Pixar news dominated the news this week. In some papers, like the San Francisco Chronicle, their breaking off talks with Disney was the lead story.
It was apparently the lead story inside Disney too. Jim Hill's insiders are saying that it is a huge blow, no matter what they are saying to the media. You can tell a company is reeling when they immediately release a press release that doesn't really tell you a damn thing. Or has one single thing stand out. This release just goes on to tout upcoming Disney CG films, and on that list is Toy Story 3. Huh? Well, we'll see. Rumor has it - and I heard about this years ago - that Tom Hanks and Tim Allen really hate Eisner and may not agree to do the voices for a non-Pixar sequel. Of course, Allen's career is seriously in the toilet so his inclusion may simply come down to money. Hanks is a whole 'nother story, though. No other actor selects roles as carefully as he does, and if his refusal to do the film doesn't keep it from being made, it will certainly hurt it at the box office.
Disney is also hurting on Wall Street right now. Shares are down, Pixar's are up. Which says a lot. Pixar won't benefit for a couple years, and Disney will actually do better for the next couple since they won't have to rejigger the current contract. All this shows how little faith investors have in Disney. Is this the true start to Roy's successful coup? Numerous polls have the public thinking so.
Then there is all the speculation as to who Pixar will run to. Time Warner is now seen as the front-runner, with Fox in second. TW is believed to be so strong since The Lord of the Rings movies prove their marketing clout and they can merchandise well too. The Looney Tunes and Hanna-Barbera characters don't make a lot of movies, but you certainly see them everywhere, don't you? Even more important, Time Warner is the market leader in the home entertainment market. Yes, even better than Disney.
Other studios have been dismissed by analysts. MGM is too small and lacks marketing muscle. Sony's music and digital arms will probably clash with Steve Jobs's similar interests at Apple. And Vivendi Universal is selling to NBC. HUH? What the hell does that have to do with anything? (The Sacramento Bee was even more behind the times... they had a chart listing the top animated films of all time and didn't even list Finding Nemo, and the article had a picture of the film that took up a quarter of the page!) Anyhow, since the "sale" isn't a good excuse, why couldn't a Universal deal happen? I have heard that Universal isn't seen as a major contender because they don't focus enough on family films. After their botching recent releases like Babe II and Peter Pan, I can understand Pixar's fear. But then again, they did a hellacious job selling Shrek, and should be considered. At the very least, Pixar should license the characters to Universal. That would be a real kick in Eisner's groin.
Disney quarterly revenue report is due out very soon. Record holiday attendence at the parks and revenue from the 'Finding Nemo' and 'Pirates of the Caribbean' DVDs could help to shore up the bottom line.
Another quarter boasting black ink could make the upcoming shareholder's meeting in Philadelphia very interesting.
Just give me great theme parks, safe and at good value for my dollar. I don't care whose name is on the CEO's door.
Here's what I know: Michael Eisner's management of the Walt Disney Company seems to have become myopic -- more concerned with short-term financial results than the long-term capital investment that great theme parks demand. John Lasseter has proven his great creative talent over the past decade. And both Steve Jobs and Michael Eisner have shown unwillingness to back down from the principles in which they believe.
Jobs obviously needs to find a corporation whose management he's comfortable working with. And I'd love to see more of Lasseter's vision expressed in a theme park. If Disney can find a way to accommodate them, more power to the Mouse. If not, then bring in the competition.
But Barron's is!
Baran’s readers were warned that “Pixar's decision to sever its movie distribution partnership with Disney might not have the happy ending investors expect.
For Pixar, the surprise divorce announced Thursday turns Disney into a rival, potentially cutting profits for the creator of such animated hits as Finding Nemo, Monsters, Inc. and Toy Story, Barron's said in its online edition.
Meanwhile, Pixar probably has limited earnings upside for the next three years, the paper added. Pixar must split profits 50-50 with Disney from its next two films: The Incredibles, slated for release in November 2004, and Cars, scheduled for a November 2005 opening. The paper noted that Disney pockets a 12.5 percent distribution fee, effectively handing it a 60 percent share of the take.
So if the next Pixar flick makes $300 million, then Pixar makes $120 million. Minus the $50 million that Pixar puts up for production and one of those $300 million production nets Pixar about $70 million -- where as Disney rakes in $130 million.
In addition, Barron's said it's unlikely that any new Pixar distribution partner
will be as strong in the
competitive family entertainment business as Disney.
That would be the opinion of the business minds at Barron's -- not necessarily mine.
On Friday, Pixar shares rose $2.19, or 3.4 percent, to $66.39. Disney shares fell 45 cents, or about 1.8 percent, to close at $24. Of course today, Pixar’s stock fell $1.76 per share (erasing all but 43 cents of its Friday increase) and Disney’s rose (erasing all but 20 cents of its loss).
Guess we will have to see what happens in the market tomorrow. I'll bet Pixar's stock will skyrocket and Disney's will drop off the table.
What do you guys think?
So I wouldn't put the 401(k) behind linear projections that today's environment will extend into the future. Instead, I'd just keep my eye on folks who've proven their ability to perform well in in changing conditions. But, hey, I've always preferred the relative honesty and integrity of Las Vegas to the mendacity and uncertainty of Wall Street day trading, anyway. (And, yes, I am fully aware of the irony of that statement.)
Meanwhile Roy Disney went to the S.E.C. to complain about Michael Eisner and -- as a result -- Disney shareholders saw the value of their investment drop. Of course we already know that after Mr. Disney left ("You can't fire me, I quit!") the stock price rose to a 52-week high.
Can't wait to see what happens tomorrow.
I'm going out on a (short) limb here and saying there's more money to be made on the Pacers to cover than guessing what the Wall Street Idiots are going to do with either Disney or Pixar tomorrow. (After all, it is Wall Street Idiot money that keeps the spread in games like this to three. Knicks fans....)
Though Jermaine's out again tonight, so maybe I'd better shut up....
(Except, maybe in taking me to Vegas and putting money down against me whenever possible.)
We've been unable to beat Indiana this year, but that's what the playoffs are for.
Conseco Fieldhouse, not that bad of an arena. It's no Staples, but it's a nice venue. To think of it, Indianapolis isn't a half-bad city - great zoo to boot.
Personally, I don't think Pixar is a good buy right now either. Sales have slowed for Nemo and The Incredibles doesn't come out until November. You really should be the CEO of Disney if you think Pixar's position right now is going to be the same as Pixar's in 2006. But I would listen to WHATEVER Wall Street investors do, because they have ALL been right ALL the time.
>>But how can you not be excited about Pixar's future? After all, it was Pixar's fat margins and money-making record that made it a popular Motley Fool Stock Advisor stock recommendation.
And can you blame Pixar for moving on? This was a company creating a quality product but taking in less than half the proceeds. When Disney CFO Tom Staggs announced that Pixar's demands were unreasonable because it would have cost Disney "hundreds of millions of dollars" that it was entitled to, how can you not do the math and see how Pixar will have the last laugh if it laughs alone? Now, it not only has the right to earn more than twice as much as it has in the past, but it also has the flexibility to call its own shots and ramp up its production schedule.
Of course, the concerns are not lost on me. Pixar will have to bankroll its future releases. Pixar had a good thing going with Disney. So what? Unlike most debt-laden movie studios, Pixar sports an immaculate balance sheet with $517 million in cash -- and growing. Financing won't be a problem.<<
Meanwhile Disney stock opens with a small gain.
The other shoe drops on February 11th, when Disney reports its quarterly earnings.