netflix’s success with its library of content, Apple invests even more into the company, asking Pixar executives to figure out how to make exclusive TV shows and shorter series that could bring in monthly subscribers. Executives think that families who purchase iPhones and iPods for their kids will subscribe to the streamer on top of heading to theaters.

It’s becoming increasingly clear to Apple executives that being in the services game is just as important as hardware. While Apple executives work on their plans for Apple Music, which would launch in 2015, Pixar+ becomes the first ever major paid Apple entertainment subscription service when it launches in late 2013. Between 2006 and 2013, when Pixar+ launches, Pixar films generate $1.3 billion in revenue. Not to mention that since Apple upheld Pixar’s existing deals to create consumer products, that brings in additional revenue for the company, as seen in past quarters. Pixar remains an overtly successful business.

Pixar+ isn’t a groundbreaking hit right off the bat, but Apple executives are pleased to be included in the quickly developing rat race. Netflix is riding high with the release of several successful original series like Orange is the New Black, House of Cards, and Hemlock Grove. Hulu is trying to find its footing. Amazon is trying to find its place with Prime Video. Disney, which continued to struggle with its own animated films until 2012 and 2013, and the release of Wreck-It Ralph and Frozen respectively, is also figuring out its next footing. Rumors float that Disney is looking into developing its own streaming service on the back of its biggest IP, including Marvel Studios and Star Wars.

By October 2016, it becomes increasingly obvious to Apple CEO Tim Cook that Apple’s path to continued success is in services. Apple Music and Pixar+ are performing well enough for the company to start focusing on developing a new streaming service, Apple TV+. Pixar will sit at the center of it, but there will be room for new original series and films, with a focus on building a streaming platform for the entire family. 

Apple TV+ officially launches in June 2018, a full year-and-a-half before Disney+ does. Apple bundles it for free into all new and refurbished product purchases, and gives current Apple Music subscribers a three-month free offering. The goal is to create an ecosystem that people never leave, incorporating consistent hardware upgrades and enticing enough content to keep them clamoring for more. To sweeten the deal, Apple also gives a free three-month offer to anyone who attends The Incredibles 2’s opening weekend. The film goes on to gross $1.2 billion worldwide, including more than $182.7 million in its domestic opening weekend alone. 

The long play that Jobs may have predicted back in 2005 pays off.

Well, does it?

That’s what could have happened. It’s a fun concept to play out on paper. 

But it doesn’t really make sense.

Pixar works as a core pillar to Disney’s entire business. Pixar would have become a small part of Apple’s potential entertainment ambitions. Apple doesn’t have a theme park division; it’s not making a significant portion of its revenue on film-related merchandise; Pixar isn’t going to become an integral part of Apple’s DNA. For Disney, however, Pixar is all of these things. Pixar is a core business that does help with theme park attractions and sales, merchandise opportunities, and is an integral part of the company’s DNA. Toy Story creates theme park rides and plushies for Disney to make billions of dollars off of every single year even if there’s no new Toy Story installment — it can only go so far for Apple, and could only reach so many heights on its own. 

Two of Jobs’ biggest cons, seen in the list above, were fears that Disney culture would destroy Pixar and distraction would kill Pixar’s creativity. Some people could argue the second point turned out to be true. In the years since Disney acquired Pixar, sequels became some of the studio’s most popular films — Finding Dory, The Incredibles 2, Monsters University, and Toy Story 4. I’d argue this isn’t fair; Pixar’s third ever film was a sequel to 1995’s Toy Story. In the last few years, Pixar has also released several new movies including Brave, Onward, Coco, and Soul. The last two are also making waves internationally, in countries like China where Pixar films don’t usually perform well. Plus, sequels aren’t new or specific to Disney or Pixar, but rather a successful model used across the industry. 

On the first point, if Disney’s culture was going to ruin Pixar, it would have ruined Pixar. When Disney purchased Pixar, Iger specifically called out protecting the studio’s culture as important, saying “I'm sensitive to what can happen when a company is bought," adding it was important "that the Pixar culture be protected and allowed to continue,” according to the New York Times. Pixar continued to do its thing and Disney benefited — at theaters, at parks, on cruise ships, in merchandise and video games, and now on Disney+. 

Steve Jobs didn’t have to sell Pixar to Disney. But he and Iger are smart, hyper aware business executives who I believe saw what lay before them — an opportunity for Pixar to join a business that could create a dominant animation empire, and the ability for Jobs to focus on Apple knowing his studio was in good hands. As the New York Times noted then: “Disney will also have increased ability to fully capitalize on Pixar-created characters and franchises on high-growth digital platforms such as video games, broadband and wireless, as well as traditional media outlets, including theme parks, consumer products and live stage plays.” Pixar would give Disney an empire, one Jobs could gloat in helping to create.

In many ways, it feels like Pixar was always going to be absorbed by some company. Disney was just the obvious option, steered into a future by a CEO who always seemed to have ambitions to make Disney bigger than ever.