EBM Assignment 3: Business Model Portfolio

Pixar

By: Donald Kelly

12/15/19

Carol Wonsavage, Entertainment Business Models

Why I chose this company:

I chose Pixar for the same reason anybody else would choose their products, I’m

in love with their content! As a child, I recall fond memories of seeing Toy Story for

the first time and being completely fascinated by how clear and concise the imagery

was displayed. Now as a parent, my son enjoys all of the Pixar films and these films

provide common ground for he and I to bond and interact.

Background Information

Pixar is a computer animation studio that is currently owned by the Disney

company. Pixar and Disney agreed to merge on January 24 2006 {web.archive.org}.

Prior to becoming Pixar, the company was first created in 1979 by George Lucas,

known simply as Lucasfilm’s Computer Division. From the years 1982 through

1985, the computer division would continue to hone its craft and techniques by

working on various projects in various film and television projects as well as by

advancement’s in computer technology.

In 1986, Steve Jobs purchases the Lucasfilms Computer Division and establishes the

group “Pixar” {pixar.com}. The very first client the Pixar company had was Disney as

they began collaboration on changing the way animated films were produced and

created. In 1991, Disney and Pixar unveil an agreement “to make and distribute at

least one computer-generated animated movie” {pixar.com}. This initial project

would go on to be the full-length feature film “Toy Story” which was released in the

fall of 1995. Recognizing the films groundbreaking success, Pixar and Disney agreed

on an extension of the previous agreement with a 10-year contract with the promise
of creating five more movies. In 1999, Toy Story 2 is released and is the first film in

history to be entirely created, mastered and exhibited digitally {pixar.com}. From

1999 to 2006, Pixar would continue to create Disney blockbusters such as Monsters

INC, Finding Nemo and Car’s. After the merger deal previously mentioned,

Disney/Pixar continued partnered successes with various spin-offs and sequels to

their popular films: newer films were added to the company’s assets as well with

titles such as Ratatouille, The Incredibles and The Good Dinosaur to name a few. All

in all, Disney/Pixar enjoy vast merchandising profits based off the films they have

created with the “Cars” franchise earning the company annually $2 billion alone in

merchandise sales {Szalai, G, 2011}.

Customer Segments

 Children all ages: Due to the content of the companies feature films, it should

be no surprise that Disney/Pixar strategize marketing heavily around

children and their general likes and requirement’s. The movies produced

have mild toon violence and are void of death: making them acceptable to

most underage audiences.

 Adults 18-44: According to a chart provided by pixarpost.com, it states that

the movies generated by Disney/Pixar are also heavy favored by adult males

and females aged 18-44. College and grad school populations make up the

majority of these populations with an income of $0 dollars to $100K+

{pixarpost.com}.
Value Proposition

 Suitable for all ages: Creating content that has a broad target market assists

Pixar with their continued successes. Films and their respective spin-offs and

sequels are generally accepted by all age groups which enhances the

company’s viewers as well as merchandise sales annually.

 Full of color: Often, Disney/Pixar creates imagery and characters that are rich

in vibrant colors that creates standout for its featured characters which

further provides marketability.

 Good Story: All of the movies and respective sequels that have been created

bring to the table a captivating storyline. Audiences will generally decipher

and process these storylines from their own perspectives, but the story is

generally easy to follow and understand which allows younger audiences to

grasp the message and adults to appreciate the adventure.

 Happy Ending: All content created ends its story on a happy ending. A happy

ending leaves the audience feeling happier about the story which creates

interest for future sequels and spin-offs. Happy endings also resonate “good-

times” for someone which will make the probabilities higher for them to

invest in a product’s merchandising.

 Images Look Real: An example of rich/realistic imagery can be found in The

Good Dinosaur. This realistic imagery creates more believable content which

assists in creating an overall great story that’s appreciated by all age groups.

 Creative: All content that is produced by Disney/Pixar contains very creative

storylines and characters. This out of the box thinking paves the way for
 developing original content that is exclusively controlled and marketed by

Disney/Pixar: thus, boosting profitability.

Channels of Distribution

 Disney Channel, Disney XD and Disney Jr: Pixar content is distributed to

cable and satellite subscribing customers through these three main media

outlets. These channels provide previously released movies and sequels,

so they are easily assessable when viewers are browsing channels in

search of something to watch on tv.

 Feature Films: Perhaps the “meat and potatoes” of the Pixar’s blueprint of

success can be cited to their production of full-length feature films. The

first film the company produced was “Toy Story” in 1995 {pixar.com}.

Since Toy Story, the company has produced a long array of films that

often times control the box-offices.

 Online Streaming: Netflix and other streaming giants have also noticed

Disney/Pixar’s continued triumphs and have featured some of their

content on the streaming sites respectively. For example, “Cars” is a Pixar

creation and my son and I enjoy this film occasionally via Netflix.

 Disney Plus: On Nov. 12th, Disney officially launched Disney+. According

to Mike Sorrentino’s article, he states “Disney has called Disney Plus the

future of the company” {Sorrentino, M. 2019}. All generated Pixar films

are assessable through this streaming service which can only boost the

already staggering number of viewers the company generates.

Customer Relationships

 Social Media: Facebook, Instagram, Twitter, YouTube and even Linked In

all serve as a means for Disney/Pixar to stay in touch with their marketed

audiences on how to view previously created material as well as

providing viewers with upcoming teasers for future projects. Generating

this sort of buzz keeps audiences engaged and looking forward to

attending theaters when movies are finished and released.

 Walt Disney Theme Parks: On May 23rd 2019, USA Today listed Disney

World in Orlando, FL as the worlds most visited theme park in 2018. The

articles author Adrienne Jordan wrote “ It drew 18.6 million visitors, with

an average of 51,000 people per day” { Jordan, A. 2019}. Pixar influenced

attractions and rides are a common sight within the park, this greatly

adds to the brands marketability with an international audience that

possesses a disposable income.

 Film Merchandise: Pixar related merchandise creates a huge sum of

profits for the Disney company annually. According to an article from

hollywoodreporter.com, its author Georg Szalai states that Disney/Pixar’s

film “Cars” brings in an average of $2 Billion per year and $8 Billion in

total merchandise sales alone.

Key Activities

 Producing new content to be distributed in film form is a major key activity

that Pixar must do in order to sustain its successes. At this time, Pixar is

rumored to have multiple sequels planned for existing film franchises as well

as all new titles to be released in theaters as early as March 6 th 2020 for a

film called “Onward” (Pixar.com, 2019). Keeping a steady tempo of new

content keeps Pixar’s product line fresh and invigorating.

 Pixar markets its products on a grand scale to represent another key activity

in the companies approach for continued profits. Social media marketing is a

cornerstone for the animated film giant’s ability to keep box office profits

flowing. All avenues of mainstream social medias ability to market the Pixar

brand have been utilized, as those successes are also explained in an article

found on notesmatic.com’s article describing these statements (Pratap,

2019).

Key Resources

 A major key resource in which Pixar benefits immensely from is their unique

and fascinating studio, located inside Emeryville, California. The studios

construction was overseen by the late Steve Jobs himself to ensure it was built

precisely to match his standards, expectations and creative inspiration. A recent

Huffington Post article regarding inside understanding of how Pixar Studios is

Designed, they stated inside contained “A full replica of the classic Muppets Show

Stage”!
  Pixar also uses another key resource created by their owned design. Pixar

Uses the animation software “Renderman” for all of their projects which has been

crucial for procucing such realistic scenery within their cartoons. One of the most

recent project RenderMan was used in the Disney remake of “The Lion King”

RenderMan.Pixar.com, 2019).

Key Partners

 The Walt Disney company has long since been a key partner or associate to

Pixar and can be traced back to 1986 (Our Story, 2019). In 2006, The Walt

Disney Company purchased Pixar and re structured the company as a branch

of the Disney business tree. To this very day, Disney and Pixar work in unison

in producing projects for the constantly evolving world of films and

computer animation.

 Star War’s creator founded the baseline of what would become Pixar in 1979

as The Computer Division for LucasFilms (Our Story, 2019). George Lucas is

best known for creating the Star Wars franchise and universe and is a very

influential people within the animation scene. Tying Pixar/Disney to George

Lucas further cementing that partnership, Disney purchased the Star Wars

franchise and rights from Mr. Lucas in 2012 for $4 Billion (usatoda.com,

2019).
Cost Structure

 With great successes in the film industry typically brings about a larger cost

in things, that said Pixar does have a high window when it comes to their cost

structure and the importance of doing well in the box offices. An example of

the high cost of producing a animated film of their caliber can be sourced

from getwrightonit.com when they state that major films such as Toy Story 3

or Monsters University costed over $30,000 for each’s respective cost per

second (getwrightonit, 2017).

 “There is an old saying: How do you make a small fortune in the film

industry? The answer to that is “Start with a large one”, That is what a Pixar

employee stated when asked how much it would cost to build a studio as

large and intricate as Pixar Studios (VandeWettering, 2017). It would be no

surprise that the costs for a studio of this caliber would be extensive and a

major part in Pixar’s cost structure.

Revenue Streams

 Pixar has enjoyed vast success at the theater box offices over the years and

shows no sign of slowing down its main revenue stream. According to Daniel

Kline, his article titled “How Profitable Have Pixar’s Movies Been For Disney”

sheds light on some incredible profits that Pixar has produced. He states that

the movie “Toy Story 3” for instance had a budget of 200 million but turned
 around and earned $1.06 billion in box offices around the world (Kline,

2015). That is an extraordinary amount of money and many of the other

popular franchises have also produced similar earnings as well.

 Pixar’s merchandise sales revolving around their film franchises have earned

an astronomical amount of money for the company and Disney alike. An

example of the incredible merchandise sales can be cited to a LA Times

article describing the amount of money Pixar’s “Car’s” had generated only 6

years after its release. Dawn Chimielewki and Rebecca Keegan state: “In the

five years since its 2006 release, “Cars” has generated global retail sales

approaching $10 billion, according to Disney” (latimes.com, 2011). To this

day, the Car’s franchise continues to earn merchandise sales for Pixar/Disney

and their products can be found at almost any retail store and online as well.

Conclusion

In conclusion, I firmly believe that Pixar currently utilizes a powerful business

model is a solid revenue powerhouse for the Disney Corporation. This conclusion

can be cited with the copious amounts of successes the Pixar films have enjoyed

dating back all the way to “Toy Story” in 1996 (Pixar.com, 2019). The Pixar films

typically bring in hundreds of millions of dollars per film, and each of the film

franchises can produce continued profits via merchandising that is marketed to

children around the world. As I stated earlier, the ‘Car’s” franchise alone has raked

in over $10 billion in merchandise sales and is still marketed heavily in large

corporate retail stores such as Walmart. All in all, Pixar shows little to no signs of
 slowing down its advancements in the film industry and can be expected to be a

staple in Disney’s own business model for many years to come. In my opinion, the

only advise I could provide Pixar to continue their stellar performance is to always

stay creative and never lose focus on Steve Job’s vision and moral compass that

made them so dynamic out of the gate.

The Business Model Canvas: Pixar December 15 2019

BY: Donald Kelly

Value Proposition Customer Relationships Customer Segments

Suitable for all ages Social media: Facebook,
Instagram, Twitter, YouTube and
Full of color Linked In.
Good Story Walt Disney Theme Parks
Children of all ages
Adults both male and
female ages 18-44

Happy ending Film Merchandise Parents with children

Images look real

Creative
Channels Distribution)
Disney Channel
Disney Plus
Online Streaming
Feature Films
Disney XD
Disney Jr.
Key Activities Key Resources Key Partners

Creating new film content and Pixar studios located in Disney Corporation
extending on sequels of Emeryville, California
previously installed titles or LucasFilms
Pixar franchises RenderMan editing software

Social media marketing and

marketing in general Cost Structure Revenue Streams

Box office film earnings

Animated film production and
editing costs Franchise merchandise
revenue
Pixar Studios creation and
upkeep

Employee salaries

References

Barr, G. (2015, November 25). Value Proposition Canvas - Pixar. Retrieved December 1,
2019, from https://prezi.com/bibwlv7tfx5z/value-proposition-canvas-pixar/.

Pratap, A. (2019, June 3). Pixar Social Media Marketing. Retrieved December 1, 2019,
from https://notesmatic.com/2019/01/pixar-social- media- marketing/.

Szalai, G. (2011, February 14). Disney: 'Cars' Has Crossed $8 Billion in Global Retail
Sales. Retrieved December 1, 2019, from
https://www.hollywoodreporter.com/news/disney-cars-has-crossed-8-99438.

Spangler, T. (2019, July 18). Disney Merges All Media Sales and TV Channel
Distribution Under Justin Connolly. Retrieved December 1, 2019, from
https://variety.com/2019/tv/exec-shuffle-people- news/disney-justin-connolly- media-tv-
channel-distribution-1203271895/.

Pixar Post. (2016, July 21). Pixar Demographics: What The Average Pixar Fan Looks
Like? Retrieved December 1, 2019, from https://www.pixarpost.com/2016/07/pixar-
demographics.html.

Our Story. (n.d.). Retrieved December 1, 2019, from https://www.pixar.com/our-story-1.

 Pixar Company FAQ's. (n.d.). Retrieved December 1, 2019, from
https://web.archive.org/web/20060702123318/http://www.pixar.com/companyinfo/faq/fa
q.htm.

Jordan, A. (2019, May 24). These are the world's most-visited theme parks. Retrieved
December 1, 2019, from https://www.usatoday.com/story/travel/news/2019/05/23/disney-
world-magic-kingdom-world-most- visited-theme-park/1206310001/.

Sorrentino, M. (2019, November 27). Disney Plus: Everything you need to know.
Retrieved December 1, 2019, from https://www.cnet.com/news/disney-plus-streaming-
service-everything-to-know-baby- yoda/.

Upcoming. (n.d.). Retrieved December 14, 2019, from https://www.pixar.com/upcoming.

ScreenCraft. (2017, December 7). Discover What It's Like to Visit Pixar Animation
Studios. Retrieved December 14, 2019, from https://www.huffpost.com/entry/discover-
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&guce_referrer_sig=AQAAAIUCImqCfaysvyg1SQSyzHTH20QeZDIynaJL36-
USVqqIdZwCB1bPHrRs1yq-s1GW6r7BaYKIy_E4CDS2mH6oF-
ICOigkSb590GMrOrAxhwuzFjkbmF6QVZv4-c490jbpQGFCjM2-
rXoZNR0oa3dRmwN20-i_IEOHcoy7_ZArjOT.

RenderMan Version 23 is Here! (n.d.). Retrieved December 14, 2019, from

https://renderman.pixar.com/.

Krantz, M., Snider, M., Cava, M. D., & Alexander, B. (2012, October 31). Disney buys
Lucasfilm for $4 billion. Retrieved December 14, 2019, from
https://www.usatoday.com/story/money/business/2012/10/30/disney-star-wars-
lucasfilm/1669739/.

How Much Does 3D Animation and 3D Illustration Cost? (2017, February 24). Retrieved
December 14, 2019, from https://getwrightonit.com/how- much-does-3d-animation-cost/.

VandeWettering, M. (2017, September 21). How much would it cost to open an

animation studio as big as Pixar today? Retrieved December 14, 2019, from
https://www.quora.com/How- much-would- it-cost-to-open-an-animation-studio-as-big-as-
Pixar-today.

Kline, D. B. (2015, August 4). How Profitable Have Pixar's Movies Been for Disney?
Retrieved December 15, 2019, from
https://www.fool.com/investing/general/2015/08/04/how-profitable-has-pixar-been-for-
disney.aspx.
Chmielewski, D. C., & Keegan, R. (2011, June 21). Merchandise sales drive Pixar's 'Cars'
franchise. Retrieved December 15, 2019, from https://www.latimes.com/business/la-
xpm-2011-jun-21-la-fi-ct-cars2-20110621-story.html.

Full Sail Library References

Isaacson, & Walter. (1970, January 1). Steve Jobs / Walter Isaacson. Retrieved December
1, 2019, from https://fullsail.bywatersolutions.com/cgi-bin/koha/opac-
detail.pl?biblionumber=9343&query_desc=kw,wrdl: steve jobs.

A., D., & Andrew, D. (1970, January 1). The Pixar touch : the making of a company /
David A. Price. Retrieved December 1, 2019, from
https://fullsail.bywatersolutions.com/cgi-bin/koha/opac-
detail.pl?biblionumber=9435&query_desc=kw,wrdl: pixar.