Dave hollis salary at disney

The Walt Disney Studios
Amid cheers from thousands of fans, many of whom had camped out for weeks to be a part of the experience, Hollywood’s biggest stars and most powerful executives were arriving for what was billed as the entertainment event of the year—the world premiere of Star Wars: The Force Awakens. It was the early evening of December 14, 2015. Among those walking the red carpet—stretching out over four blocks of Hollywood Boulevard, which had been closed off for the occasion—was Alan Horn, chairman of The Walt Disney Studios (‘Disney Studios’), the studio behind Lucasfilm’s new film. He greeted Bob Iger, chairman and chief executive officer of parent company The Walt Disney Company (see Exhibit 1), who had just posed for some impromptu photos with several ‘stormtroopers,’ white-armored characters made famous by the Star Wars franchise, that were lined up alongside the red carpet.

The two men and their families would soon make their way to the Dolby Theatre, one of three neighboring theaters that served as the venues for the premiere. Once there, Iger would call Horn, Lucasfilm president and producer Kathleen Kennedy, director J.J. Abrams, and the main cast and crew members onto the stage to celebrate the film’s first screening. The movie, made for more than $200 million, would open for audiences across most of the world on December 16, 2015—and Iger and Horn would finally begin to find out whether their investment in the Star Wars franchise reboot was going to pay off.

Star Wars: The Force Awakens was only the latest in a string of big bets that Horn had overseen since arriving at the studio in 2012. In fact, Disney was primed to pursue what Horn called a “tentpole strategy” that revolved around at least eight big movies each year. Some came from Disney Live Action (known for Pirates of the Caribbean) and Disney Animation (which had scored a mega hit in 2013 with Frozen). But just as many big productions came from three studios that after multi-billion-dollar acquisitions now also operated under the Disney umbrella: Pixar (known for hits such as Toy Story and Finding Nemo), Marvel Studios (with its many superhero properties), and Lucasfilm (which gave Disney the rights to future Star Wars movies). In 2016, Disney planned to release twelve films, including four that had production budgets of around $200 million—Alice Through the Looking Glass, Captain America: Civil War, Finding Dory, and Rogue One: A Star Wars Story—and another four with budgets of at least $150 million.

There were significant risks involved in Disney’s strategy. In a given year, Disney Studios produced nearly twice as many tentpole movies as any other major Hollywood film studio, but fewer movies overall than all but one of its rivals. Box-office failures could be extremely costly, especially because Disney—unlike its rivals—chose not to enlist the help of financing partners. “When they don’t work, I have to wear that,” said Horn. Also, finding the right balance between pursuing existing franchises and new original concepts was difficult but critical to the studio’s long-term health. “Hollywood is littered with franchises that once seemed very promising but lost their appeal just as quickly,” remarked Horn, as he looked out over a red carpet that was buzzing with excitement. Would Disney’s tentpole strategy pay off—in the short and long run?

Professor Anita Elberse prepared this case. Research associate Jennifer Schoppe provided valuable research assistance. The case was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School, and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

Copyright © 2016, 2019 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

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The Film Industry
In 2015, the motion picture industry generated around $38 billion in theatrical revenues worldwide (see Exhibit 2 for film industry statistics).1 “In the U.S., box office grosses are essentially flat,” said Horn. “Domestic revenues have been between $9 billion and $11 billion annually for a decade, and are projected to remain in that range.” Nearly 70% of Americans were moviegoers, and the average moviegoer attended five to six movies per year. “But internationally, we are seeing strong growth,” Horn added. “China alone now has an annual box office of nearly $7 billion, with annual growth projected to be 20%.”

Film Studios
Films were produced and distributed by both ‘major’ and ‘independent’ studios. The six major studios, each owned by large entertainment conglomerates, were 20th Century Fox (a subsidiary of 21st Century Fox), Paramount Pictures (owned by Viacom), Sony Pictures (a division within Sony), Universal Pictures (owned by NBCUniversal), Warner Bros. Entertainment (a subsidiary of Time Warner)—and Disney Studios. Hundreds of independent studios, lacking access to the vast production and distribution resources that characterized the majors, also produced films. A select few smaller studios, such as Lionsgate Films, had evolved to become ‘mini-majors’ and made films that could rival the major studios’ output in their production values and audience appeal. Nevertheless, in 2015, the ‘mini-majors’ and ‘indies’ together accounted for 85% of the films produced, but only around 20% of the box office grosses (see Exhibit 3 for box-office data for selected films in 2014 and 2015).2 “In any given calendar year, upwards of 600 films are being released in the U.S. and Canada,” said Horn. “But you’ve never heard of 400 of them because a release could mean it appears in one theater, one city, for one week.”

Theatrical Exhibition and Other Forms of Distribution
Films were made available to consumers through a series of ‘release windows,’ the first typically being the domestic theatrical window in which audiences could see the film in movie theaters across America. The three largest U.S. theater chains, Regal Entertainment Group, AMC Entertainment, and Cinemark USA, together accounted for nearly 40% of the 43,000 movie screens in the country.3 “The studios negotiate with the exhibitors to determine when their films make their debut in theaters, how long they stay in, and how much each party takes from each box-office dollar that is generated,” said Dave Hollis, Disney Studios’ executive vice president of theatrical distribution.

Studios and exhibitors employed various models to determine how to split revenues, explained Hollis: “Sometimes, we get higher percentages in the early weeks of a movie’s run in the theater, and lower percentages in later weeks. In other instances, the share that we take and the share that the exhibitor takes changes each time box-office grosses exceed certain thresholds.” Hollis estimated that major studios typically kept more than half of box-office receipts in the domestic market. He added: “We negotiate two-to-four-year deals with individual theater chains, staggering when those deals start and end. We make sure they know our movie slate and why we have the expectations that we have. Each film also has a separate licensing agreement that states the conditions under which they can show the movie.”

Films were usually released theatrically in international markets around the same time. China, Brazil, and other Asian and Latin American countries had emerged strongly in recent years. “As the middle classes in those countries expand, movie-going is becoming a part of the culture, but most of those markets are still under-screened,” noted Hollis. Horn agreed that there was significant room for more growth: “They are building over 20 screens a day, but there are still only around 33,000 screens in China for 1.3 billion people.” He added: “In China, the government will not allow the release of more than 34 films each year that are not produced in partnership with or fully owned by a Chinese company. So they don’t care about a film like McFarland, USA —they want to see Marvel’s Captain America.” In international markets, 3D technology was important. “In a handful of markets, especially

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in Asia, a lot of our business is done in 3D,” said Hollis, “and from a story-telling perspective, it acts as a differentiator from what consumers can experience at home.”

After playing in theaters, films were typically released on at-home-viewing platforms, including television, DVD and Blu-ray, video on demand, online streaming, and online downloads. In 2014, consumers spent $17.8 billion across these platforms. DVD and Blu-ray sales accounted for $6.9 billion in revenues, down from a peak of $21 billion in 2004. Electronic sell-through (which included downloads on platforms such as Apple iTunes) and subscription streaming (on sites such as Netflix) reached $1.5 billion and $4 billion in revenues, respectively, in 2014.4 Consumer products such as toys and games could be another source of ancillary revenues—characters made popular by films were a key category of licensed merchandise sold worldwide.5

The Walt Disney Company
Led by chief executive officer Bob Iger, The Walt Disney Company was the world’s largest entertainment conglomerate, headquartered in Burbank, California. It employed 185,000 people across four business segments (also see Exhibit 1):

· Media networks covered cable and broadcast television networks (such as ABC, one of America’s major broadcast networks, and ESPN, the top-rated sports network), television production operations, radio networks, and radio and television stations.

· Parks and resorts included several theme parks that Disney owned and operated in the US,

such as the Walt Disney World Resort in Florida and the Disneyland Resort in California, and around the world in Hong Kong, Paris, Shanghai, and Tokyo, as well as Disney Cruise Line.

· Studio entertainment produced and acquired films and direct-to-video content (through

Disney Studios), musical recordings (through Disney Music Group), and live stage plays (through Disney Theatrical Group).

· Consumer products and interactive engaged with licensees, publishers and retailers to design,

develop, and market a variety of consumer products based on Disney’s characters and stories, and produced content for games, mobile devices, websites, and other interactive media platforms.

The Walt Disney Studios
Established as an animation studio in 1923 by Walt Disney—who created the iconic character Mickey Mouse—and his brother Roy, Disney Studios released the first ever full-length animated feature film, Snow White and the Seven Dwarfs, in 1937. It became the highest-grossing film at the time, and earned Walt Disney an Academy Honorary Award for “a significant screen innovation,” which “pioneered a great new entertainment field,” as the Academy of Motion Picture Arts and Sciences put it.6 “Everyone at Disney is proud to be a part of the heritage of Walt Disney,” said John Lasseter, the chief creative officer of Pixar and Disney Animation. “A lot of us do what we do for a living because of the way he entertained us.” In 1950, Disney Studios first ventured into live-action films.

By 2015, Disney Studios employed about 6,500 employees, and spent close to $2 billion producing films annually and hundreds of millions of dollars more distributing and marketing them (see Exhibit 4 for its output in 2014). The studio was led by industry veteran Alan Horn, until 2011 the president and chief operating officer at rival studio Warner Bros., who joined Disney in June 2012.

Horn oversaw five studio ‘labels’ that together made up Disney Studios. Two, The Walt Disney Studios Motion Pictures (‘Disney Live Action’) and Walt Disney Animation Studios (‘Disney Animation’), draw lineage from Walt Disney’s original studio and produced live-action and animated feature films, respectively. Three others were acquisitions made during Bob Iger’s tenure as chief executive officer of The Walt Disney Company: computer animation studio Pixar purchased for $7.4 billion in 2006; Marvel Entertainment, which had its roots in comic books, for $4 billion in 2009; and legendary filmmaker George Lucas’ Lucasfilm for $4.05 billion in 2012 (see Exhibit 5 for each label’s

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film output). “Bob Iger wasn’t afraid to bet heavily on great stories, great characters and great content producers,” said Lasseter. “When his tenure is over, people will point to Marvel, Pixar, and Lucasfilm as great acquisitions. Those three assets have everything to do with the creative content that powers this company.” Horn agreed: “What Bob has done required both vision and courage. I am very fortunate I get to work with these brands and develop movies with them. Collectively, those assets enable us to realize our tentpole strategy.”

Disney Live Action
Since the 1950s, Disney Live Action had produced countless hit films. Recent successes included the Pirates of the Caribbean films (of which there had been four to date), Tim Burton’s Alice in Wonderland, and most recently a live adaptation of Cinderella, as well as a range of smaller, critically acclaimed films such as Saving Mr. Banks (starring Tom Hanks as Walt Disney), Into the Woods (featuring Meryl Streep, who was nominated for an Academy Award for her role as The Witch), and McFarland, USA (starring Kevin Costner as a cross-country coach at a small-town Latino high school) (also see Exhibit 5a).

The Disney brand ruled out some films, explained Sean Bailey, president of Disney Live Action: “We speak to a family audience. We aren’t going to make horror films, and we aren’t going to make R- rated comedies.” He added: “There are many movies that I would love to make that could never be Disney films. They simply do not fit our strategy.” Horn agreed: “We have a covenant with the audience. We don’t allow sex, violence, or smoking in our movies. When you see the castle with our logo come up right before the movie starts, you may not know what you are going to see but you do know what you are not going to see.”

“One question we often ask ourselves, after noting that something can be a Disney movie, is whether it should be a Disney movie—whether it adds something,” said Bailey. “We are well aware that our brand gives us an advantage with consumers. Most movies that studios like Warner Bros. and Universal make could have very easily been made by another studio. But when you say, ‘Disney’s Beauty and the Beast,’ you know what you are going to get.” Disney Studios’ other labels had come to affect Disney Live Action’s output. “We will no longer consider a movie that has an alter ego with a cape. That is Marvel’s domain now. And we may have made science-fiction films in the past, but I doubt we would consider, say, a space opera now, as Lucasfilm is making Star Wars films and Marvel has Guardians of the Galaxy,” said Bailey. “We have to work together to effectively share resources.”

Pixar Animation Studios
The animation studio Pixar had a long history with Disney. A production partnership between the two companies led to Pixar’s first full-length animated movie, Toy Story, released in 1995. A film about toys coming alive when humans leave the room, it went on to earn three Academy Award nominations and became the highest-grossing movie of the year. In 1997, the companies amended their agreement, turning it into a ten-year, five-picture deal that specified that both parties would equally share the costs and profits from Pixar’s films—a significant improvement over the earlier deal, which gave Pixar only 10% to 15% of the profits. Each of the five pictures made during the partnership, A Bug’s Life in 1998, Monsters, Inc. in 2001, Finding Nemo in 2003, The Incredibles in 2004, and Cars in 2006, was a box-office success. Finding Nemo, which revolved around a clownfish named Marlin who, along with a blue tang named Dory, searches for his son Nemo in the waters off Sydney, Australia, was the biggest hit, earning nearly $940 million at the box office globally.

“We chose to pursue stories that lend themselves well to the state of the technology at any given time,” said Lasseter, who not only served as Pixar’s chief creative officer but also directed several movies. His long-time collaborator Ed Catmull, president of Walt Disney and Pixar Animation Studios, had pioneered much of the technology used in creating the animated films with 3D graphics that Pixar had become known for. Lasseter explained: “When we made Toy Story, computer rendering was still simplistic and resulted in graphics that looked plastic-like—toys were a perfect fit for that time. And we could only animate on flat surfaces, which matched the kids’ rooms where you find toys. We needed our technology to evolve before we could make A Bug’s Life, where the main characters are ants who

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walk on an organic surface.” He added: “When I first heard the idea for Finding Nemo, I said, ‘You had me at fish.’ My brain immediately went to the 3D dimensions, light, shadows, and reflections that we would need, and those lent themselves beautifully to what we could do with our computers by then.”

Disney acquired Pixar when the agreement ended in 2006. “Pixar was really firing on all cylinders at the time,” said Horn. “John Lasseter and Ed Catmull have built a highly respected studio—they are solid gold.” Lasseter recalled the deal: “We had made only six films at the time, and yet Bob Iger was willing to pay $7 billion for us. They were successful films, but that’s a lot of money. It showed that he believed in our stories and characters, and trusted us to keep it going.” Catmull added: “Iger assured us that he would not try to interfere with our culture, which was important to us. And our people could stay where they were, in Emeryville close to San Francisco, and we could continue to operate as we did before, relatively separate from Disney.”

Pixar had produced nine more films since the acquisition. One recent movie was Inside Out, set in the mind of a young girl who has five personified emotions—Joy, Sadness, Fear, Anger, and Disgust— guiding her through life. “It is incredibly creative,” noted Horn. “Audiences had never seen anything like it.” Lasseter explained this film, too, contained a new animation challenge: “The emotions aren’t made of anything solid—they are energy. With Joy in particular, we had the idea of making her out of glowing particles, and making that believable.” Pixar’s most recent film, The Good Dinosaur, released in November 2015, was on track to generate $400 million at the box office. “Pixar has such a high bar— these guys have had fifteen hits in a row—that any film that generates less than half a billion at the box office is somehow seen as less than a hit by some people in our industry,” noted Horn. “But we love the movie.”

Reflecting on Pixar’s philosophy, Lasseter said: “We are a filmmaker-driven studio. We bet on talented storytellers. And we want to show audiences something that on one level is familiar but show it to them in a way that they have never seen before.” As of December 2015, Pixar had collected 52 Academy Award nominations and 14 wins, including seven awards for ‘Best Animated Feature Film’ since the award’s inception in 2001.

Walt Disney Animation Studios
When they became a part of Disney with the acquisition of Pixar, Lasseter and Catmull were asked to “resuscitate Disney Animation,” as Alan Bergman, president of Disney Studios put it. “Disney Animation was not in a good place, even though the company as a whole was founded on animation,” he added. Horn chimed in: “If you walk down the halls at Disney, you see posters of Snow White, Bambi, Mickey Mouse, and Dumbo. Animation is in the company’s DNA. In the 1990s, Disney Animation had a string of successful films like The Lion King. But after that they had a series of pictures that did not work—they fell into a slump.” Movies like Treasure Planet, Home on the Range, and Meet the Robinsons were both critical and commercial disappointments. Horn continued: “With Ed and John, we added creative energy, taste, and quality.”

There was some discussion about closing Disney Animation when Disney bought Pixar, recalled Lasseter. “But I fundamentally believe that a Disney Animation film and a Pixar film are different.” Catmull added: “We had both grown up with Walt Disney films, so there was also an emotional component to saving Disney Animation.” The two studios remained separate entities. “The first thing a company typically does when it acquires another company is to consolidate duplicative activities. But we decided not to do so,” stated Catmull. “We also implemented a rule that we can share ideas and technology, but we cannot do production work for each other.” He recalled one example: “The first film being made at Disney Animation after we came on board was Bolt. They were on a tight schedule and had trouble finishing the film, while Pixar had a bit of a lull. Their free people could have helped, but we said ‘no,’ because we felt it was important for the studio to say they did it themselves, without someone bailing them out.” Lasseter and Catmull had offices both at Disney Animation in Burbank in the Los Angeles area and at Pixar in Emeryville. “We have been commuting every week for 10 years,” said Catmull. “We fly down to Burbank Monday morning and later in the week we will fly back to be at Pixar.”

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The first films released by Disney Animation under Lasseter and Catmull’s leadership were Bolt in 2008 and The Princess and the Frog in 2009. “Both had been well reviewed by critics, but they were not huge commercial successes,” said Catmull. “We knew that if we could just get one hit, it would snowball,” said Bergman. “That happened with Tangled, released in 2010. That was a stunning film, of a much higher level than what Disney Animation was putting out before.” The studio built on that success with Wreck-It Ralph in 2012—and even more so with Frozen in 2013.

Inspired by Hans Christian Andersen's fairy tale The Snow Queen, Frozen told the story of a fearless princess who ventures into a mountainous landscape to find her estranged sister, after her powers have trapped their kingdom in an eternal winter. Grossing nearly $1.3 billion at the box office, it became not only the most successful film in Disney Animation’s history, but also the top-grossing animated film of all time and one of the top ten highest-grossing movies ever. It won two Academy Awards, for Best Animated Feature—Disney Animation’s first ever win within that category—and Best Original Song (for Let It Go). Development of a sequel and even a Broadway musical adaptation were underway, and Frozen merchandising continued to see strong sales. “It’s hard to believe that two years ago Frozen wasn’t out there in the world—it is such a foundation for this company now,” said Lasseter.

Marvel Studios
When Disney bought Marvel Entertainment in 2009, its film studio Marvel Studios had generated a string of successes in Hollywood. Known for the large collection of superheroes and other characters from its comic books, Marvel started licensing those characters to major studios in the late 1990s. Sony held the rights to produce and distribute movies that featured Spider-Man, one of Marvel’s best-known superheroes, in perpetuity, while 20th Century Fox had a long-term license to make movies starring the X-Men and Fantastic Four. Each had spawned multiple films: three Spider-Man and two The Amazing Spider-Man films alone, released between 2002 and 2014, had grossed close to $4 billion at the worldwide box office.

Keen to finance and produce its own movies starring some of its yet-unlicensed characters and keep a greater share of the profits, Marvel took out a half-a-billion-dollar credit facility in 2005 and signed a distribution agreement with Paramount Pictures. In the next few years, that partnership resulted in Iron Man and Iron Man 2 (both starring Robert Downey Jr. as Tony Stark, and both grossing well over

$500 million at the box office), Thor, and Captain America.

When Disney bought Marvel, it had to honor the studio’s ongoing contracts with Sony and 20th Century Fox. However, it soon bought Paramount out of the final two films of its distribution deal. Those films, distributed by Disney, ended up being huge hits: Iron Man 3 and The Avengers collected

$1.2 billion and $1.5 billion in worldwide revenues. Other, newer films also performed well: Guardians of the Galaxy, for instance, was the third-highest-grossing film in the U.S. in 2014. “Instead of labeling us as the ‘Iron Man studio’ and asking us for Iron Man 4, 5 and 6, Disney has embraced what’s new and what’s next, whether it is Guardians of the Galaxy, Ant-Man, or Doctor Strange,” said Kevin Feige, Marvel Studios’ president. “I had been pitching Guardians for years. People would just look at me blank-faced. But Disney totally got it—they believed in this big space movie. It was a huge leap of faith.” Feige recalled meeting with Lasseter before deciding on the Disney acquisition offer. “That was at Bob Iger’s urging,” Feige said. “John was very clear. He said ‘Here are all the things Bob promised when we did the Pixar deal, and he has kept every single one of those promises.’”

Marvel’s films took place in what Feige termed the ‘Marvel Cinematic Universe’: “Our characters exist in a shared universe,” he said. “You can be reading an Iron Man comic and Captain America can show up. Now that we have so many of our characters’ rights, we can make that possible in movies, too.” In February 2015, Marvel partnered with Sony to relaunch the Spider-Man franchise. “Spider-Man is a Sony movie—they pay for it, distribute it, market it, and keep all the profits,” explained Feige. “But we will be the creative producers. In exchange for that, we can include Spider-Man in our universe. And Disney now holds the merchandising rights to the character.”

Since joining Disney, Marvel had released ten films that had generated $8.2 billion at the global box office, and it had another thirteen films planned for release through 2020. “People over the years have

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asked me, ‘How long is this going to last, this fad of comic book movies?,’” said Feige. “But never once have I heard anyone say, ‘How long are they going to make these movies based on novels?’” He added: “Our movies are very different from each other. If you were to just look at the Captain America franchise, you will realize there have been three very different movies. We don’t want the audience saying, ‘I’ve seen this before.’”

Lucasfilm
Lucasfilm, founded in 1971 by George Lucas, was responsible for two of the most successful film franchises of all time—Star Wars and Indiana Jones—and housed leading visual-effects studio Industrial Light & Magic. The first Star Wars film (later renamed Star Wars: Episode IV – A New Hope), a space saga with groundbreaking visual effects that told the story of Luke Skywalker, Princess Leia, and Han Solo’s fight against the Galactic Empire, was released in 1977. The film went on to become the highest- grossing film at the time, earned $775 million in worldwide box-office grosses, and received six Academy Awards. When working out a deal with 20th Century Fox to help finance the production of Star Wars and arrange distribution for it, Lucas famously accepted a lower salary in exchange for full merchandising rights. At the time, it seemed a risky move on his part—merchandising had never made much of an impact on a film’s bottom line. Star Wars changed all of that, making Lucas a wealthy man, and enabling him to take greater control over subsequent films. Five other films were made between 1980 and 2005, bringing the total box-office receipts to $4.3 billion.

The Indiana Jones franchise, starring Harrison Ford (also known for his role as Han Solo in Star Wars) as an archeologist-turned-action-hero, saw its first film in 1981, with Raiders of the Lost Ark. Lucasfilm released three more films in 1984, 1989, and 2008. Like the Star Wars franchise, Indiana Jones had a significant impact on popular culture, making its main character one of the most revered in movie history.

By the time Disney acquired Lucasfilm in 2012, Kathleen Kennedy had been appointed co-chair of Lucasfilm alongside Lucas himself. She stayed on to lead Lucasfilm as its president under Disney’s ownership. Re-launching the Star Wars franchise was her highest priority, Kennedy explained: “We are having conversations about where we go with Indiana Jones and when it might be the right time for us to create some original intellectual property. But for the moment, all our resources are focused on Star Wars.”

The plan was to release a new trilogy—Episodes VII, VIII and IX of the Star Wars franchise—of which The Force Awakens would be the first to make it into theaters. Kennedy and her team were also working on a number of standalone Star Wars films. “Star Wars is a place—it is a universe. We work inside the mythology that George has created. I think of Rogue One, which is the next film that we are doing, as a period piece inside the Star Wars universe. We can dip into the history and the future, however we want.” She added: “I think Rogue One will make the audience go, ‘Whoa, this is a very different Star Wars story.’” Meanwhile, Disney was also preparing to build Star Wars lands at its theme parks.

Making and Releasing Movies
All five studios now operated under the umbrella of Disney Studios, explained Horn: “Where the entities come together is in the greenlight decision with the approvals of budgets, in distribution, and in marketing. All that happens centrally, at my level as chairman and at that of Alan Bergman, the president of Disney Studios.” Bergman added: “Alan [Horn] knows everything about the business side, but he is also very focused on the creative materials. You can have the best studio structure and the best distribution and marketing, but if the movies are not great then all of that does not matter.”

Developing and Producing Movies
Live Action. When it came to producing live-action movies, “all the major studios structure the process in roughly the same way,” noted Horn: “It starts with an idea. Each studio has a development

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department that finds ideas: they find original screenplays, they buy books or other materials that could be the basis for a film, or they have screenplays written on their own original properties.” He continued: “Out of the funnel of ideas comes a series of potential projects that are brought to either a greenlight committee or one person that has the greenlight authority—they have the right to say ‘Yes, we are making this movie’ or ‘No, we are not.’ Usually it comes with certain conditions—that we will make the movie if we can do it for a certain budget, for instance, or that we only make it if it stars a certain actor.”

Creative executives invested a lot of time in projects before they brought them to Horn for a decision, explained Bailey. “Yesterday a writer who worked on Cinderella for us came in and pitched a Pinocchio movie. If we buy his idea, we would work very closely with him to get a script we feel comfortable with.” This would involve Disney’s creative team giving the writer extensive ‘notes’ outlining their reactions and possible solutions to issues they encountered while reading different iterations of the script. “Along the way we might have exploratory conversations with actors and directors, but normally we like to get a draft in hand that we feel great about before we talk about what filmmaker would be most appropriate,” Bailey said. He added: “One thing we do that is different from other studios is that we have a long conversation with the director about our filmmaking process. We are Disney—they have to understand that this movie will be made differently than it would elsewhere.” Once there was a plan in place and a proposed budget for the film, Bailey and his team took it to Horn. “He controls the greenlight, but that is a bit of an antiquated term,” said Bailey. “We do so much work with him before we get to the greenlight moment that we get a ‘Yes’ most of the time.”

Horn recalled an instance in which he pushed for a higher budget. “When we discussed Cinderella, Sean Bailey and his team came in and said, ‘We can do this movie for $60 million,’ thinking I would like that,” he recalled. “But I said, ‘This might surprise you but I don’t want the $60-million version of Cinderella—I want the $100-million version. This is Walt Disney’s Cinderella.’ I told them that I wanted to see her come to the ball and walk down the stairs in that blue dress and I wanted it to be magical.” Horn also had made his own suggestions on great ideas to pursue. “I have always loved Kipling’s The Jungle Book—the original collection of stories—and I don’t think audiences have seen the best way to bring those to the big screen yet. And this studio is a perfect fit for it. So shortly after I started at Disney, I proposed the idea to Sean. “Alan will never force us to make a movie that we don’t like,” said Bailey. “We loved the idea, too.” The Jungle Book was scheduled for release in April 2016.

Marvel’s development process was slightly different. “We use five-year plans that describe what movies we plan to release and why we put them in a particular order,” explained Feige. “For each individual film, we prepare a story document of 15-20 pages that contains the main story lines and the characters and the art work—basically everything except the lines and dialogue.” He added: “Given our collaborative nature, the greenlight process has never been very formal—for our process, it would be more about getting a red light, but we have not had one so far.” Lucasfilm’s Kennedy also appreciated the relatively high level of autonomy. “Creativity is driven by a point of view. If you make decisions by committee, you often get diluted outcomes.” But that did not mean that Horn and others did not weigh in on movies in development. “It is very helpful to us to have fresh eyes,” said Feige. “When someone like Alan who lives outside of the Marvel mythology reads a script, he can be tremendously beneficial. When he goes ‘What the heck does that mean?’ and I will go, ‘Don’t you remember in the sixth movie, that one guy said…’ and I will stop half way through and go ‘Oh, I got it.’”

Once a film had been given the green light, it was taken into production. “That is when we lose some of our control over the process,” said Horn. “Think of it as a ship being built. We at the studio have a lot to say as the ship is being built and prepared for launch, but once the ship is out to sea with the cast and director we are relatively out of it.” Shooting a tentpole movie could take anywhere between 75 and 125 days. Horn and other studio executives received the unedited footage shot each day, known as the ‘dailies.’ “The people in physical production are assessing if we got the shots we wanted for the money we spent, while the creative executives are looking at the performances—they

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ask themselves whether we cast the movie well, and whether we are shooting the script as it read,” said Bailey.

After filming was complete, the director edited the footage to produce a first cut. “The Directors Guild mandates that you are not allowed to interfere with them for at least ten weeks,” explained Bailey. “Then there is a big moment when the director shows you his or her cut of the movie. This is our first real opportunity to weigh in.” The creative executives provided the filmmaker with another set of notes. “Sometimes, when you and the director see things similarly, it is really easy,” said Bailey. In some cases, reshoots were necessary. “The worst is when you watch a movie and you can’t see a way out—it is just broken. That is not a fun day,” said Bailey. “The process of creativity is inherently subjective,” remarked Horn. “You might find yourself in a discussion about what a character would or wouldn’t do, and not come to any agreement.”

Iger sometimes participated in the notes-giving process. “He viewed the Star Wars dailies,” recalled Horn. “But he did not watch those of The Jungle Book, which is also a very expensive movie—the first he saw of that film was the second cut.” Kennedy added: “Bob would usually be the first to call me to give his comments on the Star Wars dailies. Both Bob and Alan were very hands on with all the creative materials we’ve developed. Sometimes we would pull them in on our conversations with J.J. Abrams— those exchanges took place throughout the filming.”

The entire production process, from pursuing an idea to having a finished movie ready for release, could take several years. Taking into account a ‘post production’ stage that was especially important for films with extensive special effects, Horn estimated that live-action movies usually took two to three years to produce (see Exhibit 6 for an overview).

Animation. The process of making animated movies could take four to six years. “It all starts with the filmmaker,” explained Catmull. “We first pick the person we think can direct an animated movie. We ask that director to come up with three ideas, and develop those ideas for up to a year before pitching them to us.” He added: “They usually plaster their artwork all along the walls—just from seeing how much space each idea takes up, you usually know which of the three movies we are going to be making.”

Lasseter approved each idea before it could move forward. Horn described his greenlight decision for Pixar in particular as “more of a formality,” pointing out that “they have been so iconoclastic, so brilliant, and so creative, that they have earned the right to decide what their next project is going to be.” Horn continued: “If they had come to me with Ratatouille, I could imagine my executive self saying ‘A rat in a French kitchen? I don’t know about this.’ Or if they had brought us Up and said that they wanted the main character to be an 80-year-old man, I can imagine I would have asked ‘Can’t he be 60?’ But they have had it right every time.”

“Every movie has had hours and hours of research. We encourage our filmmakers to not even think about the story and the characters until they have done exhaustive amounts of research,” explained Lasseter. “They have to go outside,” agreed Catmull. “For Ratatouille, the team went into the best restaurants in France and did work in their kitchens.” After those research trips, the filmmakers started to “lay out the arc of the story,” as Catmull put it. “We bring in screenwriters to help the director create a script. When we get to about the fourth draft, we start to release ideas for production, and bring in the artists who can figure out how the characters are going to be animated and what the look of the film will be.” Using special software, animators then created scenes by manipulating three-dimensional models of characters, props and sets, and adjusting lighting and camera angles (also see Exhibit 6)—a stage of the process that usually took at least 18 months.

Lasseter and Catmull looked at each film in production every twelve weeks. “At Pixar, we have a peer group called the creative ‘brain trust.’ At Disney Animation, it is called the ‘story trust.’ These are made up of directors, heads of story, writers, and others involved in the creation of our films—we are members of that team, too. We get together as a group to look at each film,” said Lasseter. “Sometimes we rip things apart and start over completely.” Catmull gave an example of how the groups were helpful: “We were working on Inside Out, and found that there was something wrong with the tone of

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the movie. The main character, Joy, appeared to be selfish. We couldn’t get our heads around what to do. We showed the movie to the story trust and they found the fundamental flaw. So we went back to the drawing board late in the process and made some small changes which dramatically affected the tone of the film.”

Lasseter and Catmull had, at both Pixar and Disney Animation, sought to foster a culture in which “there was no hierarchy and there were no mandatory notes,” as Lasseter described it: “We don’t want layers of executives giving notes that filmmakers have to address. And if I say something that a filmmaker doesn’t like, they should feel empowered to say something back.” At the same time, Lasseter made sure that Iger and Horn were involved throughout the process. “They don’t see every single screening because I want to use them as fresh eyes. But they have had a profound effect on every movie.” He added: “A lot of what Bob has to do on a daily basis in his role as chief executive officer can’t be fun. I imagine that seeing how our movies come together and providing notes on them is the highlight of his day. I love him staying involved.”

Over the years, the costs involved in making animated movies had gone up substantially. “We made Toy Story in the 1990s with 120 people and it cost $30 million to make. The Good Dinosaur, Pixar’s latest movie, was made with 300 people and had a production budget of $200 million,” said Lasseter. “We work very hard to stay within budget. But sometimes a story is not working and you have to start over. It will add to the budget but it is worth it—the movie has to be good.”

Distributing and Marketing Movies
Disney Studios’ distribution division worked with exhibitors ahead of a movie’s release to secure screens in theaters (see Exhibit 7 for an example of the domestic theatrical run for one of Disney Studios’ recent tentpoles, Maleficent). “We are a sales organization that puts movies into theaters in more than seventy countries,” said Hollis. “Bob Iger has assembled a group of companies that allowed us to build the best slate of upcoming film content in the history of the movie business—that helps us,” he said. “International exhibitors are big fans of each of our brands because they have pull in the marketplace. In that respect, Disney has an