Pixar, Disney Partnership Talks Collapse
Disney has had mixed success over the past few years with its animated films, producing such box office disappointments as "Atlantis" and "Treasure Planet" and modest hit like "Lilo & Stitch" and "Brother Bear."
"I think that if Disney can move in that direction successfully, it's not going to be devastating," Janna Sampson, co-Manager of the AmSouth Select Equity Fund and director of Portfolio Management at Oakbrook Investments. "That's the wild card - can Disney get its animation studio to produce the kind of hits Disney used to produce without anybody's help?"
Disney recently closed its Orlando, Fla., animation studio and has pared its staff of animators to 600 from a peak of 2,200 employees in 1999. For the first time in years, it has no traditional hand-drawn films in production.
Disney plans to release its first in-house computer-animated film, "Chicken Little," in 2005, the year its current Pixar deal expires. Disney also is producing other computer-animated films, including "A Day With Wilbur Robinson," to be released in 2006.
On Thursday the company also announced plans for two new computer-animated films, including a long-awaited "Toy Story 3."
For Pixar, the break from Disney will allow it to keep more profit from future films while increasing the risks should those movies underperform.
"The risk is all theirs now," said Peter Mirsky, a financial analyst with Oppenheimer & Co. "They wanted it, they got it. Plus, they've added a competitor in Disney."
While Pixar has had major hits with all five of its films, including "A Bug's Life" and "Toy Story 2," it no longer has the field to itself.
This year alone, DreamWorks is releasing two computer-animated films: "Shrek 2" in May and "Shark Tales" in November. Warner Bros. will release the animated "Polar Express" in November, and Fox's Blue Sky Studios, which made the hit "Ice Age," is planning to release "Robot" next year.
Former Disney board members Roy E. Disney and Stanley Gold - who have been urging the company's chief executive, Michael Eisner, to step down - expressed concern when they quit the board last year that Disney was not properly managing its relationships with Pixar, Miramax and other companies.
In a statement Thursday, they blamed Eisner for the Pixar breakdown.
"While we expect that the tail of the relationship will continue to provide short-term earnings gains, the loss of this relationship, we believe, will result in the loss of long-term value for the company and its shareholders," the men said.
Analysts doubted the failure to reach a deal with Pixar would jeopardize Eisner's job.
"Roy's goal is to see Eisner out," Sampson said. "That doesn't make Eisner's job easier in the next couple of days as he tries to calm the concerns. But things are on the improvement side for Disney, and if that continues, I find it unlikely we'll see Eisner out of a job."
One certainty is that Pixar will have no problem cutting a more favorable deal with a new studio.
Thursday, Warner Bros., Fox and Sony all expressed interest in talking to Pixar. Fox distributes producer George Lucas's "Star Wars" films for a flat fee - terms similar to those Pixar wants.
© 2004 The Associated Press