The BLOG FLUME - A Big Weekend... for Pixar

The blow to the House of Mouse is even worse than Disney's PR department is letting, say some company insiders.

From Kevin Baxter
Posted February 1, 2004 at 11:28 PM
Jim Hill Media - Jan 30
Orlando Sentinel - Jan 30
LA Times - Jan 30

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.

From Kenny Hitt
Posted February 2, 2004 at 11:23 AM
Universal's dealings with Dreamworks is probably the major barricade to any possible deal with Pixar.

From TH Creative
Posted February 2, 2004 at 3:50 PM
Disney stock down 20 cents on today's trading. Pixar is down even more (Gasp!) -- $1.76 per share.

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.

From Kevin Baxter
Posted February 2, 2004 at 4:24 PM
It's timed perfectly, since next quarter will be slow at the parks, no Nemo or Pirates sales and ABC will have gotten its ass kicked during February sweeps. Damn...

From Kevin Baxter
Posted February 2, 2004 at 4:25 PM
Actually Universal would be perfect. Pixar supposedly had problems with their films competing with Disney films. That wouldn't be a problem at Universal since they release like one or two family films, and no animated films. And DreamWorks only releases two animated films, at most, a year. But then any studio would be better than Disney in that regard.

From Robert Niles
Posted February 2, 2004 at 4:23 PM
I guess it should be obvious from my posts here and here, but I don't have a dog in this fight.

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.

From TH Creative
Posted February 2, 2004 at 5:37 PM
After having such a big weekend, I wonder why Pixar's stock dropped today? I don't claim to be an expert on stocks.

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?

From Robert OGrosky
Posted February 2, 2004 at 10:17 PM
Without Pixar putting out high quality family entertainment for disney that will have a major impact on how family friendly disney is.
Pixar will be easily able to sell their movies on their own due to the high quality of their movies and dont need disney in the ads to sell.
I think now the name Pixar is more highly thought of than disney in animated movies, i mean the disney name sure helped Teachers Pet become a major success.

From Robert Niles
Posted February 2, 2004 at 10:49 PM
Here's an issue that I keep coming back to: Nothing changes for two years. Two years! Companies can form and collapse in that time. *cough*VivendiUniversal*cough* Obviously Pixar needs some lead time to secure distribution before its 2006 film. But a whole lot can change in the industry before whatever new deal kicks in.

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.)

From Carrie Hood
Posted February 3, 2004 at 9:15 AM
I for one would like to see Pixar do movies for themselves without backing of a company. Imagine what these minds who have brought us the amazing movies we love can do!

From TH Creative
Posted February 3, 2004 at 4:09 PM
The NASDAQ wennt up today and Pixar...went down. Eraing any of the gains it earned after the announcement that Disney had turned down their last offer.

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.

From Robert Niles
Posted February 3, 2004 at 4:35 PM
And in equally relevant news, the Knicks are three-point dogs to my Pacers tonight.

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....

From Robert Niles
Posted February 3, 2004 at 8:12 PM
O'Neal plays, but Indiana still tanks in the fourth. See? There's no logic in day-to-day life....

(Except, maybe in taking me to Vegas and putting money down against me whenever possible.)

From Jason Herrera
Posted February 3, 2004 at 8:43 PM
Pacers. Are they even an NBA team?=)

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.

From Anthony Murphy
Posted February 3, 2004 at 9:18 PM
This is a sucide for both companies if they do not come up with an agreement. Pixar needs the money and Disney needs the fresh ideas. Both would benefit together so start negotiating Disney and Pixar!

From Kevin Baxter
Posted February 4, 2004 at 3:51 AM
You the man, Robert.

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.

From David Klawe
Posted February 4, 2004 at 5:01 AM
From the Motley Fool...

>>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.<<

From TH Creative
Posted February 5, 2004 at 8:25 AM
One day after Steve Jobs meets with a group of Wall Street analysts and reports a very profitable quarter, Pixar stock opens down by almost $2.00 per share (!!!!).

Meanwhile Disney stock opens with a small gain.

The other shoe drops on February 11th, when Disney reports its quarterly earnings.

From TH Creative
Posted February 5, 2004 at 8:28 AM
What's also strange is that Pixar's stock has a history of going down AFTER a successful film release. Go figure.

From Robert Niles
Posted February 5, 2004 at 11:12 AM
How about an animated movie about Wall Street players? We could call it "The Incredibles."

Oh, wait.

From Kevin Baxter
Posted February 7, 2004 at 6:10 AM
"The Incredible Stupidheads"

From Kent Pugh
Posted February 9, 2004 at 4:10 AM
Why is MGM small? They put out tons of movies, and they are right now having a renaissance! And MGM RULES!

From Kevin Baxter
Posted February 9, 2004 at 5:01 AM
I think they mean it is small marketing-wise. Considering their biggest movie last year made less than $90M, who'd blame Pixar from staying away from them?

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