Acquired
01:53:23 · David Rosenthal, Ben Gilbert
[01:53:23] S1: Walt also, in his mind, think comes to see this Burbank campus as really a utopian like place, kinda almost like a college campus. I mean, Walt didn't even graduate high school, let alone go to college, but he intentionally places it in Burbank, which back then was like the sticks outside of LA. Yep. He wanted the Disney lot, the Disney studio to be this special place, kind of away from all these other studios controlled by their distributor bosses back in New York. And he kinda, I think, really wanted to create this band of merry men and women type feeling where they could achieve the impossible, like producing two feature animated films a year. [01:54:05] S0: Well, the thing he sort of didn't factor in is that you might be able to make Snow White faster in the future, but every idea that you have is gonna be a different new idea that's gonna be more ambitious and have more cost and require more people. And so this Burbank studio was necessary even to keep The [01:54:23] S1: same pace. [01:54:23] S0: Producing films every three years. Yes. But this the the lot itself is unbelievable. It's 51 acres. There are sports fields, a cafeteria. There's art classes. There's massages available. There's sunbathing in the penthouse club. In many ways, this is like the Googleplex before the Googleplex. [01:54:40] S1: This is 1940 when they opened this. [01:54:42] S0: And you're right. It's it's kinda designed to keep you there. Why would you need to go anywhere else? And, really, there's nowhere else else to go around here. [01:54:48] S1: In Burbank.
01:54:48 · David Rosenthal, Ben Gilbert
[01:54:48] S1: In Burbank. [01:54:49] S0: It reminds me a little bit of, Epic Systems too. [01:54:51] S1: Yeah. Yeah. Yeah. Yeah. Very similar. Very similar. [01:54:54] S0: So here's an example of the lengths that they went to on this campus. So I was looking at Google Maps planning our visit, David, and it looks weird. It's it's offset from the Burbank Street grid at an angle. And we asked the person who were showing David and I around listeners, why this is. And he said that it was Walt's priority when they were building it to offer the exact perfect conditions for lighting to animators, which, of course, David, you know the the spoiler here. [01:55:24] S1: Yes. To have offices that face north because northern light is true light. [01:55:29] S0: Do you know why northern light is preferable? [01:55:31] S1: No. I just know that that's what our our very kind tour guide told us.
01:55:31 · David Rosenthal, Ben Gilbert
[01:55:31] S1: No. I just know that that's what our our very kind tour guide told us. [01:55:35] S0: So if you are in the Northern Hemisphere, the sun moves across the south sky. So if you're north facing windows, your window offers the most consistent and non direct light. And so every animator got a window, and they built the building shape so that there's a whole ton of north facing sides. Like, the whole thing almost looks like a CPU heat sink. It's like got fins so that it's got all these north facing windows. It's for the time, it's an architectural marvel. Yeah. It's one of the first buildings with air conditioning in Southern California. California. The windows had custom built sort of slats that were adjustable so the animator could let in the exact right amount of sunlight, indirect sunlight that they wanted into that room. And once they sort of got this building architecturally laid out on the campus, they're like, yeah. Let's build the entire campus around this. Yeah. And to me, it really symbolizes that animators are the crown of Disney in this era, in the way that at Google, it's engineers, and at Apple, it's designers, and at at Microsoft, it's PMs. The the animators to the extent that anyone but Walt has the power, the animators are sort of the most valuable resource. [01:56:48] S1: Yes. Yes. It's an animation driven company.
01:56:48 · David Rosenthal, Ben Gilbert
[01:56:48] S1: Yes. Yes. It's an animation driven company. [01:56:51] S0: Yes. So it's got this, like, utopian vibe, but there were trade offs. I mean, this was huge compared to the old Hyperion site. People are more sectioned off to do their specific work. You had less access to Walt to know exactly what was going on upstairs if you were the rank and file. But to achieve all this, Walt does need capital. [01:57:11] S1: Yes. Oh, yes. He does. [01:57:12] S0: He doesn't wanna give up any control, but eventually, he and Roy decide, we've only ever taken on bank loans. Maybe we need another source of capital. [01:57:21] S1: Yep. I've got the numbers on all of this. So the Burbank campus construction costs alone were $3,000,000. So that's more than the money they had left over from Snow White proceeds after they repaid the Bank of America debt. But, obviously, they had all the, you know, the revenue from the soundtrack and the consumer products and all the flywheel revenue coming in. [01:57:42] S0: They're they're planning to do Pinocchio. They're planning to do Fantasia. [01:57:46] S1: Right. So the 3,000,000 is just to build the facility. Then they gotta staff it with 1,200 animators. So that's an extra 450 new animation staff they need to hire. And to feed Walt's vision of having multiple films in production at the same time, he green lights production on Pinocchio, Bambi, and Fantasia all at the same time.
01:57:46 · David Rosenthal, Ben Gilbert
[01:57:46] S1: Right. So the 3,000,000 is just to build the facility. Then they gotta staff it with 1,200 animators. So that's an extra 450 new animation staff they need to hire. And to feed Walt's vision of having multiple films in production at the same time, he green lights production on Pinocchio, Bambi, and Fantasia all at the same time. [01:58:16] S0: And all of these were completely different animation styles. Yes. And completely different from Snow White. If you look at these films, we sort of have this notion today of, oh, it's the Disney style. That is not really reflective in the darkness of Snow White, in Fantasia's really experimental artistic vignette style set to classical music. And Bambi is, again, another completely different take of a very naturalist film. These are wildly different skill sets and bigger and bigger investments using completely new techniques. So you're not really just, like, making more Snow White's. [01:58:58] S1: Yep. [01:58:59] S0: You're doing, like, discontinuous unknown high risk bets. [01:59:03] S1: Walt can't help himself. [01:59:04] S0: Yes. [01:59:05] S1: So in total, between the $3,000,000 for the campus and then these three movies that they all have in production, which collectively cost about $5,000,000 in so called negative cost before they get released, so before they earn a dollar of revenue. By early nineteen forty, Disney's, yeah, in this new campus had set up for this next phase of the company, but they're $8,000,000 in the hole. So Bank of America had loaned them another 4 and a half
01:59:05 · David Rosenthal, Ben Gilbert
[01:59:05] S1: So in total, between the $3,000,000 for the campus and then these three movies that they all have in production, which collectively cost about $5,000,000 in so called negative cost before they get released, so before they earn a dollar of revenue. By early nineteen forty, Disney's, yeah, in this new campus had set up for this next phase of the company, but they're $8,000,000 in the hole. So Bank of America had loaned them another 4 and a half [01:59:33] S0: million dollars. They just keep going to Bank of America over and over again, just remortgaging the company. [01:59:40] S1: And then the hope was that Pinocchio, the first of the new films to come out, would be a hit and earn profits quickly. Unfortunately, World War two had started in Europe by early nineteen forty when Pinocchio gets released. So international box office is basically zero, and Pinocchio ends up losing money, like a lot of money, over $1,000,000 in losses on Pinocchio alone. [02:00:04] S0: Yeah. In a scale economies business, if you lose out on potential eyeballs and potential revenue, but your fixed costs stay the same, that's super, super bad news. Mean, I you you there's no ability to retroactively scale back how ambitious you're being with investing in a film. You know? You've already spent all the money to create it, and now you find out that you can't distribute it to half the world's screens. [02:00:29] S1: Half of your audience? [02:00:29] S0: Yeah. Yeah. Not good.