Still another film was in Pixar’s pipeline during the making of A Bug’s Life. Talk of a sequel to Toy Story began around a month after Toy Story opened, when Catmull, Lasseter, and Guggenheim visited Joe Roth, Katzenberg’s successor as chairman of Walt Disney Studios. Roth was pleased and embraced the idea.

Disney had recently begun making direct-to-video sequels to its successful feature films, and Roth wanted to handle the Toy Story sequel this way, as well. A direct-to-video sequel could be made for less money, with lesser talent. It could be priced cheaply enough to be an impulse purchase. Disney’s first such production, an Aladdin spin-off in 1994 called The Return of Jafar, had been a bonanza, returning an estimated hundred million dollars in profits. With those results, all self-restraint was off; Disney would soon grace drugstore shelves with Beauty and the Beast: The Enchanted Christmas; Pocahontas II: Journey to a New World; The Lion King II: Simba’s Pride; and still another Aladdin film.

Everything else about the Toy Story sequel was uncertain at first: whether Tom Hanks and Tim Allen would be available and affordable, what the story’s premise would be, even whether the film would be computer-animated at Pixar or cel-animated at Disney.

As with A Bug’s Life, Lasseter regarded the project as a chance to groom new directing talent. In early 1996, once Roth decided that Pixar would handle production of the sequel, Lasseter assigned directing duties. Stanton was immersed in A Bug’s Life; Pete Docter, whom Lasseter regarded as the next in line, was already beginning development work on his own feature about monsters. For Toy Story 2, Lasseter turned to Ash Brannon, a young directing animator on Toy Story whose work he admired. Brannon, a CalArts graduate, had joined Pixar to work on Toy Story in 1993.

The story originated with Lasseter pondering what a toy would find upsetting. In the world of Toy Story, a toy’s greatest desire is to be played with by a child. What, Lasseter wondered, would be the opposite of that–worse, even, than being displaced by another toy?

An obsessive toy-collector character had appeared in a draft of Toy Story and was later expunged. Lasseter felt that it was now an idea whose time had come. Thinking of his own tendency to shoo his sons away from the toys on his office shelves, especially a Woody doll that he prized for its Tom Hanks signature, Lasseter began talking about the notion of a toy collector who hermetically seals toys in a case where they will never be played with again. For a toy, it would be a miserable fate. Brannon then suggested the idea of a yard sale where the collector recognizes Woody as a rare artifact and distracts Andy’s mom to grab him. Out of those ideas, Toy Story 2 was born.

The concept of Woody as part of a collectible set came from the draft story of A Tin Toy Christmas, in which Tinny was part of a set in a toy store and became separated. The other characters in Woody’s set emerged from viewings of 1950s cowboy shows for children, such as Howdy Doody and Hopalong Cassidy. “We started looking at these canonical characters that you find in westerns,” said Guggenheim, who was producer of Toy Story 2 during the first year of development work. “You would find a gruff old prospector. You would find other characters, like an Annie Oakley—Calamity Jane sort of character, a tough frontier girl.”

The development of the cowgirl character, Jessie, was also kindled by Lasseter’s life; Nancy had pressed him to include a character in Toy Story 2 for girls, one with more substance than Bo Peep. Jessie had started in a different form, as Señorita Cactus, a Mexican side- kick to the Prospector; she was to sway Woody with her feminine wiles. When the character of Jessie replaced her, the personality of the female lead became tougher and more direct.

As the story approached the production stage in early 1997, there remained the question of where Pixar would find the people to make it, given the demands of A Bug’s Life on the company’s employees. Part of the answer would come from a production organization within Pixar devoted to computer games. The Interactive Products Group, with a staff of around ninety-five (out of Pixar’s total staff of three hundred), had its own animators, its own art department, and its own engineers. Under intense time pressure, they had put out two successful CD-ROM titles: The Toy Story Animated StoryBook, released in April 1996, and The Toy Story Activity Center, released in October of the same year to coincide with the videotape release of Toy Story. The games featured much of the voice cast of the film, except that the voice actor Pat Fraley took Tim Allen’s place as Buzz, while Woody was played by Tom Hanks’s younger brother, Jim. The company touted StoryBook as the first CD-ROM to deliver full screen, motion-picture-quality animation on home computers. Between the two products, the interactive group had created as much original animation as there was in Toy Story itself.

Jobs had convinced himself that the games would sell ten million copies, like best-selling direct-to-video films. Kerwin, as head of the group, insisted that the market wasn’t there on such a scale. We can make a good, profitable business out of them, she said. (The products had sold almost a million copies combined.) But they won’t be a home run like Toy Story.

If that’s the case, Jobs said finally, then why don’t we just turn all these people over to making another movie? Thus, in March1997, while Kerwin took the assignment of building a short-films group, Jobs shut down the computer games operation and the games staff became the initial Core of the Toy Story 2 production team.

Press Release
TIM ALLEN AND TOM HANKS RETURN
AS “BUZZ LIGHTYEAR” AND “WOODY”
March 12, 1997
The Walt Disney Studios and Pixar Animation Studios announce today that a sequel to the groundbreaking Academy Award—nominated feature film TOY STORY is underway and being created exclusively for home video. The all-new, fully computer-animated sequel will feature the voices of Tim Allen and Tom Hanks, who reprise their enormously popular roles as “Buzz Lightyear,” the space ranger, and “Woody,” the pull-string Cowboy, respectively. Production on TOY STORY II reteams Disney’s Feature Animation team and Pixar’s Northern California studios. . . .
“‘Toy Story II’ is the latest production to be announced in our growing made-for-video film category,” Ann Daly, President, Buena Vista Home Video, said. “With ‘Aladdin and the King of Thieves’ and the debut of ‘Honey We Shrunk Ourselves’ next week, we are now bringing both animated and live-action films into this pipeline with great success. . . .”

Disney soon became unhappy with the pace of the work on the film and demanded in June that Guggenheim be replaced as producer. Pixar complied.

He looked back on his seventeen years with Pixar and Lucasfilm and concluded that he had most enjoyed working with groups that were venturing into new directions, like the EditDroid digital editing project and the original Toy Story effort; with Pixar’s shedding of everything but feature films, he believed the company’s strategy left few entrepreneurial opportunities. Guggenheim, now financially secure thanks to the stock offering, left the company.*

Karen Jackson and Helene Plotkin, who had been associate producers on the sequel, moved up to the role of co-producers. Jackson recalled using the enticement of greater responsibility–the chance to be a big fish in a smaller pond–to compete with A Bug’s Life for the production people they wanted.

“You could go to A Bug’s Life and be one of two hundred, or you could come to Toy Story 2 and be one of fifty or sixty,” she said. “To fill the spots on Toy Story 2, we did a lot of recruitment outside. But there were certain key positions on Toy Story 2 where we wanted to get experienced staff on board, and the way to get them on board was to say, ‘We’ll let you run this department,’ or, ‘We’ll let you be the directing animator.’ ”

In November, Disney executives Roth and Peter Schneider viewed story reels for the film, with some finished animation, in a screening room at Pixar. They were impressed with the quality of the work and became interested in releasing Toy Story 2 in theaters.

In addition to the unexpected artistic caliber, there were other reasons that made the case for a theatrical release more compelling. As it turned out, the economics of direct-to-video for a Pixar film weren’t working as well as hoped. The logic of direct-to-video hinged on low production costs, but low-budget and high-budget projects could not readily coexist under Pixar’s umbrella. The creative appetites of Pixar’s leadership made it anathema to produce a film at less than the highest level visually–one in which corner-cutting could be seen on screen. In computer animation no less than in live action, production values cost money.

More prosaically, Pixar wanted the efficiency of moving crew members from one production to the next, whatever the next one might be, so Catmull and Lasseter deemed it unacceptable to create a second, lower-wage staff for low-budget projects. Since labor costs added up to 75percent or more of the production costs, it was unrealistic to try to make a significantly lower-cost production as long as all the films were to come from the same pool of employees earning the same salaries.

Lastly, animation salaries had gone up across the board. For Toy Story, Pixar had been able to hire...