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Pixar Says Goodbye to Disney

Pixar has broken off talks with the Walt Disney Company on extending their distribution deal and will now begin negotiating with other companies.

From Robert Niles
Posted January 29, 2004 at 2:15 PM
Pixar Animation Studios has announced that it has broken off talks with the Walt Disney Company on extending their distribution deal.

Pixar announced it now will begin negotiations with other companies to distribute its films after the release of "The Incredibles" this year and "Cars" in 2005. Those films will be released by Disney under terms of Pixar's current agreement with the company.

The five films already released under the companies' agreement, "Toy Story," "A Bug's Life," "Toy Story 2," "Monsters Inc." and "Finding Nemo" have earned more than $2.5 billion at the box office.


Comments in chronological order. Most recent at the bottom. Scroll down to respond.

From Kenny Hitt
Posted January 29, 2004 at 2:38 PM
Way to go, Eisner...your botching of the working relationship with Jobs & Lasseter has now sealed your fate.

Don't let the door hit ya where the Good Lord split ya.

From Kevin Baxter
Posted January 29, 2004 at 2:44 PM
Yeah, let it hit you on the OTHER SIDE!

This is unfortunate for Pixar only because they had Disney over a barrel. They were very likely to use a future contract to rework this contract. Pixar was likely going to reduce Disney's take on the next two films, which would have actually been the best outcome. Getting more profits from the first post-Nemo film really should be a priority.

And what would Pixar have to lose? Three or four films that Disney would merely distribute? They could always leave after that. And they could force the new contract to be a sequels-only contract. Toy Story 3 and Monsters Inc 2 both supposedly have ideas for sequels in the works and they won't get done without Disney. In fact, Pixar could make a contract with Disney SOLELY for those sequels, making sure Disney doesn't make crappy ones without them, and have some other company distribute their original films.

Good luck, Pixar. Ha on you, Eisner!

From Robert Niles
Posted January 29, 2004 at 2:56 PM
Under the existing deal, Disney retains the right to the Pixar characters from their films, and can proceed with "Toy Story 3," or any other sequel or re-use of the characters (including in the theme parks), without Pixar's participation.

Letting Pixar go allows Disney to release "Incredibles" and "Cars" without having to share a greater percentage of their income with Pixar, which wanted any new deal to replace the old one for these two films. It also allows Disney to proceed with sequels to all seven Disney/Pixar films and feature them at will in theme parks, TV shows and other productions without having to share the larger fees that Pixar presumably would have commanded for their use as part of a new deal.

Yes, Disney does lose the ability to schedule Pixar's releases for Disney's benefit. And its risks seeing a rival studio use Pixar's upcoming films to promote competing theme parks, TV networks and film release schedules. But Disney was never going to get anything other than a relatively modest distribution fee from Pixar for films after "Cars." From a short-term perspective, Disney could easily argue that continuing the existing deal, then ending its relationship with Pixar, makes good financial sense for the company.

From Kenny Hitt
Posted January 29, 2004 at 3:12 PM
Ah...but note that it didn't say that Pixar is IMMEDIATELY looking for new deals...five bucks says they're just waiting for Roy to stage his coup d'etat (which he has MILES more leverage for now)

From steve lee
Posted January 29, 2004 at 3:35 PM
Blaming this on Michael Eisner is like blaming the state of the parks on Eisner. Clearly a man of Eisner's talent and business smarts couldn't be responsible for this. He's way too good, and has personally been responsible for every good thing Disney has done over the last 40 years (that's right - Michael Eisner is responsible for good things at Disney that occurred YEARS before he started there. That is truly just how talented the man is!).

Pixar is clearly a small company run by filthy hippies. They're running scared from Disney now that they know that Disney has gotten all their bestest animators under one roof now, and there won't be any more crappy Florida studio movies unleashed upon an unsuspecting public again. Rumor has it Eisner brokered a deal to exclusively have Phil Collins go back and redo the songs from older Disney films. If you thought the Circle of Life was good, wait until you hear how Phil Collins puts his special touch on it.

Michael Eisner is a God among men, and none of you are worthy to clean his toilet.

From steve lee
Posted January 29, 2004 at 3:40 PM
Sorry about that, I just wanted to beat someone else to licking Eisner's butt clean.

From Robert OGrosky
Posted January 29, 2004 at 3:52 PM
I just read another report where disney co stated they coudlnt agree to a new deal because they would lose hundreds of millions of dollars(from drudges site).
Since disney has had few succesfull movies other than POTC, wouldnt some money being made as a partner with Pixar and using the characters in the parks been alot better than now not getting anything at all.
ANother example of how eisner is screwing the company due to his oversize and undeserved ego!!!

From Kenny Doty
Posted January 29, 2004 at 5:33 PM
Now, what is the company supposed to do about making movies? Since they let all of the animators go and got the boot from Pixar, who's making the movies? Is Eisner trying to bring the company's infrastructure down one "support" at a time?

From Robert Niles
Posted January 29, 2004 at 5:49 PM
Disney retains a stable of animators in Burbank, though many now work on computers, instead of with traditional pencil and ink drawing.

From Robert Niles
Posted January 29, 2004 at 5:51 PM
File today's news under "irony."

Disney's relationship with Pixar so effectively promoted Pixar's outstanding films that Pixar no longer needed Disney's brand name to win over skeptical moviegoers. Disney helped build Pixar into a family film giant to rival itself.

Pixar knew this, and insisted upon full ownership of its future films in any new distribution deal. That left Disney with little to gain in that new agreement. It's only benefit lay in denying other studios the chance to work with Pixar and to jointly promote their work.

But to enjoy ever that benefit, Disney would have to give up millions of dollars in certain revenue, as Pixar was asking for a new deal to replace the existing one for two films that Pixar had yet to deliver to Disney under that contract. If Disney was to continue working with Pixar, it would have to wipe millions of dollars off its books -- at a time when the last member of the Disney family to help manage the company was calling for the CEO's job -- for nothing more in return but the opportunity to block its competitors from leveraging Pixar's future work.

Spite is a powerful motivator. Hollywood studios have squandered millions for less in the past. But a corporate administration that has earned the enmity of so many former fans over its parsimonious myopia is hardly one that's gonna spend a fortune today to screw its competition tomorrow.

So what was Disney to do? It could not maintain its current relationship with Pixar. Pixar would not allow it. And Disney could not make money it needs under a more distant relationship.

So Disney's only solutions were to let Pixar go... or to draw Pixar nearer.

Draw nearer? How? By buying Pixar. Disney could have made Pixar the next Miramax, a one-time independent that became an independently operated division within the Disney company. Or it could have folded Pixar into Disney's film studio, anointing Pixar's John Lasseter the new head of Disney's animation division.

For whatever reason, this aggressive solution was not to be. Pixar will lose its legacy, as ownership of its characters remains with the Walt Disney Company. And Disney will have to watch the company it ushered to greatness become its greatest competition.

From Jessica Donahoe
Posted January 29, 2004 at 6:13 PM
Wow, Disney is a world of trouble...they get rid of their animation studio and now Pixar doesn't want anything to do with him! Love it. They can someone better than Eisner.

Umm, Roy, when are you going to go back on the board and get Disney back where they used to be? Time is of the essence!

From Joe Lane
Posted January 29, 2004 at 8:02 PM
Speaking of Roy, the Pixar article is top story on savedisney.com.

Roy and Stan are doing what they can right now: keeping the fires hot and attention focused. At this rate, Roy may NOT have to do anything drastic--Disney is providing all the cannon fodder! Let's just hope the ship will be repairable after the war is won...

... yarrrrrrr... AHEM, sorry... slipped into Pirate-mode, there...

From David Klawe
Posted January 29, 2004 at 8:22 PM
Roy Disney and Stanley Gold Press Release....

>>Roy Disney and Stanley Gold Dismayed, But Not Surprised by Loss of Walt Disney Company's Relationship With Pixar


BURBANK, Calif., Jan. 29 -- Roy E. Disney and Stanley P. Gold today issued the following statement regarding Pixar ending its relationship with The Walt Disney Company:

As significant shareholders of The Walt Disney Company, we are extremely dismayed, but not surprised by the loss of Disney's Pixar relationship. More than a year ago, we warned the Disney Board that we believed Michael Eisner was mismanaging the Pixar partnership and expressed our concern that the relationship was in jeopardy. In fact, Roy cited this in his letter of resignations from the Board.

Michael Eisner's inability to manage and nurture crucial creative relationships, like the one Disney had with Pixar, is one of the main reasons we have maintained that we did not believe Disney's earnings were sustainable.

Steve Jobs, John Lasseter and their team are enormously talented. Pixar has hit five grand slam home runs in five times at bat for Disney. 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. <<

From scott sumerak
Posted January 29, 2004 at 8:29 PM
Sadly, I have to agree with an opinion I heard expressed on Jim Hill's site earlier this week. Eisner has too big a head (both litereally and figuratively...look at him next to Mickey...enormous noggins on both of em) to give up the ghost due to public opinion, or analyst grumbling. He has proven, time and again, that his way is divine word. It doesn't take much digging to find stories of cuts, cancelations, and flat out bottom line greed that have wrecked for a lot of the public what Disney is all about....storytelling. For love of Donald, Walt built his parks to be giant theatres, not giant ATM's!!!!
Some people have ruminated about the possibility of Eisner pulling a shocker in Philly, and announcing an honest to God succession plan, or even better, stepping down. Instead of swaying to pressure, however, he is only going to dig in and become more diligent in dismantling the public's trust and Walter Elias Disney's gift to us all. NOTE TO ROY: If you take your umpteen thousand shares of stock and add it to Stan's, I'll GIVE you my 50 shares. We'll be well on the way to a takeover...come on Roy....50 shares...it's a start. VIVA LA MOUSE

From Matthew Woodall
Posted January 29, 2004 at 9:47 PM
Do you think we'll see a Vivendi-Universal style bidding war for Pixar...or will they elect to go it alone?

From Robert Niles
Posted January 29, 2004 at 10:36 PM
Well, Kevin was praying for *something* to fill the Flume now that the Universal deal is done....

There's no way Pixar goes it alone. It has no distribution arm, and Jobs, et. al, have shown no desire to create one. No, Pixar will hook up with some other studio and neither Steve Jobs nor John Lasseter will need pay for a meal in Hollywood for at least the next several months.

From Doug Redecopp
Posted January 30, 2004 at 12:23 AM
Too bad Dreamworks is already working with PDI, that would be a good fit!

From Klark Kent 007
Posted January 30, 2004 at 12:34 AM
Eisner out, Jobs in, Lassiter & Roy co-Heads of Animation, Pixar comes along in the deal (like Next came with Jobs in the Apple deal)

Just a suggestion

From Karl McKenzie
Posted January 30, 2004 at 12:56 AM
Mr. Niles I appreciate your positive approach, and while I am a frequent reader not a frequent poster, I appreciate realism but not bashing.
Would they could they possibly still buy enough shares to own a controlling stake in Pixar? I agree with your posting that this would be the best for Disney---is it possible for Disney to buy Pixar?

From Kevin Baxter
Posted January 30, 2004 at 4:27 AM
With a mega-millionaire like Steve Jobs involved, and it being such a small company, I would seriously doubt if Disney could get enough shares. And no one would willingly sell to Disney. And I'm not sure how hostile takeovers work, but no one would work there if Disney were somehow able to do that.

But I have to question just how much Disney actually contributed to Pixar's popularity. Sure, they market well, but had Toy Story not been an instant classic, it wouldn't have mattered. Pixar is where they are now because of Pixar. Tom Cruise, Julia Roberts, George Clooney et al... none of them have studios to thank for their international successes. They have gotten where they are through good choices. And good choices is what Pixar's all about.

And as for Pixar being Disney's main competition... HA! Disney's main competition will be Pixar, DreamWorks, Fox, George Lucas, and anyone else who puts out computer animation. Cuz we all know Disney's will be the worst.

From T.Holland Creative
Posted January 30, 2004 at 4:47 AM
It will be interesting to see what happens to Disney's stock price over the next week or so.

'The Incredibles' is coming out in 2004 followed by 'Cars' in 2005. Caluculate in revenues on video/DVD sales and the financial impact on Disney's bottom line won't be felt until 2006 -- ironically the year Mr. Eisner's current contract ends.

I am stunned that Pixar would risk walking away -- primarily because they have not held serious talks with any other major studio in a long time. Yes they make AMAZING films, but by breaking with Disney it would seem that they have lost a degree of negotiating leverage with other studios.

As for the political fallout, Mr. Eisner will be faced with even more heat when the March 3rd share holders meeting opens in Philly.

The next shoe to drop: Disney's quarterly revenue report which should be out in the next couple of weeks.

From Dirk v. Diringshofen
Posted January 30, 2004 at 7:56 AM
This surely is a heavy blow for TWDC - but I do want to bring one point up again. According to several reports Disney did reject the contract as offered by Pixar especially because Pixar wanted to retain the copryights also for the earlier already released Disney/Pixar movies preventing basically Disney from creating any sequels or TV-series. Everybody had to know in advance that Disney would balk on that, especially as Eisner still seems to think those sequells and tv-series are the most important thing about any animated feature. So maybe only was this proposal designed so that Disney would walk out off the negotiations?? Don't forget that Steve Job supports Roy Disney's movement and this break up surely does strengthen Roy's position.

Oh and one last thing: it is interesting to see the quarterly report being mentioned here as the next topic coming up in the TWDC-discussion as actually there is one more hot topic out there that just got totally blasted off teh web by the Disney/Pixar news:

the 2003 Annual Report released only days ago by TWDC (available as PDF-file on their website), which includes quiet some interesting spin on the recent happenings in the company and future plans, including the announcement of the Digital Disney Decade... I just put an excerpted version of the Annual Report with comments regarding the Disneyland Resort Paris online at http://www.dlp.info/NewsAndRumours/Specials/TWDC_Annual2003.htm


Yours
Dirk

From Jason Moore
Posted January 30, 2004 at 8:24 AM
All of the other stories I was reading about this mentioned the possibility of it being a negotiating tactic from Pixar. Could it be possible, concidering the relationships between all the parties involved (Eisner, Jobs, Roy D., etc...), that this could be a tactical strategy on two fronts? could this move possibly help both Pixar's future renogotiations with Disney and Roy's fight against Eisner so that those future renogotiations are with an all new Disney Co.? There have been a lot of speculative columns written on the net of similar strategies and this, to me, seems to blend a lot of those ideas that have been discussed. just something to think about.....

From Robert Niles
Posted January 30, 2004 at 5:22 PM
Disney obviously lacks the access to enough Pixar shares to mount a successful hostile takeover of the company. To buy Pixar, Disney would have to win the blessing of Jobs and Lasseter. Which means working a personal relationship with the two -- precisely the thing that Roy Disney accuses Eisner of flubbing.

I don't know if Pixar would have agreed to a sale. I don't even know if Eisner ever raised the subject. But it is certain that convincing Jobs, et. al, to go along with an acquisition would have required significant persuasion and lobbying. Would Lasseter have become the long-awaited heir apparent to Eisner under this plan? What role would have been left for Jobs? All unanswered, deeply personal questions that the individual leaders involved would have had to work out together.

Buying Pixar would have been an aggressive, forward-thinking approach by Disney with significant short-term costs to the company. Instead, Disney management, as has become its habit, laid up -- taking the almost certain short-term pay day from "Incredibles" and "Cars" over the long-term expense of bringing Pixar into the Disney Company.

And let us not overlook the implications for theme parks.

From Kevin Baxter
Posted January 31, 2004 at 4:53 PM
Really, the only reason to be bought is for a constant cash source and less risk. That's why the Weinsteins did it. Pixar didn't need to. They made plenty of money in their half of the bargain to finance their own films for years and years to come. Their first five movies in the new deal would have to be total flops to start losing just Nemo profits. So there was absolutely no reason after, say, Toy Story 2 for Pixar to sell.

As far as the copyrights go... Pixar wanted to retain ownership of ALL future movies, which Disney did not want. That's ridiculous. You don't retain ownership of a movie you distribute. Period. That was a stupid move on Disney's part.

As for retaining them on past movies... from what I read Pixar was looking for EVENTUAL ownership, not immediate ownership. Now that was a little smarter to fight for. And against.

But this whole argument that Disney would be losing so much if it agreed to Pixar's last deal is ludicrous. We'll be generous and say The Incredibles and Cars make a billion apiece at the international box office, just to make it easy. If Disney did agree to, say 20% profits instead of 50%, their profits drop from $1B to $400M. Okay, that's a big drop. But every film they distribute brings them in about $200M, so that money comes back to them after three films and everything after that is profit. And none of this includes the insanely profitable merchandising or DVD markets. Now where's the profit? And where are the future theme park attractions? Are we really going to have to ride Chiken Little: The Ride?

This just further shows the short-sightedness of Michael Eisner. If he were truly interested in the success of the company, instead of his own ego, we wouldn't be having this conversation right now.

From Robert Niles
Posted January 31, 2004 at 5:31 PM
The distribution fee I've heard under Pixar's proposal was 10 percent. Given that Pixar's five previous films have averaged half a billion apiece in global box office, let's assume that Incredible and Cars stick to that average and bring in $1 billion between them.

That would give Disney $100 million in income. Versus the $500 million it would have under the existing deal. And that's not counting the value of owning the characters and sequel rights, which Disney would lose under a new deal.

Four hundred million dollars over two years is far from insignificant. That's four blockbusters, or eight solid films. Heck that's more than DreamWorks pulled in for all its releases in 2003. (About $283 million for five films.)

Without a doubt, folks can make a strong argument that Disney would have realized far more than $400 million in long-term value by retaining a relationship with Pixar. But we're talking about the Michael Eisner administration here. This is not one that has shown any willingness over the past decade to defer significant income right away in favor of investing for rewards down the road. Not cutting this deal with Pixar is completely consistent with Eisner's current style of management. If that's Wall Street wants from the Walt Disney Company, well, that's what they've got.

From Robert OGrosky
Posted January 31, 2004 at 7:36 PM
It seems that eisner cares much more about the short term gain from the next 2 movies that the longer term health of the company when he is no longer around.
The next CEO wont have a vault of untapped treasures to make money off like eisner has but will have to be creative and create new content for the company.

From Kevin Baxter
Posted February 1, 2004 at 5:21 PM
The numbers I heard were actually 15% for this contract and 12% for the future contract. I upped the 15% since I figured that was a negotiating tactic. And I believe the 12% because Pixar can get 10% from anyone, so they should be willing to pay about 15% to Disney just to keep them from creating any sequels without Pixar.

Soooooooo.... if the offer was really 10% for the next two films, which I don't believe, then Disney probably was right in leaving. If it was for 20% and Disney balked because of ownership rights for future films, then they are morons.

From Kenny Hitt
Posted February 1, 2004 at 8:20 PM
Think of this though...Disney, had they agreed to this deal, would have given control of cash cows like Toy Story, Monsters Inc and Finding Nemo back to Pixar.

Now, suppose some upstart competitor like Fox comes along, and offers an even better deal to Pixar. should Pixar break camp, you can kiss Buzz Lightyear's Space Ranger Spin, the Living Seas Featuring Nemo & Friends, and any possibilityof that Superstar Limo makeover goodbye. Such an agreement would have effectively shuttered at least 2 attractions upon Pixar's free agency, unless of course Eisner had been intelligent enough to demand licensing options in perpituity.

Which I doubt.

So therefore, this whole situation could have been avoided had Eisner requested one small, understandable concession from Pixar. Instead, little Jack Horner had to have his entire Christmas Pie.

From David Klawe
Posted February 1, 2004 at 8:39 PM
Hey, I remember in another thread that someone ;) said that the Pixar/Disney thing was a DONE DEAL.... OOPS!!!! ;)

By the way, way to go PATS!!!!!!!

From Robert Niles
Posted February 1, 2004 at 11:24 PM
Yeah, way *not* to cover, guys....

(Actually, I'm just bitter about my Colts not being there.)

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