Speaker 1: Toy Story came out in November, and I can still
Speaker 1: remember where I saw it, the Cineplex on the Upper
Speaker 1: West side of Manhattan on Broadway and eighty four. It
Speaker 1: was thrilling cinema, not only the characters and the sweet
Speaker 1: romance between the brash buzz light Year and protective Woody
Speaker 1: the Cowboy, but the awesome technical wizardry on display by
Speaker 1: a little known studio called Pixar. Twenty one years later,
Speaker 1: it's hard to imagine a time before computer animations were
Speaker 1: a thing. But before Toy Story, anything other than an
Speaker 1: animation drawn by hand was this futuristic, faraway dream. Studios
Speaker 1: didn't even have the tools to do it, either the
Speaker 1: software or the physical machines and so on. Top of
Speaker 1: developing this incredibly compelling story about the toys of a
Speaker 1: little boy called Andy, Pixar had to develop the cutting
Speaker 1: edge technology to make it all possible. But behind the scenes,
Speaker 1: as they were developing this wonderful story and the technology
Speaker 1: to tell it, Pixar was actually flirting with financial ruin.
Speaker 1: The company, owned by Apple co founder Steve Jobs, was
Speaker 1: racing against time to figure out how to make enough
Speaker 1: money to keep the lights on. Yeah, you wouldn't know
Speaker 1: it from the success that Toy Story ultimately enjoyed, But
Speaker 1: the movie was a moon shot, a gigantic all or
Speaker 1: nothing gamble on the belief that computer animated characters could
Speaker 1: be just as compelling, just as believable as the hand
Speaker 1: drawn classics from the likes of The Lion King. Pixar's
Speaker 1: very survival hinged on Toy Stories success. Hi, I'm brad
Speaker 1: Stone and I'm Paga Cary, and this week on Decrypted
Speaker 1: will take you on Pixar's roller coaster ride those crucial
Speaker 1: final months as the company rushed to finish its first
Speaker 1: feature film while simultaneously preparing for a make or break
Speaker 1: I p O Yeah, Pixar decided it would go public
Speaker 1: just nine days after the premiere of Toy Story. The
Speaker 1: entire future of the company was writing on the success
Speaker 1: of that film, and what picks are proved with Toy
Speaker 1: Story ultimately transformed not just the company, but also film
Speaker 1: history too. This year, out of the top five grossing
Speaker 1: films in all categories too were computer animations. Can you
Speaker 1: Name Them? I can? One was The Secret Life of Pets,
Speaker 1: and in the top spot was Finding Dory, a movie
Speaker 1: made by Pixar. Now. To fully understand just what was
Speaker 1: at stake for Pixar at the time, we need to
Speaker 1: go back to a nadier in the career of its
Speaker 1: Maverick owner Steve Jobs. It's a chapter of his career
Speaker 1: that sometimes gets skipped over because Steve Jobs was in
Speaker 1: between his two stints at Apple. This is the period
Speaker 1: when he started Next Computer, after he famously got fired
Speaker 1: by his own boarded Apple cast out into Silicon Valley's wilderness,
Speaker 1: and the years that followed that humiliating dismissal, but before
Speaker 1: he returned to Apple, those are the year is when
Speaker 1: Steve Jobs was the owner and CEO at Pixar, and
Speaker 1: that's one of the reasons why there was so much
Speaker 1: pressure on Toy Story to be a hit. The reputation
Speaker 1: and credibility of Jobs was actually tied into pixar of success, right,
Speaker 1: But Pixar did not have an easy relationship with Steve Jobs.
Speaker 1: I would characterize Steve jobs relationship with Pixar at that time.
Speaker 1: So this about as like an absentee landlord, so sort
Speaker 1: of the investor or the owner that never really comes
Speaker 1: to the property. That's Lawrence Levy. He's a slight wiry
Speaker 1: man with lots of tussled sandy hair. He has a cheerful,
Speaker 1: almost boyish air about him. Last month he came out
Speaker 1: with a memoir about his time at Pixar, and it's
Speaker 1: called To Pixar and Beyond. It was in that Steve
Speaker 1: Jobs personally recruited Lawrence to become the CFO of Pixar
Speaker 1: and essentially to guide the company through its I p O.
Speaker 1: After Apple, he had started Next as you know, and
Speaker 1: he was working full time at Next Computer and Pixar
Speaker 1: had been more of an investment on the side, and
Speaker 1: so there was no habit of him going there. I
Speaker 1: mean maybe he went there once a month, but I
Speaker 1: doubt even that often. Uh, And so the company was
Speaker 1: very guarded about him and had a lot of fear
Speaker 1: that this kind of very delicate, creative, homeie kind of
Speaker 1: culture that they had created would be hurt or even
Speaker 1: destroyed by the stories that they had heard about Steve.
Speaker 1: And it must have been something of a balancing act
Speaker 1: for Lawrence, lessing Pixar's creativity flourish on one hand, while
Speaker 1: building out the kind of business plan that Steve Jobs wanted.
Speaker 1: I quickly was sort of given that Moniker if you
Speaker 1: will like yours Steve's guy, and so, you know, and
Speaker 1: so there was some fear, you know, was I going
Speaker 1: to be the person that carried into Pixar all the
Speaker 1: things that they feared about Steve, And and so that
Speaker 1: began to feel It's not really what I signed up for,
Speaker 1: because well, no, I'm not carrying any of those things.
Speaker 1: I'm here to fix those things. But people didn't know
Speaker 1: what to make of it, and there was quite a
Speaker 1: bit of animosity between Steve and the employees that Pixar.
Speaker 1: One of the biggest bones of contention had to do
Speaker 1: with employee compensation. The backstory with pixel when it came
Speaker 1: to stock options was that effectively they didn't have a
Speaker 1: stock option plan. There were no stock options. And this
Speaker 1: has been something that Steve had promised its employees for
Speaker 1: quite a number of years now. Because this might not
Speaker 1: be obvious to everyone, let's explain what Lawrence means here.
Speaker 1: Why why was this so important? Right? So, for a
Speaker 1: lot of people, when they join a startup, they have
Speaker 1: to accept a lower salary than what they might get
Speaker 1: if they went to work for a big, established company.
Speaker 1: So to make up for that, startups usually give their
Speaker 1: employees the option to buy stock in the company at
Speaker 1: some point in the future at a previously agreed upon
Speaker 1: lower price, and if the company gets acquired for a
Speaker 1: lot of money or goes public, those employees stock suddenly
Speaker 1: gets very, very valuable. It's every startup employees dream. And
Speaker 1: without these stock options granted to employees and I p
Speaker 1: O would really only be a financial benefit to the owner,
Speaker 1: you know, in this case Steve Jobs and maybe a
Speaker 1: couple of other executives with special contracts. It wasn't something
Speaker 1: that would bring shared wealth to the entire company, and
Speaker 1: Pixar at this point had a hundred and forty employees.
Speaker 1: There was an enormous amount of pent up frustration over that,
Speaker 1: because especially at Pixarur, where many of the founding employees
Speaker 1: have been there for years, you know, really giving it
Speaker 1: the best years of their life in terms of their
Speaker 1: technological and engineering and creative capabilities. But they didn't have
Speaker 1: that currency that would reward them one day for taking
Speaker 1: those risks. And as we just heard Lawrence Levy say,
Speaker 1: it really was years of hard work. Pixar had been
Speaker 1: around as an independent company since ninety six when Jobs
Speaker 1: bought it for Lucasfilm and It took Pixar's team of
Speaker 1: animators about four years to make Toy Story, so I
Speaker 1: guess creating a stock options plan was right at the
Speaker 1: top of Lawrence's to do list. But for the I
Speaker 1: p O to go well and for Pixar's employees to
Speaker 1: get the reward they wanted, Toy Story had to be
Speaker 1: a hit, and not just like a few media mentions.
Speaker 1: They needed to be as successful as the biggest mega
Speaker 1: hits of all time, like up there with The Lion
Speaker 1: King and Beauty and the Beast. And that's partly because
Speaker 1: computer animation was and remains such an arduous process. It
Speaker 1: takes hours and hours just to create a few seconds
Speaker 1: of film. Think about all the salaries Pixar had to
Speaker 1: pay to keep so many employees working on a single
Speaker 1: film for years, and on top of that, the software
Speaker 1: and creating the computers needed to actually make the frames
Speaker 1: that all together would make up the movie right, and
Speaker 1: Pixar had to invent pretty much all of that process
Speaker 1: from scratch, making things even more expensive, like they couldn't
Speaker 1: just buy it off the shelf. And this was all
Speaker 1: an experiment. It was something letely unproven because nobody had
Speaker 1: ever seen a computer animated movie before, So you know,
Speaker 1: there were questions like, will the public tolerate ninety minutes
Speaker 1: of computer animation? Right, They've never seen that before, and
Speaker 1: so would that be something that people enjoyed. At the
Speaker 1: center of Pixar's creative team was John Lasseter. He directed
Speaker 1: Toy Story and has overseen all of Pixar's subsequent films. Today,
Speaker 1: he's the Chief Creative Officer of Pixar Animation Studios, Walt
Speaker 1: Disney Animation Studios, and Disney Tune Studios. Meanwhile, Andrew Stanton
Speaker 1: and Pete Doctor were the writers on Toy Story. But
Speaker 1: although the team was exceptionally creative, Pixar had really only
Speaker 1: ever made short movies and commercials before this. Okay, so
Speaker 1: let's walk through the actual process of making a computer
Speaker 1: animated movie. Well, I guess like most films, it starts
Speaker 1: with developing the main characters. So in Toy Story, that's
Speaker 1: Woody and Buzz light Year. So you draw a character
Speaker 1: and then you make a clay model of it. So
Speaker 1: you take these brilliant artists and they make these unbelievable
Speaker 1: clay models of the characters, and then someone comes along
Speaker 1: and they draw a whole bunch of dots on that
Speaker 1: clay model, and then someone else uses those dots in
Speaker 1: order to create a digital version of that model. Now
Speaker 1: it's worth noting that these digital dot drawings that Lawrence
Speaker 1: is talking about at this stage, they do not look
Speaker 1: like a real character like Woody or like nothing recognizable.
Speaker 1: Its actually a grid. It's just it's like a just
Speaker 1: a grid of dots and squares and shapes. Then within
Speaker 1: that computer model, a whole bunch of things need to happen.
Speaker 1: So first of all, that computer model has to get
Speaker 1: what they call articulation points, which are places where you
Speaker 1: can move it. So how do you move the eyes
Speaker 1: and the mouth and all of those aspects. Pixar's animators
Speaker 1: and a lot of time thinking about how and where
Speaker 1: you can move which muscles on face, arms, legs, all
Speaker 1: to create the perception of realness. I spoke to one animator,
Speaker 1: Sean Krauss. He's still with Pixar and most recently he
Speaker 1: was the supervising animator on Inside Out and Caused Three.
Speaker 1: But his very first movie was Toy Story, and he
Speaker 1: remembers the kinds of questions the animators we're having to
Speaker 1: ask themselves. They were analyzing how do faces really work?
Speaker 1: You know, what drives the muscle structures? How what are
Speaker 1: the basic shapes that go into an expression? You know,
Speaker 1: the question was always is it easier to animate on
Speaker 1: the computer? And it depends. Things that are are rigid,
Speaker 1: like cars, can be easier because that's very difficult to
Speaker 1: draw by hand, But things that are organic tend to
Speaker 1: be more difficult to manipulate and make feel organic with
Speaker 1: the computer. That's one reason why Toy Story is about toys,
Speaker 1: and why that original movie you never really saw much
Speaker 1: of the human characters at the time. It was too
Speaker 1: difficult to animate an entire movie in which every character
Speaker 1: was human. And another thing that I learned about animation,
Speaker 1: it's not just human characters that are really hard to develop.
Speaker 1: The whole natural world is difficult too, So that's why
Speaker 1: most of the movie happens inside Andy's bedroom. It's because
Speaker 1: the sky is another one of those things. It's just
Speaker 1: really hard to make it look real, so we don't
Speaker 1: think of it when we watched the film. But outdoor
Speaker 1: scenes are really complicated compared to indoor scenes. So to
Speaker 1: make an indoor scene, you basically need to create a box,
Speaker 1: which would be the equivalent of a room and make
Speaker 1: it look like a room. But for an outdoor scene,
Speaker 1: you need sky, and you need trees, and the trees
Speaker 1: need to have leaves, and if you're going to have
Speaker 1: a street, the street has to have cars. So that
Speaker 1: final scene of the movie, when Andy's driving away from
Speaker 1: his old home, that was one of the hardest things
Speaker 1: to pull off in the whole movie. At the same time,
Speaker 1: computer animation made new things possible, things that couldn't really
Speaker 1: be achieved with hand drawn animation. His Shorn again, for instance, subtlety,
Speaker 1: just simple things like I darts gave a layer of
Speaker 1: subtlety that you that were very difficult to get with
Speaker 1: traditional animation. With traditional animation, if you were going to
Speaker 1: do something subtle because of the inherent uh, you know,
Speaker 1: wiggliness of a hand drawn line versus the perfection of
Speaker 1: a computer you could get these little micro movements that
Speaker 1: just exploded off the screen for the first time, and
Speaker 1: Pixar's animators were having to discover these tricks as they
Speaker 1: went along. Pis Are basically invented the software in order
Speaker 1: to do that, and so that was one of its
Speaker 1: incredible contributions is that it literally invented its own system
Speaker 1: for dealing with that kind of complexity on a computer,
Speaker 1: which has never been done before at that time. And
Speaker 1: it wasn't just the software. Pixar had to build actual
Speaker 1: machines too, for everything from rendering the scenes to transferring
Speaker 1: the digital images onto a physical reel of film. So
Speaker 1: I remember why. It was just kind of a little
Speaker 1: room and in the middle of the room, it's kind
Speaker 1: of a dark room, and there's this big slab metallic table,
Speaker 1: and there's this odd looking microscope device sort of sitting
Speaker 1: on top of it. And I remember talking to the
Speaker 1: person running that, David Francisco, and I'm like what, I
Speaker 1: kind of even figure out what this is, and he said, well,
Speaker 1: we have to transfer these digital images to film. Eventually,
Speaker 1: that's what goes to a movie theater is film. Now,
Speaker 1: throughout this whole process, Disney Studio Exacts and it's beancounters
Speaker 1: were lurking in the background, watching closely. After all, Disney
Speaker 1: was paying for toy stories production costs, and Pixar's relationship
Speaker 1: with Disney was complicated. We were this tiny little company
Speaker 1: with no race sources whatsoever. Disney had been king of
Speaker 1: the animation hill for two generations and the feeling was
Speaker 1: that if they got their capability and computer animation up
Speaker 1: and running, they could just swat Pixar off the map,
Speaker 1: you know, like an elephant to a fly. So Lawrence
Speaker 1: spent the first few weeks at Pixar trying to understand
Speaker 1: the different parts of the company's business, and he wanted
Speaker 1: to figure out how Pixar was actually going to make
Speaker 1: money from the films that they made. He wanted to
Speaker 1: build out an attractive business plan that he could show
Speaker 1: potential investors, and at the center of that was this
Speaker 1: cryptic contract that Pixar had signed with Disney several years
Speaker 1: before Lawrence even joined the company. So Lawrence he flew
Speaker 1: out to Los Angeles to meet with Pixar's entertainment lawyer.
Speaker 1: I had seen that contract, but I hadn't paid that
Speaker 1: much attention to it, and I was sort of like,
Speaker 1: it's fine, and I'll figure it out later kind of thing. Uh.
Speaker 1: But it turned out that the contracts in the entertainment
Speaker 1: industry are written in this code that only people in
Speaker 1: the entertainment industry understand. So Lawrence is sitting there, this
Speaker 1: is his lawyer swanky corporate suite, and what Lawrence learned
Speaker 1: was pretty devastating. So it turns out that Pixar had
Speaker 1: signed a three film agreement. But think about this, It
Speaker 1: takes four years just to make one movie, so that's
Speaker 1: twelve years of commitment to Disney right there. And then
Speaker 1: another clause said that Pixar couldn't make any films for
Speaker 1: anyone else or even pitch an idea to another studio
Speaker 1: until after its contract with Disney had ended, and that
Speaker 1: includes ideas that Disney had looked at and rejected. And finally,
Speaker 1: with Hollywood's complex accounting systems, Pixar realized it would end
Speaker 1: up getting less than ten percent of the revenue from
Speaker 1: its movies. It just shows how little leverage Steve Jobs
Speaker 1: must have had to have been forced to sign that agreement,
Speaker 1: and in essence, Pixar needed to produce a gigantic hit
Speaker 1: to even make back a meaningful cut of the revenue,
Speaker 1: and they had to keep rolling out those mega hits
Speaker 1: for the next decade. That process of deciphering that contract
Speaker 1: was one of the most painful experiences I think I
Speaker 1: went through in business. And if you think that contract
Speaker 1: is bad enough, you have to remember that Pixar's other
Speaker 1: business units weren't making very much money at all. This
Speaker 1: is the part of Pixar that was making commercials, and
Speaker 1: it sold a software for rendering graphics called render Man. Yeah,
Speaker 1: and Pixar wasn't making enough money from those units to
Speaker 1: cover its overheads. So when Lawrence first joined Pixar, the
Speaker 1: company had to go through this monthly ordeal where Ed Catmill,
Speaker 1: one of the founders of Pixar, would have to tell
Speaker 1: Steve Jobs how much money the company needed just to
Speaker 1: make it to the end of the month, and Steve
Speaker 1: Jobs was having to write out personal checks just to
Speaker 1: keep the company afloat. So the odds are really stacked
Speaker 1: against Pixar at this point. They're in this incredibly expensive
Speaker 1: thing that they've been building up to for years, and
Speaker 1: what they're trying to do is something that no one's
Speaker 1: really ever actually accomplished before. And on top of that,
Speaker 1: to make back enough money, they needed this unproven thing
Speaker 1: to be a massive success, and they were trying to
Speaker 1: prove to wall streets skeptical investors that Pixar could be
Speaker 1: a viable, independent company worthy of their money. So, in
Speaker 1: other words, no pressure at all. The whole future of
Speaker 1: Pixar was coming down to a single number the opening
Speaker 1: weekend box office for Toy Story. The atmosphere of Pixars
Speaker 1: it tried to finish Toy Story was like pedal to
Speaker 1: the metal. There's no time for thinking, there's no we
Speaker 1: just have to go right, go, go, go right, working morning,
Speaker 1: you know, noon and night, trying to get this done.
Speaker 1: You know, I think that's true of of you know,
Speaker 1: a lot of invention, a lot of innovation. You know,
Speaker 1: if you're trying to get something done that's never been
Speaker 1: done before, you you have to have sort of just
Speaker 1: this relentless focus on trying to finish and almost put
Speaker 1: blinders on and go for it. And that was the
Speaker 1: atmosphere within the company. You know, we're just going for it.
Speaker 1: The animators were gunning so hard to finish the film
Speaker 1: that a lot of people hadn't even seen the completed
Speaker 1: movie until the moment when the lights went down at
Speaker 1: the preview. We all just were glowing and we had
Speaker 1: a great time just talking about the film, complimenting each
Speaker 1: other because it was the first time we had seen
Speaker 1: what the lighting department had done. It was the first
Speaker 1: time we had seen what the cloth you know, and
Speaker 1: shading departments had done in a big way. We've seen
Speaker 1: bits and pieces along the way, but we hadn't heard
Speaker 1: the music through the whole film yet. Meanwhile, Lawrence took
Speaker 1: his whole family to the premiere in Los Angeles and
Speaker 1: his wife Hillary. She also spoke to me, and here's
Speaker 1: how she remembers the audience reaction. I was almost holding
Speaker 1: my breath throughout the entire movie, and I remember as
Speaker 1: it closed, as it ended and the credits were coming on,
Speaker 1: this just roar of applause, and I just looked around
Speaker 1: to see if people were sort of clapping just to
Speaker 1: be nice, or if they really had some excitement in
Speaker 1: their faces. And I saw the ladder. I mean, people
Speaker 1: were just flabbergasted by what they saw on the screen.
Speaker 1: And it was pretty much at that moment that I
Speaker 1: knew that Pixar was okay, which brings us to this
Speaker 1: week's happy ending Toy. Story went on, of course, to
Speaker 1: become a blockbuster. It made twenty nine million dollars in
Speaker 1: the US on its opening weekend, and eventually it clocked
Speaker 1: up three hundred and seventy three million dollars worldwide. Pixar
Speaker 1: went public as planned on the thirty November. Pixar's stock
Speaker 1: boomed over the next decade, and Disney ended up buying
Speaker 1: it for seven point four billion dollars in two thousand
Speaker 1: and six. We should know that before the I p O.
Speaker 1: Pixar's employees got the reward to Lawrence Levy was able
Speaker 1: to convince Steve Jobs to give employee stock options. And
Speaker 1: as for Steve Jobs, he not only recovered his reputation,
Speaker 1: but it was actually Pixars I p O that made
Speaker 1: him a billionaire. His relationship with the company improved, and
Speaker 1: now Pixar's contribution to animation has really transformed the entire genre.
Speaker 1: It's really incredible Pia to reflect on how important to
Speaker 1: really the history of cinema that this formative time and
Speaker 1: Pixar's history was. I mean, if you look at almost
Speaker 1: all animated movies these days have an element of commuter
Speaker 1: or animation, and those early employees of Pixar have kind
Speaker 1: of gone to populate the entire film industry right. And
Speaker 1: it's been a while since a fully hand drawn animation
Speaker 1: was released by checked in with Disney about it, and
Speaker 1: their last feature film was Winnie the Pooh back in
Speaker 1: Can I tell you I've tried to introduce my kids
Speaker 1: to too great movies, and we've sort of made our
Speaker 1: way through the whole Pixar uber and there's some of
Speaker 1: my favorite movies. I mean, we just watched Wally and
Speaker 1: Inside Out. I mean, it's like a truly remarkable body
Speaker 1: of work. Well, the most recent animated film I was
Speaker 1: was was Frozen, and it really struck me how incredibly
Speaker 1: farther technology has come. You know, that movie has humans
Speaker 1: as all their main characters. It's got these beautiful, dramatic landscapes.
Speaker 1: And when I rewatched Toy Story when I was writing
Speaker 1: up this podcast, it struck me that, you know, it's
Speaker 1: come a really long way towards then they're they're no
Speaker 1: longer trying to hide the faces of the humans. I wonder.
Speaker 1: I mean, the other part of this seminal moment and
Speaker 1: Pixar history is the I p O did. Did the
Speaker 1: initial public offering elevate the status of animators in Hollywood?
Speaker 1: You think, are they now seen Morris technology workers? Well,
Speaker 1: I mean, Lawrence goes into this a bit in his book,
Speaker 1: and it's interesting that Pixar was operating in this kind
Speaker 1: of gray zone. It wasn't totally Silicon Valley, but it
Speaker 1: certainly wasn't completely Hollywood either, and um, it was a
Speaker 1: real process to try and figure out whether Pixar should
Speaker 1: be treated like an animation or an entertainment company. And
Speaker 1: I think eventually, yes, it most certainly did. It's uh,
Speaker 1: there are lines in all the books now saying that
Speaker 1: Pixar was kind of an exception to the rule as
Speaker 1: far as entertainment. I p o s go. Well, thanks Pierre,
Speaker 1: You've inspired me to go back and rewatch the original
Speaker 1: toy story. And that's it for this week's Decrypted. Thanks
Speaker 1: for listening, and tell us what do you remember about
Speaker 1: that first time you saw a toy story. You can
Speaker 1: find me on Twitter at at brad Stone and I'm
Speaker 1: at Pa Gatkari, or you can email Pa at p
Speaker 1: g A d k A r I at Bloomberg dot net.
Speaker 1: You can find Decrypted on iTunes or wherever you get
Speaker 1: your podcasts, and be sure to subscribe and leave us
Speaker 1: a rating and a review. It helps more listeners discover
Speaker 1: the show. And one quick note before we let you go.
Speaker 1: In our previous episode about school forty two, a study
Speaker 1: session organizer that we identified as Mason Young, his name
Speaker 1: is actually Kane York. This episode was produced by Aki
Speaker 1: Ito Magnus Hendrickson and Liz Smith, with help from Emily A. Buso.
Speaker 1: Alec McCabe is the head of Lumberg Podcast. We'll see
Speaker 1: you next week. H