Friday, January 30, 2004
Pressure is on Disney to come up with hit movies on its own.
LOS ANGELES (AP) -- The collapse of talks between Pixar Animation Studios and The Walt Disney Co. on a new deal pressures both companies to produce hit films at a time of growing competition among computer-animated filmmakers.
Pixar, with a string of computer-animated blockbusters to its credit, including "Monsters, Inc." and the "Toy Story" films, broke off negotiations Thursday to extend its partnership with Disney and said it would seek a more favorable deal with another studio.
"After 10 months of trying to strike a deal with Disney, we're moving on," Pixar chief Steve Jobs said in a statement. "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."
Two left under deal
Pixar still owes Disney two movies under the current deal, "The Incredibles," which is scheduled to open in theaters in November, and "Cars," which is to be released next year.
The Emeryville, Calif.-based studio, which co-produced last year's top-box office draw, "Finding Nemo," has long chafed under its contract with Disney, which retains the right to make sequels to movies such as "Toy Story" and "Monsters, Inc."
The companies share box-office receipts and licensing revenues.
Disney chief financial officer Thomas Staggs said the company rejected Pixar's "final offer" because it would have cost Disney hundreds of millions of dollars it is entitled to under its agreement "while not providing sufficient incremental returns on new collaborations to justify the changes to the existing deal."
Why talks collapsed
A person familiar with the talks said negotiations broke down because Pixar wanted to reclaim the copyrights to the five films it has produced with Disney so far, plus the two left in the deal. Such an accommodation would have presumably revoked Disney's right to make sequels and potentially denied the company millions of dollars in future profits.
Pixar also wanted to pay Disney a flat distribution fee on all future films, including "The Incredibles" and "Cars." Disney was willing to adjust its compensation on the two remaining films, but would not agree to return the copyrights, said the source, speaking on condition of anonymity.
Analysts said that while Disney may have been wise not to agree to a deal at any cost, it now has two years to show it can make successful animated films without Pixar's help.
Ups and downs
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 hits like "Lilo & amp; 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.