The History of Pixar: Lucas Left the Party Early, Disney Came Late

Not even industry greats grasped CG-animation vision in the early days

In the early days, nobody got it.

As far back as the 1970s, long before they founded Pixar, Alvy Ray Smith and Ed Catmull could see the future, a future where cartoons would be rendered on computers in three gorgeous dimensions.

It took long years, though, for them to convince the world that they weren’t just hallucinating.

Smith and Catmull first joined forces on Long Island as part of a computer graphics group assembled by millionaire Alexander Schure. In 1980, George Lucas lured them to Industrial Light & Magic in Marin County, but not even he was really convinced their graphics were useful yet for visual effects, says Smith. “George Lucas looked at us as hardware,” Smith tells Variety, “but that was his mistake.”

Part of the problem, says Smith, was that computer graphics “just cost too much. The cost of computation was too high.” Moore’s Law, which holds that computing power roughly doubles every 18 months, suggested that sometime in the 1980s, they’d be able to make a movie.

In the meantime, they had to earn their keep at Lucasfilm, building graphics-oriented computers for ILM and doing their CGI experiments under the banner of general R&D.

Meanwhile, a young animator at Disney, John Lasseter, was having the same vision. He’d seen the early work on “Tron” and was convinced that this technology would fulfill Walt Disney’s dream of putting more depth into animation — the same dream that had led to the development of the famed multiplane camera decades before. He helped put together a demo film to prove his point.

“It fell on deaf eyes,” Lasseter said in a recent speech. “I was told (Disney brass) was only interested in computer animation if it could make (traditional animation) faster or makes it cheaper.”

Not long after, Catmull asked Lasseter what he thought about doing animated characters on a computer.

“Well,” Lasseter replied, “I just got fired by Disney. I got nothing else to lose. Let’s go!” So he migrated up to the Bay Area and ILM.

The team’s break came when Paramount approached Lucasfilm looking for two vfx assignments for 1982 release “Star Trek II: The Wrath of Khan,” including the eye-grabbing “Genesis” sequence that featured prominently in the film’s trailer and convinced the business that these computer graphics guys were up to something interesting.

Unfortunately for Lucas, in 1983 he needed cash for his divorce settlement. He put Lucasfilm’s Computer Division (including Pixar forebear the Graphics Group) up for sale, asking $30 million. Apple co-founder Steve Jobs offered $5 million.

At that point, Smith and Catmull approached Disney, hoping the Mouse would buy half the unit for $15 million; Jeffrey Katzenberg vetoed the deal.

Ross Perot, then part of the General Motors board, lined up Philips Electronics and GM to back an offer near Lucas’ asking price, but the deal fell apart at the last moment.

Jobs wound up acquiring Pixar at his bargain price, putting up another $5 million from his own pocket to capitalize the company, bringing his total outlay to $10 million.

At the time, the purchase was billed as the sale of Lucasfilm’s hardware division. About 40 Lucasfilm employees came along, including Smith and Lasseter. With no consensus on what to call the company, the group adopted the name Pixar after the Pixar graphics computer they had invented. Catmull became prexy and Jobs CEO — the pair are recognized by Pixar as its founders.

By the mid-1980s, right on schedule with Catmull and Smith’s estimates, computing costs had come down enough for the company to experiment with short films. They made the 90-second “Adventures of Andre and Wally B.” while still at Lucasfilm, stunning auds at Siggraph computer graphics confab in 1984.

“Luxo Jr.” followed two years later at the newly forged Pixar, snagging an Oscar nom and demonstrating that computer animation could rival classic animation in its storytelling.

And yet the shorts weren’t generating much revenue. Jobs’ own funds were dwindling, and the company had been a money pit for him.

“He would have unloaded it anytime during that dark period,” says Smith, “to anybody who would have stepped forward with $50 million.”

They started work on a commercial software package that would make their graphics tools available to the world. But by 1988, Jobs was ready to order major layoffs, especially for the animation group.

The Pixar team pitched him another short film they were developing, saying that it would be a vital sales tool for the new software package.

Jobs bit the financial bullet one more time. “Tin Toy” went on to win the Oscar for animated short — and ended Jobs’ talk of shutting down the animation group. Later, Pixar toppers would point to “Tin Toy” as the prototype for “Toy Story.”

Slowly, Pixar’s fortunes began to turn. Its software, RenderMan, was a hit from its release in 1989 and to this day remains an essential piece of graphics software. Disney, which had long eschewed CG, then enlisted Pixar to help create the Computer Animation Production System (CAPS), which moved the Mouse House away from physical cel animation, though not to 3-D CGI.

Pixar made commercials during those years, winning a pair of Clio awards, but losses mounted and layoffs followed. Smith resigned in 1991 after a falling-out with Jobs.

Not long afterward, Jobs negotiated the company’s first feature film deal. Disney backed “Toy Story” to the tune of $26 million as the first picture in a three-picture deal. It was a dealmaking coup by Jobs, but with Disney keeping all merchandising rights, the film needed to be a smash to make money.

And the path to the preem was far from smooth. On Nov. 17, 1993, a date known as “Black Friday” in Pixar history, Disney ordered production stopped, complaining of script problems. Once the story problems were ironed out, the turnaround accelerated.

A week after “Toy Story” bowed in Nov. 1995, the company went public. It was the largest IPO of the year. Jobs’ portion of the company was suddenly worth more than $1 billion.

By the time Disney bought the company 11 years later, Pixar had stolen the Mouse’s crown as the family entertainment king. Lasseter was hailed as the new Walt Disney, Catmull collected a pair of Oscars, and Jobs’ patience in keeping the doors open is being rewarded with 138 million shares of Disney stock.

“Disney could have had us for free in the ’70s,” says Smith, “and they could have bought us for $5 million from Lucasfilm, and they could have had us for $50 million after Steve bought us. They ended up paying $7 billion.”

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