Chapter 14

A Safe Haven for Pixar

On Saturday, March 12, 2005, Bob Iger, then president of the Walt Disney Company, picked up the phone to make a few calls from his home in Bel Air, California. He called his parents, his two grown daughters from his first marriage, and Daniel Burke and Thomas Murphy, his two most important professional mentors. Then he called someone he’d only met a couple of times: Steve Jobs.

Iger had big news to share: The following day, March 13, Disney would announce that he would become the next CEO of Disney, replacing Michael Eisner. Eisner had been CEO since 1984, and had followed a great first decade with a second one that can only be described as mediocre and turbulent. By the end, he had disappointed shareholders and alienated just about every stakeholder who had a vested interest in the company. One of those was Pixar’s CEO, who disliked Eisner so much that he had publicly announced that the company would find a new distributor once its existing contract with Disney ended in 2006.

“Steve,” said Iger, “before you read it in the paper tomorrow, I’m calling to let you know I’m going to be named the next CEO of the company. I don’t fully know what that’s going to mean in terms of Disney and Pixar, but I’m calling to tell you I’d like to figure out a way to keep this relationship alive.”

There was a long pause on the other end of the line. Iger had pondered this call for several days. He knew that fixing the mess at Disney Animation was the most crucial task facing him as CEO, and he had already decided that keeping Pixar was the key to any solution. From what he’d heard, Steve thought of him as a mere extension of Eisner—and frankly, Iger, who had always been a good company man, had given him little reason to think otherwise. He’d been quoted in the press defending Disney’s position in the tortuous Pixar negotiations, and he’d never spent any real time with Steve. But now there was this long pause, and Iger was beginning to hope that, just maybe, Steve was conflicted. “Well,” he finally heard from the other end, “I think I owe you the right to prove that you’re different. If you want to come up and talk about that, then that’s what we should do.”

ONE OF THE most delightful visits of all my years covering Steve occurred early in the summer of 1999, when he invited me to see Pixar’s new headquarters and studio in Emeryville, on the Oakland side of the Bay Bridge. The animation company had been growing rapidly in the wake of its first two productions, Toy Story and A Bug’s Life, and had taken over a big lot in the middle of town, which had seen brighter days back when it was home to a slew of different manufacturers. Pixar was erecting its building on the former site of a Dole cannery.

Steve met me in the parking lot. The construction crews had left hours earlier; the only other people on the lot were two security guards. Steve directed me to go in through a side door, rather than the main doors, which were cut into the big glass wall where visitors and employees enter today. “Look up,” he said, before I opened the door. “Look up at those bricks. Have you ever seen a brick wall with so many colors? Just look at those bricks!” It was true; the bricks were, and still are, quite lovely. Each is one of twenty-four different earthy shades, from yellowish taupe to rust to maroon to chocolate brown with many more shades in between. The overall effect from a distance is of something like a subtly checkered moiré, with discolorations rippling through the surface in what seems like a totally random fashion. Except that it isn’t random at all. The bricks were manufactured by a single beehive kiln in Washington State, one that Steve’s supplier had reopened solely for the purpose of manufacturing bricks with the specific shades that Steve demanded. A couple of times, when Steve visited the construction site and saw the wall going up with a randomness that he deemed unpleasing, he had asked workers to tear down the wall. Eventually, the construction team figured out an algorithm of sorts to ensure that the bricks were distributed in a “perfectly” random pattern.

Again and again as we walked around the property, Steve delighted in both showing me a detail and explaining all the work that had gone into getting it just right. Inside the building, enormous steel girders gave off a greenish hue; they were beams from a unique mill in Arkansas, and had been varnished to achieve that extremely natural look. The workers at the mill had been told to handle them with special care; while most of their beams would be hidden within the walls of a shopping mall or skyscraper, these were never going to be covered up. The bolts holding those beams in place were of a slightly different, complementary color; Steve had me climb up a big ladder so I could get close enough to notice. Down in the atrium central lobby, the brick dome atop the cafeteria’s wood-fired oven for baking pizza, constructed with the same bricks as the exterior walls, was perfectly round, a mason’s masterpiece. Outside, youngish sycamore trees lined the long, broad path to the front door, the same kind of sycamores that line the Champs-Élysées in Paris, a city he and Laurene loved.

He was like a little kid showing me this, albeit a little kid who was hoping to convince a journalist that Fortune should devote several pages to a photo portfolio of his creation. My editors chose not to, in part because the building is not so much a jaw-dropping architectural statement. Its greatest beauty is that it is perfectly suited for its function. “It wasn’t that he was lovingly crafting a beautiful building,” says Ed Catmull. “It’s a higher thing. He was lovingly crafting a place to work in. That’s an important distinction.”

Steve’s initial design for the building was minimalist, based mostly on his particular aesthetic taste and his own ideas about how a great building can shape a great office culture. “His theory was very simple,” says John Lasseter. “He believed in the unplanned meeting, in people running into people. He knew how everybody works at Pixar, where you’re one-on-one with your computer. He had the theory of this big atrium that would be able to house the whole company for a company meeting, and that would have everything that gets you out of your office and into that center spine. It would draw you to the center, or have you crossing it, many times a day.” Steve was so set on this idea that he originally proposed that there be no bathrooms in the building’s two wings—there would be just one men’s restroom and one women’s restroom, in the central atrium. Catmull, the most masterful of the many people who had to figure out ways to manage Steve’s idiosyncratic excesses, patiently steered Steve clear of this particularly absurd example of his occasional advocacy of unrealistic means designed to achieve laudable ends. (Steve compromised and allowed bathrooms upstairs as well as in the atrium.)

Lasseter and Catmull also resisted the idea of a minimalist, glass-and-steel headquarters. It didn’t fit with either their industrial neighborhood or the rich, colorful, fantastical work being done by Pixar employees. “Pixar is warmer than Apple or NeXT,” says Lasseter. “We’re not about the technology, we’re about the stories and the characters and the human warmth.” They voiced their concern to Tom Carlisle and Craig Paine, the architects Steve had hired for the job. Carlisle and Paine hired a photographer to shoot the brickwork of the lofts in the surrounding neighborhood, and in San Francisco. Then, at the end of one of the days when Steve was working from Pixar’s Point Richmond headquarters, they laid dozens of those photos out on the table of a conference room. “He walked in and I remember him looking at all these beautiful photographs, all the details, and he walked around and around,” remembers Lasseter. “Then he looked at me and he goes, ‘I get it, I get it, you guys are right. John, you’re right.’ He got it, and he became a giant advocate for that look.”

The final result is a subtle, intuitive building. The central atrium is an enormous communal space with a first-rate cafeteria, a post office where each employee has a wooden slot for flyers, memos, personal notes, and the like, and plenty of room for informal conversations. It is bordered on the second floor by eight conferences rooms, labeled West 1 through 4 and East 1 through 4. “It’s like Manhattan,” says Lasseter. “I always hate when conference rooms get those cute names, because I don’t know where any of them are.” As movies are developed at Pixar—and there are usually four or five features and several short films in the works—the business teams allied with each film move as a group around the building, nearing the front door as their movie gets closer to its commercial release. The animators, on the other hand, don’t move. They’ve each decorated their offices to suit their own eclectic tastes: one looks like the outpost of a desert explorer; another looks like the room of a poker savant; one woman bought herself a plastic playground house from Costco and hung plastic plants in her “office,” while another created a two-story, wooden Japanese-style home with a tea service on the second floor. If you get on your hands and knees in one of the offices and press a little red button, you can crawl into the “Love Lounge,” originally a ventilating shaft that’s about five feet wide and that now sports leopard-skin wallpaper, Barry White music, and a red lava lamp. Steve signed the wallpaper: “This is why we built this building, Steve Jobs.”

“We called it Steve’s movie,” says Catmull. “This was a labor of love.” Adds Lasseter: “It took the same budget, and the same amount of time as one of our movies, and he was the director. We love it.”

Steve tried to get up to Pixar once a week. While there he met with Catmull and Lasseter, watched reels of movies in development, and huddled with folks like Lawrence Levy, the CFO, or Jim Morris, the general manager. Steve, of course, was not a movie director, nor did he try to be one. Catmull had preempted that possibility years earlier, when he wangled from Jobs a promise that he would never try to be a member of the Pixar “brain trust,” an advisory council of directors and writers and animators who weigh in on every movie as it develops. But Catmull and Lasseter did use Steve as a critic.

“One of the things we lost when Steve died was an external hammer,” says Catmull. “At some point in every film, the director gets lost in the forest. So once or twice a film, I might call Steve up and say, ‘Steve, I think we’ve got a problem.’ That’s all I would say. You never try to tell Steve what to think. I wouldn’t prep him.” Steve would drive up to Emeryville, settle into one of the small screening rooms, and watch whatever had been assembled of the movie up to that point. Then he’d offer his own critique, usually talking to the director and the whole brain trust. “Steve never said anything that hadn’t already been said by one of the other brain trust members, because they’re all really good at the storytelling,” Catmull continues. “But there is something about his presence, and he was so articulate, that he could take the same thing said by somebody else and just cut right through it. He was very careful about how he went about this. Steve would preface it by saying, ‘I’m not a filmmaker, you can ignore everything I say.’ He literally said that every time. He would then just say what he thought the problem was. Right? Only the fact that it was articulate was the gut punch. He didn’t tell them to do anything, he just told them what he thought.

“Sometimes,” Catmull says, “if it were a big enough of a gut punch he’d go for a walk with the director. Steve was this incredibly intelligent, strong-willed person who made things happen, but at the same time he enabled people. He was always big on going for walks with people. So he would take the director out on a walk, where you talked more slowly, you think through things … just talking, just a friendly back-and-forth talking. His goal was just to help them make a better movie. It always made it easier for the director to move forward. It wasn’t ever like ‘Oh, you screwed up.’ It was ‘What are we gonna do to move forward?’ The past can be a lesson, but the past is gone. He believed that.”

This kind of one-on-one mentoring was something Steve learned over time. “Early on, if somebody didn’t measure up Steve wouldn’t hide it,” says Catmull. “That kind of behavior wasn’t something I ever saw during his last ten years. Instead, he would take you off in private, and turn what could have been an embarrassing thing into something that actually became very productive and bonding. He learned; he had taken the mistakes that he made, internalized and processed them, and made some changes.”

Steve was more relaxed at Pixar than he was at Apple. “He never tried to make us like Apple,” says Catmull, “or to run us the same way.” Andy Dreyfus, a designer at Pixar who had previously worked at Apple and CKS Group, says that whenever he and his boss Tom Suiter wanted to present something to Steve, they tried to meet him at Pixar. “We were always happy when we had a Friday meeting with Steve,” Dreyfus recalls, “because Friday was the day he was at Pixar, and he was always in a good mood there.”

Week after week, year after year, Pixar provided Steve with a series of uncomplicated highs. He attended the Oscars regularly, as Pixar accumulated more and more honors. He loved showing friends preview reels from unfinished movies. “Steve was our biggest fan. Every time we did an internal reel, he would want a copy,” remembers Lasseter. “And I’d find out from people I knew, he’s showing it to every neighbor at his house. Hey, everybody—come see this! He loved it. He was like a kid.”

THERE WAS ONLY one problem with Pixar, as far as Steve was concerned, and his name was Michael Eisner.

The relationship between the two high-powered men had deteriorated since they had signed the 1997 contract in which they agreed that the companies would share billing and profits equally. There had been issues between the two companies: Steve was never satisfied with the kind of attention Pixar films got from Disney’s marketing folks, and he wasn’t impressed with the plans once they finally got developed. But things had gone well. A Bug’s Life, Toy Story II, and Monsters Inc., the first three movies on the contract, had all gotten raves from critics. And it was hard to argue with their box-office results; each had debuted at number one, and each had made well over $500 million.

After delivering Monsters Inc. in 2002, Pixar was free to start negotiations with any studio for a new distribution pact. Catmull and Lasseter wanted to continue with Disney, since the company owned the rights to all the Pixar characters they’d created, and since Pixar’s films had done so well with Disney as distributor. Steve hoped Eisner would call to open negotiations, but Eisner chose to wait him out. He believed he would be able to negotiate a better deal after the release of Finding Nemo. He’d seen two previews at Pixar, and, as he wrote Disney’s board of directors, in a memo that was leaked to the Los Angeles Times, “It’s okay, but nowhere near as good as their previous films.” Eisner, of course, was dead wrong. Finding Nemo became one of Pixar’s most beloved films and grossed $868 million around the world.

Now Steve laid out a set of aggressive terms: in return for distributing Pixar movies, Disney would get 7.5 percent of the box-office gross—and nothing else. It would have no ownership of the new characters. No ownership of the films. No DVD rights. At the same time, Steve went public with his dissatisfaction with Disney, harping on the creative excellence of Pixar versus the forgettable disasters that were being released by Disney Animation: Treasure Planet, Brother Bear, and Home on the Range.

The negotiations caused Catmull and Lasseter no end of distress. “He had stayed at the negotiating table with Disney largely for me,” says Lasseter, “because of how much I cared about the characters we had created.” As the months dragged on, things just seemed to get worse and worse. Steve believed that Eisner leaked his demands to the press in an effort to make him seem greedy. In early January 2004, things seemed to reach an endpoint: Jobs told Lasseter and Catmull that Pixar would no longer negotiate with Disney. He would not work with Eisner. Not now. Not ever. “It was the worst day of my life,” says Lasseter, who, besides facing the loss of all his old characters, was now facing the prospect that Cars, which he was just finishing up, would also belong to Disney, and to a CEO who had visited Pixar just twice since the original deal was signed. Lasseter cried as he, Catmull, and Jobs announced the impasse to the Pixar staff, and he swore that the company would never again make a movie without owning the characters.

As soon as the news went public, other studios began calling. Steve played it cool. Disney would distribute Cars regardless of a new deal, and Pixar had so much cash after all its successes that it was in no rush. While Steve dickered with other studios, Eisner began to lose the support of his own company. In the fall of 2003, Walt’s nephew Roy Disney had resigned after Eisner tried to force him off the board of directors, but only after writing a sharp and public critique of the CEO. Investors who had watched Disney’s stock lag for years were tiring of Eisner’s imperiousness. When 43 percent of shareholders voted against Eisner’s reelection to the board of directors at the company’s 2004 shareholder’s meeting, the board stripped him of his chairmanship. Eisner said he would serve out the rest of his contract, which ran through 2006, but the odds against that suddenly seemed quite high.

Steve watched all this unfold with glee, especially since his threat to take Pixar elsewhere had helped undermine Eisner. He had never had anything against Disney, after all; it was just Eisner he couldn’t stand.

When Steve returned from his postoperative convalescence in the fall of 2004, he told Catmull and Lasseter that he wanted to find a way to ensure that Pixar would be in good shape even if he wasn’t around. It wasn’t that he feared an imminent death. But as he pondered a future in which he might have to further pare down his responsibilities, he knew that Pixar would survive without him more easily than Apple. It wouldn’t be easy. Steve always believed that he, Catmull, and Lasseter worked like a three-man version of the Beatles, complementing one another’s strengths while making up for individual weaknesses. The prospect of operating without Steve made Catmull nervous. “He wasn’t a [film] director, or anything like that. It wasn’t so much the creative side that would be hurt,” says Catmull. “But I’m not really a public CEO kind of person. It’s just not who I am. So if he goes, then we are actually missing a key component.”

Pixar seemed to have three options: find a new distributor and enter into an unproven relationship; build its own distribution arm, which would have entailed a massive investment of money and people to create a service that neither Catmull nor Lasseter really wanted to manage; or stay with Disney—which in fact was not an option so long as Eisner was CEO. The choices seemed even more dire given that the first two scenarios would mean that Disney, not Pixar, would own the characters from all the movies that Lasseter and his team had created under the old contract.

Disney had the theme parks, where Pixar characters lived on in new ways. It had the proven distribution network that had successfully launched every Pixar movie. And its name was still magical for Catmull and Lasseter, who grew up dreaming of joining the great animators from Disney’s fabled past. “I knew right from the very beginning that Steve’s long-term game plan was to sell to Disney,” says Catmull, even though Steve never overtly acknowledged this to him. “I never had any question about it. He was doing all this stuff, and playing these games, but I knew that was the long-term game plan.”

For three years, Steve displayed remarkable patience as he waited out Eisner. His public attitude put pressure on the Disney CEO, since his directors couldn’t see any way to secure Pixar with him still at the helm. But behind the scenes, Steve made sure that his public ire did nothing to harm the working relationship between the companies. “We were working hard to maintain a good relationship with Disney,” Catmull remembers. “When Eisner was going through his war with Roy Disney, a book was being written, [Disney War, by James B. Stewart, which was eventually published in January 2006]. Steve said, ‘Whatever we do, we don’t talk. We don’t know what’s going to happen, so they get nothing from us for the book.’ So there is nothing that came from us, because Steve didn’t want any ill will towards us at Disney.

“With things like this,” Catmull adds, “you connect a few dots and you figure, okay, I know what this means. And then the war finally comes to an end, and they bring in Bob Iger.”

IGER’S ASCENSION WAS announced in March, but he didn’t move into the CEO job until October 1. After informing Eisner that he was going to try to repair relations with Steve, he set about doing so. One month after their first phone call, he called Steve with an idea: What if there were a way for consumers to have access to view all kinds of TV episodes, both current and past, on Macs or PCs or other kinds of devices? Couldn’t Apple do for the television industry what it had done for the music industry, and become, in essence, the retail outlet for TV? Iger said he knew the idea was fraught with complexity, but that he would love the opportunity to discuss it with Steve.

“You’re kidding,” Steve replied. Iger insisted he wasn’t. “Can you keep a confidence?” Steve asked, clearly still wary of any Disney executive. When Iger said he could, Steve told him that he was very intrigued, and that he would have something to show him in a month or two.

Iger’s call had been strategic—he thought it would help his chances if Steve knew that he, unlike his predecessor, was determined to make Disney technology-friendly. Steve was in fact impressed, and, while Iger waited to find out what Steve’s big surprise could be, the two men began to discuss a possible framework for a new film distribution deal. They couldn’t make the numbers work. At one point they considered having Disney sell back to Pixar the right to make sequels, in return for a 10 percent equity stake in Pixar. But Iger called it off. “It was a one-sided deal,” he remembers. “I’d get an announcement that the relationship is continuing, but the actual relationship wouldn’t have been good for Disney’s bottom line. We wouldn’t own the intellectual property, we’d have basically a silent ownership in Pixar, and we’d have done nothing to fix Disney Animation.”

A few weeks later, Steve visited Iger at Disney’s headquarters in Burbank. “I’ve got something to show you,” he told Iger, and pulled one of the first video iPods out of his pocket. “Would you really consider putting your TV shows on this?” he asked. “I’m up for that,” Iger replied without missing a beat. He secured the deal even faster than Steve had won Bill Gates’s investment in Apple back in 1997. Iger became CEO on October 1, and by October 5 Apple had a deal to sell downloads of Desperate Housewives, Lost, and Grey’s Anatomy episodes from the iTunes store for viewing on iPods. The two made the announcement on the stage of an Apple event a week later. “He was blown away that, one, I would even do this,” says Iger. “Two, that we could make a deal in five days without Disney lawyering it to death. Three, that I would have, I don’t know, the presence to go on his stage with Steve Jobs, even though Disney had been the mortal enemy in some ways.”

That October, Iger also asked his board of directors to allow him to explore the outright purchase of Pixar. As he recalls it, “This was my first meeting as CEO, and I hadn’t been the absolute choice of everyone in the room. I looked around and they were all a little taken aback. A third didn’t know what to say, a third were really intrigued, and a third thought this was ridiculous, but since it’s never going to happen anyway, let him go ahead.” A couple of days after the MacWorld event, Iger called Steve. “I said, ‘I’ve got a crazy idea. Maybe Disney should just buy Pixar outright.’ Steve paused, and then he said, ‘That might not be the craziest idea in the world. And anyway, I like crazy ideas. Let me think about it!’ He called me back a couple of days later.”

Iger and Steve were now speaking just about every day, and their relationship was building into one of mutual respect. Iger was pleasantly surprised by Steve’s honesty—his primary source on the Apple CEO had been Michael Eisner, who had painted a somewhat less than flattering picture. Steve, meanwhile, began to realize that Iger was smart, as well as straightforward, a combination that Steve appreciated, according to Catmull. Iger was a welcome change from Eisner, who Steve had found plenty smart but deeply political and evasive. At the very beginning of the negotiation, Iger simply laid his cards on the table. “My wife told me that the average tenure of a CEO is three and a half years,” he told Steve. “Mine will be less unless I fix Animation, and getting there goes through you. I’ve got a problem; you’ve got a solution. Let’s get this done.”

Steve asked Lasseter and Catmull to come visit him at his home in Palo Alto. When they showed up, he wasted no time dropping his bomb. “I’m thinking about selling Pixar to Disney,” he explained, before laying out the reasons he was now considering such a move. He revealed that, as part of the deal, the two of them would have to run Disney Animation as well as Pixar. “If you guys say no, we’re not going to do it. But the only thing I ask of you is that you get to know Bob Iger.”

Catmull flew down to Burbank for a one-on-one dinner with Iger. But Lasseter, who was particularly wary, asked Iger to fly up and have dinner with him at his home. So Iger flew to Charles M. Schulz–Sonoma County Airport in Santa Rosa, where Lasseter picked him up and drove him to his home near the wine country town of Glen Ellen. “We sat and talked until the wee hours,” Lasseter remembers. “We talked about the importance of Disney Animation, the importance of bringing it back. I told him all I could see was the risk of dividing my time, and he said, ‘Well, I look at it the other way. I see it as giving you a bigger canvas because I think you can handle it.’

“Then he said, ‘The number one thing is, I don’t want to change Pixar,’ ” Lasseter recalls. “He said, ‘I was at ABC for two acquisitions. The first one, with Capital Cities, was great. I learned a lot from Tom Murphy, the Cap Cities CEO. And then Disney bought Cap Cities/ABC, and everything about it was bad.’ ”

Just as Steve had, Lasseter and Catmull grew comfortable with Iger, and as they talked over the deal with Steve they came to see other benefits. Being part of Disney would mean that Pixar would be protected in ways it couldn’t as a stand-alone public company. “Our board,” says Lasseter, “did amazing due diligence. They told us that having one hit per year for a decade going forward was already built in to our valuation. And since the shareholders, whom the board represented, would always want growth, eventually that one-movie-per-year model was not going to cut it. We would have to start making television shows, or many more movies a year.” It did seem, he decided, that the best way for Pixar to cement into place the way of life it loved was to sell itself to the company it had battled for so long.

Iger did his own personal due diligence, of course. One day he flew up to Pixar, for a series of one-on-one meetings with the directors of Pixar’s next few movies. “We had only had one movie, Cars, left to distribute,” he recalls, “and people within Disney had spent months pooh-poohing the idea for the next movie, about a rat in a restaurant in Paris. So I go up to Emeryville, and for six or seven hours the directors pitch me every single upcoming movie. I see a couple of movies that they didn’t wind up making [one called Newt, and the other an unnamed Lee Unkrich project about dogs in a New York City apartment building]. I also see work in progress from Ratatouille, Up, Wall-E. Disney hadn’t seen any of this, and I went back to my guys—including Alan Braverman, the general counsel—and told them that it wasn’t even close. The richness of the creativity, the quality of the people, was so obvious. We had to do this deal.”

With Lasseter and Catmull feeling more comfortable, Steve homed in on the final details of a deal. He didn’t overreach by demanding an exorbitant premium over Pixar’s market value. Believing that Pixar might someday be purchased, investors had already overvalued Pixar with a very high market capitalization of around $5.9 billion. Steve and Iger settled on a price of $7.4 billion. They agreed that Pixar and Disney would get equal billing on every film. They even agreed to a side deal that Catmull and Lasseter had proposed: To ensure that Disney wouldn’t change the culture of Pixar, Iger agreed that his company would never change or cancel any of seventy-five items on a list of Pixar cultural touchstones that Lasseter drew up. The list protected the cereal bar in the dining room, the annual paper airplane contest, the employee car show, the right of animators to do whatever they like to their office spaces, and so on.

Iger knew that the price he had paid could not be justified by any conventional reasoning. “There wasn’t an analysis in the world that would make the deal pencil out,” he says. But he argued to the Disney board of directors that the deal had more potential than could be captured by the numbers: if Catmull and Lasseter could revive Disney Animation, and if both studios, rather than Pixar alone, were creating memorable characters, the ancillary revenue from theme parks, merchandise, and other divisions could soar. “All the way back to Walt’s time,” says Iger, “Disney has been most successful in terms of its bottom line and its reputation when animation has been strong.”

Iger also knew that many so-called experts thought he was nuts for inviting Steve Jobs to join the board of directors as Disney’s biggest shareholder. “Many people who were deeply involved in the process told me that bringing Steve in as the biggest shareholder was the dumbest thing I could do,” Iger remembers. “I won’t name names, but one of the investment bankers we used told me that. He said, ‘You’re a brand-new CEO who’s going to try to run Disney. Jobs is going to be in your life at a level that will drive you crazy. You don’t have the clout to fight that. If you want to run this company in an unfettered way, don’t do this.’ ” Iger trusted his gut. “Steve and I had talked about the fact that he was going to take all stock, and hold it. I knew there was some risk in letting him into the tent. On the other hand, I had a good relationship with him, and I felt I could benefit from having Steve Jobs around. And if for some reason it didn’t work out for me, Disney would still have Steve Jobs and that would be a great thing.”

Like many others, Bill Gates was astounded by what Steve had been able to negotiate. “When he has the upper hand, he’s good at using time,” says Gates. “You know, he would wait people out. Just look at how much of the resulting company ends up being owned by this fairly small—and yes, very high tech, very brilliant—animation studio. They end up owning a very substantial percentage of the entire Disney-ABC-ESPN entity. It’s owned by a little animation studio! That took three rounds of negotiations, and by the time the acquisition is being done, Disney is just flat on its back saying, ‘Take me.’ Because of the political dynamics of Disney at the time, they needed that win, and Steve knew they needed it.”

Selling Pixar to Disney was a singular triumph. Steve had gotten Lasseter and Catmull the corporate parent they needed for their unique institution to thrive for decades. He’d even put the two of them in a position to revive the greatest animation studio of all time, Disney. And he’d done all this by developing, in the space of less than a year, a trusting relationship, in fact a friendship, with the man who’d been the go-to executive for one of the two people he most detested. Compare this with the wary antipathy Steve displayed during the NeXT/IBM negotiations, and you realize just how much Steve had changed over the intervening years.

It was a deeply personal negotiation, one that tested both Iger and Jobs right up until the end. After both boards had signed off, the announcement was set for Tuesday, January 24, 2006. Iger flew up from Los Angeles to be with Lasseter, Catmull, and Steve in Emeryville when they announced the deal to the Pixar staff. But with about an hour to go before the announcement, Steve surprised Iger by suggesting that the two of them go for a walk around the campus. Steve had something important to tell him.

Iger excused himself for a minute to chat with Braverman, his general counsel. “I’m not sure what he wants,” Iger confessed. “Maybe he wants to get out of the deal. Maybe he wants more money.” Then Iger and Steve left the building. Steve led him to a bench in an isolated nook on the campus. They sat down, and there, he put his arm around Iger’s shoulders. Here is how Iger recalls what happened next:

He says, “Bob, there’s something really important I’ve got to tell you. I’ve got to get this off my chest with you, and it’s really important as it relates to this.”

I ask him, “What is it?”

He says, “My cancer is back.” This is January of 2006. Since the operation there’s been no hint to the outside world that he has cancer again. So, of course, I ask him to tell me more. He talks about spots on his liver, chemotherapy.… I pressed him for more details. He said, “I’ve made myself a promise that I’m going to be alive for Reed’s graduation from high school.”

So I say, of course, “How old is Reed?”

He tells me that Reed is fourteen, and will be graduating in four years. He says, “Frankly, they tell me I’ve got a fifty-fifty chance of living five years.”

“Are you telling me this for any other reason than wanting to get it off your chest?” I asked.

He says, “I’m telling you because I’m giving you a chance to back out of the deal.”

So I look at my watch, and we’ve got thirty minutes. In thirty minutes we’re going to make this announcement. We’ve got television crews, we’ve got the board votes, we’ve got investment bankers. The wheels are turning. And I’m thinking, We’re in this post Sarbanes-Oxley world, and Enron, and fiduciary responsibility, and he is going to be our largest shareholder, and I’m now being asked to bury a secret. He told me only two people know this. Laurene and his doctor. He told me, “My kids don’t know. Not even the Apple board knows. Nobody knows, and you can’t tell anybody.”

Basically, thanks.

I have to make a decision sitting on this bench with him whether I can even go through with this deal. I don’t even know. So I took a chance, and I said, “You’re our largest shareholder, but I don’t think that makes this matter. You’re not material to this deal. We’re buying Pixar, we’re not buying you. We’re going to hype the fact that you become the largest shareholder, but that’s not how you value the deal. You value the deal on the assets of Pixar.”

So we announce the deal.

The two men walked back into the building, the one that Catmull and Lasseter would name the Steve Jobs Building after his death. Iger had just sworn himself to secrecy, but he felt he had to tell Braverman. He felt he needed a second opinion. Braverman quickly agreed that Disney could go ahead with the deal. Steve went off to find Lasseter and Catmull and brought them into his office. He put his arms around the two of them. As Catmull explains, “He looked at us and said, ‘Are you guys good with this? If you say no, I’ll send them away right now.’ And we both said we were okay, and Steve just started weeping. We just held each other for the longest time. He loved this company.”

After Steve and Iger signed all the papers, the four men walked out into the atrium to tell the staff. Rumor of a deal had leaked out the day before, but the employees were nonetheless shocked when Steve confirmed that Pixar was in fact being sold to Disney. “The problem was that Ed and I had gone through this three-month journey of getting to know Bob Iger, doing our due diligence, and eventually realizing this was the right decision to do,” Lasseter recalls. “But everybody else in the company was in the same place we had been when Steve first mentioned the idea to us, of ‘How can you do this?’ Standing up in front of them in that moment was very hard. This gasp went through the crowd, like, ‘Oh my God.’ I’ll never forget [A Bug’s Life producer] Katherine Sarafian sitting down right in the front, just weeping when Steve said it.”

IGER TOLD TWO other people about Steve’s cancer. That night he told his wife, the television journalist Willow Bay. A day later he let Zenia Mucha, Disney’s communications chief, in on the secret. Steve’s cancer recurrence wasn’t publicly revealed until 2009, when he finally had to take another medical leave from Apple to get a liver transplant. “In that three-year period,” says Iger, “I always knew exactly what was going on with Steve medically. He and I would talk all the time, and since I kept things secret he confided in me. I knew about the trips to Rotterdam, or Amsterdam, and heard about the radioactive receptors that would attach themselves to cancerous cells.”

Before the deal had been announced, Steve had talked to Laurene about revealing his secret to Iger. They both felt that it was the right thing to do, given the magnitude of the sale. Their discussions had revolved around a single question: Could Steve really trust Iger to keep the secret? Steve told her they could. “I love that guy,” he told Laurene.