Pixar Ends Disney Talks, Seeks New Partner
LOS ANGELES (Reuters) – Pixar Animation Studios Inc. on Thursday ended talks with Walt Disney Co. to renew a lucrative movie distribution deal that has produced such blockbusters as “Toy Story” and “Finding Nemo.”
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Pixar, the pioneering computer animation house founded by Apple Computer Inc.’s Steve Jobs, said it would look for another studio partner to distribute its films starting in 2006, when its current deal with Disney expires.
Shares of both companies fell 6 percent after hours.
Observers had expected Pixar and Disney to renew their partnership, which has generated five mega-hits since 1995 that have collectively earned $2.5 billion at the box office.
The Pixar deal has accounted for a large share of Disney Studios’ operating profit in recent years, but Disney said Pixar’s final offer on a renewed contract would have cost it hundreds of millions of dollars.
The move was an unexpected blow to Disney, which pioneered feature animation with 1937’s “Snow White” but has seen its traditional hand-drawn films like the 2002 flop “Treasure Planet” eclipsed by Pixar-style computer-animated hits.
Chief Executive Michael Eisner is also under fire from an heir of founder Walt Disney, Roy Disney, who claims Eisner has mismanaged the company and sapped its creative energy.
Analysts and investors said Pixar could be using its announcement as a negotiating tactic and some observers did not rule out a resumption of talks.
PIXAR ‘MOVING ON”
“After 10 months of trying to strike a deal with Disney, we’re moving on,” said Jobs, Pixar’s chief executive.
“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.”
Disney Chief Executive Michael Eisner issued a statement wishing Pixar success.
“Disney management could not accept Pixar’s final offer because it would have cost Disney hundreds of millions of dollars… under the existing agreement” without giving Disney enough return on new collaborations, the company said.
A source close to Disney’s side of negotiations said that Pixar had also wanted copyright to the valuable library of previous films by the partnership.
Disney now owns the copyright and can make sequels and other works based on the films in the current deal, which includes two upcoming titles — “The Incredibles,” set for a November release and “Cars,” due in 2005.
Pixar had been expected to close a deal by the middle of this year and had said it would prefer to renew with Disney.
Roy Disney, the former chairman of Disney’s animation department, said that the breakup would be bad for Disney shareholders long-term and accused Eisner of failing to nurture the relationship with Pixar.
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“It makes it look like Eisner did something wrong again, but we shouldn’t jump to conclusions. This could be a negotiating tactic by Pixar as well,” said Patrick McKeigue, an analyst at Independence Investment, which holds Disney shares.
“It’s not a happy thing when two long-time partners break apart and Disney, of course, will survive. However, psychologically, the market was hoping there would be an agreement shortly,” said Hal Vogel, a New York-based media analyst who runs Vogel Capital Management.
Other studios that have expressed an interest in a Pixar deal included Warner Bros., a unit of Time Warner Inc., Sony Corp., 20th Century Fox, a unit of Fox Entertainment Group Inc. and Metro-Goldwyn Mayer.
Banc of America Securities analyst Michael Savner said Pixar had set itself up to compete at the box office with Disney’s future family-friendly offerings.
“Disney could put out its movies at the same time as Pixar,” he said. Many investors had already assumed Pixar would get a much-improved deal, including on the two pictures in production, he added.
Staffing at Disney’s animation department has shrunk by more than 70 percent since 1997. Disney is set to release its first in-house computer-animated film, “Chicken Little,” in 2005.
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