January 19, 2006
Disney & Pixar -- Please, For the Children
Posted by Christine Hurt

At long last, the parents of Toy Story and Toy Story2 may make it official; the WSJ today is reporting that Disney may (finally) acquire Pixar.  I can think of many reasons why this acquisition makes perfect sense and long overdue, but here are a few:

1.  The costs of market contracting between Disney and Pixar seem to be too high, so integration will save transaction costs.  In other words, since the two don't seem to be able to achieve the same synergy through contracts, they should be part of the same firm.  (Of course, the pro-Kelo crowd would just say that Disney should be able to acquire Pixar through emineBuzznt domain because Pixar is a nut-job holdout!)

2.  Quite a bit of time passes in between Pixar movies.  I sold my Pixar stock in 1996 because no one knew when the next movie was going to be released and make some money.  The stock has obviously rebounded and Pixar has overcome some of the cyclicality of its enterprise, but being part of a larger firm could also even out those cycles.

3.  Toy Story3.  I personally promise everyone at Disney that, should there be a Toy Story3, with Buzz and Woody, my family will see it three times in the theater.  We will buy the DVD the first day it is released.  We will buy every licensed piece of plastic/piece of clothing/plush toy that is manufactured that vaguely resembles something in the movie.  We will go to McDonald's three times a week until we get every Happy Meal toy from the movie.  Get the picture?

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