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.
Don't let the door hit ya where the Good Lord split ya.
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!
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.
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.
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.
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!
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...
>>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. <<
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.
Just a suggestion
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.
'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.
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
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.
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.
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.
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.
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.
By the way, way to go PATS!!!!!!!
(Actually, I'm just bitter about my Colts not being there.)
