Lawrence Levy, former Pixar CFO, discusses his experience building the company.
Pixar went from a scrappy startup to a proven leader in the entertainment industry, producing Toy Story, A Bug’s Life, Finding Nemo and other animated megahits. One of the men tasked with building the company and taking it public was Lawrence Levy, whom Steve Jobs invited on board to serve as chief financial officer. Jobs had purchased a computer graphics operation from filmmaker George Lucas in the mid-1990s and re-imagined it as Pixar. Levy writes about his experiences with Jobs and the company in his book, To Pixar and Beyond: My Unlikely Journey With Steve Jobs to Make Entertainment History. He recently appeared on the K[email protected] show, part of Wharton Business Radio on SiriusXM channel 111 to talk about what he learned along that journey.
An edited transcript of the conversation follows.
[email protected]: What made Pixar work so well at the outset and got this company going?
Lawrence Levy: Well, that took a while. At the outset, they were honing this creative process and honing their technology over a long period of time, but it had never really come together. They had tried to make different products, different technologies, so they were like an amazing technology without a market. That was what I found when I started there.
[email protected]: The company was really struggling at the start?
Levy: The company had basically burnt through $50 million of investment, and when I arrived there in early 1995, the shortfall in the monthly payroll was being paid out of Steve Jobs’ personal checkbook. That’s a company that was struggling, certainly financially.
[email protected]: Pixar has transformed the industry, wouldn’t you agree? We’re at a point now that if we don’t see five animated films a year coming out of Hollywood, then it’s a down year?
“When I arrived there in early 1995, the shortfall in the monthly payroll was being paid out of Steve Jobs’ personal checkbook.”
Levy: I do, I think so. I liken Pixar to what the Disney company did in the late 1930s, early 1940s, where they transformed film and entertainment with traditional animated feature films. Pixar did it again by transforming the whole field of animated feature films by using the medium of computer animation to tell new kinds of stories.
[email protected]: What did you learned from working there that you still carry in your professional or personal life?
Levy: I worked there in different capacities for about 12 years. There were many lessons. I will give you one example. When I got to Pixar, I am fearful as business person because I see these films are taking four, four-and-a-half years to make. I’m like, “My goodness me, we better shorten that. Let’s make these films in three years,” and that’s a way to increase our profitability. I had the feeling that we should shorten the cycle. By the time I left Pixar, I was like, “I have no idea how we can get one of these made in four years.” The reason for that is how much the creative process takes. I learned a whole different kind of respect for what it takes to do great work and how long it takes and that you can’t rush it.
[email protected]: Steve Jobs wasn’t that present within the company when you joined. This was post-first run with Apple and before that secondary run with Apple, correct?
Levy: That’s correct. This is one of the challenges that we faced because he was a little like an absentee landlord. He owned the company, but he was never there at the company. The company had built its own kind of culture, and they had quite a lot of fears about what he might do if he became more involved.
“Nobody understood Pixar as an entertainment company, not even Pixar.”
[email protected]: Toy Story started something for this company. But there had to be something within Pixar, not just the films, that really turned this entity around and got it rolling.
Levy: There were a few things. First of all, it was focusing the company. When I got there, it was doing a whole bunch of different things: selling software, selling animated commercials, developing short films and making a feature film. One thing that it did was drop everything and focus only on the feature films. Then, it was basically the coming together. Making these kinds of products requires all kinds of different forces. Creative, technical, business production. Pixar mastered the art of harmonizing all of those different forces so that they function together instead of against each other.
[email protected]: The company is a subsidiary of Walt Disney Pictures. The relationship with Disney was there pretty much throughout, correct?
Levy: Yes. The relationship with Disney was on two levels. It was really interesting. On the creative level, it was a great relationship. The collaboration between the story tellers at Pixar and their mentors at Disney in the early days was great. But at the business level, the level of the contract and the agreement, there was a lot of tension in the relationship. So, we had this multi-leveled kind of relationship to manage.
[email protected]: In terms of deciding to put the company public, what were the challenges that you faced as CFO. Pixar was in an industry that didn’t understand what the company was trying to do, correct?
Levy: That’s right, and there were several challenges. Nobody understood Pixar as an entertainment company, not even Pixar, by the way. That was a sort of a change that had to happen throughout. And nobody really ever successfully created an independent animated feature film company. Even Disney over the years had long, long ago diversified away from just animation. The third problem is that the nice, smooth curve of growth that investors like to see in the animation business just isn’t likely to be there. It’s a very up-and-down kind of revenue stream. You have to get Wall Street and investors accustomed to that.
[email protected]: Even with the success of Toy Story, there had to be apprehension about whether Pixar would be able to pull off a next great film?
Levy: Oh, there was. There was a huge amount of speculation. The release of Toy Story was an amazing moment, but it was the release of A Bug’s Life, which is Pixar’s second film and a big hit. Sometimes it gets forgotten about a little bit because that’s the film that kind of showed that we could do it again.
[email protected]: If you think about the scope of all of the films Pixar has done, A Bug’s Life may be down on the list.
Levy: In terms of maybe pure box office commercial, maybe it doesn’t get as much play as Nemo or The Incredibles. But in the history of the company, it was a moment when you could say, “Hey, we’ve done this twice now. There’s something really serious going on here.”
[email protected]: You said the production schedule was something that you were nervous about in the early days. “Good things happen to those who wait” is the old line. You had to believe that because you weren’t