http://www.orlandosentinel.com/business/nationworld/orl-bizdisney01030106mar01,0,5745510.story?coll=orl-home-headlines

QuikQuote: Walt Disney Co. Chief Executive Officer Robert Iger decided to buy Pixar while watching a parade at the opening of Hong Kong Disneyland, he said.
Disney, home of Mickey Mouse, Snow White and Cinderella, hadn't created any recognizable animated characters in the past decade, Iger said at a Bear Stearns & Co. media conference broadcast on the Internet. The recent animated characters in the parade were from Pixar, Steve Jobs' animation studio, which Iger agreed in January to buy for $7.4 billion.
"It really hit me hard that we had had 10 years of real failure," Iger said. "Keeping animation strong is incredibly vital."

Filed by The Walt Disney Company pursuant to Rule 425 promulgated under the Securities Act of 1933, as amended, and deemed filed pursuant to Rule 14a-12 promulgated under the Securities Act of 1934, as amended.

Subject Company: Pixar
Commission File No.: 0-26976

The following are excerpts from a transcript of an interview given by Robert A. Iger, President and Chief Executive Officer of The Walt Disney Company at the Bear Stearns & Co. 19th Annual Media Conference on the evening of February 27, 2006. The excerpts contain only those portions of the transcript relating to discussions of the proposed acquisition of Pixar by The Walt Disney Company pursuant to the terms of an Agreement and Plan of Merger, dated as of January 24, 2006.


First of all, Disney is the most valuable brand we have – the most valuable asset – even though it is multidimensional in terms of its businesses and touch points to consumers. It’s a true global brand. If you look at any study done of brands around the world, Disney shows up as one of the most known. So clearly there’s a lot of value there. High-quality family entertainment is the goal. Pixar certainly satisfies that. We saw a dangerous trend when we did our brand research, particularly among mothers with kids under 12, and realized that they were putting Pixar actually above Disney in some cases in terms of brand perception, which obviously is a concern. There is a list of about 15 things that I could give to justify this obviously.

But animation – in terms of all of the creative pursuits at Disney – animation is probably the most important and the most valuable. It is what Walt Disney founded the Company on and it is in many respects a great wave maker for the Company. It creates more of a ripple effect across all of our businesses when it is good than anything else we do. So keeping animation strong was incredibly vital.

In fact, the light bulb went off for me back in September in Hong Kong. I was at the opening of Hong Kong Disneyland and standing with a few thousand other people watching the parade go by and I realized that there wasn’t a character in the parade that had come from a Disney animated film in the last ten years except for Pixar. And although it was relatively known to me that we had exploited these characters across multiple businesses and multiple countries over time, it really hit me hard that we had had ten years of real failure in many respects in the business that I believe was the most vital to us.

So I started to consider our options in terms of how we can turn it around fast, because I didn’t really feel that we could afford taking a lot of time, and Pixar loomed large in that regard because I felt that buying them could turn Disney animation around immediately in a lot of different ways.

So getting animation right was important. Its impact on Disney around the world in all of its businesses was obvious as well as how quickly it could be done. And I began the process.

The other thing that was pretty interesting to observe is that, as two companies, Disney and Pixar, we were not driving as much value as we could have driven out of those great franchises they were creating. Not just because we were two companies and two interests, but obviously the tension that grew over time in part over the uncertainty about the future of their relationship. With that tension came no cooperation. There was so much more value to be mined in my opinion as one company –given what we were able to do – which Steve and I talked about at length in this whole process. I’m incredibly excited about the possibility.

When you think about these products, when you talk about them as films, they are not really just films. Cinderella is a great example. We released a DVD of Cinderella this past fall. It’s a 55-year-old movie and we’re on course to sell over 10 million DVDs – and it’s worldwide. You can buy Cinderella costumes at Wal-Mart and go to Cinderella Experiences at our parks and go to our castles and read Cinderella books and play Cinderella video games. And so thinking about these things – when they are right, I think just thinking of them as movies is very narrow minded.

And what Pixar has managed to do is to create five great franchises, and it is on course to create many more and that is why we (indiscernible) of the Company.
. . .

I’m not sure what critical mass is in this day and age. We think with Pixar and with Disney animation and with higher quality Disney live-action films we will have enough clout in the marketplace – to the extent that’s necessary – to accomplish everything at least our company needs to accomplish in terms of breaking through and creating access and both pleasing the distributor in reach but also reaching the consumer.
. . .

First of all, the research we saw among mothers with kids under 12 – when they rated brands being excellent – put Pixar ahead of Disney, which was obviously of great concern. One of the things that we’re going to do is we’re going to continue to use the Pixar brand because we actually believe – as the study suggests – there’s value there. But we’re going to better brand Disney in the process. We have gotten fairly convoluted in terms of the application of brand. We looked the other day where, at Pixar, there had been five different ways we branded these things. Disney presents Pixar, Disney Theatrical Animation distributes Pixar – all these things. The films are going to be Disney Pixar Presents, so they will be front and center.

We believe that there are some potential applications of the Pixar name and brand in other businesses like our theme parks for instance, but we’re taking a “walk before we run” approach. Pixar actually entered into a longer-term relationship with a videogame publisher, THQ, so near-term I don’t think there’s going to be that many opportunities there. But generally, through the system at Disney and the way we exploit a real high-quality franchise, there is going to be more opportunity for these Pixar titles.

We’re not looking to ramp up production because we really believe that quality long-term will create more value for the Company – both brand perception and otherwise – than quantity. We are planning a schedule that we will release roughly a Disney animated film and a Pixar animated film every year and then – probably on an every other year basis – we will release a sequel to one of the Pixar films that has already been released.

We’re not committing to that — that’s the general target that we’re looking at. And we feel that if we protect quality, that will be strong enough to create some good growth once these companies are one. Because when we were two, and the future was fairly uncertain, it was really hard to roll up our sleeves and talk about all kinds of different ventures. One area that we’re particularly interested in is online commerce, where we think we’ve got a great opportunity to really grow Disney online and have a direct relationship with our consumer. And we think Pixar will go a long way to actually helping us do that because of the brand, because of what it represents and the brand strength we believe it will create and a franchise potential that this creative activity is going to allow us.

So we are very excited about it so far. Because the deal hasn’t closed, we’re limited to just talking about the integration, but even those talks have gone incredibly well and I would say our level of excitement, and what we feel the potential is, has grown measurably since we announced the deal two months ago.

Sounds good to me! I've said it before and I'll probably say it again: Iger continues to impress me.

I don't know what characters were in the parade, but I think Stitch has done reasonably well for Disney (based on reactions I see to Lani's Stitches in various places) and I know it has done very well in certain foreign markets (particularly Japan).

But the larger point is, of course, correct. Nobody really has a Milo doll.

I don't know what characters were in the parade, but I think Stitch has done reasonably well for Disney (based on reactions I see to Lani's Stitches in various places) and I know it has done very well in certain foreign markets (particularly Japan).

But the larger point is, of course, correct. Nobody really has a Milo doll.

well, they might, but it's in the pile of Happy meal toys with Dinosaur, Teasure planet, Mulan 2, etc... but they definitely get ignored..

I know - they're in my son's toy box...

I think it's good that new characters are created now and then.

But what I think is even more important is that Iger seems to realize that the classic characters should not be ignored and just considered yesterday's news. I think he's seeing that there's a goldmine in them thar hills, and creating cheap sequels is not the only or best way to go digging for it.

Something Walt and his early successors knew full well, with the old "theatrical re-release every 7 years to expose each new generation to the classic stable of Disney films" plan that served them so well for so many decades.

It's not the quality new characters that bugs me. Those are great. It's when I see them going after and spending big bucks acquiring or creating so-so properties just to seem "fresh"...when they virtually ignore several potential sources of material they already own!!! When was the last time Mickey was really given a shot of quality fresh air? Prince and the Pauper?

And I'm not just talking about Mickey and the main players. What a hit or at least a great anchor a character like Ludwig Von Drake could be if put into the right creative hands. You could go anywhere with someone like him! Theatrically. Television. Merchandise. Contemporary. Retro. Whatever.

I remember when they spent all that time and big-money on purchasing and adapting Marsupilami for the U.S. market, while they virtually ignored a zillion other characters they already owned but refused to invest a dime in, that probably would have done better. Never mind probably. The way Marsupilami went down here in the U.S...the Keebler Elves had a bigger market share!

And what's worse...they rinsed and repeated the same types of disastrous deals several times. Never even giving their own people a chance to create new characters or inject new life into existing ones. "Let's go shopping instead!" :(

So while I'm glad to see that Iger sensed that the company had become stagnant in this area, I'm much more glad to see his comments about the current stable of characters and their value to the company. And although I do think he way overpaid for Pixar and the acquisition of Pixar might not even have been necessary, I think it bodes well for the creative side of the company.

I just think he overpaid in order to expedite what the company could have done without Pixar, if the company would have just made the commitment to revitalize the creative division with new, existing and/or "brought back" talent on it's own without Pixar.

But more important than all of the above: Just think...Opus1guy was standing not 50 feet away from Robert Iger at this very parade, when Iger made one of the biggest decisions in the history of The Walt Disney Company!

I have such an influence on people. ;)