By Summers, Nick
Newsweek , Vol. 158, No. 15
Byline: Nick Summers; Nick Summers is a senior writer for Newsweek covering media.
Ousted from Apple, Jobs looked to moviemaking for salvation--and nearly bankrupted himself in the process.
Computers didn't make Steve Jobs a billionaire--toys did.
On Nov. 22, 1995, Toy Story--the world's first fully computer-animated film--opened to critical acclaim and $29 million in box-office receipts. One week later, Pixar, the studio that created the movie and that many had written off just months before, went public. It was the biggest IPO of the year and meant a billion-dollar windfall for Jobs.
More than that, it gave Jobs back his mojo.
A decade earlier, he had been ousted from Apple. Wounded and restless, he paid $5 million to filmmaker George Lucas for the rights to his small but intriguing animation division and put up another $5 million for capital. Jobs took a 70 percent stake. The new company was called Pixar--and it would take another nine years before it came into its own, in the process reconfirming Jobs's genius and turning the prince of Silicon Valley into a Hollywood hero.
While most of Jobs's products and businesses--Apple and the Macintosh; NeXT Inc.; the iPod, iPhone, and iPad--bore their father's DNA, Pixar was always different. Like Jobs himself, Pixar was adopted; he bought the company when it was seven years old, when its own culture had already begun to jell. Over the years, Jobs would infuse Pixar with many qualities, but the company was never quite his, culturally, making his influence there a sort of nature-vs.-nurture case study of what it means to be a Steve Jobs project.
Pixar was born in 1979 as Graphics Group, a division of Lucasfilm, after Lucas sensed the potential of 3-D computer animation and lured several of the new medium's visionaries from the New York Institute of Technology. In Lucas, the group found a colorful but patient sponsor, one who prepared them well for the arrival of Jobs in 1986.
But trouble began immediately. Because the computational horsepower necessary to create a feature-length animated movie was still years away, Pixar needed to find other reasons for existing. Jobs felt the answer lay in hardware manufacturing. That, too, was a fraught business, with high overhead and complex supply chains. And graphical supercomputers were not exactly a mass product. Pixar quickly bled through Jobs's initial financing.
"We started out as a hardware company and, frankly, should have failed!" says Alvy Ray Smith, who, with Edwin Catmull, cofounded Pixar. "But Steve, who'd been kicked out of Apple, could not sustain the embarrassment. Whenever we got into trouble, Steve would write another check and get more equity. Over the next few years he bought the entire company."
Jobs would eventually sink $50 million into Pixar, as his attention was monopolized by his other startup, the foundering NeXT Inc. computer company. It was hard to tell which was the larger boondoggle. Pixar's finances, says Pamela Kerwin, an early employee, began to resemble "an extremely overdrawn checking account."
"At that point, [Jobs] didn't have any support from his Valley peers; they all thought he was crazy," says Kerwin. December, the fiscal year-end for Pixar, was often a bleak month. "He would get emotional. Frankly, anybody would. This word is never used about Steve, but I'm sure he was frightened, like anyone would be."
Too far ahead of its time, the Pixar Image Computer had few customers. To attract more of them, a Pixar employee named John Lasseter created a short film, Luxo Jr., to show off the technology. Astonishingly, it was nominated for a 1987 Academy Award as best animated short film. …