Wednesday, October 09, 2013

Pixar Canada and Money

I don't for a minute buy the official reason for shutting Pixar Canada down.  No other part of the Disney empire is concerned about having everything under one roof.  Certainly, Disney TV animation had no problem having Planes produced overseas, and if Pixar was having problems with the Vancouver facility, there are people within Disney who could easily troubleshoot any problems.

There are several potential reasons why the facility is shutting down, and they all relate to money.  As Disney is a public company, it reports its earnings quarterly.  It always makes a profit, the only question is how much?  If there are money losers for a quarter, the only way to compensate for that is to be making profits elsewhere in the company or to cut costs.

It's possible that the failure of The Lone Ranger, forcing Disney to write off up to $190 million,  may be one of the things motivating Pixar Canada's closure.  That money has to be made up somewhere, and closing a studio will certainly cut costs.

Another possibility is the delay of The Good Dinosaur.  Having replaced the director, the film is now delayed from it's original release date.  That means that Pixar's revenues will be less than expected due to the delay.  Again, a way to compensate for that is to cut costs.

Variety claims that that British Columbia's tax credits are not as lucrative as those offered by Ontario and Quebec.  While British Columbia may no longer seem lucrative enough to warrant Disney's presence, their tax credits have not changed so far as I know.  Whatever discount Disney was receiving before is still in place, so I doubt that tax credits were a big part of the decision.

Finally, there is the difficulty of putting a revenue figure on the short films that Pixar's Canadian studio made.  If a short is in front of a feature, how much of the box office can be attributed to the presence of the short?  If a short is an extra on a Blu-ray, how many more units are sold due to the inclusion of the short?  When the short shows up on TV, what part of the ratings can be credited to the short?  What percentage of sales of Toy Story merchandise can be attributed directly to the existence of the shorts?

When costs can be figured precisely but revenue cannot,  the costs carry more weight on a balance sheet. 

Note that none of the above reasons have anything to do with the work produced by the studio or the competence of the staff.  That's the tragedy of it.  A bean counter, charged with projecting profits for the quarter, decided that closing the studio was a good way to goose the numbers.  The layoffs are just collateral damage.  Robert Iger's job is to maintain the profits and the stock price.  Animation is just a means to that end and not necessarily the best one either.  A hundred artists are a tiny percentage of the tens of thousands of people who work for Disney, and their livelihoods pale beside the needs of shareholders and executives. 

Disney marches on.  Just don't get in the way.

3 comments:

Christopher Sobieniak said...

I suppose I had every right to say no whenever someone like my family members said I should've worked for Disney (if I knew what BS would happen along the way).

JPilot said...

http://www.thelocationguide.com/blog/2013/06/ng-filming-incentives-british-columbia-appeals-to-ontario-and-quebec-for-filming-incentive-co-operation/

I think the difference matters in the big studio accountants' Moneyball game.

Anonymous said...

Do you think things could change with the next CEO? A more creative-minded CEO?