"Pixar's Payday: Toon Town Teaches H'wood a Lesson: Focus"

by Marc Graser, Variety Magazine, 22 December 1999

At first glance, the birthplace of Woody, Buzz Lightyear and Flik — an unimpressive office complex outside San Francisco — seems underwhelming, but inside, Pixar Animation Studios is a different story.

In their self-described utopia, an army of animators have transformed their cubicles into tiki huts, circus tents, two-story lofts and cardboard castles, with bookshelves stuffed with toys, scattered tricycles, futons and a colorful iMac or G4 computer on every desk. And everyone — 430 techies and traditional animators — seems annoyingly happy.

If it seems surreal, it's supposed to be. Pixar doesn't hide the fact that it's tried to create the Second Happiest Place on Earth. Well-paid, employees have stock options and a creative voice in every pic Pixar produces. Turnover is extraordinarily low, and employees are encouraged to become renaissance persons by enrolling in such classes as sculpting, writing and painting.

It's a happiness few others are allowed to enjoy. Pixar execs are elusive about work until it hits the bigscreen, while visitors must wear badges that scream, "A Stranger! From the Outside!"

Striving for No. 2

"Our No. 1 goal is to build the second great animation studio in the world," said Steve Jobs, chairman, prexy and CEO of Pixar (as well as the man who saved Apple Computer Inc. as interim chairman). "Disney is the first. A lot of people have tried," he said. "But in 60 years, no one has been able to do it."

With a healthy stock, and its third consecutive toon feature, "Toy Story 2," going to infinity and beyond at the box office, the little animation house is teaching Hollywood a valuable lesson: to focus.

Though it has offers to branch into the Internet, TV series and visual effects, the company declines those offers. While most little firms dream of becoming conglomerates, Pixar wants to stick with what it does best: The 13-year-old Silicon Valley-based animation house is focusing on its films.

Pixar has turned itself into a $2 billion business, fueled mostly by a five-picture deal with Disney under which profits are split 50-50 (it collects half of ticket and homevid sales plus merchandising royalties after production costs and Disney's reimbursement for marketing and distribution fees).

"We are looking at other things," said Ed Catmull, Pixar's co-founder, exec VP and chief technology officer, "but we're always questioning whether they'll make economic sense." So far nothing has.

After "Toy Story" bowed in 1995, Pixar's inhouse interactive division created a storybook CD-ROM based on the pic. The title would become one of the bestselling CD-ROMs to hit the children's software market at the time, but Pixar still shuttered the division.

"Given the talent we put on this project and the return we got, we did the very best and only did fine financially," Catmull said.

Plans for the 'Net have been nixed; Pixar's Web site is not much more than a business card. The Web "just doesn't have a strong business model," Catmull explained.

With all of its tech talent and computer power — it licensed out its RenderMan animation software to f/x houses to create dinosaurs in Steven Spielberg's "Jurassic Park" and the battle droids in "Star Wars: Episode I — The Phantom Menace" — Pixar could create f/x for other studio pics. Again, it hasn't, "because it's not a good business," said Catmull, who created the Oscar-wining software.

Pixar, however, has dabbled in commercials, creating spots for McDonald's, starring "Toy Story" characters. "But the truth is, we've just been too busy to do anything else," Catmull said.


Since Pixar created its first short, "Luxo Jr.," in 1986, the staff has been slaving away an average of four years on each of its three pics (production takes 18 months alone). It's in the early stages on "Monsters, Inc.," its fourth pic, skedded to bow in 2001, and is developing three more for successive release each year afterward.

"The goal is to get a stable of talented directors to keep the development going on our annual releases and to be rolling the team from one film to another," said John Lasseter, the 42-year-old former Disney animator who helmed Pixar's three pics and serves as exec veep of creative.

Inside this land of computer-animated creation, God isn't Jobs, but an overly happy Lasseter, father of five sons, ages 2 to 19, who he said keep him youthful, thinking like a kid.

The company's near nonexistent turnover rate and "fun" atmosphere (employees enroll in Pixar U. to study screenwriting, painting, sculpture, etc.) are largely attributed to Lasseter. Catmull is learning to sculpt and proudly shows off his statues.

No turnover

"We have the lowest turnover rate in Hollywood history," Lasseter said. "People just don't leave. That's one of the things I'm most proud of. We created the studio we want to work in. We have an environment that's really open, a culture that's wacky. It's a creative brain trust: It's not a place where I make my movies — it's where a group of people make movies."

Sarah McArthur, exec veep of production said, "Pixar feels like the Disney I started working for 10 years ago." As an exec producer with Disney Feature Animation, McArthur helped make "The Lion King" a hit.

At Pixar, "There's an atmosphere of building something," she said. "There's energy, camaraderie, creativity. We're trying to make this work."


And they're building the facilities with which they can better do that work: a more spacious and fanciful 16-acre facility, including gym and commissary, in nearby Emeryville to serve as the company's new "jewel box," in Lasseter's words.

Lasseter himself will not direct "Monsters, Inc.," but will exec produce the story of a boy who ventures into a parallel world through his closet, where monsters live. Andrew Stanton (a co-director on "A Bug's Life"), Pete Doctor and David Silverman are helming.

Jobs said, "Every one of our films has been different. 'Monsters' is a terrific concept. From a technical point, it's our most ambitious undertaking to date."

"The story is most important," said Catmull, who spends his time handling the tech efforts and helping with the storytelling process. "A lot of people say they get it, but they don't," he emphasized.

"We aim to make a great family film that's great for kids but that's even better for their parents and young adults that don't have kids," Lasseter added.

If you ask whether this house of schmaltz is genuine, the shocker is that it really seems to be — a surprise considering who's at the top.

History has painted Jobs as an egomaniac feared by employees and critics. But Jobs' current demeanor is more mellow: He's at ease with himself and his business while wearing his trademark black turtleneck, jeans and gray New Balance tennis shoes.

Jobs acquired Pixar from George Lucas in 1986 for $10 million. Without Jobs, who owns 73% of the company and has poured in more than $50 million, Pixar wouldn't exist. He strategizes, showing up at the office one or two days a week, while Lasseter and Catmull make the movies.

Jobs' work

It's Jobs who marshaled Pixar's lucrative deal with Disney (that doesn't include "Toy Story") — a revenue-generating pact on which Pixar is dependent.

Through it, "A Bug's Life" generated $362 million worldwide, with homevid sales contributing $74 million in profits for Pixar after marketing and distribution costs and Disney's cut; without the pact, Pixar made $54 million total from "Toy Story." Pixar reported $32 million in profits on $79 million in revenues in the most recent September quarter. Its stock price spikes around the release of each pic.

Practically speaking, Pixar acts as a subcontractor for Disney: It controls casting, music production and other creative aspects of its pics via Disney Animation prexy Thomas Schumacher. Pixar gets the royalty checks.

"We work with each other a lot," Jobs said of Disney. "They have provided a lot of mentoring to us. They are smart guys and talented guys."

Building the brand

Jobs wants to use Disney to turn Pixar into a recognized brand among consumers, right up there with Spielberg and Disney itself.

"Having a brand means people trust us," Jobs said. "We're building up trust (with audiences). There's nothing more important for us right now.

"I don't know one person in my life that has not seen 'Snow White.' That's pretty amazing," he observed. "That's a 60-year-old product. We want to create some great stories and characters that endure with each generation and that we can put into the culture. A good film will be enjoyed when it is released. A great film will be enjoyed for at least 60 years."

But turbulent times may be coming. Once its deal runs out with the Mouse House in 2005, Pixar may be forced to distrib its own pics, insiders say, considering Disney has created its own inhouse computer animation unit, the Secret Lab. That unit's first pic, "Dinosaurs," is bowing this summer. "I don't think much about it," Jobs said of the pact's end. "It's a few more years into the future."

Distribbing itself

By 2003, however, several more blockbusters and a collection of cashed royalty checks could propel Pixar in the position where it's able to distribute its own pics.

Jobs denies rumors that he has been offered Joe Roth's position as chairman of Walt Disney Studios should the exec leave anytime soon. "I don't think I'd be the right person," Jobs said. "We have a great relationship with Disney that's good for both companies. The best way to help Disney is to make the best films we can."

Despite its deals and enviable hits, Jobs isn't cocky about Pixar's future. "All of our films won't be hits," he said. "We'll have a bomb, but we work to make sure none of them fail."

Development strategy

Pixar devotes two years to developing the story through a script, storyboards and story reels, then up to another two years in production. Computer-animated pics still begin with pencil sketches before images are created on the computer. "You can't really shortchange the story development," Lasseter emphasized.

Pixar constantly screens its pics for its crew throughout production, accepting suggestions to tweak the project along the way. "It doesn't matter who's idea it is," Lasseter said. "It just matters whether the idea is good."

For "Toy Story 2" — originally planned as a direct-to-vid release — the bulk of the work took place in the last year, with 20 times more computer power at its disposal than Pixar had for the first. It was revamped in January to make last-minute story changes. More than half the pic was redone. Buster the dog was added, as was Wheezy, the damaged penguin.

"For studios, the budget is most important," Catmull said. "We said the story was the most important thing. We will change the schedule and budget to make a film."

Cutting edge

Pixar improves the art of computer animation with each pic through a 50-person research-and-development staff. Jobs spends $5 million a year on the division that develops more realistic skin, fur, more flexible characters, expressions, better lighting and depth of field.

"We create what the story requires. We have the largest research group in the industry by far," he noted. "We spend the most money. We will continue to stay five to 10 years ahead of anyone else in (computer animation)."

While films using computer animation cost as much as 40% less to make than traditional animated films, as only one-third as many staffers are needed, the budgets of Pixar's pics are still upwards of $75 million.

"The line of advancements goes up because we keep on advancing these films," Catmull said. "The complexity of the shots are going up, but the complexity of the computers aren't keeping up. We are riding the $100 billion computer industry at the speed and cost."

Jobs said, "These films are getting richer and richer visually. The computers are 500 times plus more powerful. Still, it takes three hours to render each frame, the same amount as 'Luxo Jr.' "

While the humans in "Toy Story 2" did look, well, human, Pixar has no interest in creating photorealistic animated characters.

"We have the ability to make things photorealistic, but we don't," Catmull said. "We have a story to tell and aren't thinking about blowing the socks off of audiences."

"The goal is never to produce something that people think is real," said Lasseter, who has little interest in directing a live-action pic. "We don't want photorealism; that way we can use the tools to make things that don't exist believable. That's entertaining."

As for the future, the sky is the limit, so long as faster, cheaper computers are developed. Whatever happens, Pixar stubbornly stands by its pics.

"The feature animated film business is the pinnacle you shoot for if you're in animation," said Jobs. "We've gotten everything off our plate to just focus on this. There's the possibility that Pixar could do a combination of live-action and animation film. That will all be dependent on story. So until then, we'll wait and find out."

©1999 Variety

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