Steve Jobs

The wackiest piece of serendipity was “The Love Lounge.” One of the animators found a small door on the back wall when he moved into his office. It opened to a low corridor that you could crawl through to a room clad in sheet metal that provided access to the air-conditioning valves. He and his colleagues commandeered the secret room, festooned it with Christmas lights and lava lamps, and furnished it with benches upholstered in animal prints, tasseled pillows, a fold-up cocktail table, liquor bottles, bar equipment, and napkins that read “The Love Lounge.” A video camera installed in the corridor allowed occupants to monitor who might be approaching.

Lasseter and Jobs brought important visitors there and had them sign the wall. The signatures include Michael Eisner, Roy Disney, Tim Allen, and Randy Newman. Jobs loved it, but since he wasn’t a drinker he sometimes referred to it as the Meditation Room. It reminded him, he said, of the one that he and Daniel Kottke had at Reed, but without the acid.

The Divorce

In testimony before a Senate committee in February 2002, Michael Eisner blasted the ads that Jobs had created for Apple’s iTunes. “There are computer companies that have full-page ads and billboards that say: Rip, mix, burn,” he declared. “In other words, they can create a theft and distribute it to all their friends if they buy this particular computer.”

This was not a smart comment. It misunderstood the meaning of “rip” and assumed it involved ripping someone off, rather than importing files from a CD to a computer. More significantly, it truly pissed off Jobs, as Eisner should have known. That too was not smart. Pixar had recently released the fourth movie in its Disney deal, Monsters, Inc., which turned out to be the most successful of them all, with $525 million in worldwide gross. Disney’s Pixar deal was again coming up for renewal, and Eisner had not made it easier by publicly poking a stick at his partner’s eye. Jobs was so incredulous he called a Disney executive to vent: “Do you know what Michael just did to me?”

Eisner and Jobs came from different backgrounds and opposite coasts, but they were similar in being strong-willed and without much inclination to find compromises. They both had a passion for making good products, which often meant micromanaging details and not sugarcoating their criticisms. Watching Eisner take repeated rides on the Wildlife Express train through Disney World’s Animal Kingdom and coming up with smart ways to improve the customer experience was like watching Jobs play with the interface of an iPod and find ways it could be simplified. Watching them manage people was a less edifying experience.

Both were better at pushing people than being pushed, which led to an unpleasant atmosphere when they started trying to do it to each other. In a disagreement, they tended to assert that the other party was lying. In addition, neither Eisner nor Jobs seemed to believe that he could learn anything from the other; nor would it have occurred to either even to fake a bit of deference by pretending to have anything to learn. Jobs put the onus on Eisner:

The worst thing, to my mind, was that Pixar had successfully reinvented Disney’s business, turning out great films one after the other while Disney turned out flop after flop. You would think the CEO of Disney would be curious how Pixar was doing that. But during the twenty-year relationship, he visited Pixar for a total of about two and a half hours, only to give little congratulatory speeches. He was never curious. I was amazed. Curiosity is very important.

That was overly harsh. Eisner had been up to Pixar a bit more than that, including visits when Jobs wasn’t with him. But it was true that he showed little curiosity about the artistry or technology at the studio. Jobs likewise didn’t spend much time trying to learn from Disney’s management.

The open sniping between Jobs and Eisner began in the summer of 2002. Jobs had always admired the creative spirit of the great Walt Disney, especially because he had nurtured a company to last for generations. He viewed Walt’s nephew Roy as an embodiment of this historic legacy and spirit. Roy was still on the Disney board, despite his own growing estrangement from Eisner, and Jobs let him know that he would not renew the Pixar-Disney deal as long as Eisner was still the CEO.

Roy Disney and Stanley Gold, his close associate on the Disney board, began warning other directors about the Pixar problem. That prompted Eisner to send the board an intemperate email in late August 2002. He was confident that Pixar would eventually renew its deal, he said, partly because Disney had rights to the Pixar movies and characters that had been made thus far. Plus, he said, Disney would be in a better negotiating position in a year, after Pixar finished Finding Nemo. “Yesterday we saw for the second time the new Pixar movie, Finding Nemo, that comes out next May,” he wrote. “This will be a reality check for those guys. It’s okay, but nowhere near as good as their previous films. Of course they think it is great.” There were two major problems with this email: It leaked to the Los Angeles Times, provoking Jobs to go ballistic, and Eisner’s assessment of the movie was wrong, very wrong.

Finding Nemo became Pixar’s (and Disney’s) biggest hit thus far. It easily beat out The Lion King to become, for the time being, the most successful animated movie in history. It grossed $340 million domestically and $868 million worldwide. Until 2010 it was also the most popular DVD of all time, with forty million copies sold, and spawned some of the most popular rides at Disney theme parks. In addition, it was a richly textured, subtle, and deeply beautiful artistic achievement that won the Oscar for best animated feature. “I liked the film because it was about taking risks and learning to let those you love take risks,” Jobs said. Its success added $183 million to Pixar’s cash reserves, giving it a hefty war chest of $521 million for the final showdown with Disney.

Shortly after Finding Nemo was finished, Jobs made Eisner an offer that was so one-sided it was clearly meant to be rejected. Instead of a fifty-fifty split on revenues, as in the existing deal, Jobs proposed a new arrangement in which Pixar would own outright the films it made and the characters in them, and it would merely pay Disney a 7.5% fee to distribute the movies. Plus, the last two films under the existing deal—The Incredibles and Cars were the ones in the works—would shift to the new distribution deal.

Eisner, however, held one powerful trump card. Even if Pixar didn’t renew, Disney had the right to make sequels of Toy Story and the other movies that Pixar had made, and it owned all the characters, from Woody to Nemo, just as it owned Mickey Mouse and Donald Duck. Eisner was already planning—or threatening—to have Disney’s own animation studio do a Toy Story 3, which Pixar had declined to do. “When you see what that company did putting out Cinderella II, you shudder at what would have happened,” Jobs said.