How ‘Toy Story 2’ Almost Didn’t Get Made And Created A Rift Between Pixar And Disney

After the initial success of Toy Story, the Pixar lead creative team began work on their second film, A Bug’s Life. At the same time, Disney wanted a follow-up on Toy Story to build on the success of the original. The only problem was that Toy Story‘s lead creative team (director John Lasseter, writer Andrew Stanton, editor Lee Unkrich, and head of story Joe Ranft) were working on another film, so a secondary team — one that had never led a film before — would have to be formed to work on Toy Story 2.

President of Pixar Animation, Ed Catmull, thought this wouldn’t be a problem because Toy Story‘s lead team never headed a film before, either. Because of this, Disney — which was co-financing Pixar’s films as part of a three-picture deal — urged Pixar to make the film “direct-to-video” to help lower costs, but Pixar thought that would ruin the integrity of the series, and all agreed to make the film a theatrical release. The secondary team was not making the film work.

“We had a good initial idea for a story, but the reels were not where they ought to have been by the time we started animation, and they were not improving. Making matters worse, the directors and producers were not pulling together to rise to the challenge,” Catmull said in a Harvard essay.

A Bug’s Life finished production, and Lasseter, Stanton, Unkrich, and Ranft were freed up to take over the helm for Toy Story 2, but there was a problem: They only had eight months left to finish it. The team raced to fix the problems with the story. The main issue was that the crux of the narrative was too predictable, and “the first team couldn’t figure out how to do it,” according to Catmull.

In the film, Woody has to decide whether to leave his owner Andy or not, but because most Disney films have storybook endings, the audience would know that Woody would choose Andy. There was no drama. The fix was to introduce a secondary character, Jessie, and a scene called “Jessie’s story” that would bring the idea that it’s time to change owners. It worked. The film fell into place, and the new creative team was able to meet the tight deadline to finish the picture. Toy Story 2 was a critical and commercial success, but the release of the film created another problem for the computer-animation giant.

Disney didn’t agree with making Toy Story 2 the last film of their contract with Pixar because it was intended to be a straight-to-video release, and it was the start of a rift between Disney and Pixar. They completed two more films with Disney — Monsters Inc. and Finding Nemo — in which Disney handled the distribution and marketing. The profits on the films were split 50-50, but Pixar objected to the deal, citing that they should receive more of the back end. The two companies entered a 10-month long negotiation into their mutual contracts; by 2004, the relationship had soured. Then CEO of Pixar, Steve Jobs, commented on the end of their agreement.

“After 10 months of trying to strike a deal with Disney, we’re moving on. 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.”

Other companies began to take an interest in Pixar as Disney saw its stock drop six percent. “We would love to be in business with Pixar,” a Warner Bros. representative told CNN. “They are a great company.”

Under their previous agreement, Disney owned the rights to two more Pixar films, Cars and The Incredibles, and Disney said that it would push to make Toy Story 3 without Pixar. When CEO Michael Eisner left Disney in 2005, negotiations continued with Jobs’ Pixar studio. Cars was set to be the last co-production between the two animation specialists while Jobs and Disney tried to figure out a better deal. Before the release of Cars in 2006, a deal was finally struck: Disney bought Pixar from Jobs for $7.4 billion.

“Disney and Pixar can now collaborate without the barriers that come from two different companies with two different sets of shareholders,” Jobs said in a statement to CNN Money. “Now, everyone can focus on what is most important, creating innovative stories, characters and films that delight millions of people around the world.”

Disney and Pixar have made 15 immensely successful films together with at least eight more films in production, and their films have generated an estimated $9 billion in worldwide grosses. Their latest production, Inside Out, is in theaters now.