Slick Operators, by Nelson D. Schwartz and Jon Birger, page 72

Once upon a time, in the late 1990s billionaires might have been chasing internet stocks. Now the hot money wants to be in energy. But this isn't just another investment fad. Because while no one was obligated to own Amazon or Pets.com during the tech bubble, all of us buy gasoline to drive our cars or heating oil to stay warm in the winter. It's no surprise, then, that the parallel rise of commodities trading and energy prices has sparked a fierce debate over whether hedge fund managers and other financial players are responsible for $3-a-gallon gas, with the blame game stretching from the boardrooms of Big Oil to Capitol Hill and Bill O'Reilly's Fox News Studio in New York. So why then is oil so expensive? While financial activity plays some role, there needn't be anything nefarious about the motivations of these market participants, each of which is operating perfectly rationally. The bigger answer to the oil price run-up seems to be the one nobody wants to accept: supply and demand. Because energy demand is so inelastic -consumers don't quickly change their consumption habits when prices go up-and new supply takes so long to come online, small changes can have an out-sized impact on price, especially in a tight market.

 

Hollywood is morphing into an alien life form-but it's still making billions. Almost daily, it seems, they unveil initiatives that will change the way movies and television shows are produced, distributed and consumed. At the turn of the last century, pundits predicted that by now mass media would be dead and buried by the digital revolution. It didn't turn out that way: Movie downloads in all of 2006 will generate about half as much revenue as the opening weekend of Mission : Impossible III. Peering ahead isn't any easier today, but the stories that follow set out to separate hype from reality. Following the money, they uncover characters and plot twists as intriguing as anything playing at the Multiplex--or on your iPod.

 

COVER STORY: FORTUNE EXCLUSIVE, Pixar's Magic Man, as told to Brent Schlender, page 139

In late January, Disney CEO Bob Iger and Pixar chairman Steve Jobs announced a surprise $7.4 billion deal in which Pixar Animation Studios, which brought the world the Toy Story movies, Finding Nemo , and The Incredibles , would be come a wholly owned part of Disney. The deal is surprising because Pixar's longtime distribution pact with Disney fell apart in acrimony and is due to expire with the release in June of Cars , a kaleidoscopic celebration of racing, Route 66, and life in the slow lane. But in an amazing plot twist, not only is Pixar becoming part of Disney, but the upstart studio is also taking over the creative direction of Disney's own flailing animation operations. John Lasseter, Pixar's chief creative officer, explains to FORTUNE how he does it-and how he plans to sprinkle some of that Pixar dust at Disney. "I don't want anyone to feel they wasted any of their time or money to see one of our films or ride one of our rides or go see one of our shows," he said.

Also: How Disney Knew it Needed Pixar, by Brent Schlender, page 146

A couple of weeks before the Pixar deal was finalized, Disney CEO Bob Iger spoke with FORTUNE's Brent Schlender in Iger's Burbank , Calif. Office. ".Nothing creates more of an impact at this company than a successful animated film," said Iger. ".I felt animation ought to be great, and I couldn't think of a better way to make sure of that than to have John and Ed [Catmull, Pixar founder and president] come aboard to manage animation. They're providing leadership not just to Disney animation-they've ignited the whole company's creative spirit, and that just a very, very positive thing."

 

FOX the Day After Tomorrow, by Marc Gunther, page 99

Peter Chernin knows that a digital revolution is underway -but he has faith that Hollywood will be a Studio City forever. Many people believe that digital technologies threaten the established order in much in the same ways that digital music has rocked the foundations of the music industry and Internet news, blogs and classifieds have taken readers and advertisers away from newspapers. Chernin, the chairman and CEO of Fox, as well as second-in-command to Rupert Murdoch at parent company News Corp. gets no argument when he says there's a revolution going on-the debate is about what it means for Hollywood's future. "Storytelling in two-hour forms has existed since the Greeks," Chernin says. "We now have infinitely more ways to tell our stories."

Extreme Makeover, by Andy Serwer, page 108

Shari Redstone, the daughter of 82-year-old supermogul Sumner Redstone and president of National Amusements-the family-owned theater business that also holds controlling stakes in Viacom and CBS-is proudly showing off one of her company's newest emporiums, when all of a sudden she stops cold and points. "Look," she says in a Boston accent that would make Cliff from Cheers proud, "it's ahr mah-tini bahr!" Cocktails are just one facet of Redstone's meta-strategy to transform moviegoing into what she calls "premium" entertainment. She has also dreamed up "chocolate bahs," screenside waiter service, and high-end food. Redstone, with her cocktail lounges and other coming attractions, and her cohorts at the other big chains like AMC and Regal Entertainment are all grasping for a Holy Grail-a way to remake moviegoing into what it once was: an experience unlike any other.

 

The Suit Who Wears Five Hats, by Julia Boorstin, page 128

Lots of people think they have the toughest job in Hollywood . Tom Cruise's publicist. The EMT on the Jackass set. The guy who played Gollum in the Lord of the Rings movies. But Ken Tsujihara, the new head of Warner Bros.' Home Entertainment Division, doesn't just have one tough job; he has five of them fighting for his time and attention -and just plain fighting . "I have no idea what the digital home will look like in ten years," admits Tsujihara. No one does. That's why out of all the people who suspect they have the toughest job in Hollywood , Tsujihara might actually be right.

 

Money Men, by Stephanie N. Mehta, page 120

Bill Pohlad is not close to being a household name (except in his hometown, where his father, Carl, owns the Minnesota Twins). Still, by some important measures, he's a rising star in Hollywood . He not only personally helped finance Robert Altman's new movie, A Prairie Home Companion , but also backed Brokeback Mountain . He and other deep-pocketed moneymen are part of a new wave of outsiders rushing to finance movies that are to some extent changing the way films are produced.

 

Wall Street's War for China, by Clay Chandler, page 84

Over the past three years China has spawned some of the world's largest IPOs, including the $3 billion listing of China Life Insurance on exchanges in New York and Hong Kong in 2003 and China Construction Bank's $9 billion offering on the Hong Kong stock exchange last fall. This month the Bank of China, China 's second-largest bank, hopes to raise $9.9 billion from an IPO in Hong Kong . All told, the value of mainland deals in the pipeline this year could top $30 billion, and dozens of other Chinese companies have declared their intention to seek a foreign listing by 2008. The big investment banks are fighting for a piece of the action in the world's fastest-growing economy. FORTUNE takes a look inside their multibillion-dollar battle.

 

Departments

FIRST Plastic Under Attack Debt is as American as the dollar, but MasterCard and Visa have never been so embattled -lawsuits from rivals, fights with retailers over fees. With the credit card boom stalling, they may face a slow-growth future Open Season on Microsoft The revolt against Redmond's dominance in the office-application business Return Engagement Morgan wields the ax, and Facebook grows up On the Radar Delphi vs. the UAW, the FCC raps knuckles, and paying for airport pat-downs Chaos Calling Lifting the ban on in-flight phones Question Authority Lenovo CEO Bill Amelio The Job Market Giving grads a crash course in careers 60-Second Briefing Just how hot is the hybrid-car trend? In Memoriam The people's economist: John Kenneth Galbraith, 1908-2006 DISPATCHES Wal-Mart Must Wait While retail booms in India, big foreign companies are forced to watch from the sidelines Crunch Time for an HIV Test A home test just might be the next big thing in AIDS treatment COLUMNISTS Street Life Buffett's alter ego, Charlie Munger Media Bubble Is TV advertising heading south? C-Suite Strategies Citi's Sallie Krawcheck tells Geoffrey Colvin what it takes to be CFO of the world's largest bank INVESTING Why Bank Stocks Are Cash Machines With high yields and low P/Es, they offer the potential for solid long-term gains with little risk Going After Bigger Game Small-cap specialist Bob Turner is now hunting large caps too Hot Commodities A better way to play silver-if you dare BUSINESS LIFE L.A. In the entertainment industry, success is also measured by what you wear. A special section produced by the editors of InStyle

 

FORTUNE is available in digital format. To access this version go to http://mag1.olivesoftware.com/am/welcome/Time/Fortune/TFM-29-May-2006.asp .

 

For further information please contact:
Susan Brown Williams
212-522-0133
susan_williams@timeinc.com

Phil DiIanni
212-522-6282
phil_diianni@timeinc.com

 

 

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