Steve watched all this unfold with glee, especially since his threat to take Pixar elsewhere had helped undermine Eisner. He had never had anything against Disney, after all; it was just Eisner he couldn’t stand.
When Steve returned from his postoperative convalescence in the fall of 2004, he told Catmull and Lasseter that he wanted to find a way to ensure that Pixar would be in good shape even if he wasn’t around. It wasn’t that he feared an imminent death. But as he pondered a future in which he might have to further pare down his responsibilities, he knew that Pixar would survive without him more easily than Apple. It wouldn’t be easy. Steve always believed that he, Catmull, and Lasseter worked like a three-man version of the Beatles, complementing one another’s strengths while making up for individual weaknesses. The prospect of operating without Steve made Catmull nervous. “He wasn’t a [film] director, or anything like that. It wasn’t so much the creative side that would be hurt,” says Catmull. “But I’m not really a public CEO kind of person. It’s just not who I am. So if he goes, then we are actually missing a key component.”
Pixar seemed to have three options: find a new distributor and enter into an unproven relationship; build its own distribution arm, which would have entailed a massive investment of money and people to create a service that neither Catmull nor Lasseter really wanted to manage; or stay with Disney—which in fact was not an option so long as Eisner was CEO. The choices seemed even more dire given that the first two scenarios would mean that Disney, not Pixar, would own the characters from all the movies that Lasseter and his team had created under the old contract.
Disney had the theme parks, where Pixar characters lived on in new ways. It had the proven distribution network that had successfully launched every Pixar movie. And its name was still magical for Catmull and Lasseter, who grew up dreaming of joining the great animators from Disney’s fabled past. “I knew right from the very beginning that Steve’s long-term game plan was to sell to Disney,” says Catmull, even though Steve never overtly acknowledged this to him. “I never had any question about it. He was doing all this stuff, and playing these games, but I knew that was the long-term game plan.”
For three years, Steve displayed remarkable patience as he waited out Eisner. His public attitude put pressure on the Disney CEO, since his directors couldn’t see any way to secure Pixar with him still at the helm. But behind the scenes, Steve made sure that his public ire did nothing to harm the working relationship between the companies. “We were working hard to maintain a good relationship with Disney,” Catmull remembers. “When Eisner was going through his war with Roy Disney, a book was being written, [Disney War, by James B. Stewart, which was eventually published in January 2006]. Steve said, ‘Whatever we do, we don’t talk. We don’t know what’s going to happen, so they get nothing from us for the book.’ So there is nothing that came from us, because Steve didn’t want any ill will towards us at Disney.
“With things like this,” Catmull adds, “you connect a few dots and you figure, okay, I know what this means. And then the war finally comes to an end, and they bring in Bob Iger.”
IGER’S ASCENSION WAS announced in March, but he didn’t move into the CEO job until October 1. After informing Eisner that he was going to try to repair relations with Steve, he set about doing so. One month after their first phone call, he called Steve with an idea: What if there were a way for consumers to have access to view all kinds of TV episodes, both current and past, on Macs or PCs or other kinds of devices? Couldn’t Apple do for the television industry what it had done for the music industry, and become, in essence, the retail outlet for TV? Iger said he knew the idea was fraught with complexity, but that he would love the opportunity to discuss it with Steve.
“You’re kidding,” Steve replied. Iger insisted he wasn’t. “Can you keep a confidence?” Steve asked, clearly still wary of any Disney executive. When Iger said he could, Steve told him that he was very intrigued, and that he would have something to show him in a month or two.
Iger’s call had been strategic—he thought it would help his chances if Steve knew that he, unlike his predecessor, was determined to make Disney technology-friendly. Steve was in fact impressed, and, while Iger waited to find out what Steve’s big surprise could be, the two men began to discuss a possible framework for a new film distribution deal. They couldn’t make the numbers work. At one point they considered having Disney sell back to Pixar the right to make sequels, in return for a 10 percent equity stake in Pixar. But Iger called it off. “It was a one-sided deal,” he remembers. “I’d get an announcement that the relationship is continuing, but the actual relationship wouldn’t have been good for Disney’s bottom line. We wouldn’t own the intellectual property, we’d have basically a silent ownership in Pixar, and we’d have done nothing to fix Disney Animation.”
A few weeks later, Steve visited Iger at Disney’s headquarters in Burbank. “I’ve got something to show you,” he told Iger, and pulled one of the first video iPods out of his pocket. “Would you really consider putting your TV shows on this?” he asked. “I’m up for that,” Iger replied without missing a beat. He secured the deal even faster than Steve had won Bill Gates’s investment in Apple back in 1997. Iger became CEO on October 1, and by October 5 Apple had a deal to sell downloads of Desperate Housewives, Lost, and Grey’s Anatomy episodes from the iTunes store for viewing on iPods. The two made the announcement on the stage of an Apple event a week later. “He was blown away that, one, I would even do this,” says Iger. “Two, that we could make a deal in five days without Disney lawyering it to death. Three, that I would have, I don’t know, the presence to go on his stage with Steve Jobs, even though Disney had been the mortal enemy in some ways.”
That October, Iger also asked his board of directors to allow him to explore the outright purchase of Pixar. As he recalls it, “This was my first meeting as CEO, and I hadn’t been the absolute choice of everyone in the room. I looked around and they were all a little taken aback. A third didn’t know what to say, a third were really intrigued, and a third thought this was ridiculous, but since it’s never going to happen anyway, let him go ahead.” A couple of days after the MacWorld event, Iger called Steve. “I said, ‘I’ve got a crazy idea. Maybe Disney should just buy Pixar outright.’ Steve paused, and then he said, ‘That might not be the craziest idea in the world. And anyway, I like crazy ideas. Let me think about it!’ He called me back a couple of days later.”
Iger and Steve were now speaking just about every day, and their relationship was building into one of mutual respect. Iger was pleasantly surprised by Steve’s honesty—his primary source on the Apple CEO had been Michael Eisner, who had painted a somewhat less than flattering picture. Steve, meanwhile, began to realize that Iger was smart, as well as straightforward, a combination that Steve appreciated, according to Catmull. Iger was a welcome change from Eisner, who Steve had found plenty smart but deeply political and evasive. At the very beginning of the negotiation, Iger simply laid his cards on the table. “My wife told me that the average tenure of a CEO is three and a half years,” he told Steve. “Mine will be less unless I fix Animation, and getting there goes through you. I’ve got a problem; you’ve got a solution. Let’s get this done.”
Steve asked Lasseter and Catmull to come visit him at his home in Palo Alto. When they showed up, he wasted no time dropping his bomb. “I’m thinking about selling Pixar to Disney,” he explained, before laying out the reasons he was now considering such a move. He revealed that, as part of the deal, the two of them would have to run Disney Animation as well as Pixar. “If you guys say no, we’re not going to do it. But the only thing I ask of you is that you get to know Bob Iger.”