February 24, 1997 – Pixar and Disney Jointly Agree on the Production of Five Feature Films
“We got the money in the bank, and then shortly after, Disney came to us and said, ‘We want to extend the contract.’ And Steve [Jobs] said, ‘Okay, we will extend it if we can be fifty-fifty partners.’ And they said, ‘Okay, we’ll do that.’” – Ed Catmull
After the success of Toy Story, which provided more income to the once-struggling Pixar Studios, a new agreement was signed on February 24, 1997, for a new five-film deal. This deal gave Pixar more of an equal share of the assets from their films. This extended deal only served to further prove that Pixar had something amazing to offer Disney and the film industry in general.
When Pixar signed the first three-film contract with Disney in 1991, the studio was cash-strapped and needed the deal, so they had agreed to a 10 to 15 percent share of their films’ profits so that Disney would fully finance the films. This left most of the profits and merchandising with Disney. “Financially, if one film did not do well,” Steve Jobs explained about the first contract, “we would be wiped off the face of the planet.” Jobs began to push Michael Eisner for a new contract a few months after the release of Toy Story, when he was confident in the film’s success both commercially and as a groundbreaking achievement for Pixar. Jobs realized at that point that Pixar needed to become a studio, instead of a production company, and to accomplish this, they would need capital. Their best option was to go public, and Pixar became the highest initial public offering (IPO) of 1995.
Toy Story had given Pixar a massive success, and with the added bonus of their IPO, Pixar was able to co-finance their films, work on getting a higher percentage of the films’ profits, and get the proper credit for their work. Jobs offered Eisner the one bargaining chip he had: more films. Eisner could not say no, and in 1997, Pixar’s Chief Financial Officer, Lawrence Levy, and the similar representative for Disney, Robert Moore, signed a 42-page contract for five feature films (the first one being A Bug’s Life, which was beginning production and still known as Bugs), in which the production costs would be split 50-50, and Pixar would receive 50 percent of the profits, along with home video and tie-in product receipts, and equal advertising with Disney for the films. When Jobs and Eisner announced the extension of the contract, the Pixar stock jumped 50 percent.