How They Started (5 page)

On the heels of the Madden success, EA went public in September 1989, netting $8 million for the company and more for its investors. The IPO (initial public offering) gave EA a valuation of $84 million. Sales that year were $63.5 million, and profits were $4 million.

As EA was enjoying its successful IPO, a glimmer of hope appeared on the game-console horizon. Nintendo had a successful 8-bit game machine over the previous few years which, like the Atari before it, EA mostly ignored. But now, the more robust, 16-bit Sega Genesis console was coming to America. Trip was determined to turn it into a gold mine.

There was a major problem, though: it wasn’t known exactly what machine Sega would bring to the States. EA designers obtained a Japanese Sega console, in hopes the US machine would be identical. One big fear was that for the US market, Sega might implement a security “chip” on its games, a feature Nintendo employed.

In analyzing the Sega machine, EA’s software designers found it used the identical 16-bit microprocessor the team was familiar with from its Sun workstations, as well as Apple’s Lisa and later models. Taking the gamble that a security chip wouldn’t be introduced and torpedo the effort, EA moved forward to reverse-engineer game designs for Sega’s console based on the team’s knowledge of the microprocessor.

While this was in process, Trip also actively contacted other software design studios to offer EA’s help in creating games without Sega’s official blessing. At the same time, Sega was calling on Trip to negotiate a license agreement. But Trip didn’t want to pay through the nose for the right to be an official Sega licensee. He put the word out that EA would release its games with or without a license agreement with Sega.

“I was rope-a-doping them,” Trip recalls, “being really polite, pretending to show some interest—then telling them what I didn’t like about their agreement.”

The situation came to a head as May 1990 loomed. EA planned to unveil its Sega games at the Consumer Electronics Show that month. Sega caught wind that EA was setting itself up as an alternate channel for dozens of other Sega game producers. This idea terrified the Japanese firm, and then-chairman David Rosen was deployed to get Trip in line.

“Rosen read me the riot act and told me there’d be a big scandal and a lawsuit if we released the games without a license,” Trip says. “But they were much more willing to make a deal than I realized, because they wanted this problem to go away.”

On the eve of CES, a favorable licensing agreement was finally hammered out after a round-the-clock negotiation session between Trip and Sega’s attorney. Instead of paying the $8 per unit Sega wanted, EA would pay just 40 cents. The deal would be a bonanza for both sides—EA’s games helped bolster Sega’s market share in the US, and the alliance gave EA a huge market for product at a low fee.

Whereas Nintendo didn’t allow any one producer to release more than five games a year, EA was able to introduce 40 games for Sega in the next two years, skyrocketing the company’s revenue. Another 23 games would come from independent studios affiliated with EA. Nintendo introduced a 16-bit machine the following year to compete with Sega, and allowed developers to adapt existing games for the new system, opening up another major revenue channel for EA. By the end of 1993, EA’s market capitalization soared to $2 billion.

At first glance, Pixar seems an almost magically successful company.
It’s cranked out an unprecedented, unbroken string of hit animated movies:
Toy Story, A Bug’s Life, Toy Story 2, Monsters Inc.,
Finding Nemo, The Incredibles, Cars
and many more. It’s hard to imagine, but the company that is now Hollywood’s most reliable mega-hit factory faced a grueling, 10-year climb to success.

Pixar’s founders faced a daunting obstacle: when the company started, their dream—to create a full-length, animated feature entirely on the computer—was simply impossible.
The technology did not yet exist.
It took a few strokes of luck, a very generous benefactor, and the combined talents of two of the founders to keep the company alive and to build the technology needed to make the first computer-animated film.

Pixar grew out of a division of
Star Wars
creator George Lucas’s Lucasfilm production company. An early employee of the Computer Division was Ed Catmull, a computer graphics enthusiast and 1974 PhD graduate of New York Institute of Technology, then the cutting-edge hotbed for advances in the field. Ed was excited by computer graphics’ potential for use in animation.

In the early 1980s, the Division worked on solving some of the technical challenges of animating objects on the computer, such as eliminating the jagged edges of computer-mapped objects, making realistic shadows, and creating lifelike “motion blur” as objects passed across the screen. There were hardware problems, too, as computers didn’t yet have the power and speed required to quickly process or “render” images. The Division developed useful tools for conquering these problems, including the software Renderman, which quickly became the industry standard.

Ed was looking for an animator who would bring the new tools to life. At the same time, a Disney animator was looking for a more visionary company where he could explore computer animation.

John Lasseter had wanted to be a Disney animator from childhood, and studied under the studio’s top animators at California Institute of the Arts, where he won two student Academy Awards®. He was quickly hired by Disney and worked on films including
The Fox and the Hound
, but was frustrated in his efforts to sell the tradition-bound studio on the merits of three-dimensional computer animation. Minutes after pitching then-studio head Ron Miller his idea for a 3-D animated version of the popular children’s book
The Brave Little Toaster
, John was fired.

While John was devastated, this was great news to Ed, who had seen John’s short-film work at computer graphics conferences. The two ran into each other at a conference aboard the
Queen Mary
in Long Beach, California, and Ed immediately asked John to do a freelance project for Lucasfilm. By 1984 John was working full-time for the Division.

Ed was looking for an animator who would bring the new tools to life. At the same time, a Disney animator was looking for a more visionary company where he could explore computer animation.

At first, John found Lucasfilm an intimidating place. “I mean, there I was, surrounded by all these PhDs who had basically invented computer animation,” John relates in
To Infinity and Beyond! The Story of Pixar Animation Studios
. “But then I realized they couldn’t bring a character to life with personality and emotion through pure movement like I could.”

Though the animators in the Division were considered a sideline to the main hardware and software teams and were installed in offices down a back hallway, they were kept on because their work helped demonstrate the Division’s tools to other animators. At 1984’s SIGGRAPH computer graphics conference, John made a splash with his first work for Lucasfilm, a one-minute computer-animated short featuring a bumblebee,
Andre and Wally B
. The work was made possible by a new high-speed computer the Division had developed that was designed for computer animation and offered more rendering speed.

With the computer’s creation, the need for a name arose. In a move emblematic of the company culture Pixar would develop, the name chosen was a collaboration. Division co-head Alvy Ray Smith, who’d grown up in New Mexico and learned Spanish infinitive verbs often end in “-er,” suggested “Pixer,” as a cool way of saying “pixel-maker.” Others countered that an “-ar” ending would sound more high-tech, and so it became the Pixar Image Computer. The name would soon serve as the company’s moniker as well.

While the Division had some small success selling the Pixar computer to customers such as movie studios and medical-imaging firms, it faced an uncertain future. Two of its best products, EditDroid and SoundDroid, which broke ground in editing film and sound had been spun off and were no longer generating income for the Division.

A tense two years followed the SIGGRAPH success, in which the Division faced repeated threats of shutdown. Ed fended off many attempts by Lucasfilm to fire key employees. He sensed it was important to keep together the brain trust he’d built.

But George Lucas was growing increasingly uninterested in overseeing a technology company where the technology was still far from commercially viable. He sensed a large capital investment would be needed for the Division’s leaders to achieve their ultimate goals. He also didn’t want to run a hardware company. Lucas wanted to sell.

Ed fended off many attempts by Lucasfilm to fire key employees. He sensed it was important to keep together the brain trust he’d built.

Alvy and Ed realized they needed to learn how to run the Division as a stand-alone business. The pair headed off to a local bookstore, purchased a “how to start a business” book, and wrote a business plan for Pixar, envisioning a 40-person company. Now, all they needed was an investor willing to pay Lucasfilm’s asking price: $15 million plus another $15 million in funding for the new company.

Time dragged on, and no buyer was materializing to buy Pixar. There was one bright spot, though: Apple Computer employee Alan Kay, who had attended the University of Utah with Ed, heard about the Division’s sale. He thought his boss, tech-wunderkind Steve Jobs, might find Pixar interesting.

Steve did. Apple was known for its groundbreaking 2-D computer graphics. Initially, Steve envisioned that Apple would buy Pixar and apply the team’s talents to improving computer graphics. Smith and Ed declined the offer, as they wanted to continue toward their goal of using computer graphics for animated film. Turning down an apparent savior for their financial woes was a controversial move amongst Division staff that “nearly tore us apart,” Ed recalled.

As it turned out, Steve was in a power struggle with then-Apple CEO John Sculley over low sales of the first Macintosh computer—a struggle he would ultimately lose. After Steve got the ax in spring 1985, he reconsidered Pixar’s goals. Seeing the animation work the team had done, Steve was converted to their mission of creating computer-animated films.

“I ended up buying into that dream both spiritually and financially,” he recalled a bit ruefully in the documentary
The Pixar Story.

He contacted Lucasfilm again, with a plan to spin Pixar out on its own. While Pixar hung by a thread at Lucasfilm, the negotiations dragged on, leaving the team to agonize over whether Pixar had a future. It took until February 1986 to hammer out the deal.

After Steve got the ax in spring 1985, he reconsidered Pixar’s goals. Seeing the animation work the team had done, Steve was converted to their mission of creating computer-animated films.

With no other buyers on the horizon, Steve snapped up Pixar for a relative song: $5 million to Lucasfilm and another $5 million in guaranteed funding for the new company. At last, Pixar had won independence and fresh funding with which to drive toward its goal of creating feature films.

Steve might have hesitated if he had known it would be nearly a decade from the day he inked the deal until Pixar would become financially self-sustaining.

If $5 million sounds like a lot of money, it went fast at the highly technology-reliant new film-production studio. Pixar needed to both hire top animators and break new technical ground to develop the ability to create a realistic-looking, feature-length film entirely on the computer. The team was soon scrambling for ways to bring in revenue.

From Lucasfilm’s San Rafael, California, headquarters, Pixar moved to a complex in nearby Point Richmond. The building quickly acquired a look that was a cross between a college dorm and an acid trip. Animators each decorated their cubicles in themes to suit—one looked like a wooden clubhouse, another an opium den. Workers rode scooters and teeter-totters in the halls, and generally let creativity run free.