Breaking News: Steve Jobs announces Pixar breaking off from Disney

[ocnative1964]

The Incredibles seem a bit like "The TICK" to me....

[cinder]

That's true, I can see how there is a slight resemblance in the art work.

[disneyfreak62]

...Cars sounds more appealing in my opinion because its something theyve never tackled...

I'm looking forward to "Cars" but I'm not as excited about it. I keep thinking of "Wheelie and the Chopper Bunch", a series done by Hanna Barbera in the 70s. Or, the Chevron comercials.

[ocnative1964]

Kudlow on Kudlow and krammer asked an analyst if Steve Jobs wants Eisner's job....

Wow, how would that be???

he is very smart and creative... of course could you imagine Imac colors in Tomorrowland LOL

[ZeekSlider]

The Incredibles seem a bit like "The TICK" to me....

"SPOOOOOOOOON!"

[ocnative1964]

spooooon very funny lol... i forgot about that...

[Darkbeer]

Fitch Comments on Non-Renewal of Disney-Pixar Relationship
Press Release

http://home.businesswire.com/portal/...30&newsLang=en

Fitch Ratings views Disney's failure to renew the distribution and profit-sharing agreement with Pixar as a credit concern. While recognizing that credit metrics will not likely be materially affected through fiscal-year (FY) 2006, the non-renewal of the Pixar relationship reinforces Fitch's Negative Rating Outlook. The Rating Outlook reflects Disney's below-average credit metrics and the continuing challenges faced by the company. Fitch presently rates Disney's long-term debt 'BBB+'. Fitch will continue to monitor developments with Disney for their credit impact. On Jan. 29, 2004, Pixar ended discussions with Disney regarding the extension of its movie distribution and profit-sharing contract. The existing contract expires after the delivery of the final film which is scheduled for late 2005 (FY2006). The loss of the associated earnings from future Pixar releases is potentially significant for Disney's studio business, but less so within the scope of the company's consolidated operations. While the five Pixar films released to date have represented significant contributors to Disney's studio business, each major theatrical and related home video release has only combined to represent approximately 3-5% of Disney's consolidated cash flow. As a result, the impact on key measure of cash flow leverage, including debt/EBITDA and adjusted debt/EBITDAR is modest. The loss of longer-term Pixar relationship releases reinforces the creative void that has developed in the company's animated film business, a core franchise for the Disney Company. Nevertheless, Disney has until FY2006 to address the creative challenges posed by the absence of a longer term Disney/Pixar distribution agreement. Disney plans to mitigate the loss of the Pixar relationship through internally developed computer animated films and by developing new relationships with emerging animation production companies. Furthermore, Disney will retain distribution and profit-sharing rights for the remaining two films under the existing contract with Pixar, as well as rights on home video sales and the right to release film sequels. Pixar to Find Its Own Way as Disney Partnership Ends New York Times, 1/31/04 But what has left many people in Hollywood scratching their heads is whether personal or professional reasons led Steven P. Jobs, the chief executive of Pixar, to end his working relationship with Michael D. Eisner, the chief executive of Disney, and walk away from one of the most lucrative film partnerships in recent history. Executives from Disney and Pixar have declined to elaborate on what went wrong. But several people involved in the talks, who insisted on anonymity, said a deal could have been reached if each side had been willing to compromise a little more. But the residue of several years of testy relations, and Mr. Jobs's distaste for the way Mr. Eisner conducted business with Pixar, may have amplified the typical problems of partnerships into irreconcilable differences. Disney's task of remaining a leader in animation will not be an easy one. As little as six years ago, Disney had no significant competitors in animation and an eager partner in Pixar. But now Disney is facing two formidable foes, not only Pixar but DreamWorks SKG, both led by executives who dislike Mr. Eisner. (Like Mr. Jobs, Jeffrey Katzenberg of Dreamworks, a former Walt Disney Studios chief, clashed with Mr. Eisner over how much authority he was allowed.) Movies produced by Pixar contribute as much as half of Disney's operating income in filmed entertainment, according to stock analysts. Disney currently distributes all of Pixar's films in exchange for 12.5 percent of the box-office revenue, and the two companies split the profits. In addition Disney owns the rights to all movies made by Pixar, including the coming "Cars'' and "The Incredibles.'' That bonanza was going to end by 2005, when the Disney-Pixar deal was set to expire, because few people on Wall Street expected Disney to retain such favorable terms. Yet most analysts counted on Disney's keeping a substantial revenue stream from distribution, if not from profit sharing. According to a report released yesterday by Richard A. Bilotti, an analyst at Morgan Stanley, Disney's annual profit starting in 2007 could drop by $30 million to $40 million without a distribution-only agreement. Disney will also face increased competition for the animated-film audience. Despite the recent success of animated movies like "Lilo & Stitch" in 2002, Disney has not been able to replicate the success it had in the early 1990's. In the last several years, the animation unit at Disney has had a revolving door of executives in charge of the division while it eliminated nearly 1,000 jobs and closed its Florida operations. Disney and Pixar had been working on the agreement for nearly a year. While much of a framework for a distribution deal had been agreed to by December, there were still two sticking points Pixar and Disney had to resolve, two people involved in the talks said. For one, Mr. Jobs wanted sole ownership of "The Incredibles" and "Cars," two movies that Pixar had already agreed to make under the old contract. Mr. Jobs also wanted to limit the time that Disney had sole authority to distribute Pixar movies to five years, much shorter than a typical deal of 20 years. Those demands posed problems for Disney, the two people said. For one, Disney already owned "The Incredibles" and "Cars." In addition, in the event that Disney invested in a theme park attraction based on a Pixar movie, it did not want to be in the position of not having the right to distribute the movie. Still, executives at the two companies expected that some sort of compromise could be reached, the two people said, and the sides went away for Christmas vacation pledging to continue talks when they returned. During the week of Jan. 12, Disney proposed a compromise that Mr. Jobs rejected, one of several he turned down in the last 10 months. "Steve was frustrated," said one of the people involved. "He was not any closer to getting a deal done than he was a month earlier." It was an experience he had had before. After Pixar's "Toy Story" was a hit in 1995, Mr. Jobs successfully renegotiated his deal with Disney which gave Pixar a 50-50 split of all profits, but not without Mr. Jobs first threatening to end the relationship with Disney after several months of talks, according to a former Disney executive. Later, when Mr. Jobs approached Mr. Eisner about adding sequels to the original deal, the Disney chief balked. That angered Pixar executives, particularly the creative director John Lasseter, who wanted to make "Toy Story 3," but could not because Disney owned the rights, the former executive said. "I just think the overall feeling was Steve did not want to be in business with Michael," one person involved said. By Tuesday, Mr. Jobs decided to end the partnership talks and told the Walt Disney Studios chairman, Richard Cook, on Thursday afternoon. Investors in Pixar, which is expected to announce earnings in the next week, responded positively to the news that the company walked away. Its share price increased $2.19, to close at $66.39. By contrast, shares of Disney fell 45 cents, to $24. "The small studio will now go out and swim among the other Hollywood sharks for a while," said Tom Wolzien, a media analyst for Sanford C. Bernstein, referring to Pixar. "We don't know the final outcome, but somehow, it doesn't feel like this is over." Rival Movie Studios Line Up to Court Picture-Perfect Pixar - LA Times Warner Bros., 20th Century Fox, Sony Pictures Entertainment and Metro-Goldwyn-Mayer Inc. said Thursday that they would pursue Pixar and its picture-perfect record. Industry executives and analysts said Warner Bros., a division of Time Warner Inc., has the best shot at cinching the film distribution deal, given its vast experience with family-oriented fare from its "Lord of the Rings" trilogy and the "Harry Potter" series. News Corp.'s Fox studio, which was behind the animated hit "Ice Age," is considered a strong contender. "They are probably the two most likely candidates," said independent analyst Christopher Dixon. Pixar walked away from the negotiating table because it wanted to retain full ownership of future movies and pay only a flat distribution fee. That could be worth an estimated $50 million to $100 million a movie for a new partner — but wouldn't kick in until Pixar delivers two more movies it owes Disney under the current contract: "The Incredibles" is expected in theaters in November, while "Cars" will be released next year. Warner Bros., Fox and Sony executives met informally last year with Pixar. "We remain interested," Warner Bros. President Alan Horn said Thursday. For his part, Jim Gianopulos, Chairman of 20th Century Fox Film Corp. said: "We're certainly interested in pursuing our discussions and we would make an excellent choice." Analysts handicapping the contest say Time Warner's studios have proved its marketing and licensing clout. Since its release in December, "Lord of the Rings," released by the company's New Line unit, has brought in about $340 million in the U.S. and Canada.

[Darkbeer]

From Saturday's LA Times...

http://www.latimes.com/business/prin...es-pe-business

Wall St. Bets on Pixar

Wall Street, having watched one of Hollywood's great melodramas come to a bitter ending, gave Pixar Animation Studios a thumbs up Friday and Walt Disney Co. a thumbs down.

Pixar's shares rose 3.4%, closing up $2.19 at $66.39 on Nasdaq. In contrast, Disney shares dipped 1.8%, ending the day down 45 cents at $24 on the New York Stock Exchange.

Friday's trading gave investors their first opportunity to react to Pixar Chief Executive Steve Jobs' surprise move to end negotiations with Disney. The announcement was made after the markets closed Thursday.

Pixar was renegotiating the terms of its current deal with Disney. Under the arrangement, the two split the costs and profits of their animated films. Disney also receives a 12.5% distribution fee. Pixar, the maker of such computer-generated hits as "Finding Nemo," has decided to fully finance future films and keep all the profits minus a distribution fee.

Some analysts attributed Pixar's stock gain to beliefs that the Emeryville, Calif.-based company could make more money in the long run by retaining control and hiring another studio to distribute its films.

"They might get a better deal than they would have from Disney," said Lowell Singer, a media analyst with SG Cowen Securities.

Disney's shares declined, analysts speculated, because the company ultimately stands to lose a reliable profit engine. Merrill Lynch analysts estimated that Pixar had contributed on average more than 50% of Disney's studio profit during the last five years.

Some of the sternest comments Friday came from the credit ratings industry, which downgraded Disney's standing more than a year ago for its sluggish performance amid a weak economy.Analysts with Fitch Ratings said the Burbank-based entertainment giant's inability to find a way to extend its profitable 13-year partnership with Pixar added to the company's financial challenges. It also threatened to worsen the "the creative void" in Disney's animated film business, Fitch wrote.

"This raises questions about whether Disney will have the creative talent to be able to produce box-office hits comparable to Pixar's," said Randy Alvarado, Chicago-based director of Fitch's media group, during an interview.

Reiterating its negative outlook on Disney's credit, Fitch said it would maintain its BBB-plus rating on Disney's long-term debt, its third-lowest investment-grade rating.

Executives from Disney and Pixar declined to comment.

Under the current deal, Pixar will deliver two more movies to Disney: "The Incredibles," which is scheduled for a fall release, and "Cars," which is set to land in 2005. The two companies have spent much of the last year trying to revise their financial arrangement and extend their partnership. Many thought an agreement was likely.

Instead, Jobs broke off talks. Four of Disney's Hollywood rivals — Warner Bros., 20th Century Fox, Sony Pictures Entertainment and Metro-Goldwyn-Mayer Inc. — have already expressed interest in snaring the distribution deal.

Disney retains the right to make sequels to Pixar films produced under the current deal and said Thursday that it was going forward with "Toy Story 3." But company executives said Friday that they had not signed Tom Hanks, Tim Allen and other actors whose voices are so identified with characters that made the franchise such a hit.

In addition, Disney does not own the underlying technology that Pixar used to create the characters in their joint films. As a result, Disney must re-create the millions of lines of computer code needed to bring the characters back to life.

[Nemo88]

some thoughts on Disney stock:


on Friday the day after the news that Disney and Pixar break up,Disney stock barely went down,I think it went down 45 cents or something,it was a pretty miniscule drop.if you would have asked me 6 months ago what would happen to Disney stock if it broke up with Pixar,I would have told you that Dis stock would have dropped like a rock....but that didnt happen...and it likely wont happen since anyone who wanted to dump thier Disney stock had the chance on friday,I see no reason why it would drop anything substantial on monday if it didnt even drop much the day after the news.

obviously investors either think the deal Pixar presented to Disney was bogus and wasnt worth signing,or they feel Disney can survive just fine without Pixar doing thier own CGI films,or maybe even both.

bottom line is,Disney stock didn't tank,Eisner will prolly keep his job if the stock doesnt go down substantially

[Instidude]

Barron's magazine had a quick bit on the break-up:

By CBS MarketWatch
Last Update: 3:10 PM ET Jan. 31, 2004

SAN FRANCISCO (CBS.MW) -- Pixar's decision to sever its movie distribution partnership with Disney might not have the happy ending investors expect, according to a published report.

***
For Pixar (PIXR: news, chart, profile), the surprise divorce announced Thursday turns Disney (DIS: news, chart, profile) 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.

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.

and then Reuters has this, with half the article pointing out that Eisner will be vindicated in his decision:

'EISNER WILL BE VINDICATED'

But short-term, analysts said, Disney would benefit, since it was not going to give away any of its profit from the two films left in the current Pixar deal, which had been part of the renegotiation.

"Eisner had no other choice in my opinion," said Schwab SoundView analyst Jordan Rohan who estimates Disney would have forgone up to $1 billion in pretax profit over four years.

"If my financial projections are correct... then Eisner will be vindicated, the company will be back and Roy Disney will find it hard to effect any change," he said.

Eisner's second problem is the state of Disney's own animation unit, an industry pioneer which has seen its staff slashed and its focus changed to computer animation from its hand-drawn specialty.

Its last mega-hit was "The Lion King" in 1994, although it has had some successes since, like 2002's "Lilo and Stitch."

"A lot of people are criticizing them for emptying out their brain trust. Disney seems to be letting a lot of people go and those people are moving on to other companies," said Ryan Ball, editor of Animation Magazine.

Disney says it can make sequels to Pixar films from its current deal and has "Toy Story 3" in development. It will put out its own first completely computer-animated movie, "Chicken Little" in the summer of 2005.

Lowell Singer, an analyst at SG Cowen, said Pixar had more than just technology.

"Disney has a long way to go to get to the level of performance that Pixar has achieved. There is no guarantee they will ever get there," he said.

However, investors might forgive that if Disney's profits continue to rise, he added. "If the company continues to perform well, the market is going to care a lot less that this relationship will end," he said.

Here's the link to the whole article:Eisner Faces Challenges

It could be bad, could be good. The analysts are looking at it right now, and are crunching their numbers. It will be a while before anyone knows if this was the right thing for Pixar to do, or not (since everything I've read says that it was Pixar that didn't want to compromise, and Disney had gone back to the table last week with a compromise offer that didn't meet what Jobs was demanding)