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Pixar Myth No. 1: Steve Jobs Bought Pixar from Lucasfilm

No, he didn't. See the founding documents. Not even close. A new spinout corporation from Lucasfilm, called Pixar, was capitalized with $10 million from Steve Jobs. Pixar paid $5 million of this to Lucasfilm for exclusive rights to the technology developed by the team while at Lucasfilm (exclusive except that Lucasfilm could continue to use it too). That was not a "buy" of Pixar. It was a "buy" of technology rights, and it was a "buy" by Pixar not Steve. The other $5 million was used to actually run the new company. Steve Jobs was the investor, pure and simple. Again, see the founding documents. Ed Catmull and Alvy Ray Smith were the management of Pixar. Steve owned 70% of the new company, the management and employees the other 30%. Ed, Alvy, and Steve were the board of the corporation. Again, this was not a "buy" by any stretch of the definition. The implication of "buy" is to "own and run." The implication of "invest" is to own an interest in and let managers (ultimately responsible to the board) run. Pixar was of the second type. Use of the term "buy" is a marketing ploy to make it seem that Steve was the single inspired genius who had all the ideas of Pixar and made it work. That's not how it worked. Not even close.

Over the course of about five years (while waiting for the price of computing movies to drop sufficiently via Moore's Law), Pixar ran out of money several times. Each time Steve, to avoid the perception (and reality) of failure after having been ousted from Apple, put more capital into the company in exchange for more of the equity owned by the employees. Eventually, by about 1991, he owned 100% of Pixar at a total investment of $50 million. This was still not a "buy" by any definition, unless the several restructurings where the employees lost equity are interpreted as a buy from the employees of Pixar (not from Lucasfilm). About 1994 Steve became CEO of Pixar and owned it all by then. THEN it could be said truthfully that he "owned and ran" Pixar, but that was eight years after Lucasfilm. Ed Catmull was, for nearly all of that eight years, the head of Pixar's management; he ran Pixar, Alvy departing in 1991 to found and run another company.

The myth is partly Pixar's own causing. The original Pixar news release says "Steven P. Jobs and Pixar employees buy Pixar." This is already wrong, and it got worse because journalists quickly dropped the "and the employees" part of the headline. (Drop the "Steven P. Jobs and" part of the headline to see how strangely it is worded.) The opening statement of that press release said, "Pixar, the computer graphics division of Lucasfilm Ltd., announced today that it has been acquired by Steven P. Jobs and the employees of Pixar." An early headline from 8 Feb. 1986 (Pixar was born 3 Feb. 1986) from the Los Angeles Times is "Jobs Acquires Lucasfilm's Graphics Unit." In the opening paragraph it states that "Lucasfilm Ltd. has sold its computer graphics division to Steven P. Jobs, co-founder and former chairman of Apple Computer, and the division's employees." The "employees" part of that statement is easy to miss and nearly always has been. In fact, as stated the entire statement is incorrect. There continued to be a computer graphics division at Lucasfilm after Pixar's spinout, and as already mentioned the purchase was of technology rights. The Wall Street Journal of 10 Feb. 1986 has it almost right in an item titled "Jobs Buys Majority Stake in Former Lucasfilm Unit," which states, "Steven P. Jobs, former chairman and co-founder of Apple Computer Inc., said he bought a controlling interest in Pixar, formerly the graphics computer division of closely held Lucasfilm Ltd., San Rafael, Calif." The San Francisco Chronicle of 8 Feb. 1986 reports it almost exactly the same way. Variety of 11 Feb. 1986 has it most closely in an item titled "Lucasfilm Ltd. Spins Off the Last Segment Of Its Computer Division," which states, "Lucasfilm Ltd. has spun off the last remaining segment of its computer division, selling a majority interest in its Pixar computer graphics division to former Apple Computer Chief Steven P. Jobs for an undisclosed sum." 

Here's an accurate statement of the truth that avoids the ambiguous term "buy": Steve Jobs capitalized Pixar, a spinout corporation from Lucasfilm's computer graphics division, with $10m of which Pixar immediately paid $5m to Lucasfilm for an exclusive right to the technology it had developed at Lucasfilm. Jobs took 70% ownership of the corporation in exchange for his cash investment and the employees 30% for their intellectual investment. Jobs, by right of his majority ownership became chairman of the board. Ed Catmull and Alvy Ray Smith, the second two largest and equal shareholders, were the other two members of the board. Ed, President, and Alvy, Vice President (later Executive Vice President), were the management.[1]

[1] See organization chart of Pixar, dated 31 Dec 1986. Ed and Alvy manage roughly half of the company each.