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The Toy Story you never saw: why Disney almost sent Buzz and Woody straight-to-video hell

A scene from Toy Story 4
A scene from Toy Story 4 Credit: Pixar

This article has an estimated read time of 10 minutes 

In an internal email to his staff in the first weeks of 2003, Disney CEO Michael Eisner claimed that he finally had proof that the animation giants at Pixar, with whom he was in the midst of a combustible feud, were on their last legs. He had seen a rough cut of that summer’s Pixar effort Finding Nemo, he said, and determined that it was a failure. “This will be a reality check for those guys,” he wrote. “It’s okay, but nowhere near as good as their previous films. Of course they think that it’s great.” 

When the email was leaked to the Los Angeles Times that same year, it brought into the public sphere what had been a long simmering but largely private degree of antagonism between Eisner and Pixar CEO Steve Jobs, whose investment and oversight had shepherded the studio into existence 20 years earlier. The feud looked set to permanently damage the Pixar brand if Eisner got his way, and help transform the likes of Woody, Buzz, Dory and Sully into tragic, low-budget regulars of the direct-to-video bargain bin.

The fourth Toy Story movie is arriving in cinemas this week, upending expectations by being very good; the franchise has become that rare quadrilogy comprised of nothing but masterpieces. But it wasn’t always going to be this way. The original Toy Story 3 was set to introduce sexy action figures to the mix and feature a presumably less expensive actor voicing Woody instead of Tom Hanks - all courtesy of a short-lived Disney-backed animation studio created as an elaborate bargaining tool and ultimately responsible for a number of enraged screenwriters feeling manipulated and betrayed.

The feud began in 1999, when Toy Story 2, eventually envisioned as a straight-to-video sequel akin to The Lion King II: Simba’s Pride, was released in cinemas and grossed a colossal $497 million worldwide. Pixar’s original deal with Disney called for three collaborations, later upped to five, but this did not factor in straight-to-video sequels – then a very Nineties Disney trademark.

Jobs begrudgingly agreed to allow Toy Story 2 to fall under the terms of the original deal, but demanded contractual changes in the event of a third Toy Story.

Eisner, meanwhile, was unbothered. The original Disney/Pixar deal additionally gave Disney full copyright ownership over Pixar’s characters, which Eisner knew he could exploit in the event of Pixar’s fortunes going south. So when Jobs requested further changes to the deal, changes that would give Pixar more financial control over their output as well as a far bigger slice of its revenue, Eisner balked, believing Pixar needed Disney as a distributor far more than Disney needed Pixar – despite the far majority of Disney’s own animated films underperforming at the box office in the preceding years, among them The Emperor’s New Groove and Brother Bear.

And with ownership over Pixar’s most famous characters, Eisner believed they could still make millions of dollars from licensing the likes of Buzz Lightyear across straight-to-video sequels, theme parks and merchandising.

The tension between both parties continued for over three years, until Jobs kicked off in 2004 by declaring that Pixar was walking away from renewal negotiations with Disney. In a statement, Jobs said that Pixar was looking for a new distributor. “After 10 months of trying to strike a deal with Disney, we’re moving on,” he wrote. “We’ve had a great run together – one of the most successful in Hollywood history – and it’s a shame that Disney won’t be participating in Pixar’s future successes.”

“The relationship went sour when [Eisner] didn’t treat Jobs and the Pixar machine as a giant creative engine,” former Disney board member Stanley Gold told the Los Angeles Times in 2004. “He treated them as second-class citizens.”

A storyboard from Circle 7's scrapped Toy Story 3 Credit: Disney/Jim Martin (jimmartindesign.com)

Never one to accept defeat, Eisner declared ambivalence towards Disney’s loss of Pixar. Instead, he merely set up what he believed was a good-enough, Pixar-esque animation studio on the Disney lot called Circle 7, with a mission to fill Blockbuster outlets with sequels to their Pixar hits. It was a move so controversial within the Hollywood animator community that many took to calling the new studio “Pixaren’t”.

According to reports at the time, many high-profile animators, who tend to work under a “story-first” ethos rather than a purely money-driven one, were outraged that Disney had spurned a famously innovative studio in favour of an endeavor purely motivated by greed. And others felt that Disney had demeaned the hard work and genius of the likes of John Lasseter and Pete Docter by rendering their insight unimportant.

Ice Age director Chris Wedge told the Los Angeles Times that the move was “misguided and depressing,” while the studio’s popularity within the industry was embodied by the low-wattage of many of its recruits. Along with a raft of screenwriters poached from direct-to-video sequels to animated classics, the studio’s creative affairs executive was one of the key figures behind 2004’s dismal talking-fish flop Shark Tale.

But Circle 7 pressed on regardless. First on their docket was the much-anticipated Toy Story 3, which Disney put into production under the direction of Bradley Raymond, an animator who had previously directed straight-to-video Disney sequels including Pocahontas II: Journey to a New World and The Lion King 1½. Bill and Cheri Steinkellner, the writers of the forgotten alien curio Teacher’s Pet, were recruited to write the script, which reportedly involved Andy’s mother dumping the toys at his grandmother’s house when Andy outgrows them, and Woody and Buzz finding themselves wrapped up in an Agatha Christie-style whodunnit mystery involving missing toys.

Former Disney boos Michael Eisner, in 2005 Credit: AP

Forty people were recruited to work on the film in its early stages, with Disney claiming that a further 40 screenwriters had come to Circle 7 with pitches for potential sequels to Finding Nemo and Monsters Inc. Not involved, however, was Hanks, the voice of Woody, with Disney prepared to replace him with a different actor. Tim Allen, the voice of Buzz Lightyear and the far less employed of the two, was reportedly open to returning.

But despite Disney talking of their excitement about Circle 7 in the press, Toy Story 3 quickly began to fall apart behind the scenes. The Steinkellner script was scrapped, with Disney recruiting Jim Herzfeld to take another stab at it, having been impressed with his work on the comedy hit Meet the Parents.

Herzfeld’s new script saw the toys banding together to send a malfunctioning Buzz to Taiwan to be repaired, only to discover too late that the entire Buzz Lightyear line has been recalled, leading the gang to ship themselves to Taiwan after him, rescuing a litany of broken toys in the process. There would also be an array of new characters: something called Jujubee Bee, a toy designed to look like a Pez dispenser, a tuck-in doll named Cozy Rosey who catches on fire, and a sexy action figure dressed in a tight sweater and hotpants named Cindy Scissors.

A Monsters Inc sequel was also put into production around the same time, subtitled Lost in Scaradise, in which heroes Mike and Sully venture into the human world to find Boo, the little girl from the first film. Screenwriters Bob Hilgenberg and Rob Muir, who had previously pitched ideas for Toy Story 3 and later wrote the direct-to-video sequel Tinker Bell and the Great Fairy Rescue, told Animated Views in 2012 that their work coincided with increasing unease on the Circle 7 lot, with the studio’s staff unsure whether their jobs were secure.

A scene from Pixar's final version of Toy Story 3 Credit: rex

“It was at this time that the realities of what was happening with Disney and Pixar began to seep into our minds more and more,” they said. “Everyone at Circle 7 was nervous, but we still had a job to do, and we all took these sequels very seriously.”

One of the major sticking points was the much-floated rumour that Circle 7 was never intended to be more than a bargaining tactic – an Eisner-orchestrated ploy to scare Pixar, and specifically Jobs, into believing they needed Disney more than Disney needed them. And, therefore, that the work of numerous writers and animators was never going to be used in the first place. It didn’t help that constant speculation hovered in the air about Disney/Pixar returning to the negotiation table, which would likely render Circle 7 moot.

In truth, the feud between Eisner and Jobs had escalated behind the scenes since their companies went their separate ways, with a New York Post story in 2004 alleging that Jobs had privately suggested to Disney power players that he was willing to re-open negotiations over Pixar’s future with the company under one condition: that they ditch Eisner as CEO entirely.

And, coincidence or not, Eisner agreed to exit his role as Disney CEO in early 2005, shareholders having convinced him to step aside following years of turmoil within the company, including declining ratings at their US TV network ABC and its increasingly haphazard performance on the US stock exchange. With Bob Iger due to replace him, many saw Eisner’s departure as an opportunity for Pixar and Disney to try and make amends, particularly as Jobs and Iger had always had a healthy relationship.

This was apparently due to Iger’s eagerness to learn from Pixar rather than resent them. While attending the opening of Disneyland Hong Kong in 2005, he realised that the only Disney characters on floats from the last decade were from Pixar-created movies. “A light bulb went off,” he recalled to biographer Walter Isaacson for the 2011 biography of Steve Jobs. “I’m standing next to [Eisner], but I kept it completely to myself, because it was such an indictment of his stewardship of animation during that period. After ten years of The Lion King, Beauty and the Beast, and Aladdin, there were then ten years of nothing.”

Within weeks, Iger had told Disney’s board of directors that they had two choices: either face an uncertain future by endlessly launching go-nowhere properties like Treasure Planet or Meet the Robinsons, or buy Pixar. Faced with dire financial statistics, the Disney board agreed to allow Iger to pursue Pixar once again.

In the same Isaacson biography, Jobs recalled being won over by Iger’s new pitch. “He just blurted out [that Disney badly needed Pixar],” he remembered. “Now that’s the dumbest thing you can do as you enter a negotiation, at least according to the traditional rule book. He just put his cards on the table and said, ‘We’re screwed.’ I immediately liked the guy, because that’s how I work too. Let’s just immediately put all the cards on the table and see where they fall.”

Further meetings happened, specifically with Pixar heads John Lasseter and Edwin Catmull, who were inspired by Iger’s eagerness for new ideas and the openness of their conversations about Disney’s future. Finally, Jobs declared that a Disney overseen by Iger could indeed purchase Pixar, for a hefty price of $7.4 billion worth of Disney stock.

Toy Story 4 Credit: pixar

Eisner, true to form, attempted to derail the purchase, telling Iger that he could fix Disney’s problems without help from Pixar, and later trying to convince a number of high-profile Disney shareholders, including billionaire magnate Warren Buffet, to not approve the purchase based on statistical evidence that Pixar would likely struggle in the coming years.

In a presentation, Eisner declared that, like Steven Spielberg or Disney movies of the past, a consistent run of hit movies has never historically lasted past ten or so years, and that Pixar was due for a number of misfires in their future. Despite his pressure, Disney shareholders were unconvinced, and the purchase was approved.

The new deal meant that Pixar wasn’t entirely absolved by Disney, instead existing as a separate entity as always, and retaining its creative autonomy and earning far more of their film’s profits. As an additional kick in the teeth for Eisner, the deal also resulted in Jobs succeeding him as Disney’s largest individual shareholder, Jobs walking away with ownership of 7 per cent of the company’s stock, valued at $3.9 billion.

As for Toy Story 3, it became a top priority at the new Disney/Pixar. But it also came at the expense of Circle 7, which was dissolved within months of the merger. In March 2006, Circle 7 staff were told that 80 per cent of employees would be absorbed into the new Disney/Pixar, with 32 employees ultimately losing their jobs. But while it was a kind gesture from Pixar, the merger did mean that all the scripts and designs that Circle 7 had spent two years developing were scrapped.

For many within Circle 7, it was infuriating. Speaking to Entertainment Weekly in 2006, Herzfeld appeared to confirm what many had speculated about the studio’s motives. “I should have had my agent look into it more,” he said. “We were just pawns, used to scare Pixar to the negotiation table. It was essentially Michael Eisner putting a gun to the head of Pixar’s children. I can understand that. Somebody took [Pixar’s] children and dressed them up in clothes they didn’t approve of. But it doesn’t mean they’re bad clothes.”

Toy Story 3’s eventual director Lee Unkrich made clear in interviews leading up to the film’s release that they had deliberately started afresh when the merger occurred, throwing out Herzfeld’s script. Oddly, however, there are similarities between the released Toy Story 3 and the original Steinkellner script, namely that they both open with Spaghetti Western fantasy scenes, along with their shared themes of growing up and Andy ageing out of his toys. But they are largely superficial; the rest of the released movie was vastly different in premise and execution.

For Pixar fans, the merger proved to be positive. Outside of, arguably, the Cars franchise and 2015’s The Good Dinosaur, Pixar has enjoyed a run of creative success matched by consistently gargantuan box office numbers since they were purchased by Disney, with even its more financially-motivated sequels proving unusually well-liked.

That Toy Story has unveiled a fourth movie to universal raves, despite a run of bad buzz and behind-the-scenes conflict during its production, is the kind of unparalleled good fortune that Michael Eisner never would have seen coming. Despite currently reclining somewhere on a bed of money, he is more than likely furious about it.