At one time, Toy Story 2 was going to be released as a 60 minute, direct-to-video sequel. But in November of 1997, during a showing of the story reels to Disney executives, they were so pleased with the results they requested Pixar to expand the story and make it into a 90 minute theatrical release. Toy Story 2 went on to be a huge success, bringing in over $485 million worldwide and was the 3rd highest grossing film domestically in 1999 with almost $246 million. Many people consider the film to be the best of the Toy Story trilogy.
Wouldn't it be cool to know what the direct-to-video version would have focused on? I've read a few things on the web regarding the original plan and script. It seems the idea of Woody being kidnapped was a core premise from the beginning, but otherwise I haven't found a lot of other information.
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By the time the 1997 annual report came out (in early 1998), it had been announced Toy Story 2 would be released as a theatrical film and had been pushed back to the 1999 holiday season to give the team time to expand the story. As Steve Jobs wrote in his letter that year, Toy Story veterans Ash Brannon and Colin Brady would be directing with John Lasseter serving as executive producer. Again, Jobs was tight-lipped about the plot of the film, but there was one piece of artwork. Looking at the expressions of both Buzz and Woody just makes me chuckle!
I'm not sure how the direct-to-video version would've differed from the final film, but I'm happy they saw its potential and upgraded it to a full theatrical release. It ranks as one of my favorite Pixar films!