WEBVTT - Interview With Lawrence Levy: Masters in Business (Audio) 0:00:00.120 --> 0:00:03.199 Brought to you by Bank of America Merrill Lynch, committed 0:00:03.240 --> 0:00:06.280 to bringing higher finance to lower carbon named the most 0:00:06.320 --> 0:00:10.280 innovative investment bank for climate change and sustainability by the banker. 0:00:10.600 --> 0:00:13.920 That's the power of Global Connections. Bank of America North 0:00:13.960 --> 0:00:20.599 America member f D I C. This is Masters in 0:00:20.680 --> 0:00:25.239 Business with Barry Ridholts on Bloomberg Radio. This week on 0:00:25.280 --> 0:00:28.400 the show, we have a really fascinating guest. His name 0:00:28.440 --> 0:00:33.000 is Lawrence Levy. He is the CFO of Pixar, has 0:00:33.040 --> 0:00:37.120 a new book out about his time. They're essentially he 0:00:37.240 --> 0:00:41.560 was recruited by Steve Jobs. He's working in his office 0:00:41.560 --> 0:00:45.800 electronics for Imaging. He's a corporate lawyer from London to 0:00:45.800 --> 0:00:51.640 to Harvard too out into who Silicon Valley. And he's 0:00:51.680 --> 0:00:53.880 working at his desk one day and the phone rings 0:00:53.920 --> 0:00:56.720 and it's Steve Jobs. Hey, I have a company I'd 0:00:56.720 --> 0:00:58.760 like you to come look like to talk to you 0:00:58.840 --> 0:01:01.600 about um. He thought it was gonna be about next 0:01:01.680 --> 0:01:05.640 It turns out to be about Pixar, and he wrestles 0:01:05.640 --> 0:01:09.360 with the idea Jobs. His reputation precedes him, but he 0:01:09.400 --> 0:01:11.800 goes and gets a tour of Pixar, which you know 0:01:12.000 --> 0:01:15.440 is a horrible part of town, across from an oil refinery. 0:01:15.520 --> 0:01:18.480 It looks like a dumping What is why do I 0:01:18.520 --> 0:01:20.720 want to have anything to do with this? On the 0:01:20.760 --> 0:01:24.760 wrong is a long, ugly commuter. There was nothing appealing 0:01:24.800 --> 0:01:27.240 to it. And then he gets inside the building and 0:01:27.400 --> 0:01:31.640 starts to see the magic of of Pixar and just 0:01:31.800 --> 0:01:35.600 the collection of brilliant creative people, both on the technology 0:01:35.680 --> 0:01:42.479 side and the storytelling side, and early version of Toy Story. 0:01:42.600 --> 0:01:45.920 A few minutes he gets to see UM as part 0:01:45.920 --> 0:01:47.920 of his tour, and he's just you know, we take 0:01:47.920 --> 0:01:50.880 it for granted today, how brilliant these movies are. But 0:01:50.960 --> 0:01:56.080 he's just blown away. Imagine you see five minutes of Pixar, 0:01:56.200 --> 0:02:00.680 even of Toy Story, even a rough, un in version 0:02:00.720 --> 0:02:03.560 of it, and it's just mind blowing. It's unlike anything 0:02:03.800 --> 0:02:08.040 ever before um And ultimately wrestles with the question and 0:02:08.080 --> 0:02:12.440 decides to join the company, and he describes bluntly the 0:02:12.480 --> 0:02:16.240 company was a disaster from a business perspective. They had 0:02:16.280 --> 0:02:19.480 all these different lines, none of which could scale, and 0:02:19.600 --> 0:02:24.880 ultimately comes up with a creative business plan in order 0:02:24.919 --> 0:02:28.919 to turn the company into a real business, which really 0:02:29.240 --> 0:02:32.360 relied on all we have to do is shut down 0:02:32.360 --> 0:02:35.119 these three lines of business that aren't scalable and we'll 0:02:35.120 --> 0:02:38.920 never make money, pivot from technology and hardware into the 0:02:39.120 --> 0:02:42.880 entertainment business, and then come out with a series of movies, 0:02:43.040 --> 0:02:46.880 each of which has to be spectacular and record breaking 0:02:46.919 --> 0:02:50.800 at the box office. Easy peasy. How hard could that be? Well, 0:02:50.880 --> 0:02:54.280 it turns oh nps take the company public with a 0:02:54.280 --> 0:02:57.680 mercurial owner who just got tossed out of his previous 0:02:57.720 --> 0:03:02.080 company called Apple, and it turns out that his plan 0:03:03.160 --> 0:03:07.079 worked out really well. All sorts of things come out 0:03:07.120 --> 0:03:09.520 in the book he wrote, called to Pixar and Beyond. 0:03:09.960 --> 0:03:11.960 You learn about all sorts of things you had no 0:03:12.080 --> 0:03:16.280 idea about about Pixar, about the entertainment business, about Apple, 0:03:16.320 --> 0:03:19.960 about Steve Jobs. It's really a fascinating story, and I 0:03:20.000 --> 0:03:23.360 had a great time um speaking with him. As as 0:03:23.400 --> 0:03:27.200 an old mac heead and a huge fan of Pixars films, 0:03:27.520 --> 0:03:29.600 I found it to be just fascinating and I think 0:03:29.639 --> 0:03:32.840 you will too. So, with no further ado, here's my 0:03:32.960 --> 0:03:37.760 conversation with Pixars CFO Lawrence Levy. For those of you 0:03:37.920 --> 0:03:41.080 who are unfamiliar with Pixar, and I can't imagine there's 0:03:41.080 --> 0:03:45.560 anybody listening who is Fourteen of Pixar's films are amongst 0:03:45.880 --> 0:03:49.520 the fifty highest grossing animated films of all time. You're 0:03:49.560 --> 0:03:54.200 familiar with names such as Toy story Finding, Nemo, The Incredibles, Ratatui, 0:03:54.560 --> 0:03:58.320 while E Inside Out, Monsters, Cars. It just goes on 0:03:58.360 --> 0:04:01.400 and on. The studios are in sick teen Academy Awards, 0:04:01.560 --> 0:04:05.640 seven Golden Globes, eleven Grammys. He is also the author 0:04:05.680 --> 0:04:09.120 of a new book titled to Pixar and Beyond, My 0:04:09.280 --> 0:04:13.640 Unlikely Journey with Steve Jobs. Lawrence Levy, Welcome to Bloomberg 0:04:14.080 --> 0:04:16.000 High Burry. It's a pleasure to be here. So I 0:04:16.040 --> 0:04:18.320 have to tell you I'm almost done with the book 0:04:18.320 --> 0:04:22.320 and I've really been enjoying it. Let's start with you. 0:04:22.320 --> 0:04:24.760 You're born in London. How do you end up working 0:04:24.760 --> 0:04:27.440 in Silicon Valley as a lawyer. Well, yes, I was 0:04:27.480 --> 0:04:29.760 born and raised in London. I moved in my late 0:04:29.800 --> 0:04:32.320 teens over to the United States and then I ended 0:04:32.400 --> 0:04:35.600 up in the university. I was at Indiana University, Bloomington, Indiana, 0:04:35.640 --> 0:04:38.000 where I studied business and accounting that i'd go into 0:04:38.080 --> 0:04:40.600 Harvard Law School and then I started my law practice 0:04:40.760 --> 0:04:43.960 and I was practicing on the East Coast, and I 0:04:44.000 --> 0:04:45.839 was not happy whether this is sort of in my 0:04:45.880 --> 0:04:48.520 mid twenties, um, and I'm like, you know, what do 0:04:48.600 --> 0:04:51.320 I really want to do? And at that time, I 0:04:51.400 --> 0:04:54.560 was married, we had a one year old baby, and 0:04:54.600 --> 0:04:56.719 there was a request in the law firm to represent 0:04:56.760 --> 0:05:00.480 a software company and nobody was interested. This is like 0:05:01.760 --> 0:05:05.320 seven no one was interested in representing software companies. They 0:05:05.360 --> 0:05:07.920 didn't mean anything. And my hand shut up and I 0:05:08.000 --> 0:05:10.120 was like, this is what I'm gonna do, And so 0:05:10.200 --> 0:05:12.120 I did. This is just a tiny little company. I 0:05:12.120 --> 0:05:15.119 don't even remember its name, but I could see that, 0:05:15.200 --> 0:05:17.479 you know, by doing this, that this was sort of 0:05:17.520 --> 0:05:21.840 a land of opportunity and then technology, this technology thing 0:05:21.880 --> 0:05:24.600 is going to go somewhere. Even the law is associated 0:05:24.640 --> 0:05:26.640 with the protection of software and this kind I hadn't 0:05:26.640 --> 0:05:28.960 been sorted out yet. And so but I'm in the 0:05:28.960 --> 0:05:31.360 wrong place, you know, Where shall I go? And we 0:05:31.400 --> 0:05:34.120 had never been to California, We've never really even heard 0:05:34.160 --> 0:05:36.760 of Silicon Valley, but that was the place. So I 0:05:36.839 --> 0:05:40.120 came out to Silicon Valley and I interviewed with the 0:05:40.120 --> 0:05:42.599 biggest law firm out there, and the founding partner of 0:05:42.600 --> 0:05:46.320 that firm Larry Soncini, who's featured in the book Le 0:05:47.200 --> 0:05:50.039 Langendary Law Firm. And I said to Larry, you know, 0:05:50.120 --> 0:05:52.680 I just want to come out here and do technology transactions. 0:05:52.720 --> 0:05:55.040 And he said, you know, we have no one specializing 0:05:55.040 --> 0:05:57.160 in it. It's growing and growing. I'll let you do it. 0:05:57.560 --> 0:06:00.280 And that was the start of what became the rest 0:06:00.520 --> 0:06:04.240 and the biggest technology transactions law practice in in the 0:06:04.360 --> 0:06:07.640 legal business. That's that's worthy of a book. Unto itself. 0:06:08.440 --> 0:06:11.000 Let's talk about the phone call out of the blue 0:06:11.040 --> 0:06:14.800 from Steve Jobs. What was that like? So imagine that 0:06:14.920 --> 0:06:17.839 I'm sitting in my office. By that time, I was 0:06:17.880 --> 0:06:20.440 working for a company called Electronics for Imaging that had 0:06:20.480 --> 0:06:22.640 been one of my clients, and I went to to 0:06:22.800 --> 0:06:25.239 work for them, and I ended up becoming their CFO 0:06:25.400 --> 0:06:27.960 and we took that company public. They're still around. It's 0:06:27.960 --> 0:06:31.000 a great company. And my phone rings, and I pick 0:06:31.080 --> 0:06:32.440 up the phone and I hear on the other end 0:06:32.480 --> 0:06:35.120 of the line, High, this is Steve Jobs. I saw 0:06:35.160 --> 0:06:36.839 your picture in the magazine a couple of years ago. 0:06:36.839 --> 0:06:39.159 I thought we'd worked together. Someday I have a little 0:06:39.160 --> 0:06:41.600 company I want to tell you about. And I immediately 0:06:41.640 --> 0:06:44.560 thought to myself, next, he's talking about next computer. Now, 0:06:44.600 --> 0:06:47.680 this is some context. This was after he's tossed out 0:06:47.720 --> 0:06:51.960 unceremoniously from Apple eight years later. This he's tossed out. 0:06:52.880 --> 0:06:55.640 You know some years before you went to do next computer. 0:06:55.880 --> 0:07:00.560 But two years before next it's shut down. It's hard business, 0:07:00.600 --> 0:07:04.000 which so it was basically rumored to be done. And 0:07:04.279 --> 0:07:06.719 I thought to myself, Okay, he wants some help to 0:07:06.800 --> 0:07:09.880 turn around next And but then he says the company 0:07:09.920 --> 0:07:13.520 is called Pisarre, and inside I'm kind of going, what's 0:07:13.560 --> 0:07:16.280 picks are? And awardly, I kind of said, that sounds 0:07:16.280 --> 0:07:17.760 really cool. I'd love to you know, I'd love to 0:07:17.840 --> 0:07:20.080 learn about it. But you know, it, Picks alway was 0:07:20.200 --> 0:07:22.400 so unknown at that point that you know, maybe you 0:07:22.560 --> 0:07:25.320 sort of barely had heard of it. Um. But that 0:07:25.440 --> 0:07:28.119 was how the that was how everything got started. So 0:07:28.120 --> 0:07:32.440 so let's briefly talk about the genesis of Pixar. George Lucas, 0:07:32.480 --> 0:07:35.360 while working on Star Wars and other films, wanted his 0:07:35.440 --> 0:07:39.760 own facility. Why did he cleave the Pixar portion off 0:07:40.080 --> 0:07:43.520 and keep Skywalker Labs or studios or whatever it's called 0:07:43.560 --> 0:07:46.720 for himself. I think he cleaved it off for the 0:07:47.360 --> 0:07:50.520 because it was very expensive to run, and so I 0:07:50.560 --> 0:07:53.920 don't think he wanted to continue the investment in their 0:07:54.160 --> 0:07:58.160 computer graphics division and so um. And so that's when 0:07:58.200 --> 0:08:01.200 at Katmo av Ray Smith and decided to sort of 0:08:01.200 --> 0:08:03.080 try to take it as a spinoff, and they needed 0:08:03.160 --> 0:08:06.200 an investor to help with that. So Jobs invites you 0:08:06.440 --> 0:08:09.720 to come be the CFO at Pixarar. At that point, 0:08:09.880 --> 0:08:12.600 his reputation wasn't what it was today. He was sort 0:08:12.600 --> 0:08:16.200 of an on front every blow. How concerned were you 0:08:16.360 --> 0:08:19.600 about that before you said yes to join Pixar. I 0:08:19.760 --> 0:08:22.640 was extremely concerned. And that's why the first chapter in 0:08:22.680 --> 0:08:24.360 the book is is cool? Why would you do that? 0:08:24.880 --> 0:08:27.200 Because that's what a lot of people told me. It 0:08:27.800 --> 0:08:31.960 was maybe the lowest point in in Steve's career. You know, 0:08:32.120 --> 0:08:35.679 he'd had a string of basically four failures in the 0:08:35.920 --> 0:08:38.360 you know, the Apple Leasa computer, then the original Apple 0:08:38.400 --> 0:08:41.080 Macintosh computer that had a very hard time finding a market. 0:08:41.280 --> 0:08:43.959 Uh um, the next computer that Pixar Imagine computer. So 0:08:44.200 --> 0:08:46.480 there were books being written about you know him as 0:08:46.760 --> 0:08:51.200 done finished and so I I was very concerned about him. 0:08:51.679 --> 0:08:55.280 So you go to Pixar, You you meet everybody before 0:08:55.320 --> 0:08:58.040 you agree to say yes, what was your impression? Well, 0:08:58.280 --> 0:09:00.360 it's funny, you know, Pixar was at that time in 0:09:00.440 --> 0:09:02.719 Point Richmond, California, which, from the point of view of 0:09:02.760 --> 0:09:04.880 Silicon Valley was kind of like in the middle of nowhere. 0:09:05.400 --> 0:09:07.400 And so and it was in It's across the street 0:09:07.440 --> 0:09:10.559 from an oil refinery, and it's a dumpy building and 0:09:10.880 --> 0:09:15.319 there's nothing remarkable or inspiring about it whatsoever. And so 0:09:15.400 --> 0:09:17.640 I went in there scratching my head, and you know, 0:09:17.720 --> 0:09:19.800 I meet at Cat moll and a couple of other people, 0:09:19.920 --> 0:09:23.120 and then John John Lasseter, and then they take me 0:09:23.240 --> 0:09:26.760 to see this sort of footage of Toy Story, which 0:09:26.840 --> 0:09:29.240 is a year before Toy Story comes out, and it's 0:09:29.280 --> 0:09:31.520 just a few minutes and it's unfinished and there's no 0:09:31.720 --> 0:09:33.880 music and the voices on final and so there's all 0:09:33.920 --> 0:09:36.319 these caveats about what it's going to be. And I'm 0:09:36.360 --> 0:09:39.040 in a screening room that's full of like couches that 0:09:39.280 --> 0:09:41.240 look like they've been picked up from the end of 0:09:41.280 --> 0:09:44.400 a driveway, and I'm like, what's going on here? And 0:09:44.520 --> 0:09:46.360 the film begins to roll and I'm kind of like 0:09:46.880 --> 0:09:50.120 mesmerized by this. I'm looking at this saying to myself, 0:09:50.679 --> 0:09:54.040 somewhere in this building there is magic. I don't know 0:09:54.120 --> 0:09:56.520 where it is or what it is, but something is 0:09:56.559 --> 0:09:59.400 going on here. I'm Barry rid Hultz. You're listening to 0:09:59.600 --> 0:10:03.079 Master in Business on Bloomberg Radio. My special guest today 0:10:03.280 --> 0:10:07.000 is Lawrence Levy. He was the CFO of Pixar and 0:10:07.120 --> 0:10:09.959 he is the author of Two Pixar and Beyond, My 0:10:10.200 --> 0:10:13.520 Unlikely Journey with Steve Jobs. Let's let's talk a little 0:10:13.520 --> 0:10:17.360 bit about Pixar. When you first arrived there, they seem 0:10:17.440 --> 0:10:20.640 to have a lot of different businesses going on, but 0:10:21.400 --> 0:10:24.760 entertainment was almost an afterthought. Tell us, tell us what 0:10:24.960 --> 0:10:27.520 greeted you when you first joined the company. Yeah, well, 0:10:27.800 --> 0:10:30.640 entertainment wasn't afterthought. You know. Pixar was created as a 0:10:30.679 --> 0:10:34.319 graphics company, and it was hardware, software, software. It made 0:10:34.400 --> 0:10:36.920 a computer called the Pixar Imaging Computer, and so it 0:10:37.040 --> 0:10:39.160 was in these different things that it was making this 0:10:39.360 --> 0:10:42.680 random and software which was rendering these high end graphics, 0:10:42.960 --> 0:10:46.000 uh and creating them into computer images. It was doing 0:10:46.240 --> 0:10:49.040 animated shore films, it was doing commercials. It was doing 0:10:49.120 --> 0:10:51.160 this sort of thing called there's a lot of focus 0:10:51.240 --> 0:10:53.599 on toy story. Um so there was kind of a 0:10:53.679 --> 0:10:57.280 lot going on, and I realized right away, you know, 0:10:57.360 --> 0:10:59.920 I had kind of a lot to learn there, that was. 0:11:00.120 --> 0:11:02.520 And so when I first got there, I was just like, 0:11:03.120 --> 0:11:05.480 you know, I'm not gonna make any decisions. I'm not 0:11:05.520 --> 0:11:08.719 going to do anything. I literally took I got a 0:11:08.840 --> 0:11:11.280 pad of paper and a pen, and I asked, everybody, 0:11:11.600 --> 0:11:14.440 can I just follow you around and and see what's 0:11:14.480 --> 0:11:16.559 going on? And I literally did that. You know. I 0:11:16.640 --> 0:11:21.480 spent a lot of time just you know, sitting listening, 0:11:21.679 --> 0:11:23.520 you know, and just taking notes so I could sort 0:11:23.559 --> 0:11:26.160 of start to understand, you know, what was going on 0:11:26.240 --> 0:11:29.079 at the company. You look at three businesses, the hardware, 0:11:29.280 --> 0:11:34.640 the software, the short commercial business, and none of them 0:11:34.760 --> 0:11:38.839 scale to anything remotely approaching a public company. None of 0:11:38.880 --> 0:11:41.640 them could scale. They were amazing for the hardware had 0:11:41.640 --> 0:11:45.480 already been closed down, but the anime commercials, the animate 0:11:45.559 --> 0:11:48.439 short films, the rendom and software they couldn't scale. And 0:11:48.520 --> 0:11:51.360 the reason was because there's too high end. You know, 0:11:51.480 --> 0:11:53.120 there was like, how many people in the world at 0:11:53.200 --> 0:11:56.080 that point in time, We're gonna pay this very large amount, 0:11:56.160 --> 0:11:59.679 but it's unbelievable software, you know, to render unbelievably high 0:11:59.760 --> 0:12:03.640 quality image. You know, just studios. You know, studios not 0:12:03.840 --> 0:12:06.920 enough to build a business. So you decide the future 0:12:06.960 --> 0:12:09.520 of the company if, if it's going to have a future, 0:12:09.920 --> 0:12:13.800 is to pivot from technology to applying the technology to 0:12:13.880 --> 0:12:17.719 be a unique entertainment company. How hard was it to 0:12:17.840 --> 0:12:22.760 get Steve Jobs two, who is essentially a tech slash 0:12:22.960 --> 0:12:25.520 marketing guy at heart, how hard was it to get 0:12:25.640 --> 0:12:29.560 him to buy in on that vision? Yeah, well, decide 0:12:29.720 --> 0:12:33.040 is probably a bit of an overstatement. It was a 0:12:33.160 --> 0:12:36.040 strategy by default in a way. So you look around 0:12:36.080 --> 0:12:38.400 the company and this isn't gonna work, This isn't gonna work, 0:12:38.440 --> 0:12:40.040 This isn't gonna work. So then you look at this 0:12:40.320 --> 0:12:43.240 animated feature film thing, and so I started to learn 0:12:43.280 --> 0:12:46.480 about that, and I'm like, well, this is the worst 0:12:46.760 --> 0:12:52.080 possible business strategy. So you you specifically right, in order 0:12:52.120 --> 0:12:54.599 for this to be successful, we have to have a 0:12:54.800 --> 0:12:58.400 string of blockbuster hits, And then you go through the 0:12:58.520 --> 0:13:01.960 numbers and and send snow White in the Seven Dwarfs. 0:13:02.000 --> 0:13:06.600 In nineteen thirty seven, the two biggest hits that were 0:13:06.600 --> 0:13:09.880 animated were both Disney. One is a Laddin at two 0:13:10.000 --> 0:13:13.120 hundred seventeen million dollars, The other is Lion King at 0:13:13.160 --> 0:13:16.160 three hundred thirteen million dollars, And in order for the 0:13:16.320 --> 0:13:19.440 Pixar business model to make sense, you have to come 0:13:19.520 --> 0:13:23.280 pretty close to those two, you know, in in almost 0:13:23.440 --> 0:13:28.120 uh three quarters of a century, every three or four years. Yeah, 0:13:28.160 --> 0:13:30.680 I mean, and it's worse than that in a sense 0:13:30.760 --> 0:13:33.560 because if you looked at the Disney model, which I did, 0:13:33.679 --> 0:13:36.680 and I was like, why didn't Why aren't there more 0:13:36.960 --> 0:13:40.679 independent animated feature film, It's not like animated feature films 0:13:40.679 --> 0:13:45.560 there's a new product, right, it's been around for two generations, right, 0:13:46.559 --> 0:13:48.760 Disney releases snow White in the Seven Dwarves, the first 0:13:48.840 --> 0:13:52.040 animated feature film. So it's like every studio had an 0:13:52.080 --> 0:13:55.000 opportunity to get into that business, and none of them 0:13:55.040 --> 0:13:58.400 are in it. And it turned out that even Disney 0:13:58.720 --> 0:14:01.439 couldn't make it work because you know, he has a 0:14:01.480 --> 0:14:06.000 good run from He's got you know, Bamby and snow 0:14:06.000 --> 0:14:08.480 White and Dumbo and all these beloved films, but he 0:14:08.520 --> 0:14:12.600 couldn't keep that engine running financially. So he diversifies, right, 0:14:12.679 --> 0:14:16.320 he diversifies. He goes into five, he goes into theme 0:14:16.360 --> 0:14:20.080 parks early, he goes into television with the wonderful world 0:14:20.120 --> 0:14:23.760 of Walt Disney. Uh, he goes into distribution. He sets 0:14:23.840 --> 0:14:26.359 up one of us, the distribution. He's trying to diversify 0:14:26.800 --> 0:14:30.200 away from an animation because he goes to live action 0:14:30.280 --> 0:14:32.760 film Mary Poppins in this and that. So he built 0:14:32.800 --> 0:14:36.240 this diversified media company. And so I'm looking around and 0:14:36.320 --> 0:14:40.400 not even Disney is a good example of an independent 0:14:40.440 --> 0:14:45.720 animated feature film. But um, you know, you know, you're 0:14:45.720 --> 0:14:48.800 sort of looking at it qualitatively and quantitatively that was 0:14:48.920 --> 0:14:52.200 the only shot, and you're you're exactly right that in 0:14:52.400 --> 0:14:54.400 order to make that work, those films had to be 0:14:54.840 --> 0:14:57.240 you know, blockbusters pretty much, every single one of them. 0:14:57.440 --> 0:15:00.520 And that's what the business plan called for. You could 0:15:00.560 --> 0:15:02.840 call it crazy, right, You could say, well, that's a 0:15:03.000 --> 0:15:05.720 crazy bet to take, and I would agree with that, 0:15:05.960 --> 0:15:10.240 but what what other choice do you have? That In 0:15:10.360 --> 0:15:12.880 the book, so, so before we get to Toy Story 0:15:12.920 --> 0:15:16.640 and the subsequent films, a big part of the middle 0:15:16.880 --> 0:15:19.240 of the book is about the Pixar I p O. 0:15:20.280 --> 0:15:24.320 That sounded like that was a really fascinating experience. Yeah, 0:15:24.440 --> 0:15:28.200 well it was, you know how. And so the idea 0:15:28.280 --> 0:15:30.720 for the I p O essentially comes about from do 0:15:30.800 --> 0:15:33.680 you want to it's sort of all flows from this strategy. 0:15:33.720 --> 0:15:37.000 So you want to build an independent animation film company, 0:15:37.160 --> 0:15:39.520 that means you have to finance your own films. Those 0:15:39.560 --> 0:15:41.920 films cost a lot, so it could be you know 0:15:41.960 --> 0:15:44.360 at the time, seventy million, hundred million dollars. You know, 0:15:45.040 --> 0:15:47.200 So how are you going to get that kind of money? Right? 0:15:47.480 --> 0:15:51.000 And so no lender is gonna provide that kind of money, 0:15:51.120 --> 0:15:52.320 you know, for that kind of product, So you got 0:15:52.400 --> 0:15:54.680 to go to the equity markets, capital markets, and so. 0:15:55.200 --> 0:15:58.680 But the business model of Pixar had none of the 0:15:58.760 --> 0:16:02.680 characteristics that the investors and investment banks. So it wasn't steady, 0:16:02.880 --> 0:16:06.320 it wasn't reliable. It required a lot of one off 0:16:06.440 --> 0:16:09.920 success stories that had to be the best of their type. 0:16:10.360 --> 0:16:13.800 It really in advance, it's amazing anybody was willing to 0:16:13.840 --> 0:16:16.920 give you money. You laid out and impossible, here's what 0:16:16.960 --> 0:16:19.400 we're gonna try and do something that's impossible, and then 0:16:19.480 --> 0:16:22.520 repeated every three years from the next twenty years. And 0:16:22.640 --> 0:16:25.320 my take at the time was, in the world you said, 0:16:25.360 --> 0:16:28.640 which is layer it out, just lay it out right, um, 0:16:29.000 --> 0:16:32.320 put it out there, because and then investors are investment banks, 0:16:32.480 --> 0:16:35.160 they'll decide you know, I don't have to decide for them, 0:16:35.280 --> 0:16:39.240 I just have to lay it out. Steve presented, you know, 0:16:39.360 --> 0:16:41.560 grand vision for what Pixock would be. I would lay 0:16:41.600 --> 0:16:44.560 out all of the details together. We we we presented 0:16:44.640 --> 0:16:47.040 you know, this, this vision and this possibility, and then 0:16:47.080 --> 0:16:49.680 it was sort of up to investors to decide, and 0:16:49.840 --> 0:16:52.200 you know, fortunately some decided to go along for that. 0:16:52.480 --> 0:16:56.240 So toy story comes out. It comes out just before Thanksgiving, 0:16:56.880 --> 0:17:01.400 and you're hoping for a ridiculous millions. Steve is hoping 0:17:01.480 --> 0:17:05.520 for fifteen to twenty million opening weekend. What happens? So 0:17:05.680 --> 0:17:07.680 the opening weekend, you know, it turns out to be 0:17:08.040 --> 0:17:10.840 you know, thirty eight million, and you know, just faring 0:17:10.960 --> 0:17:13.600 on anybody's world. And he says, you know, by today's standards, 0:17:13.680 --> 0:17:16.680 that's not even even that huge. But in that time, 0:17:17.119 --> 0:17:20.440 but that film, it was like, you know, grand slam 0:17:20.560 --> 0:17:21.919 home run in the bottom of the ninth. I mean, 0:17:21.960 --> 0:17:24.359 he just couldn't have been better. We would just giddy 0:17:24.480 --> 0:17:27.320 from it. I'm Barry rid Helts. You're listening to Masters 0:17:27.359 --> 0:17:30.240 in Business on Bloomberg Radio. My special guest this week 0:17:30.359 --> 0:17:34.080 is Lawrence Levy. He is the CFO of Pixar Now 0:17:34.280 --> 0:17:37.840 part of entertainment giant Disney, and he is the author 0:17:37.960 --> 0:17:41.120 of a new book two Pixar on Beyond My Unlikely 0:17:41.240 --> 0:17:45.320 Journey with Steve Jobs to make Entertainment History. Let's talk 0:17:45.320 --> 0:17:48.439 a little bit about, uh, what took place with your 0:17:48.480 --> 0:17:51.920 relationship with Disney. There's a line in the book that 0:17:52.040 --> 0:17:55.960 I really enjoyed. You said, the darkest day in your 0:17:56.080 --> 0:17:58.919 life is when you were had already been working at 0:17:59.040 --> 0:18:03.639 Pixar and you reviewed the contract between Pixar and Disney. 0:18:04.160 --> 0:18:06.760 Why was that so awful? Yeah, Well, the darkest day 0:18:06.800 --> 0:18:10.240 in my career, that's for sure. Um. So, you know, 0:18:10.680 --> 0:18:14.920 Disney had Pixar had entered an agreement a few years 0:18:14.960 --> 0:18:17.440 before I came before the making of Toy Story, and 0:18:18.040 --> 0:18:21.520 you would have thought that me, a you know, well 0:18:21.640 --> 0:18:24.639 trained and experienced lawyer, would sort of understand what that 0:18:24.760 --> 0:18:26.399 was all about. And I told we had a challenge 0:18:26.440 --> 0:18:28.520 to look at it. But it was written in this 0:18:28.800 --> 0:18:31.919 sort of arcane language of entertainment law, which is totally 0:18:32.000 --> 0:18:34.840 different from any other type of law. It's its own rules, 0:18:34.920 --> 0:18:38.160 its own everything, its own language, everything. Because I didn't 0:18:38.240 --> 0:18:40.920 know that at that moment, right, So I just thought, 0:18:41.240 --> 0:18:43.560 you know, I can't I don't understand everything that says 0:18:43.560 --> 0:18:45.639 I'll figure it out later kind everything. That's that's what 0:18:45.760 --> 0:18:48.440 I said to myself. How bad can it be? Right? Well, 0:18:48.720 --> 0:18:50.840 anytime you ask that question, you usually find out. Yeah, 0:18:50.920 --> 0:18:53.560 usually find out, and it probably is. It probably turns 0:18:53.560 --> 0:18:55.879 out to be a good thing that I went in naive, 0:18:56.119 --> 0:18:58.840 because if I had known what I learned later about it, 0:18:58.920 --> 0:19:02.000 I kind of imagined I would taken that job. So 0:19:02.920 --> 0:19:05.080 but it just it turned out when I did understand it, 0:19:05.280 --> 0:19:08.880 that Disney had effectively tied Pixar up for what three 0:19:08.960 --> 0:19:12.040 films which could have been twelve fourteen years, and with 0:19:12.359 --> 0:19:15.240 almost no chance of sort of making money on those 0:19:15.280 --> 0:19:17.760 films that would be anything like what you would need 0:19:18.080 --> 0:19:20.480 to grow a business. To go over some of the details, 0:19:20.800 --> 0:19:23.760 they owned, the rights to the sequels, the merchandizing, the 0:19:23.880 --> 0:19:27.359 Lion's share of the profits, everything, I mean it worse. 0:19:27.400 --> 0:19:30.320 I mean like they and they had sort of exclusivity provisions. 0:19:30.359 --> 0:19:32.520 It's not even right a first refusal. It was them 0:19:32.640 --> 0:19:34.920 or nobody, Yeah, them or nobody. So it was like, 0:19:35.119 --> 0:19:37.560 you know, Pixar is not even allowed to work on 0:19:37.720 --> 0:19:40.040 other other film projects, you know, And I was asking, 0:19:40.080 --> 0:19:42.879 you know, the lawyer. You know that Sam Fisher about that, 0:19:42.920 --> 0:19:45.080 and he's saying yeah, because you know, like it picks 0:19:45.119 --> 0:19:46.680 us working on other things. They could take that better 0:19:46.720 --> 0:19:48.479 people and put them on other things. And Disney want 0:19:48.520 --> 0:19:50.520 to make sure has assets to the best people. And 0:19:50.600 --> 0:19:52.719 I was like, but that ties up a whole company. 0:19:52.960 --> 0:19:55.320 We could hire a thousand animators and they could only 0:19:55.359 --> 0:19:59.439 work for Disney. And but you know, my my protests 0:19:59.520 --> 0:20:01.240 were or for know it, it was what it was. 0:20:01.520 --> 0:20:05.160 So you you create a business strategy, which you describe 0:20:05.200 --> 0:20:09.240 as four pillars. In order to allow the company to grow. 0:20:10.160 --> 0:20:14.600 You have to change this contract with Disney, and briefly, 0:20:14.960 --> 0:20:17.640 you have to capture more of the profits on each film. 0:20:18.119 --> 0:20:21.080 You have to raise capital so you can self finance, 0:20:21.119 --> 0:20:22.600 which is part of the way to get to that 0:20:23.160 --> 0:20:26.119 greater profit share. You have to double or more the 0:20:26.280 --> 0:20:29.119 output of films. It can't be every four years. And 0:20:29.280 --> 0:20:33.000 you have to turn Pixar into its own standalone brands. 0:20:33.760 --> 0:20:36.640 How did you go about negotiating that with Disney? Because 0:20:36.640 --> 0:20:38.960 they could have said no, we have a contract to 0:20:39.040 --> 0:20:42.840 go away. They absolutely could have. And we learned that 0:20:43.320 --> 0:20:47.240 there are two things that talk in Hollywood. Um One 0:20:47.560 --> 0:20:51.640 is success, right, so you have a success here, celebrity 0:20:51.640 --> 0:20:54.800 of any kind, you have some cloud and the second 0:20:54.840 --> 0:20:58.520 thing that talks is money. Uh and so and so 0:20:59.080 --> 0:21:01.679 all of a sudden, from the I p O Pixel 0:21:01.760 --> 0:21:05.720 had money from Toy Story, Pixarl had success. And that 0:21:05.960 --> 0:21:08.280 means that in that you know, that is going to 0:21:08.359 --> 0:21:11.639 get attention. And so then Disney, you know it's Michael 0:21:11.680 --> 0:21:14.320 Eisener at the time, is sort of going to start 0:21:14.400 --> 0:21:18.440 to think about okay, um, Pixar is willing to invest 0:21:18.520 --> 0:21:21.560 in its own films, right, and so instead of Disney investing, 0:21:22.440 --> 0:21:26.960 you know, maybe the Pixar's willing is invest that's of interest. Secondly, 0:21:27.400 --> 0:21:29.560 you know, I want to keep closer attention to these 0:21:29.640 --> 0:21:32.120 guys because now they're successful, I don't want to risk 0:21:32.280 --> 0:21:35.960 losing them. And so that opened the door for a negotiation. 0:21:36.119 --> 0:21:38.040